By Kushagra Agarwal
On 21st April, 2017, the Competition Commission of India [“CCI”] passed an order under Section 26(1) of the Competition Act, 2002 [“the Act”] directing the DG to conduct a detailed investigation into the functioning of F. Hoffman La Roche AG and two of its subsidiaries – Genetech Inc. and Roche Products (India) Pvt. Ltd. [“the Opposite parties”] for their alleged violation of Section 4(2) of the Act. This order for investigation stems from the information filed under Section 19(1)(a) of the Act by Biocon Ltd. [“IP 1”] and Mylan Pharmaceuticals Private Limited [“IP 2”] alleging abuse of dominant position by the Opposite parties in this matter.
IP 1 is a company engaged in the business of manufacturing generic active pharmaceutical ingredients. IP 2, a subsidiary of Mylan Inc., is engaged in the business of development and sale of pharmaceutical products in India. F. Hoffman La Roche AG is the second largest pharmaceutical company worldwide and is a leading biotechnology company that develops, manufactures and commercializes medicines. Genetech Inc. and Roche Products (India) are both subsidiaries of this company.
The facts of the case are such that in 1990, Genetech Inc. developed an antibody, commonly known by the name Trastuzumab, which is used to treat a specific type of breast cancer. Thereafter, the opposing parties entered into an agreement to market Trastuzumab under the brand name of HERCEPTIN in India and accordingly got all the requisite approvals from the Drug Controller General of India [“DCGI”]. The DGCI granted its approval for importing HERCEPTIN in 440 mg vials in India, which were priced at around Rs. 1,20,000 per vial. In 2008, IP 1, in collaboration with IP 2 initiated the development of a biosimilar drug for Trastuzumab. In 2014, they announced its launch under the brand names CANMAb and HERTRAZ and claimed their prices to be much lesser than HERCEPTIN. Thereafter, the Informants filed information before the CCI alleging that Roche Group being the dominant player in the market was indulging in a series of practices to stop the Informants from entering the market and hampering their growth and accordingly contravening the provisions of Section 4 of the Act.
The CCI observed that it is well known that introduction of generics intervenes with the monopoly position of the innovator/originator drug and introduces competition in the market. This competition not only brings affordability but also ensures accessibility. However, since competition intervenes with the monopoly position of the innovator drug, such innovator often resorts to strategies to delay or oust the entry of generics/biosimilars. 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.
To analyze and understand the CCI’s order, I shall break down this post according to the issues that were laid down by the CCI in its order.
- The first question that arose before the CCI was whether the case was maintainable before the CCI considering an ongoing civil suit before the Delhi High Court?
Roche argued that the present case was not maintainable as the issues raised here were a lot similar to and dependent on the civil suit pending before the Delhi High Court. The Informants argued that the reliefs that are sought before both the forums are very different. The CCI ruled against Roche and held that the case is maintainable. The CCI referred to the Delhi High Court’s decision in the case of Telefonaktiebolaget LM Ericsson v. CCI wherein a similar issue arose with respect to the Patents Act, 1970. The Court in that case ruled that remedies provided under Section 27 of the Competition Act for abuse of dominant position are materially distinct from the remedies as available under Section 84 of the Patents Act. Thus, it is open for a licensee to approach the Controller of Patents for grant of compulsory license and the CCI to pass an appropriate order under Section 27 of the Act simultaneously.
Therefore, the CCI rightly found no infirmity in proceeding with the present case and accordingly went on to examine whether a prima facie case existed under Section 26(1) or not.
- The next issue before the CCI was what constituted the “relevant market” in the present matter?
As there were allegations of abuse of dominant position, the first obstacle before the CCI was to determine the “relevant market” to analyze the alleged abusive conduct of the Roche group. Section 2(r) of the Act defines relevant market as a market comprising of a relevant product market or relevant geographic market or both. Section 2(t) of the Act defines a relevant product market as a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use. The CCI opined that for drugs, the intended use of a drug is of more relevance which, for the purposes of substitutability, is governed by its quality, safety and efficacy. Further, in the combination matter of Sun Pharma and Ranbaxy (C-2014/05/170), the CCI defined the relevant product market at the molecular level in the case of chemical drugs, i.e., medicines/ formulations based on the same active pharmaceutical ingredient (API). At the molecular level, branded as well as generics based on the same API, were considered part of the same relevant product market. Thus, going by the analogy, drugs based on Trastuzumab, i.e., the reference biological drug as well as its biosimilars would be considered part of the same relevant product market.
