Life Sciences: What's new in France?

Companies should nonetheless get ready to comply with the new requirements for the first semester of 2017 on September 1 this year.

By a decision dated 29 March 2017, Paris Court of appeal has fined two companies (GACD and Promodentaire (the “Companies”)) and their director, for having organized a customer loyalty program towards dental surgeons in infringement of the anti-gift law (article L. 4113-6 of the Public Health Code (“PHC”)). 

I. A loyalty program disclosed and fined

In the field of dentistry, the Companies commercialize a wide range of products and equipment, including medical devices (“MDs”) and medicinal products used in the provision of dental care. 

The Companies established a customer loyalty program upon which each order placed by a dental practitioner provided the purchaser with a credit note to be used in three different ways: 

• To obtain a financial reimbursement;
• To obtain a price reduction on next products’ purchase;
• To obtain goods from the “privilege program catalogue” (including TVs, watches, bags, etc.).
  

The way the case was brought to the Court is peculiar: first, a dentistry professional association alerted the annual account auditor of GACD on misbehaviors it considered in breach of the anti-gift law, and the auditor, pursuant to its legal and professional duties, referred the case to the public prosecutor.  In parallel, from January to September 2011, dentists complained to a local branch of the Directorate General for Competition Policy, Consumer Affairs, and Fraud Control (DGCCRF) for not having received the trips to New York they were eligible to according to the loyalty program.  

The public prosecutor decided to prosecute the Companies and their director but on 22 May 2015, the first instance Tribunal decided to acquit the defendants because it considered that the Companies did not produce or commercialize products reimbursed by French social security system (“FSS”) but products used to provide services reimbursed by such system. 

The public prosecutor appealed the case before the Paris appeal Court which, without surprise, reversed the Tribunal judgement and fined the Companies and their director between 40 and €75.000 each.

II. Take aways

First, the Court of appeal reminds that the determining factor in assessing the submission of a company to the anti-gift law is the fact a company provides services, produces or commercializes products reimbursed by FSS, even if the product is a MD and if only one products is reimbursed by FSS. Furthermore, it is not necessary that the product itself is reimbursed. It is sufficient that it is prescribed as part of a therapeutic act which is reimbursed, as long as “products are a direct component of the care”.

In contrast, the Court excludes “accessories and tools enabling the performance of the care” as being part of the reimbursed care. In practice, the borderline is therefore very difficult to draw and a cautious approach would be for companies supplying medical equipment to hospitals to comply with the anti-gift law, all the more that the distinction between reimbursed products and not reimbursed products will soon no longer apply (as of 1st July 2018 or before).

Second, the Court reminds that direct or indirect benefits in cash or in kind “are to be broadly understood, and include for instance diverse gifts and liberalities, support of travel expenses, free provision of equipment […]”, the sole limit being negligible value in relation with the medical art and normal professional relationships. In the case at stake, the Court dismissed without surprise the argument.

The Court namely provides an interpretation of what is to be considered a prohibited gift as opposed to rebates that could have been granted as part of normal professional relationship: “whatever its calculation method, rebates constitute a commercial benefit granted to the dental practice as they reduce a purchase price immediately or with postponement; in contrast, the gift does not have this function and is only provided to a person (dentist, assistant) and has no consequence on the account of the professional structure”.   

Ancillary to the loyalty program, the Court also sanctioned the deficient invoicing system put in place by the Companies in order to hide the loyalty program. 

III. Penalties

In this action, only the Companies and their director were prosecuted, not the physicians. One may wonder whether this is due to their role as whistleblower, as otherwise most of the fines in this field were imposed against HCPs.

The Court fined: 

• The director to a €75.000 fine;
• GACD to a €75.000 fine;
• Promodentaire to a €40.000 fine
  

The total amount of the benefits provided by the Companies was superior to €5.300.000 in 2011 and the infringement lasted for at least five years. The fines might therefore not be seen as very dissuasive but the sanction against the Companies and their director should be seen as a clear signal, and we cannot exclude that fines become higher once the reform of the anti-gift law will become effective in July 2018.

French ministerial order promoting the use of biosimilars

The Directorate of Health Care Supply (DGOS), the Directorate of Social Security (DSS), the Directorate General for Health (DGS) and the National Union of Health Insurance Funds (Uncam) published an order 12 October 2017 to require the Regional Health Agencies (ARSs) to promote the use of biosimilar drugs (the “Order”).

Like generic pharmaceuticals, biosimilars are cheaper than the breakthrough biologic and have therefore been quickly embraced by governments seeking to reduce costs to their healthcare systems. But the use of a ministerial order that would clearly promote the prescription of biosimilars appears rather unusual.   

