The Belgian Competition Authority (“BCA”) imposed a fine of EUR 2.78 million on Novartis for disparaging its competitor’s products. Following a press release in January, the full decision (non-confidential version) has now been published.
The case concerns two drugs, Lucentis and Avastin, respectively marketed by Novartis and Roche to treat wet age-related macular degeneration (“AMD”), a serious and long-lasting eye disorder that causes blurred vision or a blind spot in the central vision. While Avastin is officially only registered to treat certain types of cancer, multiple government-sponsored studies concluded that both Avastin and Lucentis offered the same therapeutic value for treating AMD. Avastin has been used off-label to treat AMD since 2005.
Novartis however kept issuing warnings regarding alleged safety risks related to the use of Avastin, thereby favouring its own Lucentis product, which was about 20 times more expensive than Avastin.
The BCA took the view that Novartis’ warning communications, targeting medical professionals, hospitals and public authorities, constituted abusive denigration under competition law, as Novartis’ claims were not supported by any scientific evidence. Similar proceedings in France and Italy resulted in much higher fines (444 million and 182.5 million respectively). The French decision and fine have however recently been overturned on appeal.
What is “denigration”?
“Denigration” refers the practice whereby a dominant undertaking systematically portrays competing products or services as unsafe, inefficient or of significantly lower quality. The purpose of this behaviour is to influence customers’ purchasing patterns and to disincentivize the customer from buying the competitor’s products. It goes without saying that this strategy is more likely to be successful (and therefore more likely to be abusive) in markets like the pharmaceutical sector where trust in products or services is a decisive factor.
Denigrating one’s competitor is of course not always abusive. Case law and decisional practice in France has shown that four elements are required for denigration to be abusive:
- the denigrating firm must seek to obtain a commercial advantage;
- the denigrating firm’s dominant position must make the denigration possible (i.e. there must be a link between the dominance and the denigration);
- the denigrating statements must not be based on objective findings or verified assertions; and
- the commercial statements are liable to influence the structure of the market.
According to the European Court of Justice, denigration constitutes a ‘by object’ (i.e. very severe) restriction of competition if it concerns the dissemination, in the context of scientific uncertainty, of misleading information relating to adverse reactions resulting from the use of a medicinal product, with a view to reducing competitive pressure.
The BCA’s decision
In its decision, the BCA found that Novartis had abused its dominant position for AMD therapies between May 2011 and December 2015.
The decision contains a number of interesting arguments on denigration as an abuse. We highlight a few of these points below.
First, Novartis argued that it had merely pointed out objective differences between the drugs, which cannot be seen as misleading under the case law.
The BCA dismissed this argument. According to the authority, a dominant undertaking must refrain from misleading or exaggerated communications that may have an impact on the market. This can include skewing the scientific or regulatory debate or knowingly complicating the search for correct conclusions by providing incomplete information. The authority confirms that a dominant undertaking is allowed to highlight the (comparative) qualities of its products, as well as to criticise the methodology and results of studies concerning its products, in so far as such critiques are part of a reasonable scientific debate. The BCA however found that Novartis went beyond the limits of that debate, by emphasising, in an alarmist and exaggerated manner, the possible side effects of Avastin, the uncertainties related to the results of comparison studies as well as the legal risks which ophthalmologists could face if they were to consider treating AMD with Avastin, contrary to scientific and medical consensus.
This point has had an important impact on the duration which the BCA considered. The BCA concluded that Novartis’ communications only really departed from scientific consensus from 2011 onwards, following a couple of studies on the use of Avastin and Lucentis for treatment of AMD. Consequently, only at that point did the BCA consider the communications to have become abusive.
Novartis also claimed that denigration can only be abusive if the behaviour is capable of excluding as efficient competitors. In other words, Novartis argued that the BCA must apply the as-efficient-competitor (AEC) test. In this context, Novartis argued that off-label treatments are per definition not as efficient as competing, approved indications. The BCA however reminded Novartis that the AEC test is not relevant to establish an abuse in non-pricing practices, such denigration. In addition, the BCA found that denigration was in any event not part of “competition on the merits” and that both drugs are scientifically proven to be equally efficient.
In addition, Novartis argued that it was not proven that its conduct was intended to influence the competent authorities and practitioners. Similarly, Novartis reasoned that there can be no abuse as long as the competent drug authorities are still able to take impartial decisions. The BCA however found that Novartis did have a clear intention to reduce the use of off-label Avastin for treating AMD by emphasising the risks relating to its use, and even had an intention to exclude Roche from the market. The BCA in this regard stressed again that Novartis’ communications were not supported by scientific and medical consensus. According to the BCA, Novartis was fully aware of the fact that its strategy had an impact on prices, and should also have been aware that, because of the particular characteristics of the market, the strategy was also able to impact the structure of the market.
Final thoughts
In comparison to the fines imposed in Italy and France, the BCA’s EUR 2.78 million fine may appear low. The non-confidential version of the decision does not allow us to draw any final conclusions on this point, but there are a number of factors which may explain this difference. First, the duration of the infringement in Belgium is significantly shorter than in the French and Italian cases. Second, the BCA took into account a number of mitigating circumstances, in particular the fact that at the time of the infringement there had not been a lot of cases on denigration. As a result of those mitigating circumstances, the BCA lowered the base amount of the fine by 50-60%. Finally, the infringement took place under the old legal framework which provided that the BCA could not impose a fine higher than 10% of the Belgian turnover. In the meantime, this ceiling has been increased to 10% of the worldwide turnover.
It is notable that denigration cases are clearly being pioneered by national competition authorities, under the auspices of the European Court of Justice. Leading cases so far have taken place in France, Italy, Denmark, and now Belgium.
Finally, this case is also fully aligned with BCA’s most recent enforcement priorities, which identify the pharmaceutical sector as a priority sector.
VISIT OUR COMPETITION & EU HOMEPAGE
For further information, please contact:
Baptist Vleeshouwers, Bird & Bird
baptist.vleeshouwers@twobirds.com
