Updated: April 27, 2010 (Initial publication: April 26, 2010)

Bibliographic Reports : Books

III-1.4 : "Concurrence, santé publique, innovation et médicament" (Competition, public health, innovation, and medicine), under the scientific direction of Marie-Anne Frison-Roche, collection "Droit et Economie", L.G.D.J Lextenso éditions, Paris, January 2010, 525 pages.

by Marie Cullin

The book "Concurrence, santé publique, innovation et médicament" (Competition, public health, innovation, and medicine), published by French publisher L.G.D.J., provides an analysis of the pharmaceutical sector’s oscillation between competition and regulation. The first part of the study is consecrated to "Médicament dans la regulation des dépenses de santé" (The role of medicine in the regulation of healthcare costs), which exposes health-related questions in their most government-controlled aspect. The second part conceives health through its social function, with "Innovation et incitation à la recherche" (Innovation and incentive to perform research), while the last part explains "Les difficultés des prises en compte par le droit de la concurrence des spécificités du secteur pharmaceutique" (Competition Law’s difficult apprehension of the pharmaceutical sector’s specificities). The three parts of this study offer an exhaustive presentation of the stakes involved in healthcare law, economy, and policy, and clearly shows that the hybrid nature of this sector makes it more a matter for regulation rather than for competition law.

 