I. The last piece of a progressive update of the French health system in favor of biosimilar drugs

Biosimilar drugs have been defined in the Public health code through the Law No 2007-248 dated 26 February 2007 relating to the adaptation to the EU legislation with regard to medicinal products. 

The substitutability of biosimilars is addressed in article 47 of the Law No 2013-1203 relating to the Social Security funding for 2014 (at articles L. 5125-23-2 and L. 5125-23-3).  Pursuant to this law, pharmacists were authorized to substitute a biosimilar only at the initiation phase of the treatment, to ensure continuity of treatment. While the law provided for the adoption of a decree that would detail the conditions under which substitution would be permitted, such a decree was never adopted.

The new Law No 2016-1827 relating to the Social Security funding for 2017 went one step further. Following the ANSM’s position on biosimilars, strict continuity of treatment was no longer sustainable, and the new law softens the approach by allowing substitution even after treatment had begun with another product.  

However, despite these new changes, biosimilars’penetration rate was still insufficient to significantly reduce Social Security expenditures, representing only 10.6% of all biological drugs as of March 2017. It was in this context, and with the intent to increase substitution and market penetration of biosimilars within the French health system, that the Order was adopted. 

II.  An explicit fostering of biosimilars use

The Order begins from the premise that the efficacy and safety of biosimilars is equivalent to biologics and allow substitution of biosimilars at any time during a patient’s course of therapy.

The Order also notes that the law requires that both biologics and biosimilars be prescribed the same way, physicians be provided with similar types of information for both, and the efficacy and safety of both are equally traceable. The Order demonstrates that there is no additional burden in prescribing a biosimilar.

The local health agencies (ARS) are asked to disseminate this message on a local level, through informational and promotional campaigns. As such, the ARS are invited to take various actions to promote the use of biosimilars, such as providing patients with information brochures on biosimilars, harmonizing prescribers’ practices in favor of biosimilars, providing assistance to hospitals in the organization of tenders, developing financial tools to enable the hospitals to calculate the savings inherent in prescribing biosimilars. The Order also encourages hospitals to launch competitive public tenders as soon as a biosimilar is available, which means that ongoing markets might be terminated early.

More importantly, hospitals are also asked to draw an action plan and assign quantitative targets by 1st March 2018, the aim being to reach 70% of all prescriptions for biologics are biosimilars, through renegotiation of the quality and efficiency contracts entered into with each hospital.  

The Order, which strongly favors prescription of biosimilars, overlooks both the pioneering efforts of firms that develop innovative biologics as well as the practical matter that these firms may, in fact, reduce the cost of these biologics upon the introduction of biosimilars through significant price cuts and commercial rebates.

The way this instruction will be implemented will be even more crucial in a context where contracts entered into between ARS and hospitals might lead to financial sanctions imposed on hospitals by the Social security such as decrease in reimbursement rates, if they do not meet the targets for the prescription of biosimilars.

EU-US Mutual Recognition Agreement is operational for the pharmaceutical sector

The Mutual Recognition Agreement (MRA) between the European Union (EU) and the United States (US) covers six industrial sectors, including the recently amended Good Manufacturing Practices (GMP) on pharmaceuticals. In the pharmaceutical sector, the MRA is intended to facilitate the global sourcing of pharmaceuticals and active ingredients while maintaining high standards for consumer safety. On 1 November 2017, the US Food and Drug Administration (FDA) confirmed the capability, capacity and procedures of eight EU member states (Austria, Croatia, France, Italy, Malta, Spain, Sweden and United Kingdom) to conduct GMP inspections, allowing for the MRA, which was negotiated nearly 20 years ago, to come into force. The EU had previously affirmed the capability, capacity and procedures of the FDA earlier this year. The FDA is expected to approve the capability of agencies in the remaining 20 member states over the next two years.

The MRA introduces important efficiencies in an increasing globalized pharmaceutical supply network. For example, nearly 85% of the pharmaceutical products authorized within the EU include at least one manufacturing step outside of the region. The MRA provides a statutory framework for verifying the effectiveness of inspections carried out by other agencies, allowing the parties to rely on each other’s reports and findings for their own cases and investigations.

All stakeholders will benefit from the now-operational MRA:

• Agencies: EU and US authorities will be able to optimize the use of their investigation resources, by concentrating their efforts on regions and manufacturing sites where safety concerns suggest a more cautious evaluation.
• Patients: By ensuring consistent standards among the US and the various EU member states, patient safety should be enhanced. As the MRA might encourage manufacturers to consider launching products at the same time in the US and the EU, patients will also benefit from better access to innovative medicines.
• Manufacturers: The costs and delays associated with duplicative inspections will be eliminated, enabling manufacturers to launch products faster.
  

