PharmaLaw

Contents – Pharma Industry Legal Developments

Focus on Parallel Imports Biotechnology Inventions Direct to Consumer Clinical Trials OTC Switching NICE Product Liability Pricing Domain Names Disclaimer

PHARMA INDUSTRY LEGAL DEVELOPMENTS

Focus on Parallel Imports

We look below at key recent parallel import news including international exhaustion, the compatibility of the PPRS with EU competition laws, the ability of one party to an agreement which proves to be anti-competitive to claim damages against the other, imposing quotas on wholesalers, GSK’s dual pricing in Spain and the effect of the withdrawal of the marketing authorisation in the country of import.

• French Decision on Refusal/Restriction of Supplies – Readers may well be aware that the European Court of Justice (ECJ) is still considering the Commission and API appeals against the decision of the Court of First Instance (CFI). The CFI decided that orders placed by Spanish wholesalers under a quota system imposed by Bayer did not amount to an agreement. The basis of the Commission’s appeal is primarily that the CFI’s interpretation of what was an agreement was unduly restrictive. Following the CFI decision and pending the appeal, some companies have imposed quotas on the supply chain. These companies may have been reassured by a recent decision reached by the French Competition Council following the CFI position and refusing to intervene against schemes that imposed quotas and refusal of supply.

  Note –This option would be unlikely to succeed with a product considered to be dominant in a particular market – commonly taken as ATC level 3 or 4 but depending on substitutability. In such a case supply restriction or refusal to supply such a product could constitute an abuse of a dominant position contrary to Article 82 of the Treaty.

• PPRS –The UK Court of Appeal has dismissed the appeal by the Association of Parallel Importers (API) who had argued that the modulation provisions of the PPRS scheme amounted to an anti-competitive agreement contrary to Article 81 of the Treaty of Rome. The Court decided that the modulation provision and the 4.5% price cut to which it was related, were part and parcel of the whole scheme and could not be considered in isolation. It also considered any investigation into whether the modulation provisions did in fact hinder parallel imports was beyond its remit in this case. Permission to appeal to the House of Lords was refused.

• Recovery of Damages by a Party to an Anti-Competitive Agreement – A case from outside the pharmaceutical industry may nevertheless be of significant importance. The decision involved the Courage brewing group and one of its tenants. The ECJ decided that one party to an agreement who suffered damages could sue the other if that loss was due to provisions that were found to be anti-competitive. The ECJ held that damages could be awarded where the claimant was in a much weaker bargaining position than the other.

  Note – This case may have implications if the ECJ uphold the Commission’s case in the Bayer case (above). If the Court were to consider that a quota restriction did amount to an agreement, the wholesalers might be able to recover damages.

• International Exhaustion – In November, the ECJ gave a boost to brand owners. Tesco and other supermarkets had imported designer goods from outside the EU. The ECJ had already decided that the EU principle of ‘exhaustion of rights’ (upon which the European parallel import business is based) does not apply where the goods were first marketed outside the EU and that such goods cannot be resold within it unless the brand owner consents. The decision in the Levi Strauss case establishes the principle that a trader in such goods cannot assume consent from the absence of a prohibition – the brand owner will need to have given positive consent.

  Note – The debate on international exhaustion has limited direct application to pharmaceuticals in that it currently would be necessary for the parallel importer to obtain a full marketing authorisation for the imported product – the situation that technically prevailed for intra-Community pharmaceutical imports before the UK PLPI scheme was introduced.

• GSK Dual Pricing in Spain – GSK have appealed to the CFI against the decision of the European Commission disallowing GSK’s dual pricing scheme in Spain under which GSK charged one price for domestic sales and a higher price for exports. The Commission considered that the terms imposing the pricing structure infringed Article 81. As with the Bayer case above, the argument revolves around what constitutes an ‘agreement’. GSK also argue that the terms compensate for market distortion caused by Spanish pricing policies.

• MA Withdrawal – The Advocate General to the ECJ has delivered an opinion to the effect that where the marketing authorisation is withdrawn by the holder for reasons other than public health, the parallel importer does not need to stop import. In 1999 Ferring had withdrawn its old ‘grandfathered’ authorisation for Minirin in Germany and replaced it with an MA under the European regulatory regime with changes to the formulation of the product. Ferring sought to prevent Eurim-Pharm from continuing parallel import of the product. The AG was of the opinion that to require cessation under these circumstances would be in breach of the free movement provisions of the Treaty of Rome. The decision of the ECJ is awaited.

