Preface Pharmaceutical Antitrust 2017

120 Pages·2017·1.53 MB·English

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© Law Business Research 2017
Pharmaceutical Antitrust
2017
Contributing editors
Marta Giner Asins and Yann Anselin
Norton Rose Fulbright LLP
Publisher The information provided in this publication is
Law
Gideon Roberton general and may not apply in a specific situation.
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© Law Business Research 2017
CONTENTS
Introduction 5 Japan 63
Marta Giner Asins and Yann Anselin Yusuke Nakano
Norton Rose Fulbright LLP Anderson Mōri & Tomotsune
Brazil 7 Korea 68
Alexandre Ditzel Faraco, Ana Paula Martinez and Hwa Soo Chung, Kyungsun Kyle Choi and Luke Shin
Mariana Tavares de Araujo Kim & Chang
Levy & Salomão Advogados
Mexico 73
China 13 Ricardo Arturo Pons Mestre, Ernesto Federico Algaba Reyes
Susan Ning and Zhifeng Chai and Martin Michaus-Fernandez
King & Wood Mallesons Hogan Lovells BSTL
European Union 20 Poland 77
Andrea Hamilton, Wilko van Weert and David Henry Sławomir Karasiński and Natalia Wolska
McDermott Will & Emery Belgium LLP Fortak & Karasiński Legal Advisors LLP
Finland 27 Portugal 83
Salla Mäntykangas-Saarinen and Hanna Paloheimo Joana Gomes dos Santos
Castrén & Snellman Attorneys Ltd Caiado Guerreiro, Sociedade de Advogados, SP, RL
France 32 Spain 88
Christophe Hénin and Julie Vasseur Helmut Brokelmann and Mariarosaria Ganino
Intuity Martínez Lage, Allendesalazar & Brokelmann
Germany 40 Turkey 94
Maxim Kleine and Tim Schaper Gönenç Gürkaynak and K Korhan Yıldırım
Norton Rose Fulbright (Germany) LLP ELİG, Attorneys-at-Law
India 47 Ukraine 101
Samir R Gandhi, Kamya Rajagopal and Alexey Pustovit
Kadambari Chinoy Asters
AZB & Partners
United Kingdom 106
Israel 51 Peter Scott, Ian Giles, Susanna Rogers and Maria Campbell
David E Tadmor, Shai Bakal and Itai Cohen Norton Rose Fulbright LLP
Tadmor & Co Yuval Levy & Co Attorneys-at-Law
United States 115
Italy 57 Daniel L Wellington and Neely B Agin
Enzo Marasà and Elisa Stefanini Norton Rose Fulbright US LLP
Portolano Cavallo
2 Getting the Deal Through – Pharmaceutical Antitrust 2017
© Law Business Research 2017
PREFACE
Preface
Pharmaceutical Antitrust 2017
Tenth edition
Getting the Deal Through is delighted to publish the tenth edition of
Pharmaceutical Antitrust, which is available in print, as an e-book and
online at www.gettingthedealthrough.com.
Getting the Deal Through provides international expert analysis in key
areas of law, practice and regulation for corporate counsel, cross-border
legal practitioners, and company directors and officers.
Throughout this edition, and following the unique Getting the Deal
Through format, the same key questions are answered by leading
practitioners in each of the jurisdictions featured.
Getting the Deal Through titles are published annually in print. Please
ensure you are referring to the latest edition or to the online version at
www.gettingthedealthrough.com.
Every effort has been made to cover all matters of concern to readers.
However, specific legal advice should always be sought from experienced
local advisers.
Getting the Deal Through gratefully acknowledges the efforts of all
the contributors to this volume, who were chosen for their recognised
expertise. We also extend special thanks to the contributing editors, Marta
Giner Asins and Yann Anselin of Norton Rose Fulbright LLP, for their
continued assistance with this volume.
London
April 2017
www.gettingthedealthrough.com 3
© Law Business Research 2017
Norton Rose Fulbright LLP INTRODUCTION
Introduction
Marta Giner Asins and Yann Anselin
Norton Rose Fulbright LLP
This new edition of Getting the Deal Through – Pharmaceutical Antitrust prices, rig bids and allocate customers for certain generic drugs fol-
will provide readers with an updated, thorough overview of the lowing a two-year investigation into the generic drug market.
