EU Upholds $63 Million Fine for AstraZeneca

(CN) - Europe's highest court upheld a $63 million fine against pharmaceutical giant AstraZeneca for blocking the generic version of its Losec ulcer medication in the EU marketplace.

The European Commission originally fined AstraZeneca $72 million in 2005, after finding that the company had deliberately lied to member state patent offices in an effort to extend its protection of Losec.

Regulators also found that AstraZeneca attempted to undo marketing authorizations for the drug in Denmark, Sweden and Norway to delay the generics and prevent parallel imports of Losec into those markets.

AstraZeneca appealed the commission's fine to the EU's lower court, which rejected most of the company's arguments. However, the court lowered the fine by $9 million, finding that regulators failed to prove that AstraZeneca's actions had an effect on the market in Denmark and Norway.

The Court of Justice of the European Union upheld the lower court's decision Thursday, rejecting AstraZeneca's argument that the general court made errors of law in finding for the commission.

AstraZeneca's appeal is "tantamount to an argument that where an undertaking in a dominant position considers that it can, in accordance with a legally defensible interpretation, lay claim to a right, it may use any means to obtain that right, and even have recourse to highly misleading representations with the aim of leading public authorities into error," the Luxembourg-based court wrote. "Such an approach is manifestly not consistent with competition on the merits and the specific responsibility on such an undertaking not to prejudice, by its conduct, effective and undistorted competition within the European Union."

The patent extensions -- called supplementary protection certificates, or SPCs -- which AstraZeneca obtained through misrepresentations to patent offices in Germany, Finland, Norway, Belgium, Luxembourg, the Netherlands and Austria harmed competition, according to the court.

"As regards, in particular, those countries where the misleading representations enabled AZ to obtain unlawful SPCs, the appellants cannot deny the anti-competitive effect of those representations on the ground that the applications for the SPCs were filed between five and six years before the entry into force of those SPCs and that, until that time, AZ's rights were protected by lawful patents. Not only do such unlawful SPCs lead, as the General Court observed ... to a significant exclusionary effect after the expiry of the basic patents, but they are also liable to alter the structure of the market by adversely affecting potential competition even before that expiry. In the light of those anti-competitive effects, the General Court was also fully entitled ... to regard as irrelevant the fact that, in Germany, following legal proceedings brought by a manufacturer of generic products, the SPC was annulled before the expiry of the basic patent," the court wrote.

The high court also rejected AstraZeneca's argument that since it was not the dominant force in the market at the time, its actions cannot be construed as anti-competitive. And the company's attempts to yank generic marketing authorizations after its patents expired damaged the marketplace, according to the court.

"[D]eregistering a MA (market authorization) is not equivalent to a property right," the court wrote. "Consequently, the fact that, in the light of its special responsibility, an undertaking in a dominant position cannot make use of such a possibility in such a way as to prevent or render more difficult the entry of competitors on the market, unless it can, as an undertaking engaged in competition on the merits, rely on grounds relating to the defense of its legitimate interests or on objective justifications, does not constitute either an 'effective expropriation' of such a right or an obligation to grant a license, but a straightforward restriction of the options available under European Union law."

The high court concluded by affirming the $63 million fine, which AstraZeneca called "excessive."

"As regards the first part of that ground of appeal, concerning the novelty of the two abuses of a dominant position, it must be stated that those abuses ... had the deliberate aim of keeping competitors away from the market. It is therefore common ground that even though the Commission and the Courts of the European Union had not yet had the opportunity to rule specifically on conduct such as that which characterized those abuses, AZ was aware of the highly anti-competitive nature of its conduct and should have expected it to be incompatible with competition rules under European Union law. In addition, as it has already been explained in the assessment of the third and fifth grounds of appeal, the General Court was fully entitled to find that that conduct was manifestly contrary to competition on the merits," the court concluded.

The European Commission welcomed the high court's decision.

"The Court of Justice ruled for the first time on a Commission decision on the abuse of a dominant market position in the pharmaceutical sector. Today's judgment is significant as it clarifies a number of issues of principle in relation to market definition, dominance and the concept of an abuse in the meaning of [the EU constitution]," the regulators said in a statement ."In particular, it confirms that misuses of regulatory procedures can in certain circumstances constitute abuses of a dominant position," the commission continued. "The judgment also confirms the Commission's method to define the relevant product market and existence of a dominant position in the pharmaceutical sector."

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