The elements of analysis unique to the healthcare sector are set forth by Marie-Anne Frison-Roche in her introductory article, Politique publique de maitrise de santé, protection de la santé publique, droit général de la concurrence et régulation sectorielle (Public healthcare management policies, protection of public health, general competition law, and sector-specific regulation), which highlights the importance in this sector of finding a balance between the principle of competition and other objectives, such as permitting universal access to healthcare. The sector analysis report published by the European Commission on 8 July 2009 tends, however, to gloss over the regulatory aspect, and insists on the competition-related section of the healthcare sector, even though the Commission’s objectives make this a domain in which politics should have the predominant role.
The issue of attaining equilibrium between competition, innovation, and public health is common to all the parts of this work, and especially the first one, entitled Médicament dans la régulation des dépenses de santé (The role of medicine in the regulation of healthcare spending). Here appear the two major distinctions within the subject: by reason of the subject matter (between pioneer and generic drugs), and by reason of place (between medicine as practiced in general practices in towns, and medicine as practiced in hospitals). The contribution of Christophe Hénin and Anne Servoir, Environnement règlementaire et concurrentiel du marché du médicament en ville et à l’hôpital (The regulatory and competition-law environment of the market for medicines in towns and in hospitals) clearly shows the foundations of this geographic separation, reminding us that, in France, medicine sold to hospitals is subject to an invitation to tender, controlled by competition law, while medicine sold by private pharmacies is modelled upon the State’s preference for generic drugs. Healthcare spending regulation also depends upon the Contrôle des profits et contrôle des marges (Control of profits and control of margins), an article by Christophe Hénin and Anne-Catherine Maillois-Perroy. This control is minimal on the European Union level, but maximal in France. In France, this control takes the form of a convention on profits, where medicine prices are administratively fixed between manufacturers and the Comité Economique des Produits de Santé (Economic Committee on Healthcare Products). Moreover, healthcare products are also regulated upstream using taxation. The control of margins, on the other hand, only applies to wholesale distributors. The French system of medicine reimbursement and its impact on competition is then addressed by these authors, who highlight the pertinence of the geographic distinction between town and hospital, since price negotiation between hospitals and drug manufacturers has become, under the influence of the Autorité de la Concurrence (French Competition Authority), a procedure of centralised negotiation. If we distance ourselves from classically conceived competition, such a system is justified by the specificities of medicine itself. Xavier Coron then considers la promotion du médicament (sales promotion of medicines), considering whether practices in this area are loyal and transparent. The promotion of pioneer drugs involves visits to doctors by medical representatives, while generic drug manufacturers prefer advertising. This distinction should not, however, be regarded as a distortion of competition, because drug promotion is highly controlled by four cumulative sets of regulation, which provide a solid basis upon which the principles of quality and integrity are fostered. Economic constraints are not only imposed on drug manufacturers, and Blandine Fauran, in her study on la substitution générique (generic substitution) demonstrates these collective constraints and their consequences in terms of public policy. In France, pharmacists have the power to substitute pioneer drugs with generic drugs, without having to obtain permission from the prescribing doctor or from the drug manufacturer. This political decision in favour of generic drugs is supported by strong incentive measures: pharmacists earn more on the sale of a generic substitute, and patients who refuse generic substitutes cannot benefit from tiers-payant (direct payment for the drug to the pharmacy by the insurer, which means that when he refuses to accept a generic substitute, the patient has to advance the money for his treatment and physically file a claim for reimbursement later). Moreover, doctors have to write prescriptions in International Non-proprietary Name (INN), and are no longer supposed to write the brand name of the medicine. These procedures are part of a national healthcare spending control policy, which does not imply that generics are not controlled. In order to be marketed, a generic drug must be included in the French repertory of generic drugs, and fulfil safety requirements. Therefore, generic substitution is performed when the generic substitute is “therapeutically equivalent”, a concept with no legal definition, and which is so polymorph that generic groups of medicines can be extended rather far. It would be better to develop a ‘continuous’ generics policy, which allows for cost control while preserving innovation. Finally, Christophe Hénin and Floriane Chauveau present les différents systèmes de regulation du prix et du remboursement du médicament, comparaisons européennes et convergences, (European comparisons and convergences in medicine pricing and reimbursement), which analyses the movements towards divergence and convergence currently at work in Europe. The European Commission’s Transparency Directive of December 21st, 1988 establishes the principle of state sovereignty in the matter, limited only by the necessity of transparently setting the criteria upon which drug pricing and reimbursement are based. The atomisation of legal systems is, however, counterbalanced by an informal system called the Pharmaceutical Forum, where States exchange information, and can even agree upon converging or common policies. However, regulatory systems remain separate and different. In France, prices are set by agreement between manufacturers and the Comité économique des produits de santé (Economic Committee on Healthcare Products); the German system indirectly controls prices through the level of reimbursement; Great Britain has established an incentive system. As concerns reimbursement, two systems coexist: positive lists, which contain all medicines eligible for reimbursement (the French system); or negative lists, which only contain medicines ineligible for reimbursement. This dichotomy is completed by the system of grouping medicines by analogous therapeutic effects, which means that the State can decide to reimburse all medicines in function of the lowest-priced medicine of the group, which incites manufacturers to lower their prices. This is a system also applied in France, where medicines in the same category are all assigned the same reimbursement price.
 