application of antitrust law to the pharmaceutical sector worldwide. The situation is no different in the EU. In the UK, Pfizer and
The pharmaceutical sector remains an important area for antitrust Flynn Pharma were fined nearly £90 million in December 2016 for
enforcement in nearly all major jurisdictions, where concerns polar- ‘excessive and unfair’ pricing to the NHS after increasing the cost of
ise around traditional subjects, such as patent settlements, public an anti-epilepsy drug by up to 2,600 per cent overnight, a decision
procurement and life-cycle management strategies, but increasingly following the decision taken on 25 October 2016 by the Competition
also on emerging issues, such as the growing importance of innova- and Markets Authority to launch another investigation relating to sus-
tion competition, drug prices and, in particular, excessive pricing and pected excessive prices in the supply of certain pharmaceutical prod-
e-health platforms and databases. ucts. In September 2016, the Italian Competition Authority issued a
In terms of mergers, competition authorities are likely to con- €5 million fine to the pharmaceutical company Aspen, accusing it
tinue focusing on innovation and potential competition, particularly of threatening the agency with stopping the supply of vital oncology
in the US and EU. In February 2016, the Federal Trade Commission medicines for patients in the Italian market if they refused to increase
(FTC) required generic drug manufacturers Lupin Ltd and Gavis the drugs’ price, a decision that prompted the Spanish Competition
Pharmaceuticals LLC (Gavis) to divest the rights and assets associated Authority to initiate proceedings against Aspen on similar grounds in
with two generic drugs to allow Lupin’s acquisition of Gavis to proceed, February 2017. In Ukraine, an investigation was recently closed and
although neither party had yet reached the market. Key to the FTC’s resulted in fines for both pharmaceutical companies and distributors,
assessment was that the two companies were among the few players accused among others of implementing non-transparent retroactive
likely to enter the market in the near future. In the European Union, rebate schemes allowing distributors to overcharge pharmaceutical in
the EU Commission assessed ‘pipeline to pipeline’ competition in the tender proceedings. Outside the EU, in China, the National Reform
recent Mylan/Meda merger of 2016. In GSK/Novartis the Commission and Development Council is also conducting a nationwide drug-
went one step further by extending its analysis of pipeline pharmaceu- pricing investigation on pharmaceutical companies and has clearly
tical products beyond those that are in advanced stages of develop- signaled the will to target and sanction excessive pricing. This subject
ment (phase III products), to fully assess the impact of the merger on is clearly a global trend and is to be watched in the following years,
competing clinical research programmes for ovarian and skin cancer although its modalities will be different in each local jurisdiction, since
and, ultimately, on innovation competition. The Commission also practices are very strongly conditioned by the local pricing system
emphasised the importance of innovation competition with respect and regulations.
to biosimilars in the Pfizer/Hospira merger of 4 August 2015, in which In this context, patent settlements remain a risky endeavour con-
it considered that because there is room for differentiation strategies sidering the strict case law developments on both sides of the Atlantic.
and non-price competition between biosimilars, the number of differ- The US First Circuit confirmed on 22 February 2016 in In re Loestrin 24
entiated biosimilars for price competition is important as it is less likely FE Antitrust Litigation that non-cash reverse payments (in this case an
that few biosimilar competitors can deliver significant price reductions agreement by the originator not to market an authorised generic prod-
than typically observed for generics. E-health platforms and databases uct during the generic challenger’s 180-day exclusivity period to settle
are also raising an increasing number of antitrust concerns evolving litigation under the Hatch-Waxman Act and in exchange for delayed
around data access and interoperability, aspects which were analysed generic entry) are subject to antitrust scrutiny under the Sherman Act.
by the Commission in the Sanofi/Google JV in February 2016. Meanwhile, in the EU the General Court confirmed in Lundbeck that
Outside the merger arena, the pressure to lower drug prices will patent settlements can constitute a restriction ‘by object’ although the
drive enforcement and private actions against unilateral and con- upcoming Servier judgments may provide further guidance for under-
certed conduct across jurisdictions. takings in the coming months. These concepts have also been adopted
Two years after the Daraprim scandal, excessive prices remain a by other authorities around the world, such as the Japan Fair Trade
clear enforcement priority of the new administration in the US where Commission, which in 2015 published a report alerting pharmaceuti-
litigation is expected to be particularly intense. The year 2017 started cal companies in Japan to the reverse payment issue.
with Mallinckrodt’s agreement to pay US$100 million to settle charges More generally, companies should pay close attention to any
by the FTC and five states for having taken advantage of its monop- type of life-cycle management strategy, including misleading repre-
oly in the market for ACTH drugs by raising the price per vial from sentations and slandering. By way of example, in Israel, the Central
US$40 per vial in 2001 to more than US$34,000 per vial. According to District Court recently sanctioned Sanofi, in a case echoing the EU
the complaint, Mallinckrodt felt threatened that a competitor would AstraZeneca precedent, for misleading the patent office by knowingly
obtain the US rights to Synacthen, a competing drug used in Europe submitting incorrect information regarding the circumstances of the
and Canada to treat infantile seizures and allegedly outbid several discovery that led to its patent application. Similarly, in Brazil, the
competitors to obtain the US rights to Synacthen from Novartis AG. Council for Economic Defence Tribunal found, in June 2015, that Eli
Also in January of 2017, three makers of diabetes treatments were Lilly abused its rights by presenting misleading information to courts.
