On 9 September 2020, the French Competition Authority (“FCA”) issued an infringement decision sanctioning Novartis and Roche with record fines for the pharmaceutical sector in France, totaling 444 million euros, for having allegedly abused a collective dominant position on the French market for the treatment of wet age-related macular degeneration (“wet AMD”).

Background

Genentech, a biotechnology company and part of the Roche group which specializes in research and development of medicines designed to treat serious and life-threatening diseases, developed two different drugs: Avastin (bevacizumab) and Lucentis (ranibizumab), each in a different therapeutic area. While Avastin is indicated for the treatment of certain types of cancer, Lucentis was subsequently specifically designed and authorized for the treatment of ophthalmic diseases, including wet AMD. Genentech retained the commercialization rights for these two drugs in the United States (“US”). Outside of the US, Genentech in-licensed the commercialization of Avastin to Roche and out-licensed the commercialization of Lucentis to Novartis. Roche thus obtained a European marketing authorization (“MA”) for Avastin in 2005, with an indication in oncology, and Novartis’s MA for Lucentis was granted two years later, in 2007, with an indication in ophthalmology.

As the active ingredient of Avastin and Lucentis is to some extent similar, although not identical (ranibizumab being presented as a fragment of bevacizumab), empirical research revealed that Avastin, when used to treat cancer on patients that also suffered from wet AMD, also had a positive effect on wet AMD. Given the lesser cost of Avastin than Lucentis, some ophthalmologists began to prescribe this drug off-label to treat wet AMD, which gave rise to a worldwide scientific debate around the efficacy and safety of Avastin used in ophthalmology that, according to the French health authorities themselves, did not stabilize before 2014.

In France, the prescription of Avastin in ophthalmology was less widespread than in other countries (both before and after Lucentis was approved and placed on the market), in particular due to the specificities of the French regulatory framework, which strictly limits physicians’ ability to prescribe a drug off-label and the fact that Avastin is only available in hospitals while wet AMD is mostly treated by ophthalmologists in private practice outside of hospital.

Despite these hurdles, the French Health Authority (“ANSM”) sought to legitimize the use of Avastin off-label in wet AMD, through the mechanism of so-called RTU (temporary recommendation of use), which provides a legal framework for the off-label use of certain drugs, notably when they can treat rare diseases for which there is no alternative with a MA.

However, according to the FCA, the ANSM’s initiatives would have been blocked, or at least slowed down, by the behavior of Novartis and Roche which allegedly held a collective dominant position on the market for wet AMD and adopted an alarmist or even misleading communication strategy towards the health authorities and, as concerns Novartis, also towards health professionals. More particularly, Roche and Novartis would have knowingly emphasized the risks associated with the off-label use of Avastin, in order to protect the sales of Lucentis on the French territory (to the benefit of both Novartis, as licensee of the drug, and the Roche group, as licensor of the drug through Genentech).

Novartis and Roche’s practices would have prevented the emergence of a cheaper alternative to Lucentis in France which, at the time of the practices, was amongst the most expensive treatments and, thus, very costly for the national health system. Consequently, both companies were heavily sanctioned by the FCA, which imposed an unprecedented fine for the pharmaceutical sector, totaling 444 million euros, out of which 385 million euros for Novartis and 59.7 million euros for Roche.

The very broad stance taken by the FCA to characterize a collective dominant position of Novartis, Roche and Genentech

Unlike the Italian Competition Authority, which had condemned Roche and Novartis in 2014 under Article 101 of the Treaty on the functioning of the European Union (“TFEU”), the FCA – which probably lacked evidence of a concerted practice – chose to analyze Roche and Novartis’ practices under Article 102 TFEU and its French equivalent, Article L. 420-2 of the French Commercial Code, by establishing a collective dominant position of Roche and Novartis in the market for the treatment of wet AMD.

To characterize such collective dominant position, the FCA did not hesitate to depart from well-established case-law, considering that (i) Novartis’ minority shareholding in the Roche group (amounting to 6% of the capital and less than a third of voting rights, with no control over the company), combined with (ii) the existence of license agreements between Genentech and Roche, on the one hand, and between Genentech and Novartis, on the other hand, sufficed to align their incentives and lead them to adopt a common position on the market.

