Competition Bureau Discontinues Pharma Abuse of Dominance Investigation

Published by the Competition / Antitrust & Foreign Investment Group

On December 20, 2018, the Competition Bureau (Bureau) discontinued its abuse of dominance investigation into certain brand name drug manufacturers (Brands), including Celgene, Pfizer and Sanofi-Aventis, that it had launched in November 2016. The Bureau investigated whether such Brands were making it difficult for generic drug manufacturers (Generics) to get access to samples (known also as Canadian reference products), which Generics require in order to develop bio-equivalent generic versions of brand name drugs. The Bureau expressed concerns about the conduct, but concluded that it had insufficient evidence of anti-competitive effects to bring an application before the Competition Tribunal. The Bureau left open the possibility of enforcement action in the future.

Overview

In its position statement, the Bureau explained that its inquiry focused on: (i) alleged restrictions imposed by Brands on their wholesalers or distributors that could prevent them from supplying samples to Generics, and (ii) the manner in which Brands dealt with direct requests from Generics for samples. Additionally, it was alleged that Celgene operated a risk management program (required by Health Canada to control access to drugs that pose health and safety risks) in an unduly restrictive manner that blocked Generics’ access to samples, which was not necessary to achieve the purpose of the program.

The Bureau did not find that Celgene’s risk management program limited the supply of samples to Generics in an anti-competitive fashion. However, the Bureau appears to have found that Celgene refused to supply samples covered by a risk management program to any Generic, despite concluding that Generics have requested such samples. The Bureau found that Generics were able to procure samples from Celgene through other means. As such, the Bureau was not convinced that Celgene’s conduct resulted in a substantial prevention or lessening of competition, a prerequisite for a finding of abuse of dominance.

The Bureau did not find sufficient evidence that the policies of the other Brands inhibited Generics’ access to samples and, in fact, found that Generics were able to access samples. Since generic entry was not substantially delayed or prevented, this required element of abuse of dominance was not present again. The message from the Bureau appears to be that if generics did not have alternative sources, the Bureau may well have taken action against Celgene.       

Guidance to Pharmaceutical Companies

In addition to discussing the specific allegations that were the subject of inquiry, the Bureau offered some general guidance to the pharmaceutical industry:

  • In order to abuse one’s dominance, one must be dominant in a market. Generally, the Bureau considers a given active ingredient to constitute a product market (i.e., a brand name drug plus any generic versions) and Canada to be the geographic market. As such, the Bureau is likely to conclude that a Brand has 100% market share, and is, therefore, dominant, with respect to brand name drugs where generic entry has not yet occurred.
  • Section 79(5) of the Competition Act states that abuse of dominance does not apply to conduct that is the mere exercise of an intellectual property right, such as a pharmaceutical patent. The Bureau’s view is that Brands blocking Generics’ access to their samples to stifle the development of generic drugs is more than the mere exercise of an intellectual property right and, thus, could constitute abuse of dominance provided that the other factors are met as well.
  • The Bureau noticed that it is becoming more popular for Brands to limit distribution of their drugs (e.g., only through specialty pharmacies) and cautioned that, to the extent the limitation is implemented to foreclose generic entry, the practice could raise competition issues.

Takeaways

The pharmaceutical industry continues to be an area of focus for the Bureau. For example, we previously reported on the Bureau’s discontinued investigation into Alcon for “product hopping” and its white paper on pharmaceutical patent settlements. Moreover, as the Bureau noted, Generics’ access to samples is an issue in the U.S. as well. The U.S. Food & Drug Administration has found that risk management programs have been used to block Generics from obtaining samples, and this issue is being addressed by proposed legislative changes. It is common for the Bureau to pick up on issues that have been identified in the U.S., and it appears that that is what happened with this inquiry.

Even though Celgene, Pfizer and Sanofi-Aventis avoided enforcement action, a Bureau inquiry creates risk (legal, financial, reputational and otherwise), not to mention the costs and distraction of dealing with the investigation. Before implementing any policy or practice that could restrict the ability of Generics to bring generic drugs to market, a competition law assessment should be undertaken.

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