named in a class action lawsuit in a federal court in Massachusetts for A further investigation is also pending in relation to alleged conduct by
having increased the price of insulin by over 150 per cent during the AstraZeneca to deter generic entry, including ring-fencing practices
past five years. Generics are not shielded from risk as shown by the regarding its IP rights and ‘sham litigations’ before courts. In France,
first charges resulting brought by the DOJ against two former senior in October 2016, the French Supreme Court upheld Sanofi’s generic
generic pharmaceutical executives for their roles in conspiracies to fix denigration fine imposed by the French Competition Authority in 2013.
www.gettingthedealthrough.com 5
© Law Business Research 2017
INTRODUCTION Norton Rose Fulbright LLP
Public tenders are another obvious area of enforcement risks as regarded as competitors when the licensee company operates on the
shown in Spain, Portugal or Mexico, as is medicine distribution. In market solely by virtue of that agreement, and whether national com-
China, the NDRC fined US device manufacturer Medtronic US$17 mil- petition authorities can define the relevant market autonomously with
lion for engaging in resale price maintenance in December 2016 and, regard to the content of marketing authorisations (Case C-179/16,
in the same month, the Shanghai Price Bureau fined Smith & Nephew Hoffmann-La Roche). Still in the EU, parallel trade remains an ever-
for similar conduct. In Germany, the Federal Cartel Office raided drug contentious area, as shown by the number of recent or pending inter-
wholesalers (some of whom had already been sanctioned for simi- nal market cases before the Court of Justice (See, eg, cases C-277/15,
lar conduct in 2006) suspected of illegal collusion and in Spain, the Servoprax (language obstacles to parallel imported medical products),
above-mentioned investigation against Aspen initiated by the Spanish C-297/15, Ferring Lægemidler (repackaging and use trademark law) and
Competition Authority also involves a suspected vertical agreement C-148/15, Deutsche Parkinson Vereinigung (fixed prices in Germany for
with a distributor. Cross-distribution of medicine is also trending in prescription-only medicine)).
the EU. Following referral by the Italian Council of State (the ICS) in It is also interesting to note that other authorities are following the
the Lucentis/Avastin case, the Court of Justice will provide guidance trend of the EU Commission and using sector inquiries to analyse the
on the assessment of alleged market-sharing agreements and clarify pharmaceutical sector. For example, in India, in 2015, the CCI invited
key issues at the intersection of antitrust and pharmaceutical regula- entities to carry out a study on the pharmaceutical and healthcare
tion, including to what extent parties to a licensing agreement can be industry, the result of which has not been published yet.
6 Getting the Deal Through – Pharmaceutical Antitrust 2017
© Law Business Research 2017
Levy & Salomão Advogados BRAZIL
Brazil
Alexandre Ditzel Faraco, Ana Paula Martinez and Mariana Tavares de Araujo
Levy & Salomão Advogados
Pharmaceutical regulatory law • ANVISA’s Resolution No. 39/2013, which provides for the admin-
istrative proceedings for granting of the Certificate on Good
1 Which legislation sets out the regulatory framework for the
Distribution Practices.
marketing, authorisation and pricing of pharmaceutical
products, including generic drugs? Which bodies are
3 Which aspects of this legislation are most directly relevant
entrusted with enforcing these rules?
to the application of competition law to the pharmaceutical
The main pieces of legislation that set out the regulatory framework for sector?
the pharmaceutical sector in Brazil are:
The most relevant aspects of the Brazilian regulatory framework to
• Law No. 5,991/1973, which provides for the sanitary control of
the application of competition law to the pharmaceutical sector aim to
drugs, medicines, pharmaceutical and related inputs marketing;
promote competition between originator and generic drugs. These are:
• Law No. 6,360/1976, which provides for the sanitary control
• doctors within the public health system shall consider the active
to which medicines, drugs, pharmaceutical and related inputs
ingredient rather than the brand in the prescription;
are subject;
• the government shall organise bids listing the active ingredient
• Law No. 9,782/1999, which defines the national system of sani-
rather than the brand;
tary control and creates the National Health Surveillance Agency
• the entry price of generics has to be at least 35 per cent under the
(ANVISA);
price of the originator product (prices are regulated by CMED); and
• Law No. 9,787/1999, which amends Law No. 6,360/1976 by pro-
• originator companies shall supply samples to generic competitors
viding for generic drugs;
to allow them to produce generics.