The FCA also conveniently retained that Avastin and Lucentis belonged to the same product market, as in practice they are both used to treat wet AMD, in spite of their respective indications for cancer and ophthalmic diseases and the numerous legal and practical obstacles to the prescription of Avastin off-label in wet AMD.

This unprecedented approach, both as regards market definition and the characterization of a collective dominance, is highly challengeable and raises major concerns for the pharmaceutical industry as a whole. Indeed, if standard license agreements can now be enough to create the conditions of a collective dominance situation, almost all pharmaceutical companies should be worried that they may possibly be found dominant on certain markets, even though they do not act directly in such markets (by virtue of the license given to a third party).

The questionable demonstration by the FCA of an abuse resulting primarily from the companies’ participation in an ongoing scientific debate

Once it had established the existence of a collective dominant position, the FCA went on to analyze the communications of Roche and Novartis on the off-label use of Avastin which, despite the contemporaneous scientific debate on the safety of Avastin when used in the eye, were nonetheless found to be overcautious and, thus, abusive.

In more detail, the FCA characterized two abuses.

On the one hand, it found that Novartis engaged in a structured communication campaign exaggerating the risks associated with the off-label use of Avastin in comparison to Lucentis, targeting health professionals and the public in general. According to the FCA, although not concerning a generic product (as Avastin and Lucentis do not have the same active ingredient), this amounted to disparagement of a competing drug, and contributed to limit off-label prescriptions of Avastin by ophthalmologists, thereby maintaining artificially high prices for Lucentis and, to some extent, Eylea (another drug indicated for the treatment of wet AMD, launched at the end of 2013, and whose price was at the time determined by reference to that of Lucentis only).

On the other hand, the FCA found that Novartis and Roche would have adopted an alarmist, and sometimes even misleading, communication strategy, dictated notably by Genentech, targeting more specifically health authorities.

According to the FCA, despite (i) the on-going debate on the risks associated with the off-label use of Avastin, which had been underlined by the authorities themselves, and (ii) the fact that the regulatory framework itself limited the off-label use of Avastin, the companies’ communications towards the French health authorities still amounted to an abuse. The FCA considered that this communication was intended to instill doubt regarding the safety profile of Avastin when used in the eye, thereby delaying the ANSM’s initiative to legitimize the off-label use of Avastin, although the latter – in presence of an alternative such as Lucentis – could in practice not move forward with the adoption of a RTU for Avastin in wet AMD pending the change of the law that only happened in 2014, after the end of the alleged infringement.

With regard to this second abuse, it is worth noting that the FCA went one step further than it did in the Durogesic case where, with the blessing of the Paris Court of Appeal, the FCA sanctioned Janssen-Cilag for its repeated interventions before the ANSM that had as their objective to raise an unfounded legal debate with a view to delay the grant of a MA to a generic drug. This situation drastically contrasts with that of Roche and Novartis which, contrary to Janssen-Cilag, limited themselves to engage in scientific debate with the ANSM, for which the latter normally has an exclusive jurisdiction.

Against this background, if the Court of Appeal were to uphold the FCA’s approach, this would considerably reduce the scope of action and freedom of speech of any pharmaceutical company. In any event, the magnitude of the fines imposed on Roche and Novartis sends a clear message to the industry that any conduct intended to prevent the development of cheaper alternatives to expensive drugs, constitutes a potentially serious infringement of competition law.

Key points and takeaways

• This case is a reminder that pharmaceutical companies must be extremely vigilant when it comes to both their internal documents and their external communications, with all stakeholders. Such communications should always remain as objective and neutral as possible, to avoid a potential finding of infringement under competition law.
• It also confirms the growing powers of the FCA, which has declared itself competent to review under antitrust rules any action taken by a pharmaceutical company, including its participation in an on-going scientific debate, irrespective of the fact that it may not have the required knowledge and expertise to appropriately appreciate the validity of the scientific arguments brought to the attention of health authorities.
• Finally, this case illustrates the current political tension in the pharmaceutical sector between the absolute necessity, on the one hand, to reward innovation and the political agenda, on the other hand, to minimize the costs of treatments for the healthcare system.