The Competitive Edge

EC releases new study assessing ‘killer acquisitions’ in the pharma sector

At the very end of November 2024, the European Commission (EC) released its final report setting out the results of an ex-post evaluation of EU competition enforcement in pharma markets regarding ‘killer acquisitions’ (where larger companies acquire smaller firms with significant growth potential, with the primary assumed intent of eliminating future competition). Competition authorities have pointed to some studies and theories that raise concerns that killer acquisitions can reduce R&D efforts and innovation. This is especially true in the pharma sector, where there are findings that market consolidation can result in significant reductions in research spending and patent output of the merged firms.
The EC’s primary findings have been that:

• A high number of agreements concern a close overlap between drug projects and are followed by a product or project discontinuation, warranting further scrutiny;
• Extensive access to information and data on killer acquisitions is needed to assess their intent and potential effects;
• Enforcement of Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), as well as the extension of national authorities’ call-in powers to review deals, may be bolstered to act against smaller M&A deals and R&D / licensing agreements with a killer acquisition objective or effect.

EC imposes €462.6 million fine on Teva for abuse of patent system

On 31 October 2024, the EC announced that it had fined Teva Pharmaceuticals (Teva) €462.6 million for abusing its dominant position to delay competition to its medicine for the treatment of multiple sclerosis, Copaxone. The EC found that Teva artificially extended the (divisional) patent protection of Copaxone and systematically spread misleading and disparaging information about a competing product to hinder its market entry and uptake.
Further, the EC said that after the patent expired, Teva sought to prolong the drug’s IP protection by filing and withdrawing secondary patent applications, thereby forcing competitors into legal challenges each time an application was made and frustrating competitors’ market entry. Given the relatively novel legal theories of harm and mechanisms underpinning the findings and the fine, it is expected (and in fact Teva has confirmed) that it will appeal the decision.

The Paris Court of Appeal confirms two fines imposed by the French Competition Authority (FCA) to suppliers active in the glasses and corrective lenses distribution sector for restricting online sales

In two decisions dated 12 December 2024, the Paris Court of Appeal confirmed the fines imposed for restricting online sales through anti-competitive vertical agreements and discriminatory practices.

• the 125 m€ fine on Luxottica company for having controlled the distributors’ ability to lower prices through promotional operations (even for luxury products) is confirmed to be a resale price maintenance agreement since it did not allow distributors to reduce the suppliers’ recommended retail price. This price-control, along with the prohibition of online sales of sunglasses and glass frames by suppliers, is a restriction by object.
• The fine of 81 m€ on EssilorLuxottica for implementing abusive discriminatory practices towards online distributors, including (i) delivery restrictions of brands adapted to online selling, (ii) the restriction of trademark and logo use and (iii) warranty limitations is also confirmed since these practices were not objectively necessary or counterbalanced by efficiency gains.

The FCA’s General Rapporteur announces that a statement of objections has been sent to companies active in the potentially infectious medical waste treatment sector in French overseas territories

On 2 October 2024, the sending of a statement of objection to companies active in the potentially infectious medical waste treatment market in one of the French overseas territories has been confirmed. It follows the complaint of a new entity active in this sector, which accused the established companies of having concluded and implemented an agreement that led to the creation of a monopoly and the elimination of all competition in this territory.
The FCA specified in its communication that the agreement could have had effects on the related market for the collection and transport of potentially infectious medical waste, in which the new entity also operates.

German Competition Law Extends Exemptions for Hospital Mergers

Mergers in the hospital sector have traditionally been in the focus of the German Federal Cartel Office (FCO) and its enforcement activities. Since 2003, more than 400 mergers in the hospital sector have been notified to the FCO. The authority intervened in several cases and blocked some transactions due to concerns of market concentration and potential creation of dominant market positions. Other transactions were abandoned by the parties to pre-empt a prohibition as the FCO raised concerns during the proceedings.

In 2021, the legislator introduced exemptions for certain mergers, for example such that involved hospitals receiving state funding (e.g., from the Hospital Structure Fund) and that concerned a cross-location concentration.

Nevertheless, some hospital mergers were still subject to a merger review. The FCO recently blocked a hospital merger (see press release here), which reignited the debate on competition enforcement in the hospital sector. The discussion intensified with the German Government's push for hospital consolidation, reflected in the Hospital Care Improvement Act (Act) adopted in December 2024. The Act aims to increase efficiency, secure and improve the quality of patients treatment, ensure comprehensive medical care, and reduce bureaucracy.

