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“Pay for delay”, privity and Lundbeck

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12/09/2013

The pharmaceuticals giant, Lundbeck, has been the subject of two important decisions in recent weeks – the first concerning the practice of pharmaceuticals companies seeking to prevent or delay the entry onto the market of generic competitors and the second relating to privity of interest in a patent dispute.

“Pay for delay”

The European Commission (the Commission) has been investigating perceived anti-competitive practices in the pharmaceuticals sector. The Commission launched an inquiry into the sector in January 2008, publishing its final report in July 2009. The final report found that the market was not functioning as it should, and that these deficiencies could largely be attributed to delays in the entry of generic medicines to the market. In particular, the Commission concluded that originator drug companies were using a number of methods to extend the commercial life of their medicines and to prevent or delay the entry of generics. The Commission has been monitoring patent settlement agreements, reflecting its concern that such agreements are being used as a means to delay the entry of generic products onto the market and thus to extend artificially the patent-holder’s monopoly.

The Commission alleged that Lundbeck concluded agreements with generic competitors to prevent the market entry of generic versions of its antidepressant drug citalopram, following the expiry of its patents relating to the drug itself. Essentially the Commission claimed that Lundbeck paid substantial sums to the generic competitors in return for a delay in launching their generic products, so that the Lundbeck version of the drug would remain the only one on the market, despite the fact that the relevant patent was no longer in force. Following an investigation, the Commission decided on 19 June 2013 that, in 2002, Lundbeck and the generic competitors were guilty of entering into anti-competitive arrangements and fines of €93.8 million and €52.2 million were imposed upon Lundbeck and the other companies respectively.

The size of the fines is indicative of how seriously the issue of delaying generic competitors is regarded by the competition authorities, although we understand Lundbeck is planning an appeal, based on ongoing patent protection which it claims exists in relation to the production process used for the drug.

Privity of interest

In another case involving Lundbeck, this time in the English Courts [1], Lundbeck is the defendant in patent invalidity proceedings. Lundbeck had already faced a validity attack in respect of its patent in 2005 brought by a number of different pharmaceuticals companies, including a company called Arrow. The Claimant in the present case, Resolution, had belonged to the same group as Arrow but when it became independent it launched its own invalidity proceedings. At first instance Arnold J held that Resolution could proceed with its challenge because it had no interest itself in the patent in 2005. Lundbeck argued essentially that Arrow had argued its case on behalf of Resolution and therefore Resolution was bound by the 2005 decision – in other words there was a “privity of interest” between Arrow and Resolution.

In upholding Arnold J’s decision, the Court of Appeal explained that while the subject matter in the instant proceedings was the same as in 2005 there was insufficient degree of identity between the parties to the 2005 litigation and Resolution so as to bar Resolution from beginning a fresh action. Whilst Arrow and Resolution had been under common control, there had been no subsisting relationship between the two parties from which it could be inferred that Arrow was conducting the 2005 litigation on behalf of Resolution.

The judgment is helpful to any party seeking to re-litigate a patent in circumstances where it was a member of the same group of companies as an earlier litigant – this will not, of itself, operate to preclude re-litigation.

Postscript: Permission to admit experimental evidence

Matters did not end there for Lundbeck. In the same litigation involving Resolution, the High Court gave judgment on 30 July 2013 on Resolution’s application for permission to admit experimental evidence in its claim. Resolution had provided Lundbeck with a notice of experiments and invited certain admissions by Lundbeck. Lundbeck’s response left Resolution unsure as to what case it had to meet at trial and, accordingly, Resolution conducted a second set of experiments. It was those revised experiments that it now sought to adduce, with Lundbeck resisting the application on the basis that it needed the opportunity to take instructions on the differences between the procedures used in the two sets of experiments.

In granting Resolution’s application, Norris J considered that the differences between the procedures were not so significant as to prompt the conclusion that the second set of experiments should not be admitted. As the trial was expedited, it was appropriate to take a preliminary decision on the basis that the experiments were to be admitted at trial. Lundbeck was given the opportunity to review whether it could challenge the probative value of the experiments after it had taken instructions, and provision was made for it to apply to object to the experiments being admitted in that event.

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[1] Resolution Chemicals Ltd v H Lundbeck A/S [2013] EWCA Civ 924

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