Dominance in the pharma sector - An EU/US Perspective

Conference organized by Concurrences Review in partnership with Compass Lexecon and White & Case.


Paul Csiszár, Miguel de la Mano, Mark Gidley and James Killick debated three hot antitrust topics in the pharmaceutical sector: (i) predatory innovation or “product hopping”, (ii) the evolution of market definition and (iii) the role of competition law when it comes to pharmaceutical pricing.

Predatory innovation or “Product hopping”

Mark Gidley introduced the topic by noting that over the past three to four years, the pharmaceutical sector in the US has seen a series of class actions claiming abusive “product hopping”. Claimants have argued that pharmaceutical companies have made the entry of generic drugs into the market more difficult by making incremental improvements to a patented drug. This theory is not new. In the 1981 Yale Law Journal, [Ordover, J., and R. Willig, “An economic definition of predation: Pricing and product innovation”, Yale Law Journal 91: 8- 53] set out a theoretical framework describing under what circumstances “too much innovation” could amount to “predatory innovation”. It was initially included as one of the potential antitrust theories of harm of the US Department of Justice (“DoJ”) during its investigation into IBM, which was dropped in 1982. In more recent cases, in the pharmaceutical sector, competition enforcers have intervened as amicus curiae supporting the theory. This antitrust theory is however quite unusual in that it essentially claims that there can be “too much innovation”, or “too rapid” innovation preventing generics to keep up and therefore compete with originators. It is unclear why society would want to slow down innovation for drugs that alleviate patients’ suffering. The argument put forward in the context of these class actions seems to be that if “incremental” innovation was prohibited, the resources could instead be spent on developing new cures. However, this fails to take into account the fact that nearly two-thirds of medicinal advances are “tweaks” based on existing drugs, and sometimes the fifth or sixth drug in a class turns out to be the best (Lipitor is an example of that for statins). There is no good definition of what constitutes “product hopping” and very little guidance from competition authorities. Innovation itself is inherently unpredictable. When designing medical research one cannot beforehand know whether innovation will be incremental or profound. He ended by posing a provocative question to the panel: can you define a threshold above which innovation is OK and below which it is unlawful?

Photos © Emilie Gomez

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  • White & Case (Washington)
  • DG COMP (Brussels)
  • Compass Lexecon (Brussels)
  • White & Case (Brussels)