• Decree No. 3,675/2000, which provides for special measures
related to the registration of generic drugs;
The intersection between the pharmaceutical sector and competition
• Law No. 10,742/2003, which defines rules for the pharmaceuti-
law is widely recognised by the Brazilian authorities. In 2013, ANVISA
cal sector and creates the Chamber of Drug Market Regulation
and the Council for Economic Defence (CADE) executed a technical
(CMED);
cooperation agreement, with the goal of enhancing the relationship
• Decree No. 4,766/2003, which regulates CMED’s attributions
between the two agencies, through, for example, workshops, techni-
and operation;
cal visits, and joint studies and research. The agreement also provides
• Decree No. 4,937/2003, which regulates article 4 of Law No.
for the exchange of information, reports, databases and other rel-
10,742/2003 to establish the criteria for the adjustment of drugs’
evant documents.
prices; and
• Decree No. 8,077/2013, which regulates the conditions for the
Competition legislation and regulation
functioning of companies subject to sanitary licensing, and the
registration, control and monitoring of products subject to sanitary 4 Which legislation sets out competition law?
control, according to Law No. 6,360/1976. Competition law and practice in Brazil is primarily governed by
Law No. 12,529 of 30 November 2011 (Law No. 12,529/2011 or the
Moreover, there are several regulatory acts from ANVISA regarding Competition Law), which entered into force on 29 May 2012. The com-
matters such as drug registration, licences for pharmaceutical labora- petition law has consolidated the investigative, prosecutorial and adju-
tories and other agents of the pharmaceutical production chain, and dicative competition functions into one independent agency, CADE.
price regulation, the latter made by CMED.
CMED regulates prices for original, branded generic and generic 5 Which authorities investigate and decide on pharmaceutical
drugs, and regularly publishes price lists. Prices of new drugs are mergers and the anticompetitive nature of conduct or
defined based on overall reference values and a basket of other coun- agreements in the pharmaceutical sector?
tries’ market prices.
CADE’s structure includes a tribunal composed of six commission-
ers and a president; a Directorate-General for Competition (DG);
2 Is there specific legislation on the distribution of
a General-Attorney’s Office; and an economics department. With
pharmaceutical products?
respect to merger enforcement, the DG is responsible for clearing sim-
ANVISA is responsible for regulating activities related to the distribu- ple transactions and challenging complex cases before the tribunal,
tion of pharmaceutical products in Brazil. Some of the rules issued by while CADE’s tribunal is responsible for adjudicating complex cases
the agency on distribution activities are: challenged by the DG, by the tribunal itself or by third parties. The
• ANVISA’s Resolution No. 320/2002, which determines duties of DG is also the chief investigative body in matters related to anticom-
companies that distribute pharmaceutical products; petitive practices. CADE’s tribunal is responsible for adjudicating the
• ANVISA’s Resolution No. 204/2006, which establishes that all cases investigated by the DG. All of CADE’s decisions are subject to
undertakings that perform distribution activities, among other judicial review.
things, must comply with the guidelines provided in the Technical Certain anticompetitive conduct (primary cartel conduct) is also
Rules of Good Practices for Distribution and Fractioning of a crime in Brazil. Federal and state public prosecutors are responsible
Pharmaceutical Inputs; and for enforcing the Criminal Statute. Also, the police (local or federal)
may initiate investigations of anticompetitive conduct and report the
results of their investigation to CADE and prosecutors, who may indict
www.gettingthedealthrough.com 7
© Law Business Research 2017
BRAZIL Levy & Salomão Advogados
the individuals. The administrative and criminal authorities have inde- sector inquiry was conducted in 2009 and 2010 by the then Secretariat
pendent roles and powers, and may cooperate on a case-by-case basis. of Economic Law (SDE), following the initiatives of the European
Commission and the US Federal Trade Commission. The SDE sent out
6 What remedies can competition authorities impose for questionnaires to approximately 40 originator companies questioning
anticompetitive conduct or agreements by pharmaceutical practices related to patent extensions. Brazilian Law 5,772/1971 explic-
companies? itly prohibited drug patenting. On the other hand, the Agreement on
Brazil’s competition law applies to corporations, associations of corpo- Trade-Related Aspects of Intellectual Property Rights created an
rations and individuals. For corporations, fines range between 0.1 and obligation for Brazil to protect drug patents, with transitional rules
20 per cent of the company’s or group of companies’ pre-tax turnover (‘pipeline’ patents). The ‘pipeline’ allowed patent requests to be auto-
in the economic sector affected by the conduct in the year prior to the matically approved based on the date of the first foreign filing; the
beginning of the investigation. maximum period for patent protection is 20 years under Brazilian law.
