European Commission Launches Pharmaceutical Competition Inquiry with Dawn Raids

January 18, 2008

The European Commission (“Commission” or “EC”) carried out dawn raids on several innovator and generic pharmaceutical companies on Wednesday, January 16, 2008, as the first step in a “sector inquiry” into competition in the pharmaceutical industry. For the pharmaceutical industry, the initiation of the sector inquiry means intensified scrutiny that likely will last for several years. The Commission has also announced that it intends to send out requests for information to other pharmaceutical companies as part of its inquiry. For other industries, the novel use of the dawn raid in connection with a sector inquiry underscores the need to have in place a process for dealing with dawn raids, particularly to protect privileged communications that are not afforded the same protections in the EU that they are afforded in the United States.

The European Commission’s Intensified Interest in Pharmaceutical Competition

Before this inquiry, the Commission’s interest in pharmaceutical competition outside of distribution issues had been relatively recent and sporadic. In June 2005 the Commission issued a decision against AstraZeneca for violating Article 82 of the EC Treaty by making misrepresentations to the patent offices of several countries and withdrawing certain versions of its product from the market in order to limit generic competition for its omeprazole-based products. In March 2007 the Commission announced a proceeding against Boehringer AG for allegedly misusing the patent system to exclude potential competition in chronic obstructive pulmonary drugs. The present inquiry confirms that these were not isolated matters, but the forerunners of a broader initiative to look into a wide range of practices to determine their effect on pharmaceutical competition.

Although the inquiry is not targeting companies suspected of wrongdoing at this time, some previous Commission sector inquiries in other industries have led to follow-on enforcement proceedings. The Commission has identified patent settlement agreements, patent misuse, and vexatious litigation as among the specific objects of their current sector inquiry. These practices have all been the subject of intense scrutiny by the U.S. Federal Trade Commission and the U.S. courts—often in matters in which Dechert has been heavily involved.

Important Lessons for Other Industries – Avoiding Attorney Client Privilege Waiver

This is the first time that the Commission has used a dawn raid in connection with a sector inquiry, as opposed to an enforcement matter. One of the critical issues that arises with Commission dawn raids is the handling of privileged documents. Voluntarily producing d January 2008 / Issue 26 2 privileged documents to the Commission could waive the privilege for purposes of U.S. litigation. The Commission has specific procedures in place for handling privilege claims, which, if not carefully followed, could result in a privilege waiver in U.S. courts. It is, therefore, important to have a plan in place for handling the Commission’s inspection and its aftermath, so that any production cannot be deemed a waiver. The Commission’s rules on attorney-client privilege are much narrower than the U.S. rules, which heightens the need for careful advance planning. Most importantly, the Commission does not extend the privilege to communications involving in-house counsel or non EU-qualified outside counsel unless those communications are prepared solely for the purpose of obtaining legal advice from EU-qualified outside counsel.

Following the U.S. Playbook

This new inquiry confirms the Commission’s intention to devote substantial attention to pharmaceutical competition matters. There is no doubt that the Commission will be looking at practices that have already drawn serious attention from antitrust authorities and courts in the United States. 

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