The current MRA applies to a wide range of products, including marketed pharmaceuticals for human use, biological products, intermediates, active pharmaceutical ingredients and investigational products. Vaccines and plasma derived pharmaceuticals, as well as veterinary products, may also be included at a later date.

In practice, the US, the EU and its Member States are expected to rely on each other’s factual findings arising out of GMP inspections at manufacturing sites in their respective territories and plan to adopt common databases and other technologies to facilitate access and information sharing. The new system will also feature a proactive alert system, which will allow agencies to quickly exchange information concerning any identified quality defects, recalls, falsified products or potential serious supply shortages. Agencies in one jurisdiction may also request their counterparts in other jurisdictions to conduct specific inspections within their respective territories and may even rely on GMP inspections conducted outside of their respective territories. In the case of such a request, the agency that is the subject of the request is expected to respond in a timely manner, although no hard deadlines are provided.

The MRA further provides that agencies may attend inspections conducted by the other agencies, conduct their own inspection, or refuse to take account of foreign GMP inspections on the grounds that they are either incomplete or inconsistent.

Companies should encourage agencies to use the MRA and feel free to report any improvement they could foresee after the first months of implementation as this should be a tool beneficial to all stakeholders.

The French Competition Authority has launched its new sector inquiry on the functioning of competition in the medicinal products and medical biology sectors

The pharmaceutical sector continues to be scrutinized by the French Competition Authority (FCA). In a 20 November 2017 decision, the FCA has announced the launch of a new sector inquiry which, according to the FCA itself, will be wide and will focus on two areas: the pharmaceutical distribution chain and the process of setting medicines’ prices.

A wide investigation of the whole pharmaceutical sector

The investigation covers only medicines, excluding medical devices. All pharmaceutical companies are likely to be concerned, whether they sell reimbursed or OTC medicines, dispensed through general practice or hospital prescription.

The FCA will target some companies who may receive requests for information (RFI) and/or invitations to attend to interviews with the FCA staff.

In addition, company which would not have received a RFI could still participate in the sector inquiry by getting in touch with the FCA.

The FCA should publish a sector inquiry report in the course of 2018.

A monitoring of the previous investigation into the whole distribution chain

The FCA intends to update the findings of its 2013 sector inquiry regarding the pharmaceutical distribution chain to analyse whether competition conditions have evolved since then.

The FCA deplores that only few of its recommendations have led to concrete effects but intends to steer towards new recommendations focusing on intermediaries (wholesale distributors, pharmaceutical purchasing groups).

Moreover, the FCA points out the effects of direct trade on prices.

In this context, the FCA may revisit the way pharmaceutical companies sell OTC medicines to pharmacies, and is likely to investigate how pharmaceutical companies manage parallel trade since the undertakings subscribed by some of them towards the FCA ten years ago.

The first review of market access pricing negotiations from an antitrust perspective

For the first time, the FCA intrudes into the process of setting medicines’ prices.

The FCA mentions that it will review the content of pricing agreements with the French Economic Committee for Healthcare Products (CEPS) to study the mechanism of contractual rebates. It may propose to amend price setting rules for less regulation and in favouring price settings by competitive mechanisms.

The FCA shall also investigate pricing vis-à-vis of hospitals, as it already notices that prices offered in calls for tenders tend to systematically align on maximum prices negotiated with the CEPS without offering any commercial rebates.

Generic medicines (and probably biosimilars) are not left aside, as the FCA notes that the heavy discounts granted to dispensing pharmacies rarely benefit customers and the French National Health Insurance. The FCA might end up in favouring a free competitive price setting mechanism between originators and generics.

The FCA final report will thus address important topics for the pharmaceutical industry, which will echo various stakeholders’ calls for reform into the sector. Moreover, if the FCA discovers practices which may infringe competition law rules, it could at a later stage decide to open subsequent investigations targeting certain practices or companies.

Combination of active ingredients – scope of protection – Gilead

Gilead’s application for interim injunction against Mylan was refused by the interim relief Judge of the Paris District Court on 5 September 2017. On the basis of its SPC 032, Gilead tried to prevent Mylan from launching in France a generic version of TRUVADA®, a drug notably treating HIV using a combination of two active ingredients (tenofovir disoproxil fumarate and emtricitabine).