Apart from fines, CADE may also: A number of branded pharmaceutical companies resorted to judi-
• order the publication of the decision in a major newspaper at the cial courts to extend their protection, defending theories such as only
wrongdoer’s expense; the first valid foreign filing should be considered for the purposes of
• prohibit the wrongdoer from participating in public procurement determining the duration of the patent protection (at the time of the
procedures and obtaining funds from public financial institutions sector inquiry, there were over 37 cases pending before the Superior
for up to five years; Court of Justice). The issue was settled in April 2010, when the Superior
• include the wrongdoer’s name in the Brazilian Consumer Court of Justice decided that the date of the first foreign filing is the
Protection List; valid one, even if the filing was later withdrawn (Viagra case).
• recommend that the tax authorities block the wrongdoer from
obtaining tax benefits; 9 To what extent do non-government groups play a role in the
• recommend that the IP authorities grant compulsory licences of application of competition rules to the pharmaceutical sector?
patents held by the wrongdoer; Any individual or entity, including non-government groups, can file
• order a corporate spin-off, transfer of control or sale of assets; and a complaint before CADE’s DG in relation to alleged anticompetitive
• prohibit an individual from exercising market activities on its practices. Non-government groups can also be requested to provide
behalf or representing companies for five years. information in proceedings related to merger review or anticompeti-
tive conducts. Moreover, non-government groups can also petition
The law also includes a broad provision allowing CADE to impose any CADE to be admitted to different proceedings as an ‘interested third
‘sanctions necessary to terminate harmful anticompetitive effects’. party’, as mentioned in question 7.
CADE’s wide-ranging enforcement of this provision may prompt judi- Federal, state and municipal governments, public prosecutors, any
cial appeals. governmental consumer protection agency, publicly held entities and
Regarding anticompetitive conduct in the pharmaceutical sector, private non-profit organisations that have in their bylaws the protec-
CADE’s tribunal has traditionally imposed fines of up to 5 per cent of tion of consumer or antitrust rights and were incorporated at least one
the relevant turnover. year before the filing can stand in class actions related to anticompeti-
tive conducts.
7 Can private parties obtain competition-related remedies Historically, Pró Genericós, the Brazilian association of generic
if they suffer harm from anticompetitive conduct or companies, has been playing a very active role before CADE, bringing
agreements by pharmaceutical companies? What form would most of the complaints challenging life-cycle management strategies
such remedies typically take and how can they be obtained? on the part of originator companies.
At the administrative level, private parties can petition CADE to be
admitted to the administrative proceedings aimed at investigating the Review of mergers
anticompetitive conduct or agreement as an ‘interested third party’. 10 Are the sector-specific features of the pharmaceutical
Such parties have the ability to file arguments or documents with industry taken into account when mergers between two
CADE, but the antitrust authority is responsible for imposing the rem- pharmaceutical companies are being reviewed?
edies deemed necessary.
While analysing mergers concerning the pharmaceutical industry,
Moreover, private parties that were victims of anticompetitive con-
CADE usually considers sector-specific features only in the more com-
duct or agreement may seek recovery of actual damages and lost earn-
plex cases.
ings, and moral damages by filing a judicial lawsuit. Courts may also
Some of these features are listed in the Procedural Guideline for
order other types of relief, such as court injunctions to cease the illegal
setting and performing the antitrust analysis of the relevant drug mar-
conduct. The scope of such orders is broad. Possible examples include
kets, issued by the former SDE. According to this document, the rele-
ordering a defendant to stop selling a product, to change pricing condi-
vant market definition for cases involving the pharmaceutical industry
tions or any other contractual provisions.
should take into account the following features:
There are already damages claims filed by generic drugs against
• medicines are subject to different and specific legislation regarding
originator companies pending before judicial courts and this could rep-
their production, distribution and advertising;
resent an additional area of concern when dealing with non-ordinary
• prescription-bound and over-the-counter (OTC) medicines may
life-cycle management strategies in Brazil.
follow different competition patterns;
• the strong information asymmetry leads to high advertising costs,
8 May the antitrust authority conduct sector-wide inquiries?
especially for OTC products, which may sometimes cause product
If so, have such inquiries ever been conducted into the
differentiation and market segmentation;
pharmaceutical sector and, if so, what was the main outcome?
• there are relevant barriers to entry including patent protection; and
Brazil’s antitrust authorities may conduct sector-wide inquiries. • the strength of generic drugs and strategic brand-positioning for
According to the Competition Law, CADE’s tribunal and DG can retain some medicines should also be taken into account.
professionals to conduct analysis, studies and inspections as well as  
request information from any individual, authority, agency and public 11 How are product and geographic markets typically defined in
or private entities deemed necessary. CADE’s economic department the pharmaceutical sector?
can also, by its own initiative or at the request of CADE’s tribunal or
The product market is generally defined by CADE as including all the
DG, conduct studies and economic opinions. The Competition Law
products and services considered substitutable by consumers because
also provides that the Economic Monitoring Office is the agency
of their features, prices and usage. A relevant market of the product
responsible for competition advocacy, and may, among other meas-
could encompass a certain number of products and services that pre-
ures, develop studies examining competition in specific sectors of the
sent physical, technical or business characteristics that recommend
national economy.
the grouping.
