Earlier this year, the French Competition Authority (“FCA”) held that Sanofi-Aventis infringed the competition laws by implementing a “denigration strategy” aimed at convincing healthcare professionals to limit prescriptions and sales of generic versions of its branded product, Plavix.  As punishment for the infringement, the FCA fined Sanofi-Aventis €40.6 million.

This decision is another example of competition authorities extending the application of the competition rules to cover any activity perceived to not be “competition on the merits”.  In combination with the very low standards applied by the FCA to find that a company is dominant, this case raises serious concerns for pharmaceutical companies, as criticism of generic pharmaceuticals or other behaviour outside of “competition on the merits” could trigger investigations and large fines.

The alleged anticompetitive practices

According to the FCA, Sanofi-Aventis’ representatives misled doctors and pharmacists by casting doubts on the quality and safety of competing generics, and tried to dissuade them from substituting generic versions of Plavix, except with Sanofi-Aventis’ own generic version of Plavix (Clopidogrel Winthrop).  In particular, the representatives highlighted the differences between Sanofi-Aventis’ products and competing generics, i.e., the type of salt used and therapeutic indications.  In addition, professionals were warned of potential liability if medical problems were to arise following the prescription/sale of generics.

Assessment

Was Sanofi-Aventis Dominant?

As unilateral actions (such as detailing) will only be covered by the competition laws if a company is dominant, the FCA first was required to establish that Sanofi-Aventis held a dominant market position.  While dominance depends upon a number of factors, in practice competition authorities principally rely on the parties’ share of the relevant market.

In this case, while Sanofi-Aventis may not have had a high market share had the FCA adopted a broad market definition, including other competing molecules, the FCA instead adopted a very narrow market definition at the molecular level, comprising only products with the active ingredient clopidogrel.  Following its traditional approach, the FCA based its conclusion almost exclusively on the views of prescribing doctors which the FCA views to be the “essential criterion” in the determination of the relevant market in the pharmaceutical sector.  In particular, the FCA found that doctors considered clopidogrel to be a must-have molecule and that products based on other molecules did not seem to exercise any competitive pressure.

It is worth noting that the FCA’s approach is inconsistent with the guidance provided by the EU General Court in its AstraZeneca judgment in 2010, which indicated that authorities should consider other relevant factors, including pricing, in defining the relevant market.  Such factors constitute important evidence of competitive constraints by other molecules, and may lead to a broader market definition.  For example, price competition in negotiations for pricing and reimbursement or market access with public health authorities is a very important element of competition in the pharmaceutical industry.

However, based on the narrow market definition adopted by the FCA, comprising only products with the active ingredient clopidogrel, Sanofi-Aventis’ held a very high market share, and the FCA thus found that Sanofi-Aventis was dominant.

Were the Actions an Abuse?

In the AstraZeneca case, the Court of Justice of the EU established that activities outside of “competition on the merits” may constitute an abuse of a dominant market position.  However, the Court did not define what activities do and do not constitute “competition on the merits”.

In most industries, promoting one’s products and emphasizing distinctions with competing products should clearly constitute “competition on the merits”.  Indeed, a little competitive bombast may be seen as normal in promotions (e.g. toothpaste advertisements claiming that 4 out of 5 dentists recommend a specific toothpaste).  So the question raised by the present decision is when do such promotional efforts cross the line and constitute an abuse meriting large fines?

In its decision, the FCA acknowledged that denigration is not always an abuse, but that the pharmaceutical sector can be distinguished from other industries (e.g., telecommunications), because:

• healthcare professionals adopt a cautious approach towards medicines, especially new ones, and tend to favour the products they already know;
• this reluctance to novelty – especially in view of the seriousness of the conditions treated by Plavix – is reinforced in the case of generics;
• the reputation of the company concerned and the trust put in it by professionals also play an important role;
• numerous professionals were influenced by Sanofi-Aventis’ promotional efforts, leading to a declining substitution rate for Plavix and a high penetration rate for Sanofi-Aventis’ own generic medicine.

According to the FCA, pharmaceutical companies may very well highlight the objective qualities of their products, but they should not emphasise their differences with competitors’ products in such a way as to raise objective doubts as to the quality and security of the latter.  It follows that the mere provision of negative, incomplete and/or ambiguous information on competitors’ products could allegedly be enough in this sector to constitute abusive denigration in violation of the competition laws.

Next Steps

Sanofi-Aventis has appealed the FCA’s decision to the Paris Court of Appeal.  Of particular interest on appeal will be whether the FCA’s special standard for denigration in the pharmaceutical sector makes sense, particularly in light of the fact that doctors and pharmacists are sophisticated customers which can assess by themselves whether a generic product is equivalent in terms of efficacy and safety.  This is likely the reason why doctors still have the possibility to refuse to substitute generics for branded products.  In this context, it would seem legitimate for pharmaceutical companies (both originators and generics) to promote the benefits of their products to healthcare professionals.

In addition to the present case, the FCA is expected to issue two further decisions regarding denigration allegations by pharmaceutical companies within the next year.  These cases concern complaints filed by generics manufacturers against Schering-Plough and Janssen-Cilag.  The FCA has also recently launched an inquiry into the pharmaceutical sector.