CCI Order on Pharma Major Roche – I and CCI Order on Pharma Major Roche – II
(Continued…)
(ii) Whether or not Roche group tried to influence regulatory authorities so as to deny market access to the Informants? (Paragraphs 66 – 74)
The Informants submitted various letters written by the Roche group to regulatory authorities. The Roche group, vide these letters, raised concerns regarding the clinical trials undertaken by the Informants for biosimilars. It tried to create a perception that biosimilar versions may pose potential, unknown risks to patients. Citing these contents, it was contended that the Roche group tried to influence regulatory authorities. Roche argued that these “letters/communications can, at the best, be labelled as an expression of opinion or statement of facts or benign marketing strategy adopted by every player, which cannot be held to be anti-competitive.”
According to the CCI, “While efforts aimed at meeting competition on merits, e.g. reducing prices, improving quality by introducing improved drugs that leave the generic / bio-similar entrants behind, are certainly legitimate under the Act, resorting to anti-competitive strategies to distort genuine competition go against the very aim that competition law seeks to achieve ………………………….The Commission is conscious that competitors, in normal business parlance, indulge in tactics to belittle competitors’ products. However, there is difference between puffery aimed at promoting one’s own product and adopting practices which disparage or malign the image of competitors, thereby causing competitive disadvantages to them. This is even more harmful in the pharmaceutical sector, where such disparagement is made to the doctors who are treating the patients of cancer. The line of difference between these two business strategies is very thin; however, when crossed by a dominant enterprise to its own illegal advantage, it warrants intervention by the competition authority.” (paragraphs 72-73)
The Commission considered the factual matrix and prima facie determined the attempt to deny market access to the Informants. The factual matrix entails the following:
a) Not intimating the effective judicial decision in toto and and thereby, appearing to have prejudiced the medical fraternity and others;
b) practices adopted by Roche Group to create negative impression regarding the propriety of the approvals granted, the safety and efficacy of biosimilars, the risk associated and the outcome of the on-going court proceedings in the medical fraternity, including doctors, hospitals, tender authorities, institutes etc.
My view: Roche suffered heavily for not intimating the judicial orders in toto. This ill-advised strategy created negative impression which could have been avoided in the first place. Also, Roche’s claim with regard to efficacy and safety of biosimilars should have been grounded on verifiable medical data. Absence of supporting data costed Roche heavily. Further, CCI was not ready to accept Roche’s marketing strategy as mere puffery. In short, denigration of a competitive product may prove costly from the Competition Law angle as well. Therefore, it is always advisable to carry out an apposite legal due diligence vis-à-vis marketing strategies.
(iii) What is the nature of denial of market access which can attract the scrutiny of CCI? (Paragraphs 75 – 78)
The denial of market access within the meaning of Section 4(2)(c) of the Act need not be complete and absolute in nature. Even a partial denial of market access that takes away the freedom of a substitute to compete effectively and on merits in the relevant market, may amount to a contravention of Section 4(2)(c) of the Act. The CCI declined to ascertain the impact of Roche Group’s strategies on the market share of the Informants and left it to be determined by investigation. The CCI made some pertinent observations here: “ 78. We are dealing with a case which involves a highly sensitive sector, where the safety of the patient is of paramount importance. Thus, creating any iota of doubt in the minds of doctors can adversely affect the market for biosimilars, which is prescription induced, beyond repair. Such disparagement may also have ripple effects within the medical community. In this scenario, those biosimilar manufacturers who do not have strong marketing channels amongst doctors may be forced out of the market because of abusive denigration by a dominant player.”
(f) Special responsibility of dominant player (Paragraph 79)
The CCI held that “………..a dominant enterprise is endowed with a special responsibility not to allow its conduct to impair undistorted competition in the relevant market. The Act places special responsibility on such enterprise not to conduct its business in a manner which is prohibited under Section 4(2) of the Act. Prima facie, it appears to the Commission that Roche Group has shirked such responsibility and indulged in abusive conduct.”
On other allegations against Roche group
• On Informants’ allegation on unfair pricing under Section 4(2)(a)(ii) of the Act, the Commission was prima facie not convinced on the existence of a case.
• The Director General is free to delineate narrower “relevant market” so as to examine whether the conduct of Roche group constituted leveraging under Section 4(2)(a)(i) of the Act.
• Roche Group claimed that it is its prudent business strategy to not to import BICELTIS / HERCLON. The Commission agreed with the assertion made by Roche Group and hence, prima facie, did not find any imposition of unfair condition proscribed under Section 4(2)(a)(i) of the Act.
• The CCI was not prima facie convinced on Informants’ allegation on unfair pricing under Section 4(2)(a)(ii) of the Act.
My view with respect to delineation of narrower “relevant market”: I would like to draw your attention to US Supreme Court judgment in Brown Shoe Co. Inc. v. US (365 US 320 (1961)). It was held that well-defined sub-markets may exist within the broad product market which may themselves constitute the “relevant market”. The boundaries of such a sub-market may be determined by examining factual matrix involving industry or public recognition of the sub market as a separate economic entity, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes and specialized vendors. The Indian Competition Act doesn’t expressly talk about sub-markets. However, it can be argued that ‘consumer preference’ under Section 19(7)(c) entails ascertainment of sub-market.
Conclusion
The Roche group prima facie violated Section 4(2)(c) of the Act and therefore, detailed investigation by Director General is warranted as per Section 26(1) of the Act. The final Order will definitely involve analysis of Comparative Law on the subject. In realistic terms, Roche will have to re-visit its legal strategy so as to overcome prima facie psyche of the CCI with respect to the instant fact situation. For instance, it may consider presenting verifiable, scientific data so as to back its claims (if at all there is).
In this context, it is interesting to note a seminal judgment delivered by Court of Justice of European Communities in Hoffman La Roche & Co. Ag, Basle v. Commission of the European Communities in Brussels (Case 85/76) (ECLI:EU:C:1979:36). The Court held as follows (which is pertinent to the final Order in this case as well):
“An undertaking which has a very large market share and holds it for some time, by means of the volume of production and the scale of the supply which it stands for — without those having much smaller market shares being able to meet rapidly the demand from those who would like to break away from the undertaking which has the largest market share — is by virtue of that share in a position of strength which makes it an unavoidable trading partner and which, already because of this secures for it, at the very least during relatively long periods, that freedom of action which is the special feature of a dominant position. “(Paragraph 41)……………………..
The concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.” (Paragraph 91)
The Court set out the relevant factors for determining the existence of dominant position: a) the relationship between the market shares of the concerned undertaking and of its competitors; b)the technological lead of an undertaking over its competitors; c) the existence of a highly developed sales network; and d) the absence of potential competition.
(Concluded)