Similarly to other jurisdictions, there is an increasing number of
cases in the pharmaceutical sector being reviewed by CADE, and a
8 Getting the Deal Through – Pharmaceutical Antitrust 2017
© Law Business Research 2017
Levy & Salomão Advogados BRAZIL
CADE has consistently taken as a starting point for market defini- share was under 20 per cent. For the two ACT4 category classes for
tion purposes the anatomical therapeutic chemical (ATC) classification which the resulting concentration was over 20 per cent, CADE resorted
system devised by the European Pharmaceutical Marketing Research to the HHI index, which indicated the high market share was in fact prior
Association (EphMRA) and maintained by EphMRA and IMS Health. to the transaction and was little affected by it. As concentrations were
In most of the cases, CADE has adopted the fourth ATC level over 50 per cent, CADE took a conservative approach and proceeded
(ATC4) as the criterion to define the relevant product market. However, with the analysis of the possibility of exercise of market power, which
CADE has also stated that it may be necessary to analyse pharmaceu- would not be significantly affected by the merger, and thus cleared
tical products at a higher, lower or mixed level of ATC classification the case. More recently, in Merger Case No. 08700.005093/2016-
and based on the effective substitutability of the products in order to 59 (Sanofi and Boehringer Ingelheim), despite finding concentration
define the relevant market. In most of those exercises, CADE took into above 20 per cent in the market segments involved in the transaction
account ATC3 and the drug’s therapeutic use. and a HHI variation above 200 points, CADE cleared the case with-
Also, CADE has considered in the past that originator drugs and out restrictions due to: (i) the fact that the parties’ products included
their generic copies belong to the same relevant product market, as in the same market segment were not close substitutes; and (ii) that
generics can effectively substitute originator drugs after patent expiry, there is a great number of companies with high market share in the seg-
especially if the regulatory system encourages switching – as is the case ments affected. A similar approach was taken by CADE while review-
in Brazil. ing Merger Case No. 08700.006159/2016-28 (Pfizer and AstraZeneca).
Furthermore, in its decisional practice, CADE has defined separate Even though the transaction resulted in a high market share in some
products markets for out-licensing, supply of active pharmaceutical of the affected markets – and in some cases the HHI variation was also
ingredients and contract manufacturing. relevant – CADE cleared the transaction without restrictions because,
From a geographic perspective, CADE has traditionally defined among other things: (i) Pfizer’s high market share was only identified
the market to be national in scope, given the limited weight of imports, considering the scenario in terms of value, which could be related to
the high level of regulation, the obligation for laboratories and medi- drugs over which the company previously had patent; (ii) the mar-
cines to be registered before ANVISA and the fact that pharmaceutical ket share of the parties in terms of units was very low; (iii) new drugs
companies generally offer their medicines throughout the country with entered the market and there is projection of new products; and (iv) the
uniform price policies. presence of important competitors in the affected markets.
12 Is it possible to invoke before the authorities the 14 When is an overlap with respect to products that are being
strengthening of the local or regional research and developed likely to be problematic? How is potential
development activities or efficiency-based arguments to competition assessed?
address antitrust concerns? An overlap concerning products that are being developed may be prob-
CADE traditionally follows a five-step review process provided for in lematic in some scenarios, such as: if the patent rights related to the
the Horizontal Merger Guidelines, consisting of: active principles of the developing product may increase current and
(i) definition of relevant market; potential costs of third parties, and strengthening the merging par-
(ii) determination of the parties’ market share; ties’ dominant position, increasing barriers to entry; or if there is a risk
(iii) assessment of the probability of the parties exercising market that the merged entity will terminate or reduce the development of the
power following the transaction; product to avoid competition with products currently being marketed
(iv) examining the efficiencies; and by the other party to the transaction. In more recent years, CADE has
(v) evaluating the net effect on welfare. reviewed a number of joint ventures between pharmaceutical compa-
nies aimed at developing new products in Brazil. In such cases, com-
Based on this review process, the authorities will consider whether petition concerns arose when the partnership resulted in potential
perceptible efficiencies resulting from the merger are likely to reduce elimination of future competition between the parties, preventing
or reverse adverse effects arising from the transaction. It is incumbent them from entering the market alone.