  Note - The Court is also being asked to give its opinion on a similar argument in Finland where AstraZeneca withdrew the Losec MA.

Biotech Inventions

The European Court of Justice (ECJ) rejected the Dutch challenge to the legality of the EC Directive on the protection of biotechnology inventions (Directive 98/44). However this is not the end of the story. France and Germany seem to have arrived at their own interpretations. In addition, the Commission continues to pressure the member states that are still to implement the Directive.

• ECJ Decision - To the industry’s great relief, the ECJ turned down the case brought by the Dutch government who, along with Italy and Norway, argued that the Directive was illegal. The ECJ decided that the Directive does not undermine human dignity since the human body effectively may not be patented and is justified balanced against the risks of different patent protection in each member state.

• National Implementation - As at the end of 2001, eleven member states (including the UK) were reported not to have fully implemented the Directive. Commission action against those member states is ongoing. In addition, France and Germany have both come up with their own proposed variations. France has introduced a draft law that implements the Directive with the exception of Article 5 (which deals with patenting elements of the human body) replacing it with the language from its own national intellectual property code. Germany announced in January 2002 that it wants to add explanatory language to confirm that gene functions are patentable but not the genes themselves. It remains to be seen how sympathetic the Commission are to these national ‘tweaks’ to what is supposed to be harmonised legislation.

  Note- These developments come against a background of an EC Commission Communication published in January 2002 identifying the future issues for the industry and proposing a 30-point action plan including strengthened intellectual property protection. It will be discussed at the Barcelona European Council meeting in March.

Direct to Consumer

With pharmaceutical companies hoping to gain limited rights to advertise, prescription medicines in Europe, direct-to-consumers, in the areas of diabetes, AIDS and asthma, we report on apparent confusion as to the Commission’s real intent and EFPIA website guidance.

• HAI Meeting - Scrip (2712) report on a meeting held in January by Health Action International in which it was noted that the English translation was the only one that referred to “public advertising”. The French version refers to “information to the public”. Scrip suggested that this appeared to throw doubt on the Commission’s desire for DTC advertising. There was said to be almost unanimous opposition at the meeting to the supposed Commission proposals by patient and consumer groups. The Dutch Ministry of Health also reportedly announced their opposition.

• EFPIA Website Guidance – Following a request from the European Commission, the EFPIA has proposed guidelines for company websites available to healthcare professionals, patients and the public in the EU. It addresses what content would be appropriate as a) general company information, b) health education material, c) information for health professionals and d) information about products to the general public. The guidance confirms that information to the public confined to an unedited summary of product characteristics and patient information leaflet for each product, information on the products consistent with SmPC and PIL and the full unedited public assessment report can be provided but the site should contain advice that patients should consult a health professional for further information.

  The guidance also addresses the conditions upon which email enquiries, links from other sites, website addresses in the packaging of products and scientific and medical information on the site would be allowable. It stresses the need for compliance with legislation on privacy and the protection of personal data.

Clinical Trials

In addition to the legislative changes needed in consequence of the EU Clinical Trials Directive, there have been developments in the UK in the industry/investigator relationship.

• The Directive - The MCA and the Department of Health published a briefing note on the UK implementation plans. The Directive must be implemented by 1 May 2003 to come into effect on 1 May 2004. Meanwhile the Commission is seeking comments by May 2002 on the changes to GMP required to extend it to investigational medicinal products. Finally the Commission is yet to indicate whether it will adopt the ICH 1997 Good Clinical Practice Guidelines.

• GMC Research Guidance – In February, the UK General Medical Council published its guidance for doctors conducting medical research in the UK backed by the threat of disciplinary sanctions. Of particular relevance are clauses 13 and 14 which deal with conflicts of interest and funding and payments. These guidelines come in the wake of criticism in the medical journals and the pressure the industry is alleged to place on researchers. The journals state that they will not review or publish papers based on studies where the sponsor has sole control over data and publication arguing that the study manuscript should be the intellectual property of the author not the sponsor. It may be appropriate to review investigator agreements in the light of these new policies.

OTC Switching

The MCA is seeking to facilitate and speed up the OTC switching process and also has issued a discussion document proposing an extension of the list of potential pharmacy only products.

• Changes to the Switch Process - The Agency is proposing that the legal status of the product becomes part of the marketing authorisation. This would allow variation at any time rather than requiring the applicant to undergo the current twice-yearly statutory instrument process. The new procedure will still allow for public consultation and an export advisory committee for reclassification is also envisaged.