The second part of the work concerns l’innovation et l’incitation à la recherche (innovation and incentive to perform research). It opens with a panorama of the question, drawn up by Christel Jouan Flahaut, Pierre-Yves Arnoux and Isabelle Delattre: Recherche, Innovation et Progrès therapeutique dans le secteur du médicament: état des lieux et perspectives (Therapeutic Research, Innovation and Progress in the field of medicine: current situation, stakes, and perspectives), which first of all reminds us that medicine production has been extremely rich over the last fifty years, and was accompanied by the implementation of a regulatory framework to ensure the safety of these products: preclinical tests, clinical trials, studies after obtaining the market authorisation, preliminary economic evaluation of the product by the Commission de la Transparance (French Transparency Commission), a part of the Haute Autorité de la Santé (French High Authority for Health). However, research’s stakes lie in knowledge and competitiveness. Research’s corollary is extremely high financial costs, and a very long timeframe, since the development of a medicine from a newly discovered molecule takes an average of 12 years. These difficulties have modified not only the use of the patent, but also that of research itself, which has left the sphere of innovation to become incremental. Therefore, the way research is carried out is modelled, on one hand, on the needs of innovation with the implementation of the incremental patent, and on the other hand, by new research requirements themselves: an aging population, access to healthcare, creating regional research networks. Contemporary research is also focused on nanotechnologies, cellular therapy, and other treatments of the future whose cost requires a redefinition of the way research is performed in order to allow innovation in coming years. Jérôme Peigne continues with an article on the age-old question of la Protection des données de l’Autorisation de mise sur le marché : entre enjeu concurrentiel et défense de l’innovation (Protecting data in the Market Authorisation: between competition issues and protecting innovation). He herein reminds us that the economic value of data contained in the Market Authorisation supported the American policy of protecting pioneer drugs from generic commercialisation: an accelerated procedure, exoneration from the trial period, but also the extension of patent protection for pioneer drugs and an obligation to notify the patent owner. The European model is largely inspired by the American experience, with the implementation of an abridged Market Authorisation procedure for generics and the protection of data contained in the original Market Authorisation for ten years. Case law has however tempered this protection: only the medically active ingredient is completely protected, this protection cannot be renewed, and since the Generics decision handed down by the European Court of Justice (ECJ), if a generic has the same active ingredient but a different chemical composition, it can be granted a mixed abridged market authorisation. However, the European Directive of 2004 on brand name medicines represents a break from the American model by defining the generic as being identical in its active ingredient and identical in its Galenical form to the reference medicine. There are now two subsequent steps: the first being the period of protection of the pioneer drug; and the second, competition. It is now established that the reference drug does not have to have been marketed for generic competition to take place.  This is followed by the study by Olivier Sautel and Gildas de Muizon, la durée effective de protection des investissements dans l’industrie pharmaceutique: une analyse économique à partir de la courbe de rendement (the true duration of investment protection in the pharmaceutical industry: an economic analysis based on the yield curve). The initial postulate is simple: the profitability of research is a necessary condition for innovation. However, the patent’s function is ambiguous: it is an incentive to innovate, but it allows others to profit from the formalisation of information it implies. This is compounded by research’s second issue, the incertitude as to the usability of its results: rate of failure, consumer price insensitivity… Therefore, it would be better for public powers to use the two variables at their disposition in order to stimulate research: the duration of patent protection and the price of the product, since a higher price attracts generics faster, which fosters innovation, the goal that society wishes to attain. Existe-t-il une spécificité des brevets dans le domaine pharmaceutique ? (Are pharmaceutical patents special?) is the question asked by Laetitia Benard, who begins by recalling that the patentability of medicine results from the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), one of the World Trade Organisation’s agreements, and in France, on a 1959 law implementing a patent appropriate to medicine’s specificities.  However, the conditions of patentability and the use of the rights granted by a patent illustrate the specificities of this subject. Thus, even if the Office des brevets (French Patent Office) grants patents to therapeutic methods and procedures that already existed (albeit, without a known medical application), the fact that it refuses to grant patents to living things might block future research. Today, in France, patentability is possible for each and every specific use of a product. But what does ‘specificity’ mean? Similarly, the use of one’s patents is subject to a particular regime: its duration can be extended by the Complementary Protection Certificate, certain acts are excluded from the patent (such as the tests used in order to obtain the Marketing Authorisation), and the procedures used by generic laboratories in order to obtain Marketing Authorisations. The reality of the specificity of patents is therefore established, and yet the European Commission articulates its report around the distinction between a ‘strong patent’ and a ‘weak patent’, without taking into account the methods and conditions of patentability. These questions relating to the innovation economy are addressed by Capucine Asséo and Laetitia Bénard in their study on the Cycle de vie d’un produit et incitation au perfectionnement (Product lifecycle and incentive to improve), which demonstrates the numerous ways in which protection of innovations is undermined, first of which is the right of generic manufacturers to use pioneer laboratories’ clinical and preclinical data to apply for their abridged Marketing Authorisation. However, the patent tends to counterbalance the risks of research, and therefore limits on what can be patented prevent many important treatments from being researched. Faced with these shortcomings, and because of the latent risk of using some products in an unapproved manner, public authorities have reacted and implemented commercial exclusivity for drugs intended to treat rare or orphan diseases. And yet, the European Commission still has a monolithic conception of innovation itself, and does not recognise the subtle articulation between technological innovation and medical innovation. The second part of the study ends with an article by Lord Justice Jacob, relating to the notion of Raising the Bar, by which he explains market paralysis can occur when it is too easy to obtain patents. Lord Justice Jacob shows us, however, that this phenomenon is both stable and inevitable, since the Patent Office only superficially filters applications. It would be better to implement a true European Patents Court, which would regulate the system using competent judges, aware that owning a patent means nothing more than having gotten through the Patent Office’s crude filter.
 