A relevant product market, within the meaning of Section 2(t) of the Act, need not comprise of products which exhibit ‘identical’ properties as it may also include products which are ‘similar’ in terms of their intended use. Therefore, despite not being identical to the reference biological product, a bio-similar is highly analogous to an already approved biological product and may serve the same intended use as that of the reference biological drug and can be said to be a competitor to it. Thus, the CCI observed that the relevant product market would be the “market for biological drugs based on Trastuzumab, including its biosimilars”. As the conditions of competition are homogenous across India for pharmaceutical products, the relevant geographic market would be ‘India’.
Therefore, the CCI held the relevant market as “the market for biological drugs based on Trastuzumab, including its biosimilars in India”.
- The next question before the CCI was to determine whether the Roche group held a dominant position in the relevant market.
After HERCEPTIN’s introduction in 2002 and its subsequent cheaper versions, till 2014 there was no other pharmaceutical company in the market producing a biosimilar of Trastuzumab. Accordingly, Roche had a 100% share in the relevant market. Roche contended that after the Informant’s drugs were introduced in 2014, its market share has continuously fallen. However, the CCI observed that the allegations in the present case pertain to Roche’s abusive conduct starting from 2013 till date. Therefore, even if its market share fell, Roche still held a considerable market share in 2014 (83.9% in terms of value and 77% in terms of volume of sales) and 2015 (70.9% in terms of value and 61% in terms of volume of sales). Further the CCI took into consideration various other factors enlisted under Section 19(4) of the Act to conclude that prima facie Roche Group had a dominant position in the relevant market and it has and can operate independently of the market forces.
- After determining the relevant market and concluding that Roche Group had a dominant position in the market, the next question before the CCI was whether Roche had abused its dominant position or not?
It was alleged by the Informants that the Roche Group had abused its dominant position by attempting to distort competition in the market by indulging in vexatious litigations, trying to influence regulatory authorities, disparaging the reputation of the informant’s biosimilars etc. The CCI rightly observed the existence of both pricing and non-pricing strategies used by dominant players to exclude their rivals from the market. However, the CCI also noted that such strategies and conduct have to be analyzed carefully, keeping in mind the rights of the dominant party also.
Opining on the issue of whether vexatious litigation was initiated by the Roche Group, the CCI noted that right to bring civil litigation and other claims to asset or defend key interests is a legal right. However, in certain cases, litigation can be pursued by a dominant player as a tool to exhaust smaller players’ resources and delay or prevent their entry in the relevant market. The CCI identified two factors that may be used in examining such a case – first, whether the legal action initiated is baseless and it appears to be an instrument of harassment and second, whether it appears to be conceived with an anti-competitive intent. Considering these two factors, the CCI set aside the Informants’ claim and held that considering the long drawn legal battle between the parties before the Delhi High Court, the Commission is reluctant to hold that the litigation initiated by the Roche Group is baseless.
Coming to the second aspect of whether the Roche group tried to influence regulatory authorities or not, the CCI examined various letters that were submitted by the Informants. The Informants contended that through these letters, the Roche Group tried to create a perception that the Informants’ biosimilars were not adequately tested and posed potential risks to patients. Roche argued that these letters were mere expressions of opinions and cannot be held as anti-competitive. The CCI opined that a line of distinction between puffing and product disparagement must be drawn here. The CCI noted that the practices adopted by Roche amounted to product disparagement as it was trying to create an overall negative impression about the safety and efficacy of the Informants’ biosimilars.
With respect to other issues, the CCI declined to ascertain the Roche’s strategies on the market share of the Informants and left it to be determined by the investigation. On informants’ allegations of unfair pricing, the CCI was prima facie not convinced. The CCI also left it up to the DG to delineate a narrower relevant market to examine certain other allegations imposed by the Informants.
Therefore, on a detailed perusal of the information filed under Section 19(1)(a)of the Act, the CCI found that the Roche Group prima facie violated Section 4(2)(c) of the Act as there was partial, if not absolute, denial of market access by the Roche Group. Accordingly, the CCI ordered a detailed investigation in the matter.
 4th year student, B.Sc. LL.B. (Hons.), National Law University, Jodhpur (Rajasthan, India).
 W.P.(C) 464/2014 & CM Nos.911/2014 & 915/2014.
UPDATE: The CCI order against Roche draws flak from the Delhi High Court
On May 24, 2017, the Delhi High Court opined that the investigation initiated by the Competition Commission of India [“CCI”] against Roche for abuse of dominant position was an “interference in the administration of justice”. Justice Sanjeev Sachdeva, before whom the matter was listed, also said, “a company which holds a dominant position cannot be precluded from exercising its legal remedies. If such was the case, no prominent player would be able to file a suit against their grievances.” He further questioned the CCI’s intent to investigate as the communications on which it had based the investigation order were being admitted to by Roche. However, he refused to pass any orders at this stage and sought the response of the CCI, and two other Indian pharmaceutical companies (Mylan and Biocon) on whose complaint the regulator’s order had been passed. The matter is now posted for August 2, 2017.