ACCC not satisfied of claimed benefits from proposed settlement between pharmaceutical companies

ACCC

The ACCC proposes to deny authorisation for the provisions of a settlement and licence agreement between Celgene and generic drug companies, Juno and Natco. The companies are seeking authorisation to settle a patent dispute currently before the Federal Court of Australia.

Given the lack of information provided about the extent of benefits from the agreement, and its impact on competition, the ACCC is not satisfied that the likely public benefits outweigh the likely public detriments. Without authorisation the agreement and related conduct risks breaching the Competition and Consumer Act.

Celgene manufactures the drugs Revlimid and Pomalyst (with active ingredients lenalidomide and pomalidomide, respectively), used in some cancer treatments, and owns patents for these drugs.

Celgene and Juno/Natco entered into a proposed settlement and licence agreement for Juno/Natco to supply generic versions of lenalidomide and pomalidomide from specified launch dates. The parties submit that the agreement will enable these generic products to be supplied before the relevant Celgene patents expire.

“The competitive implications of the settlement and licence agreement are unclear,” ACCC Commissioner Stephen Ridgeway said.

The ACCC can only grant authorisation where it is satisfied that proposed conduct is likely to result in a benefit to the public and the benefit would outweigh the likely detriment to the public.

“The extent to which the agreement is likely to result in cost savings to the Commonwealth Government under the Pharmaceutical Benefits Scheme is uncertain,” Mr Ridgeway said.

“There is insufficient evidence that the agreement would be likely to result in greater security of supply of lenalidomide and pomalidomide products. Further, the ACCC is not satisfied that the litigation would proceed without the agreement, and therefore cannot be satisfied there would be litigation cost savings which would result in a public benefit.”

“The opportunity for other generic manufacturers to enter the market is a key driver of competition. The ACCC is concerned the agreement seeks to establish Juno/Natco as the first generic supplier on Celgene’s terms and this could result in public detriment by distorting competition between generic manufacturers,” Mr Ridgeway said.

“Proposing to deny authorisation does not prevent the Applicants from settling the patent dispute proceedings. It means that the Applicants are not permitted to engage in cartel or other anti-competitive conduct under the agreement.”

Submissions on the draft determination are sought by 6 April.

Background

Celgene is Celgene Corporation and Celgene Pty Ltd (together, Celgene), a Swiss-based global biopharmaceutical company that develops and manufactures pharmaceutical products, with a particular focus on cancer and immunology-related diseases. Celgene Pty Ltd is a wholly owned subsidiary of Celgene Corporation which is a wholly owned subsidiary of Bristol-Myers Squibb.

Celgene is the manufacturer of Revlimid (active ingredient lenalidomide) and Pomalyst (active ingredient pomalidomide) which are immunomodulatory drugs for the treatment of some blood cancers. Celgene owns several patents in relation to each of these products.

Juno is Juno Pharmaceuticals Pty Ltd (Juno), a Victorian-based supplier of marketing and distribution services to pharmaceutical manufacturers that specialises in post-patent pharmaceuticals (i.e. generic products). Juno distributes generic pharmaceutical products obtained from third party manufacturers pursuant to supply arrangements. It does not manufacture pharmaceutical products itself.

Natco is Natco Pharma Ltd, an Indian-based pharmaceutical manufacturer, which operates in countries including Australia for the purpose of selling and distributing Natco-manufactured pharmaceutical products.

On 9 November 2020, Juno/Natco commenced proceedings against Celgene in the Federal Court of Australia, wherein Juno/Natco sought to invalidate Celgene’s active ingredient (i.e. compound) patent for Revlimid. On 29 January 2021, Celgene filed a cross claim against Juno/Natco for threatened infringement of Celgene’s patents. Both the claim (insofar as it relates to the compound patent) and cross claim (insofar as it relates to the compound patent and alleged breaches of the Australian Consumer Law) were discontinued by the parties by consent on 27 October 2021. However, the claims insofar as they relate to the lenalidomide and pomalidomide method of treatment patents are stayed, not discontinued.

The applicants have sought authorisation for certain provisions of the settlement and licence agreement because there is a risk that the agreement contains provisions which raise concerns under the cartel provisions of the Competition and Consumer Act.

The test for authorisation requires that the ACCC must not grant authorisation unless it is satisfied in all the circumstances that the proposed conduct is likely to result in a benefit to the public and the benefit would outweigh the detriment to the public.

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