The last part of the work addresses les difficultés de prise en compte par le droit de la concurrence des spécificités du secteur pharmaceutique (Competition Law’s difficult apprehension of the pharmaceutical sector’s specificities). The first subject of analysis is Les facteurs affectent l’entrée des génériques: rôle des stragégies d’entreprise et de la réglementation (Factors affecting generic entrance: the role of corporate strategies and of regulation), written by Tim Wiildson and Laurent Flochel, who show that there is a correlation between the size of the market, high prices, and the rapidity of generic penetration. In this framework, the system of reimbursement thwarts the natural interplay of competition, and regulations have a strong impact on entrepreneurial strategies. Therefore, in France, the size of the market and the amount of reimbursement does not incite generic manufacturers from entering the market. The articulation between pioneer drug and generics is then analysed by Olivier Freget, Fleur Herrenschmidt, Laetitia Bénard and Christophe Hénin through le rôle de l’information préalable à la délivrance de l’AMM générique (the role of preliminary information in obtaining a generic Marketing Authorisation), which focuses on the obligation for generic manufacturers to previously notify the patent holder before they apply for a generic Marketing Authorisation before the expiration of the patent. This is a weapon for pioneer drug makers, and deprives the generic manufactures of using a surprise tactic, but grants the generic manufacturer the right to use data owned by the patent holder as the counterpart for informing him. This obligation balances out the use of the data, which are the guarantee of competition and the safety of generic drugs. Finally, it protects the intellectual property rights of the pioneer drug manufacturer who owns the patent because once the Marketing Authorisation has been granted, the generic can be included on the repertory even though the patent is still valid. Therefore, informing the patent holder can allow a downstream reaction, by allowing him to sue the generic manufacturer. However, not only is there no punishment for not informing the pioneer manufacturer, but also, this obligation is not supervised, and also, an infringement suit only offers weak protection to the pioneer drug manufacturer, while in the United States, the ‘act of virtual infringement’ provides pioneer manufacturers with protection even before obtaining a Marketing Authorisation, but at the same time, establishes the right of generic entry. These intellectual property questions are readdressed by François Lévêque, who describes the link between Régulation de la pharmacie et propriété intellectuelle: la troisième côté du triangle (Pharmaceutical Regulation and Intellectual Property: the third side of the triangle), where he analyses a connection that has yet to be made, for regulation, competition, and intellectual property all operate according to shared ideas about the monopoly, but analyse them differently. This meeting of different conceptions around the same notion is compounded by a fundamental difference between the economic analysis adopted by competition law and regulatory law, while intellectual property law is concerned with patents and not with investments. It is evident that regulation and patent pursue a common finality: they act ex ante and encourage investment, which mean they pursue dynamic economic efficiency, while competition law tends to pursue static economic efficiency. Yet, regulation deforms the patent’s incentives to innovate, even though patents don’t yet have a unique regulatory function, so to speak. Therefore, according to a suggestion of the European Commission, the competition and regulatory law act in the good of the consumer, while patent law acts in the good of innovation. The rules surrounding patents remain essentially reactive, and since competition authorities cannot make innovation a criteria of examination, this finality remains poorly controlled. The question of market power is therefore fundamental in healthcare law, and an article by Jean-Noel Bail and Caroline Sitbon intitled Pouvoir de marché et contre-pouvoir de l’acheteur public (Market Power and the Challenge of Public Purchasers) illustrates the particularities of healthcare, in that hardly any place is left to the meeting of supply and demand. The State organises the conditions of market access, and regulates this system upstream, preventing the market from having any real role. The competition law approach to healthcare is not simply limited to market power, but also includes the question of anticompetitive