Fat cats feel the squeeze? Pharma's lean time in Europe

Although it's not actually an intellectual property case, today's ruling in Case C‑62/09, The Queen, on the application of the Association of the British Pharmaceutical Industry v Medicines and Healthcare Products Regulatory Agency; the NHS Confederation (Employers) Company Ltd is potentially of great importance to at least one class of intellectual property owners -- the proprietary pharmaceutical sector. This preliminary ruling follows a reference from the Queen’s Bench Division (Administrative Court), England and Wales.

So what's the story? In England and in Wales, medical general practitioners and other healthcare professionals have the power to write prescriptions for the benefit of their patients. If these prescriptions are written for medicines that are funded by the British National Health Service (NHS), they must comply with (i) NHS rules and prescription controls as well as (ii) the professional codes of conduct issued by the General Medical Council.

Within the NHS, bodies known as Primary Care Trusts (PCTs) and Local Health Boards (LHBs) organise the day-to-day running of the country's healthcare and, since their budgets are always under pressure, they are ever anxious to keep their costs down. Accordingly they introduced a scheme aimed at medical practices, offering them financial incentives to prescribe either specific named medicinal products or generic medicinal products. The scheme seeks to encourage doctors to favour the prescription of "certain medicinal products belonging to the same therapeutic class as those previously prescribed or those which might have been prescribed to patients if the incentive scheme did not exist, but which do not contain the same active substance". The effect of this is to encourage doctors, first, to change the treatment of their patients as regards existing prescriptions and, second, to favour a treatment based on one active substance over another when writing first-time prescriptions.

The PCTs and LHBs establish therapeutic equivalence of medicinal products in the same therapeutic class in accordance with the guidance of the National Institute for Health and Clinical Excellence. The incentive scheme which brought about this litigation mainly related to the prescription of cholesterol reducing statins.

Two separate incentive schemes were implemented. Under the first, medical practices were given points for compliance with a number of prescribing targets, the level of payment reflects the total points obtained. The second was based on setting specific targets, such as increasing the overall proportion of prescriptions for a specific named medicinal product, with payment being made after the target is reached. These schemes were designed to save money, they might have wider repercussions: another medicinal product in the same therapeutic class might be better suited to the treatment of a particular patient than that favoured by an incentive scheme: switching the prescribed medication to another based on a different active substance might therefore have adverse consequences for the patient.

The Association of the British Pharmaceutical Industry, on behalf of 70 pharma companies operating in the UK, expressed its concerns about, and legal objections to, some of these schemes, under Article 94(1) of Directive 2001/83 on the Community code relating to medicinal products for human use, which governs the manner in which medicinal products can be promoted. The regulatory authority considered that the Directive covered only promotion or incentive schemes of a commercial nature and that, while Article 94 was adopted in order to prevent commercial organisations from influencing the judgment of doctors when prescribing medicinal products, Article 4(3) of the directive clearly recognised that Member States need to, and are permitted to, take steps to ensure that publicly funded costs are controlled.

In subsequent litigation, the Administrative Court stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling:

"Does Article 94(1) of Directive 2001/83/EC preclude a public body forming part of a national public health service, in order to seek to reduce its overall expenditure on medicines, from implementing a scheme which offers financial incentives to medical practices (which may in turn provide a financial benefit to the prescribing doctor) to prescribe a specific named medicine supported by the incentive scheme that is either:

(a) a different prescription medicine to the medicine previously prescribed by the doctor to the patient; or

(b) a different prescription medicine to that which otherwise might have been prescribed to the patient but for the incentive scheme,

where such a different prescription medicine is from the same therapeutic class of medicines used for treatment of the patient’s particular condition?"

The Court this morning ruled that Article 94(1) does not preclude the implementation of financial incentive schemes by the national public health authorities in order to reduce their public-health expenditure and which are designed to encourage, for the purpose of treating certain conditions, the prescription by doctors of specific named medicinal products containing an active substance which is different from the active substance of the medicinal product which was previously prescribed or which might have been prescribed but for such an incentive scheme.

The IPKat notes that medicinal products which are under patent are likely to be more costly than those which are not, that branded goods can be expected to be more expensive than their generic counterparts, and that repackaged, depackaged and overstickered parallel imports seem to stay cheap even though so much effort is taken to perform all these post-marketing activities on them. He therefore assumes that incentive schemes will likely favour products that are not tied to active IP rights over those that are. Merpel says, I don't suppose that much leeway is given to the proprietary pharma sector in the UK to offer its own incentives -- public policy would surely frown on such a thing.

Reuters report here

Statins here

Cholesterol here

Incentives here

Survival of the fittest here

Survival of the fattest here