Orphan drugs have a special position under EU pharma laws. Among other things, the EU orphan drug laws grant the marketing authorization holder (MAH) of an orphan drug a 10 year period of so-called “market exclusivity”. According to Article 8(1) of the Regulation (EC) No. 141/2000 on orphan medicinal products, the EU and the EU Member States “shall not, for a period of 10 years, accept another application for a marketing authorization, or grant a marketing authorization or accept an application to extend an existing marketing authorization, for the same therapeutic indication, in respect of a similar medicinal product.” This market exclusivity is a particular incentive granted to pharmaceutical companies that develop orphan drugs.
Now, the Munich Regional Court (Landgericht München I) has decided on 4 August 2023 in a German civil litigation case (case-no.: 21 O 6235/23) that this market exclusivity right also gives the MAH of the orphan drug the subjective right to enforce the market exclusivity also against competitor companies before civil courts. Hence, the enforcement of the market exclusivity is not limited to legal actions against regulatory authorities. As far as we know, this is the first court judgment that confirms this legal position in this area.
The Munich court has also drawn interesting conclusions on the scope and nature of the underlying violation and infringement of the market exclusivity (see below).
This court decision has an interesting case pattern and will probably have a wider impact. The decision was taken in a preliminary injunction case. So, what happened?
Pharma company A. has been marketing the orphan drug S. with four approved indications. Three of these indications still benefit from orphan drug market exclusivity in the EU while this exclusivity has expired for the fourth indication (paroxysmal nocturnal haemoglobinuria or PNH). In April 2023, the competitor company B. received the marketing authorization for a new biosimilar medicinal product for the indication PNH but not for the other three indications of the orphan drug S. Nevertheless, company A. filed a civil action against company B. due to concerns against the promotion of that biosimilar. These concerns were caused by the fact that B. has distributed a (promotional) recommendation letter which included references to a cross-indication use of the biosimilar drug, i.e. a use of the biosimilar also in the three indications that are still under market exclusivity for orphan drug S. This is also referred to as “cross-label use”. Company A. took the position in the court proceedings that this promotional activity can encourage doctors to prescribe the biosimilar for such a cross-label use. Accordingly, A. argued that by doing so, the competitor B. is violating the market exclusivity of drug S. for the remaining three indication.
Already in May 2023, company A. could successfully obtain a preliminary injunction from the Munich Court in which the court ordered that company B. has to cease and desist from distributing its biosimilar product without taking specific accompanying measures that are suitable to protect the remaining orphan drug market exclusivity of drug S. The preliminary injunction was appealed by B. and now, on 4 August 2023, the Munich court issued the said judgment.
Legal Findings of the Court
The Munich court largely upholds its original legal decision. It emphasized that the market exclusivity for orphan drugs also gives an absolute subjective right to the MAH who can enforce this also against competitors before civil courts. The defending company B. had taken the position that the Orphan Drug Regulation only has an impact under public law and prohibits the regulatory agencies to authorize a competitor product but that the regulation does not grant the MAH a claim under civil law against competitors. The court disagreed with this argumentation.
The Munich court stated that the market exclusivity right in its subjective meaning is intended to grant protection against impairments or infringements of the market exclusivity also against other competitors. According to the court’s understanding, the legislator’s intention regarding the market exclusivity right was to create a legal position for the MAH that goes beyond the mere public law rights against regulatory agencies. The court stresses that under the Orphan Drug Regulation, the market exclusivity right is the decisive incentive for companies to invest in the field of orphan drugs and that this is only possible if the MAH is given the legal possibility to take individual action against circumvention or infringements of its rights, even after marketing authorization has been granted.
Furthermore, the court confirmed that such a violation of the market exclusivity of an orphan drug can also be committed if a competitor distributes promotional material that suggests a use of his product in an indication that still enjoys market exclusivity. This aspect is also interesting, since Article 8 of the Orphan Drug Regulation (EC) No. 141/2000 does not explicitly mention the possibility of infringement of the market exclusivity through advertising activities by a competitor.
Practical Implications of the Decision
In its press release, the Munich court reports that the competitor B. has meanwhile decided to withdraw the biosimilar product from the German market.
This new court decision clearly strengthens the position of pharmaceutical companies with orphan drugs. The decision generally strengthens the legal status of the orphan drug market exclusivity. With respect to the EU pharmaceutical rules, the German courts have traditionally been rather reluctant with deriving an own subjective right for granting pharmaceutical companies to take own legal action or go after competitor companies in litigation.
This has also been a chronic issue in Germany in the generics area where complaints of MAHs of originator reference products have been rejected on the ground that they do not enjoy an individual subjective right to challenge a generic authorization. On that issue, the Court of Justice of the EU (CJEU) had decided in the Olainfarm case in 2014 (Case C-104/13) that EU law grants legal standing for MAHs of reference products against a generic authorization on the basis of their data exclusivity rights and had broadened the concept of subjective public rights of MAHs under Directive 2001/83/EC (see our E-Alert on the Olainfarm case of the CJEU).
This new Munich court decision also underscores the importance of a careful legal review of promotional material and its implications in the market.
This decision of the Munich court is subject to appeal and may not be the last word in this case. It will also be interesting to see how other courts in Germany and the EU will handle such cases. Therefore, pharmaceutical companies and stakeholders should closely monitor the legal developments. The Life Sciences Team of Covington & Burling LLP in Frankfurt (Germany) will continue to monitor the situation and report about further developments.