Transcript 슬라이드 1

Workshop of the
FAS Russia, 2014
KFTC’s Enforcement Experience:
Pay for Delay Agreement between GSK
and Dong-a Pharmaceutical Co., Ltd.
March 2014
KFTC, Anti-monopoly Division
Ko, Young-Hwan
1
s
2
1. KFTC’s Action in the Pharmaceutical Industry
The KFTC have focused on enforcing against drug companies
for offering rebate for doctors or medical institution in return for
prescribing their drug.
The KFTC decided that: unlawful benefits provided in exchange
for prescription of their drugs constituted “kickback”; such
practices substantially suppressed competition in the medical market.
Korea’s health authorities introduced punishment not only on
drug companies but also on doctors who received illegal benefit.
As a result, illegal rebate in the pharmaceutical industry slightly decreased.
KFTC turns it’s eyes on different kind of drug companies illegal
behavior such as pay for delay and patent abuse.
3
2. Motive and Process of Pay for delay Investigation
In Korea, large-scale patent disputes increased after 2006 because
many blockbuster drug’s patent for a substance have expired.
* The number of patent disputes between domestic and foreign pharmaceutical
company have increased from 83 in 2006 to 159 in 2011.
In order to find patent abuse, the KFTC investigated the actual
condition of intellectual property right in the pharmaceutical industry in 2010.
The KFTC took a document investigation on total 48 major drug
companies(both domestic and multinational) during one month.
After documentary work, the KFTC found one case which needs to
be investigated further. The KFTC performed a field investigation in
October 2010 and in April 2011. Economic analysis was also
carried out in February 2011.
4
3. Summary of Case
The KFTC imposed GSK(Glaxo Smith Kline) and Dong-A
Pharmaceutical Co., Ltd. a total of KRW 5.173 billion(about $ 4.8mil
lion) for fines, and cease-and-desist order in October 2011.
The GSK (the multinational drug pharmaceutical company that
holds the patent for the new drug) offered Dong-A economic gains
including exclusive domestic sales rights on condition that the
generic medication company Dong-A withdraws the generic drugs
from the market and refrains from producing and selling generic
medications.
This is nation’s first crackdown on collusion blocking the entry of
cheap generic drugs.
5
3. Case: Related Market Condition
The holders of the patent right to new drugs can make huge profit,
but the entry of generic drug creates downward pressure on the
price and leads to encroachment of market share.
One survey finds that in the year a generic is launched, the generic
can take 16.2% market share and six year later it reaches to 44.5%.
Therefore, pharmaceutical companies launching new drugs have
strong incentives to extend the patent right beyond its expiration
and use various patent strategies such as the so-called generic
delay dealing.
6
3. Case
Case:study:
Related
MarketMarket
Condition
3.
Related
Condition
The anti-nausea drug Zofran (Ondansetron*) developed by the
GSK captured a 47% share in the domestic anti-nausea drug
market in 2000, carving out a whopping 90% share of the market
along with Kytril, the anti-nausea medication with the second largest
market share produced by Roche.
• Ondansetron: pharmaceutical ingredient of Zofran (drug substance)
The anti-nausea drug market grew from KRW 11.6 billion in 2000 to
KRW 39.4 billion in 2009.
Zofran was a new drug in the market for anti-nausea drugs
containing Ondansetron as main ingredient before the launch of the
generic version; thus capturing 100% share in the market.
7
3. Case
Case:study:
Background
of Collusion
3.
Background
of Collusion
The launch of generic version triggered competition in the Zofrandominated market.
Dong-A developed the patent for the manufacturing process of
Ondansetron, which was different from that used by GSK, in 1998.
After acquiring the patent, Dong-A marketed product name
“Ondaron”, a generic version of Zofran.
At that time, GSK had the exclusive right to sell Zofran in Korea
based on a manufacturing process patent that expired on January
25, 2005.
Dong-A launched Ondaron at 90% of the price of Zofran in
September 1998 and reduced its price to 76% of the price of
Zofran in May 1999 in an attempt to increase sales.
8
3. Case: Details and illegality of collusion
A. Details and process of settlement
GSK and Dong-A reached an agreement wherein GSK would
offer exclusive rights to sell new drugs and offer unprecedented
incentives, provided
1) Dong-A withdraws its patent litigation,
2) takes “Ondaron” off the market, and
3) stops producing or selling drugs that would compete against
the drugs of GSK in the anti-nausea/anti-viral drug markets.
Both companies reached an agreement when they signed “the Letter
of Intent” on December 17, 1999.
They inked a contract on the right to sell Zofran and exclusive right
to market anti-viral medication called Valtrex* on April 17, 2000.
* Valtrex: anti-viral medication used to treat shingles
9
3. Case
Case:study:
DetailsDetails
and illegality
of collusion
3.
and illegality
of collusion
In fact, both companies ended the legal dispute over the patent and
performed the terms and conditions of their agreement to take the
generic versions off the market and not to compete against each other.
Furthermore, the two companies have regularly renewed the contract
on the sales right, and they have been colluding until October 2011.
10
3. Case: Details and illegality of collusion
Dong-A agreed to pull out Ondaron from the market and not to
develop, produce, and sell any product that could compete against
Zofran and Valtrex.
In return, GSK offered Dong-A the right to sell Zofran to national
and public hospitals and the exclusive right to sell Valtrex, a new
drug that was not yet introduced to the domestic market at that time.
The incentives offered as rewards for the withdrawal of the generics
were at an unprecedented level. Dong-A received 25% of Zofran
sales for 2 years and 7% of sales beginning the 3rd year even if the
company met only 80% of the sales target. Dong-A was also
promised KRW 100 million yearly - for 5 years - for selling Valtrex
regardless of its sales performance.
11
3. Case: Details and illegality of collusion
B. Restriction on competition & Encroachment of customer’s benefit
This arrangement between both companies leads cheap generics
(Ondaron) to be taken off the anti-nausea market and prevents the
entry of rival medications into the market, thereby restricting
competition.
Consumers are deprived of the
right to choose cheap generics
and are forced to buy very
expensive original drugs;
thus leading to an upswing
in the average drug price.
(see right chart)
12
3. Case: Countermeasure
Applicable law
: Article 19 (1) of the Fair Trade Act
on prohibition of unfair collective action (so-called Cartel)
Countermeasures:
1. Cease-and-desist order: Prohibition of non-competition provisions
2. Imposition of fine: a total of KRW 5.173 billion
GSK
Dong-A
Total
3,049mil KRW
2,124mil KRW
5,173mil KRW
13
4. After KFTC enforcement and Effects in the medical market
The two companies respectively appealed to a high court of justice
against the KFTC’s decision in 2012.
For the most part, the appellate court supported the KFTC’s view in
2013. This case is under the review of the Supreme Court now.
The KFTC’s enforcement sounded the alarm that reverse payment
for delaying of generic drug sales could constitute “cartel”.
The KFTC strengthens monitoring of possible intellectual property
rights abuse including unfair contract between innovator companies
and generic drug companies and takes stern action against illegal
acts.
14
Thank You !
The views expressed are not purported to represent the views of the Korea
Fair Trade commission.
15