upon the merging firms to substantiate efficiency claims so that CADE When Pfizer and Orygen filed the formation of a joint venture
can verify by reasonable means the likelihood and magnitude of each aimed at producing and selling up to five biosimilar products in Brazil
asserted efficiency, how and when each would be achieved, how each (Merger Case No. 08700.005601/2014-37), CADE assessed the esti-
would enhance the merged firm’s ability and incentive to compete, and mated market shares and potential horizontal overlaps with regard
why each would be merger-specific. to each relevant ATC4 class. Since there were no relevant horizontal
CADE’s case law shows that efficiencies arguments have limited overlaps, CADE identified no risk of potential competition elimination,
weight in the agency’s decision-making process. Historically, when- leading to the approval of the transaction with no conditions.
ever CADE has reached item (iv), the transaction was either blocked or
cleared subject to substantial remedies. 15 Which remedies will typically be required to resolve any
Non-competition issues, such as industrial policy or public inter- issues that have been identified?
est, are not traditionally factored into the review process. The Competition Law allows CADE to take whatever measures
deemed necessary to ensure the merger would not impact competition,
13 Under which circumstances will a horizontal merger and there is a preference for adopting structural rather than behav-
of companies currently active in the same product and ioural remedies. If CADE finds a transaction to be harmful to compe-
geographical market be considered problematic? tition, it may block it or accept remedies, particularly divestitures of
The Competition Law presumes market power to exist if the par- production facilities, stores, distribution networks or brands. Under
ties jointly hold a share of at least 20 per cent of the market. CADE’s the Competition Law, parties can negotiate undertakings with CADE
recently published Guidelines on Horizontal Mergers describe thresh- to remedy perceived competition issues. Parties can offer undertakings
old levels of market concentration that raise concerns about the possi- from the day of filing up to 30 days following the challenge of the trans-
ble exercise of market power in a few ways: by a single firm unilaterally, action before the tribunal by the DG.
when that firm has a market share of at least 20 per cent; or through For example, in Sanofi/Medley (Merger Case 08012.003189/2009-
coordination of firms (collective dominance) in a market in which the 10), CADE cleared the transaction in 2010 on the condition that the
four-firm concentration ratio is at least 75 per cent and the resulting merged entity would sell three drugs to market players with less than
firm has a market share of at least 10 per cent. If the market concentra- 15 per cent market share to improve competition. The merger entity
tion exceeds either of those levels, CADE proceeds to step three (mar- would otherwise have over 50 per cent of the problematic relevant
ket power exercise). Following the US or the EC standards, CADE’s markets, considered to have high entry barriers. The transaction was
guidelines also consider the Herfindahl-Hirschman Index (HHI) as a also viewed as creating portfolio effects. The case also involved the
measure of concentration. adoption of an interim measure in 2009 aimed to ensure that the par-
For example, when reviewing Merger Case No. ties would preserve the reversibility of the transaction in case CADE
08700.009834/2014-09 (Anovis and União Química), CADE consid- ultimately decided to block it or impose remedies (at that time, CADE
ered that no competition concerns would arise if the combined market
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BRAZIL Levy & Salomão Advogados
did not have a pre-merger review and parties were allowed to close the • assessment of possible efficiencies generated by the practice and
transaction pending CADE’s decision). balance them against potential or actual anticompetitive effects.
16 Would the acquisition of one or more patents or licences be In practice, no case has yet been decided on the basis that harmful con-
subject to merger reporting requirements? If so, when would duct was justified by pro-competitive efficiencies.
that be the case?
Law No. 12,529/2011 requires that a transaction be filed in Brazil if the 18 To what extent are technology licensing agreements
following criteria are met: each of at least two parties to the transaction considered anticompetitive?
meet the turnover threshold; the transaction amounts to ‘a concentra- Article 36 of Brazil’s Competition Law includes as examples of anti-
tion act’; and the transaction produces effects in Brazil, as defined by competitive practices conduct performed through the abuse of intel-
article 2 of the Competition Law (effects test).  lectual property rights, and CADE has been consistently stating that
Brazil’s competition law provides for a minimum-size threshold, the grant of intellectual property rights may lead to anticompetitive
expressed in total revenues derived in Brazil by each of at least two par- effects (when, for example, a party licenses intellectual property rights
ties to the transaction. One party must have Brazilian revenues in the to one party and refuses to do the same to its rivals). Restraints involv-
last fiscal year of at least 750 million reais and the other party 75 million ing intellectual property rights are assessed under the rule of reason,
reais – both the acquirers and sellers, including their whole economic therefore, it is likely that the assessment would take into account the
group, should be taken into account. specific characteristics of each case, and balance potentially competi-
The Competition Law provides that any ‘concentration act’ must tive against anticompetitive effects.