practices. Therefore, Laurent Flochel and Olivier Freget ask the question Quelles tests appliquer pour apprécier les pratiques anticoncurrentielles ? (What tests should be used to appreciate anticompetitive practices?). They start by assimilating the situation of a pioneer drug manufacturer at the end of its patent protection to an economic operator confronted with the arrival of a less-expensive substitution product on the market. Discerning between licit defence and anticompetitive practice is therefore difficult, especially because even though price evolution, comparison of revenue and costs, loss recuperation, or modelling sales in the absence of anticompetitive practices are possible methods, such an analysis is biased by the existence of asymmetrical regulation favouring generics, controls on market access, and the difficult definiton of the relevant market. The question of anticompetitive practices is then tackled from the perspective of corporations who benefit from subjective rights by Marie-Anne Frison-Roche’s article on l’Usage stratégique des droits et abus du droit dans l’application du droit de la concurrence au secteur des médicaments (The strategic use of rights and the abuse of power in the application of competition law to the sector of medicines). The starting premise is that the beneficiary of such rights does not have to justify their use, except if it can be demonstrated that he abused his power—in other words, his intention to harm—beyond reasonable market competition. The abuse must therefore be proven by the competition authority, in order not to denature subjective rights, such as not only intellectual property rights, but also the fundamental right to act in a court of law. However, the competition authority tends to control the strategic use of rights, and not abusive behaviour, in order, it would seem, to counterbalance the lack of severity of patent offices. The question of medicine’s competitive environment is at the heart of contemporary issues in healthcare, and addressed by la restauration de l’égalité des chances dans la concurrence entre princeps et génériques (restoring equal opportunity in competition between pioneer and generic drugs), by Olivier Fréget and Fleur Herrenschmidt, who emphasise the importance of the notion of equal opportunity in competition law. The situation of certain regulated sectors, especially telecommunications, is very different from the situation of the healthcare sector. Legal monopolies in healthcare are the legitimate counterpart for taking risks. On the other hand, external imperatives derived from public policy model regulation in this domain, which resembles ‘affirmative action’ in favour of generics, which struggle with their poor public perception, customer habits, and notoriety. However, studies conducted in France show that generics have a very strong market penetration. The question is then, is the distinction between generic and pioneer drugs durable, given that governmental action is biased in favour of the former, and that the State is both regulator and purchaser. Finally, Marie-Anne Frison-Roche examines l’office du juge en matière des médicaments (The duties of the judge towards medicine), where she first reminds us of the hesitation of judges, and the difficulties they meet in assuming their power: if they exercise their important power of review over lower courts or administrative authorities, they allow the State and the Regulator to take charge of the political organisation of the sector. Judicial review therefore occurs within the burden of proof, the articulation of an argument, and its accuracy. The judge cannot take a political decision relative to the organisation of the pharmaceutical sector, and yet he must not ignore the systemic aspect of political decisions, and integrate it into his decisions.
 
In conclusion, Olivier Fréget and Marie Potel-Saville enquire on the Comparaison possible entre l’arrivée des génériques et la libéralisation des secteurs protégés par des droits exclusifs (Possible comparison between the arrival of generics and the liberalisation of sectors protected by exclusive rights), and perform an analysis of the differences in structure between healthcare law and regulated sectors, such as telecommunications, energy, or postal services. However, the distinctions between the natures of these sectors are not always recognized by competition authorities, who counter-intuitively deal with the healthcare sector in the same way they deal with other regulated sectors, except that they are stricter with the owners of exclusive rights than with the former public monopolies.

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