The interim relief judge considered that the SPC 032 was likely to be held invalid, in that it would go beyond the invention initially covered by the patent the SPC 032 was supposed to extend the duration of which.

This decision is of interest as it deals with two main topics:

• the scope of the SPC which is based on a European Marketing Authorization (MA) the validity of which imposes to remain within the scope of the main patent; and
• the criterion used to assess the risk of invalidity of a patent/SPC to have an application for interim injunction rejected: serious challenge of validity or obvious invalidity?
  

Facts and Proceedings:

Gilead is the owner of:

• the European patent No 0 915 894 (the “EP 894”), filed on 25 June 1997 covering the use of tenofovir disoproxil used alone or in combination with other therapeutic ingredients, notably for treating HIV, until it expired on 25 July 2017;
• the European MA No EU 1/04/305001, granted on 21 February 2005 for TRUVADA®, a combination of tenofovir disoproxil and emtricitabine;
• the SPC 032, granted on 21 December 2016 and set to expire on 24 February 2020, covering said combination.
  
  

EP 894 
25 July 1997 - 25 July 2017
 tenofovir disoproxil  - OR - 
 tenofovir disoproxil  + other therapeutic ingredients
 ** no specific mention of emtricitabine**

SPC 032
26 July 2017 - 21 February 2020
 tenofovir disoproxil  + emtricitabine

Anticipating the expiration of EP 894, Mylan filed a European MA application for a generic of TRUVADA®, which was granted on 16 December 2016.

This launched a battle in Europe with Mylan commencing action for revocation of Gilead’s SPC and/or Gilead applying for preliminary injunctions.

In three EU countries (Sweden, the Netherlands and Greece), Gilead’s application for an SPC had been refused. In some of the countries where an SPC had been granted, Gilead filed cases in some European jurisdictions. In Spain and Belgium, Gilead obtained an interim injunction against Mylan. In Italy and Germany, the cases are still pending, being noted that in Germany an action for revocation against the SPC has been filed and the Bundespatentgericht has issued a negative preliminary opinion against the SPC. In Ireland, after Mylan and McDermott Laboratories had undertaken not to launch their generics until a hearing that took place on 3 October 2017, the High Court rejected Gilead’s application for an interlocutory injunction against Mylan and Teva on 7 November 2017. In Switzerland, the Federal Patent Court upheld the validity of the SPC on 3 October 2017, and preliminarily enjoined Teva from distributing its generic of TRUVADA®; an appeal is currently pending before the Federal Supreme Court.

In the UK, several invalidity actions have been filed against the SPC. On 13 January 2017, the High Court referred the following prejudicial question to the Court of Justice concerning the interpretation of Article 3(a) of Regulation 469/2009: “What are the criteria for deciding whether ‘the product is protected by a basic patent in force’ in Article 3(a) of the SPC Regulation?”

On 4 April 2017, the President of the Court of Justice turned down a request for expedited proceedings made by the High Court, which suggest that following its usual timeline, a decision is to be expected by the first half of 2018.

In France, on 20 September 2016, Mylan filed in France an action for revocation of the SPC 032, arguing that the combination of tenofovir disoproxil and emtricitabine was not specifically claimed in EP 894, so that Article 3(a) of the SPC Regulation No 469/2009 of 6 May 2009¹ would have been breached and should have been an obstacle to the grant of the SPC.

Then, Gilead filed on 13 July 2017 a preliminary injunction application with an emergency motion to be heard on very short notice (référé d’heure à heure), asking for a “provisional injunction and placing under seal” of Mylan’s generic until a decision on the merits would be made, under a noteworthy €1,000,000 daily penalty payment.

Mylan launched a generic of TRUVADA® on the French market on 26 July 2017, a day after the expiry of EP 894.

Ruling:

On 5 September 2017, the interim relief judge recalled the conditions set out by the No 469/2009 Regulation to obtain an SPC, and adopted the interpretation set out by the Court of Justice in four notable decisions handed down on 24 and 25 November 2011 (Medeva (C-322/10), Daiichi-Sankyo (C-6/11), Yeda (C-518/10), and University of Queensland (C- 630/10).

These rulings had indeed required the active ingredients within the SPC request to be “explicitly specified in the wording of the main patent’s claims”, and had rejected the former “infringement test” that had previously been applied by numerous European national courts and which was more favorable to patentees:

(Former) Infringement Test
SPC validly granted as long as its active ingredients infringe the main patent's claims
SPC 032 does infringe EP 894 = SPC 032 is valid

(New) ECJ Interpretations
SPC only validly granted if its active ingredients are explicitly specified in the wording of the main patent's claims
emtricitabine not mentioned in EP 894 = SPC 032 is not valid

It is interesting to note that in Switzerland, which does not fall under the ECJ’s jurisdiction, the Federal Patent Court maintained the infringement test, pointing out that the ECJ’s aforementioned case law led to a “terminological mess”.