  Note – The new proposed procedure would give the first applicant a 90- day marketing advantage during which subsequent piggyback applications could not be filed. There is currently no EU equivalent for the 3 years data exclusivity given to switch data in the US.

• OTC Product List – An MCA-led working group has prepared a discussion document proposing an extended list of products that may be eligible for pharmacy-only status. The list includes lifestyle drugs and drugs for chronic conditions and is intended to establish a consensus around the types of product that may be eligible for reclassification. The full list is available in www.mca.gov.uk

NICE

As well as the news that guidance from NICE is to become mandatory, we also report on the House of Commons Health Select Committee Review and the risk-sharing deals with multiple sclerosis products.

• Status of NICE Guidance – From 1 January 2002 it has become a requirement for health authorities and primary care trusts to provide funding for treatments recommended by the National Institute for Clinical Excellence. Whilst welcomed by the industry, the primary care organisations, represented by the NHS Alliance, complained that without a ring-fenced pot of money for NICE-approved treatments, other services could suffer.

• Select Committee Review – The Select Committee has held an enquiry into NICE over four weekly hearings involving stakeholders including patient organisations and health authorities. The ABPI attended the second hearing, NICE itself the third with the Department of Health giving evidence at the fourth hearing. It is reported in pharmafile.com that there appeared to be a growing consensus behind splitting the roles of clinical and cost effectiveness.

• MS Medicines – In January 2002 and after over 2 years, NICE reiterated the advice given in October 2001 against the use of multiple sclerosis therapies. However this has led to a novel risk-sharing deal under which the companies involved would cut the price of their products on a sliding scale if the estimated benefits of treatment were not seen at 2-year intervals over a 10-year period.

Product Liability

We look at three recent claims in the UK concerning Baycol, Epilim and Seroxat.

• Baycol – A group of 22 patients are reported to be planning to sue Bayer for alleged adverse effects sustained from Baycol (cerivastatin), the lipid-lowering agent. Side effects complained of include depression, stomach and kidney problems and heart failure. In Germany, US lawyers were understood to have joined forces with a German law firm so as to add German and other non-US plaintiffs to a US class action (under which the damages would potentially be greater than any likely award in Europe). Bayer insists that the joining of the cases is inappropriate for both medical and legal reasons. Claimant lawyers suggest that damages in total could amount to $800 million. The drug was said to be linked with 52 deaths including 5 in Germany from amongst its 6 million patients.

• Valproate – It was recently reported that 20 patients in the UK have been granted legal aid to sue a number of doctors and authorities claiming that the anti-epileptic, sodium valproate caused foetal defects. Valproate is marketed by Sanofi-Synthelabo as Epilim and by CP as Orpelt. Despite strong warnings on the labelling about use of the products in women of childbearing age, it is alleged that the risks were not sufficiently brought to the attention of relevant patients.

• Seroxat – Claimants’ solicitors are also reported to be representing between 30 and 40 patients alleging to be suffering from dependence on or addiction to the SSRI antidepressant Seroxat.

Pricing

The UK Competition Commission Appeal Tribunal has upheld the Office of Fair Trading decision fining Napp for abuse of its dominant position of MST.

This confirms the first fine to be imposed under the Competition Act with the tribunal stressing that predatory pricing by a company with a dominant position in a particular market (Napp offered a 90% discount to hospitals against the community pharmacy price) even for a short time could be an abuse. However the fine was cut from £2.2 million to £1 million due to mitigating factors, which included the existence of the PPRS. The tribunal also upheld the OFT’s pricing instruction to sell MST tablets to hospitals at not less than 20% of an NHS price which was to be cut by 15%.

Domain Name Disputes

Disputes over ‘.co.uk’ domain names may now be resolved under the new Nominet dispute resolution policy. It recently reached its first decision when Eli Lilly persuaded the independent expert that the name ‘Xigris.co.uk’ should be transferred to them.

‘Xigris’ is a Lilly trade mark and an ex-employee beat the company to registering the domain name. The expert upheld Lilly’s case on the grounds that the domain name was identical to the mark and as an employee, the registrant had not been given permission by Lilly to register the name.

Note– There have been a number of UK court cases on ‘cyber squatting’ as this practice is known and this decision reflects the willingness of tribunals and courts to order transfer when there is clear evidence that the person originally registering the domain name intends to profit from another with a legitimate interest in the name.

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