Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Canada competition chief discusses IP, competition issues facing pharmaceutical industry, (Sep 24, 2014)

By Linda O’Brien, J.D., LL.M.

John Pecman, Canada’s Commissioner of Competition, discussed the Bureau’s enforcement approach to potentially anticompetitive patent litigation settlement agreements and announced the release of a white paper providing the Canadian perspective on the issue, in a September 23 speech before the Global Antitrust Challenges for the Pharmaceutical Industry conference at the George Mason University School of Law in Fairfax, Virginia.

Pecman began his address by noting that, due to the importance of pharmaceuticals to Canada’s health care sector, the Bureau has taken a keen interest in reverse-payment settlements and product-hopping issues, given the possibility that they may delay entry of generic drugs. Patent litigation settlement agreements allow parties to avoid costly litigation, but also may have the potential to prevent or delay timely entry of lower cost, bio-equivalent generic drugs and result in consumers paying higher prices and having less choice.

Pecman disagreed with suggestions that Canada’s regulatory regime governing pharmaceuticals has several unique features that dictate a less vigorous approach to reverse-payment settlements than in the United States or the European Union (EU). He noted that the Bureau was in the process of developing an approach to these types of agreements.

In connection with Pecman’s address, the Bureau has developed a white paper, entitled “Patent Litigation Settlement Agreements: A Canadian Perspective.” This paper provides background information on the regulatory system that governs the entry of generic drugs in Canada, the role of competition legislation in Canada, and the Bureau’s preliminary views on how Canadian competition law could be applied to potentially anti-competitive patent litigation settlement agreements in Canada.

Pharmaceutical sector. The significance of pharmaceuticals to Canada’s health care sector—combined with the role that generic drugs have played in fostering the benefits of competition—has led the Bureau to take an active interest in this sector, Pecman stated.

The Bureau has sought to preserve and promote competition in the pharmaceutical sector through both advocacy and enforcement. As part of its advocacy initiatives, the Bureau published two studies addressing competition issues related to generic competition. The first, entitled “Canadian Generic Drug Sector Study,” was a detailed examination of the Canadian generic drug market and identified reasons why the prices of generic drugs were higher in Canada than in other jurisdictions. The second report, entitled “Benefiting from Generic Drug Competition in Canada: The Way Forward,” contained specific recommendations for private and public drug plan providers on initiatives they could adopt to decrease generic drug prices. Since these reports were published, a number of Canadian provinces have made regulatory changes in order to reduce generic drug prices for both public and private payers.

Additionally, the Bureau hosted a workshop to explore a number of developments in the industry, including international trends in pharmaceuticals and antitrust law, pay-for-delay settlements, and lifecycle management strategies. On the enforcement front, the Bureau has several decades of experience in reviewing mergers in the pharmaceutical sector, and has sought remedies in a significant number of cases over the years, according to Pecman.

The official said that the Bureau would review potentially anti-competitive patent litigation settlement agreements under the criminal conspiracy, the civil agreements, or the abuse of dominance provisions in the Competition Act. He added that decisions on whether to pursue alleged anti-competitive behavior under the criminal or civil provisions of the Act would be based on the facts and evidence available.

Need for notification system. As discussed in more detail in the white paper, Pecman noted that there are areas where Canada’s regulatory regime could be improved. For example, unlike the regime in the United States, where all potential pay-for-delay settlements must be reported, there is currently no such system in Canada. Given the absence of a notification system in Canada, the Bureau does not know when—or even if—pay-for-delay settlements are occurring. This lack of insight challenges the Bureau’s determination to ensure that competition is open and transparent, and that the benefits of competition accrue to both business and consumers.

Canadians are justifiably proud of their publicly-funded universal health care system. But, the benefits of universal health care—such as ready access to primary care practitioners and chronic care facilities—can be easily undermined if drug costs are prohibitively high. The Bureau will continue to scrutinize the activities of the pharmaceutical industry to ensure that competition within it is fair and open, and that both business and consumers enjoy the benefits of a transparent and vibrant marketplace, Pecman concluded.

News: Antitrust