The Paris Judge recalled and adopted the reasons set out in a further Court of Justice ruling in the Eli Lilly case (C-493/12), which conceded that an ingredient defined according to a functional definition (as opposed to a structural one) was not, per se, precluded from being eligible for an SPC, as long as the patent’s claims relate, implicitly but necessarily and specifically, to the active ingredient in question.

Finally, the Judge also recalled the Sanofi (C-443/12) ruling in which the Court of Justice stated that SPC protection can only be sought on a main patent’s central inventive concept.

The Judge noted that Gilead’s EP 894 had not “implicitly but necessarily and specifically” referred to emtricitabine either in its claims or description, and therefore could possibly not teach a combination of tenofovir disoproxil and emtricitabine to the skilled person.

She judged that although claim 27 of its EP 894 did not specifically refer to emtricitabine, it was a functional claim that would have necessarily led the skilled person to choose emtricitabine as a further ingredient to combine to tenofovir disoproxil.

In light of the above facts and case law, the Paris Judge held that the validity of Gilead’s SPC 032 was seriously challenged in light of Article 3(a) of the SPC Regulation and that the SPC 032 was “likely to be void”, making any infringement unlikely. It dismissed Gilead in all of its claims, and ordered it to pay €100,000 to Mylan for legal costs.

Interestingly, the Paris Judge applied the same line of reasoning in a recent decision on the merits (Mylan v. Merck Sharp & Dohme, 30 November 2017, RG No 16/14466), in which it ruled that Merck’s SPC No 08 C 0021 was void as it exceeded the scope of the main patent’s claims.

The Paris Judge nonetheless did open the door to validly obtaining more than one SPC in instances where a main patent contains more than one central inventive concept, staying in line with the ECJ’s Georgetown University v. Octrooicentrum Nederland ruling of 12 December 2013 (C-484/12).

Of further interest is the serious challenge criterion applied by the interim relief judge to decide on this SPC preliminary proceedings.

Over the past few years, French case law has indeed diverged on the means available to a defendant to validly oppose a request for an interim injunction, with the majority of case law considering that the existence of serious challenge as to the validity of the title (patent or SPC) makes it possible to object to the injunction.

However, another stream of the case law has adopted a narrower interpretation whereby the defendant could only oppose the interim injunction request by proving the “obvious” nullity of the title.

Here, the Paris Judge chose the first interpretation, keeping with the decision of the French Supreme Court (Cour de cassation) of 21 October 2014, which validated the criterion of serious challenge and rejected the criterion of obvious nullity once adopted by the Paris Court of Appeals and First Instance Court.

Takeaways and Open Questions:

In light of the request for a preliminary ruling referred to the ECJ by the High Court concerning Article 3(a) of Regulation 469/2009, and the uncertainty surrounding the interpretation thereof, could the French interim relief judge indeed still assert that there was a high risk invalidity of the SPC?

Furthermore, should Gilead have spontaneously offered financial guarantees to improve its chances of obtaining an interim injunction, as it did in the Irish litigation where it had undertaken to compensate any financial loss caused by Mylan’s withdrawal of its generic pending the injunction hearing? In other terms, can a serious challenge still be successfully raised by a defendant when the applicant offers to compensate any financial loss caused by an injunction in case it is wrongfully granted?

In addition, we might wonder whether the Judge would have reached the same decision if the action for revocation of the SPC 032 would not have already been pending when the action for preliminary injunction was filed. Indeed, the action for revocation of the SPC 032 had been filed almost one year before Gilead sought the preliminary injunction.

This case confirms that if the strategy consisting in filing a patent/SPC revocation action before any launch is still a way of preventing interim measures in France, this trend had declined to some extent when Courts applied the criterion of obvious nullity of the patent to reject preliminary measures. The strategy of generics will recover some interest as the mere filing of a patent revocation might become a hurdle to preliminary measures.

This has to be prepared well in advance when the dossier is prepared and the application for marketing authorization filed.

Finally, the main takeaway of this decision is that patentees seeking to extend their protection with an SPC should ensure that it remains within the scope of the main patent, regardless of the language included within their marketing authorizations.

Footnote

_{1) “A certificate shall be granted if (…): (a) the product is protected by a basic patent in force”.}