Patent protection is not price protection

This decision has been handed down by the Federal Administrative Court, not the Federal Patent Court. Still, it will surely be of interest for patent practitioners in the pharmaceutical field.

Case No. C-7765/2015 ¦ Decision of 07 March 2018 ¦ ‘KVG, Spezialitätenliste’

Lyrica® capsule

The decision has been published on 11 May 2018; it is anonymized but pretty obviously pertains to Pfizer‘s blockbuster drug Lyrica® with the active ingredient pregabalin; see the specialist information and the specialty list for further information (German only). Pfizer heavily litigated with generic companies about infringement issues, most prominently in the U.K. where the final judgment of the Supreme Court is still awaited.

The present matter is not about infringement, but rather all about pricing issues. It is important to understand that Lyrica® is approved for three indications:

  1. Neuropathic pain
  2. Epilepsy
  3. Anxiety disorders

Patent protection for (1) only expired in July 2017 (and allegedly accounted for about 2/3 of all uses of the drug), while protection for (2) and (3) already expired in May 2013. Overall sales of Lyrica® still accounted for about 5bn of Pfizer’s annual turnover in 2017.

Further, it is important to understand some basic principles of how prescription and use of generics is promoted in Switzerland. In general, the insured person’s share of costs consists of a fixed annual amount (franchise) and a deductible of 10% of the costs exceeding the franchise (up to a certain maximum). However, if the insured person demands a more expensive medicament and waives the cheaper option, he must pay 20% of the cost of the medication instead of 10%.

Until February 2017, this differentiated deductible of 20% applied to drugs whose price exceeded the average price of the cheapest third of all drugs consisting of the same active ingredients (and listed on the specialty list) by at least 20% (since March 2017: 10%).

Pfizer appealed an order of the Federal Office of Public Health (FOPH) of 29 October 2015, in which the FOPH issued a 20% deductible for Lyrica® with effect from 1 December 2015, not taking account of different indications at all. The overall calculation is anything but easy. In a nutshell, Pfizer argued that the price level of the generics had been wrongly determined by the FOPH, based on Art. 38a KLV. In simple terms, Pfizer argued that the not yet generic indication (1) has to be excluded from the maths and that a deductible of 10% shall apply in accordance with Art. 38a(4) KLV.

The FAC did not agree. Rather, the decision holds that the Health Insurance Act (KVG) and the Ordinance on Health Insurance (KVV) only differentiate on the level of preparations, not on the level of indications (¶8.2.7, emphasis in original):

[…]; vielmehr unterscheiden KVG und KVV auf der Stufe der Präparate zwischen Originalpräparat und generischen Arzneimitteln.

Further, the decision is very clear in that the patent law does not give the patent holder the right to a certain — or even just an economically worthwhile — price in the context of the commercial use of his invention. Contrary to what the plaintiff argued, patent protection does not mean price protection (¶8.3.3):

Das Patentrecht gibt dem Patentinhaber damit kein Recht auf einen bestimmten — oder auch nur auf einen für ihn wirtschaftlich lohnenden — Preis im Rahmen der kommerziellen Nutzung seiner Erfindung. […] Entgegen den Ausführungen der Beschwerdeführerin bedeutet Patentschutz nicht Preisschutz.

Finally, the decision holds that there would have been established ways for Pfizer to exclude the not yet generic indications from the maths — but it failed to take the appropriate actions. According to the Handbook for the Specialty List (p. 51, ¶C.5.2.2; corresponding to ¶C.4.4.3 of the former version of 1 September 2011),  only the market volume of the original preparation with the same indication as the generic drug is taken into account when different original preparations with different indications exist for an active ingredient. However, Pfizer only had the further indications added to the list of indications of one and the same preparation of Lyrica® (¶8.4.4):

Zu Recht weist die Vorinstanz auf die […] Möglichkeit hin, eine neue Indikation eines bereits bestehenden Wirkstoffes als neues Medikament anzumelden und in die SL aufnehmen zu lassen. Dieses Vorgehen hätte der Beschwerdeführerin ermöglicht, für ein (hypothetisches) Medikament “[…] [für] […]” bis Ende des Patentschutzes dieser Anwendung von den höheren Preisen für Originalpräparate zu profitieren, ohne gleichzeitig einen höheren Selbstbehalt in Kauf nehmen zu müssen. […] Es steht damit dem Hersteller und Patentinhaber frei, welches Vorgehen er wählen möchte, im Wissen um die jeweiligen Konsequenzen.

Pfizer logo

In the end, it’s all about money. Due to the suspensive effect of the appeal, Pfizer benefited from an unlawful deductible of 10% instead of 20% from 1 December 2015 until 31 November 2017. Accordingly, the FOPH will have to examine whether and, if so, to which extent Pfizer will have to pay a refund.

The decision is not yet final; Pfizer’s appeal is pending at the Supreme Court.

Reported by Martin WILMING

BIBLIOGRAPHY

Case No. C-7765/2015 ¦ Decision of 07 March 2018 ¦ “KVG, Spezialitätenliste”

Pfizer PFE Switzerland GmbH ./. Federal Office of Public Health

Panel of Judges:

  • Beat WEBER
  • Christoph ROHRER
  • Vito VALENTI
  • Michael PETERLI
  • Viktoria HELFENSTEIN

Court Clerk:

  • Tobias GRASDORF

Representative(s) of Plaintiff:

Representative(s) of Defendant:

  • n/a

DECISION IN FULL

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