be submitted to CADE for review, provided that the turnover thresh- In 2013, for example, CADE cleared with conditions four trans-
old is met. Whereas the law specifically refers to ‘concentration acts’, it actions involving licensing agreements between Monsanto and four
defines those very broadly as when: other companies (Don Mario Sementes, Nidera Sementes, Syngenta
• two or more companies merge; and Coodetec – Cooperativa Central de Pesquisa Agrícola) in rela-
• one company acquires, directly or indirectly, sole or joint control of tion to the development, production and marketing of soybean seed
another, or even a minority shareholding; with Mosanto’s Intacta RR2 PRO technology. The conditions refer to
• an absorption of other companies takes place; or changes in clauses of the agreement that granted Monsanto the pos-
• a joint venture, an associative contract or a consortium is formed. sibility to influence strategic decisions of the licensee companies (eg,
the agreement established a compensation mechanism for licensee
Finally, the effects test is met whenever a given transaction is wholly companies that was based on the sales of the Intacta product and on
or partially performed within Brazil or, if performed abroad, it is capa- the sales of certified seeds of Monsanto’s competitors).
ble of producing effects within Brazil. This will be the case if the target
to the transaction has a direct or indirect presence within the country 19 To what extent are co-promotion and co-marketing
or the market is global in scope. Direct presence is achieved through, agreements considered anticompetitive?
among other things, a local subsidiary, distributor or sales repre- The Antitrust Law provides no clear-cut guidance on the subject.
sentative. Although indirect presence is most commonly established However, since these agreements are reviewed under the rule of rea-
through export sales into the country, the possibility that CADE con- son, it is likely that the assessment would take into account the specific
siders third-party sales (eg, via a licensing agreement) as evidence of characteristics of each case, and balance potentially pro-competitive
indirect presence in Brazil cannot be ruled out. Intention to enter the and anticompetitive effects.
Brazilian market in the near future may also be considered by CADE
when assessing the potential effects in the country. 20 What other forms of agreement with a competitor are likely
The acquisition of licences of patents would be subject to manda- to be an issue? Can these issues be resolved by appropriate
tory filing assuming the criteria set out above are met. confidentiality provisions?
Under article 36 of Law 12,529/2011, agreements with competitors
Anticompetitive agreements
would be an issue if they ‘have as [their] object or effect’:
17 What is the general framework for assessing whether an • the limitation, restraint or, in any way, harm to open competition or
agreement or practice can be considered anticompetitive? free enterprise;
The basic framework for the assessment of anticompetitive agree- • control over a relevant market for a certain good or service;
ments or conducts in Brazil is set by article 36 of Law No. 12,529/2011. • an increase in profits on a discretionary basis; or
Article 36 deals with all types of anticompetitive conduct other than • engagement in market abuse.
mergers. The Competition Law prohibits acts ‘that have as [their]
object or effect’: Therefore, there is no specific form of agreement that is forbidden a
• the limitation, restraint or, in any way, harm to open competition or priori by the legislation. Besides their object and effect, CADE will take
free enterprise; into consideration the market power held by the involved parties in
• control over a relevant market for a certain good or service; order to assess the likeliness of antitrust risks. For those agreements
• an increase in profits on a discretionary basis; or that may concern the exchange of commercially sensitive information
• engagement in market abuse. among competitors, confidentiality provisions will be useful tools to
help reduce this exchange and thus avoid further antitrust liability.
Article 36(3) contains a lengthy but not exhaustive list of acts that may Cartel cases, however, are an exception to the assessment under
be considered antitrust violations provided they have the object or the rule of reason, as CADE historically defined it as a per se conduct.
effect of distorting competition. Potentially anticompetitive practices CADE also includes in the cartel definition the exchange of commer-
include resale price maintenance, price discrimination, tying sales, cially sensitive information that may lead to the change of market con-
exclusive dealing and refusal to deal. ditions, even if an agreement is not reached by the parties.
CADE Resolution 20/1999 specifically provides that exclusivity
agreements, refusal to deal, price discrimination and other vertical 21 Which aspects of vertical agreements are most likely to raise
restraints are not per se infringements in Brazil and shall be assessed antitrust concerns?
under the rule-of-reason test. Annex II of CADE Resolution No. 20/99 Vertical agreements raise antitrust concerns when they ‘have as [their]
(Annex II) outlines ‘basic criteria for the analysis of restrictive trade object or effect’:
practices’, including: • the limitation, restraint or, in any way, harm to open competition or
• definition of relevant market; free enterprise;
• determination of the defendants’ market share; • control over a relevant market for a certain good or service;
• assessment of the market structure, including barriers to entry and • an increase in profits on a discretionary basis; or
other factors that may affect rivalry; and • engagement in market abuse.
10 Getting the Deal Through – Pharmaceutical Antitrust 2017
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