The Act introduces additional exemptions from merger control rules in the hospital sector. For exemptions to apply, a merger still needs to involve a cross-location concentration, but it’s no longer required that a public funding be involved. Instead, the competent state planning authority can authorize the merger in writing.
This means that concentrations in the hospital sector are not subject to German merger control rules if:

1. The concentration involves a cross-location concentration of several hospitals or medical specializations of hospitals;
2. The relevant state authorities responsible for hospital planning confirm in writing that they consider the concentration to be necessary for the improvement of hospital care and that this does not run counter antitrust rules based on the information available to the relevant state authorities; and
3. The concentration is implemented by 31 December 2030.

Hospital mergers that are implemented after 31 December 2030 and until 31 December 2038 continue to be exempted under the previous exemption that involve a publicly subsidised hospital.

It is important to note that not all hospital mergers may benefit from the new exemption. Mergers that do not involve multiple locations will continue to be subject to the merger control regime subject to the relevant thresholds being met.

The Act and the new exemption for hospital mergers have not been welcomed across the board. In an interview, the President of the German Federal Cartel Office, Andreas Mundt, was critical of the potential impact of the legislative amendment:
“There is clearly a need for reform in the hospital sector. However, we criticise the fact that the federal states can now approve any hospital mergers without our competition-related merger control. Now there is a risk that patients will no longer have a choice in some places, which in turn may indirectly affect quality.” (see the interview here)

This statement very much nails down the dilemma that the German hospital market is currently facing: Securing a more efficient and improved medical care while at the same time ensuring that the competition rules continue to apply and ensure that patients still have a choice between hospitals owned by different operators.

Pfizer and Flynn Pharma fined by UK antitrust court over epilepsy-drug pricing behaviours

On 20 November 2024, the Competition Appeal Tribunal (CAT) ruled that Pfizer and Flynn Pharma had breached competition law in abusing their dominant positions by charging excessive prices for a life-saving epilepsy drug, phenytoin sodium capsules. This is the second CAT ruling in the case. An earlier CMA decision was overturned on appeal (going to the Court of Appeal) and the case was remitted to the Competition and Markets Authority (CMA), which reconsidered and re-cast its infringement finding.

While the CAT actually set aside the recast infringement decision by the CMA, it nonetheless made its own infringement findings, observing that both Pfizer and Flynn Pharma were “gouging the market in a manner that can only be characterised as unjustifiable or opportunistic or – in a word – unfair”. The CAT imposed fines of £62 million on Pfizer and £6.7 million on Flynn Pharma. It remains to be seen whether the case works its way back to the Court of Appeal. While the CAT set aside the CMA’s findings, as the CMA’s own findings were substantively similar, it may consider the ruling a distinction without a difference.

CMA accepts Vifor Pharma’s proposals to end probe, including £23 million payment

On 10 December 2024, the CMA announced that Vifor Pharma had made certain remedial proposals following an investigation into the pharma company’s allegedly anti-competitive practices in the intravenous iron deficiency market, including the spreading of misinformation to healthcare professionals about the safety of a rival treatment.

The proposals include (i) making a payment of £23 million to the NHS to rectify the adverse financial impact on the health service; (ii) writing to healthcare professionals to correct any potentially misleading communications regarding the safety of the iron-deficiency treatments; and (iii) introducing several measures to prevent the dissemination of misleading information in the future. The CMA is currently inviting views from interested parties on the proposed commitments as part of a consultation which closes on 17 January 2025.

CMA imposes a penalty of £1.5 million on Viatris Inc.

On 22 November 2024, the CMA announced that it had fined pharma company Viatris Inc. (Viatris) £1.5 million for failing to comply with a legally binding order imposed during the CMA’s review of its deal with women’s health company, Theramex. During the investigation, the CMA imposed an Initial Enforcement Order under the Enterprise Act 2002 which sought to prevent any action which could prejudice the CMA’s inquiry or any potential remedies that the CMA might impose – Viatris breached these restrictions by implementing changes to key members of its UK management team without the CMA’s consent, and then failed to notify the CMA of the breach. The CMA found that there was no reasonable excuse for Viatris’ failure to comply with the rules, and that the breaches were capable of having an adverse impact on the investigation. The merger itself was cleared subject to the divestment by the merged entity of the rights to commercialise the problematic ‘overlap’ products (Femoston and Duphaston) in the UK.