Clifford Chance

On 2 January 2004, the Italian Supreme Court of Cassation upheld the ruling of the Court of Appeal, confirming the damages awarded to the Ministry of Health and the Ministry of Economy and Finance against a multinational pharmaceutical company.

This case marks a significant development in the realms of competition law, intellectual property, and pharmaceutical regulation, offering an important element to be considered, particularly by "originators" holding a dominant position in given market segments.

The Case

Previous episodes of this saga saw the pharmaceutical company, which developed and marketed an original and patented product in Italy, being found liable for abuse of a dominant position. The contested conduct involved applying for a divisional patent and a Supplementary Protection Certificate (SPC) exclusively in Italy, in order to align the exclusivity period in the Italian market with those of other European countries. The abusive nature of these actions was confirmed by the Italian State Council (the ultimate appeal body in relation to the decisions of the Italian Competition Authority).

Through the Ministry of Economy and Finance as well as the Ministry of Health, the Italian State initiated a "follow-on" action before the Court of Rome to seek damages, relying on the decision of the Italian Competition Authority, which ascertained the anticompetitive conduct.

At the core of the State's request was the argument that the anticompetitive conduct of the originator delayed the market entry of generic products. Both the original products and the generics are partially reimbursed by the Italian National Health Service through public funds derived from general taxation. The State then claimed damages for the higher amount of reimbursement paid to the originators during the period when the entry of generics was unfairly prevented by the anticompetitive conduct of the originator.

The follow-on action of the Italian State had a troubled path: initially, the Court of Rome rejected the claim, but the Court of Appeal reversed the first instance decision and awarded the Italian State the amount requested.

The Decision

The Court of Cassation's affirmation that the Court of Appeal correctly assessed the causal link between the originator's conduct and the damages claimed is particularly noteworthy. The evidence, including sales volume and the price disparity between the original product and the anticipated generic versions, was sufficient to quantify the damage. The Italian National Health Service bore the financial brunt of this delay, as it had to reimburse the costlier original drug in the absence of a generic alternative.

The decision to reduce the damages by 5% for equity reasons was also upheld by the Court. This reduction acknowledges the possibility that some purchases of the original drug might not have been eligible for reimbursement, thus slightly mitigating the extent of the damages.

The Importance of the Decision

In conclusion, the Italian Supreme Court of Cassation's decision in this case is a pivotal moment for competition law enforcement in the pharmaceutical sector. It confirms the substance of the Court of Appeal's decision, setting an important precedent that may inspire similar actions abroad: anticompetitive practices against a generic company do not only cause damages to that specific competitor (who may file its own "follow-on" to recoup lost profits) or to competition in general (addressed with fines issued by the Italian Competition Authority). The State, as the funder of the Italian National Health Service, also suffers its own damages and can seek redress against the originator.