The Pharmaceutical Intellectual Property and Competition Law Review: United Kingdom


The pharmaceutical industry has been for many years and remains an important sector in the UK. It has a vibrant research and development community within universities, hospitals and companies, from the largest multinationals to start-ups, and it continues to have significant manufacturing activity (although there is a move to bring more drug manufacturing within the UK to reduce the risk of shortages that have been experienced during the covid-19 pandemic and as a result of the uncertainty caused by Brexit).

As well as the innovator manufacturers in the UK, there are a significant number of generic manufacturers. Many commentators would say that there is a healthy balance (or even a virtuous circle) between the incentives and stimulus to the originators to maintain their research-based activities and the activities of the generic manufacturers to secure access to reasonably priced medicines.

The UK government has expressed its support for the sector in 'The Life Sciences Sector Deals',2 which were designed to help ensure that new pioneering treatments and medical technologies are produced in the UK and to drive economic growth. The deals involve substantial investment from private and charitable sectors, and significant commitments in research and development from the government.

Notwithstanding the current buoyancy of the sector, to some extent its future is a little uncertain in the light of Brexit; the UK exited the European Union (EU) on 31 January 2020 and EU law continued to apply in the UK until the 31 December 2020. The EU treaties, EU free movement rights (including the access to the single market) and the general principles of EU law have since ceased to apply in relation to the UK, and prior EU regulations only continue to apply in domestic law if not already revoked or amended by the UK. The effects of Brexit on the life sciences sector are likely to be substantial. This is because, as a third party to the EU, the UK no longer has access to the benefits of the EU Single Market, such as the centralised procedure for marketing authorisations, the EU portal for clinical trials and the pharmacovigilance database. On the other hand, the MHRA was seen to show agility and flexibility in permitting the emergency use of covid-19 vaccines and was quick to put in orders for the same, which gave it a head start in the implementation of its vaccination plans. The EU were not pleased when the AngloSwedish company AstraZeneca seemed to give priority of supply to the UK, resulting in legal action for breach of contract. It remains to be seen if this 'spat' is a one-off or a sign of relations to come.

Competition (antitrust) law is enforced by the UK Competition and Markets Authority (CMA) – its activities are considered in more detail below. Recent cases have dealt with unlawful market3 and information4 sharing activity, excessive pricing5 and investigations into 'pay-for-delay' cases where the innovator company pays a generic competitor to delay or give up completely its plans to enter the market.6

In this chapter, we set out the pharmaceutical legislative and regulatory framework, how to bring a product to market, the use and challenge in using patent litigation for product launch and then an overview of the competition law environment in the UK, including a review of the rules on anticompetitive agreements and abuses of dominance, merger control and an assessment of case law.

Legislative and regulatory framework

In the UK, pharmaceutical products and medicines are regulated in accordance with the Human Medicines Regulations 2012, as amended7 (UK HMR), which retain Directive 2001/83/EC8 and other key EU legislation (as at 31 December 2020 and with necessary Brexit-related changes) and consolidate relevant UK laws.

i Patent duration

Patent protection is governed by the Patents Act 1977. Patents have a maximum duration of 20 years from their filing date, subject to payment of renewal fees and remaining valid.9 Under Regulation (EC) No. 469/200910 (as retained in the UK), a supplementary protection certificate (SPC) may be granted in certain circumstances to extend the duration of a patent relating to a medicinal product.11

ii Marketing authorisation

The UK Medicines and Healthcare products Regulatory Agency (MHRA) is the competent enforcement authority for the regulation of pharmaceutical products. As an executive agency of the Department of Health and Social Care (DHSC), the MHRA is responsible for managing licences and marketing authorisations (MAs) under the UK HMR.

Until the end of the post-Brexit transition period, the UK came under the auspices of the European Medicines Agency (EMA), which regulates pharmaceutical products on a pan-European level. This includes evaluating applications and providing recommendations to the European Commission for the grant of an MA through a centralised European procedure. Applications are assessed on the principles of safety, quality and efficacy set out in the Medicines Regulations, Community Code and Regulation (EC) No. 726/2004.12

iii Pricing

The DHSC manages the pricing and reimbursement of medicines in the National Health Service (NHS), on the guidance and advice of the National Institute for Health and Care Excellence (NICE). Companies typically consult the DHSC before setting a reimbursement price, which is published in the Drug Tariff. NICE analyses the cost and potential benefit of a new drug to decide whether it should be recommended for use in the NHS.

The Voluntary Pricing and Access Scheme (VPAS) is a non-contractual agreement between the DHSC and the Association of the British Pharmaceutical Industry. Under VPAS, NHS spending on branded medicines is capped at 2 per cent growth of the total annual bill, with spending above this cap being paid back by members as a percentage of product sales. To encourage innovation, exemptions are available for products containing new active substances and for small- and medium-sized companies.

Companies not participating in VPAS are subject to the statutory scheme, governed by the National Health Service Act 2006 and the Branded Health Service Medicines (Costs) Regulations 2018.13 Under this scheme, companies pay rebates based on a percentage of their UK revenues.

iv Public purchasing

Medicines are procured using collective purchasing and framework agreements, governed by the Public Contracts Regulations 2015.14 The Commercial Medicines Unit of NHS England is responsible for awarding and managing frameworks across regional pharmacy purchasing groups, while hospital trusts are responsible for managing the contracts awarded. In Wales, the contract process is managed by the NHS Wales Shared Services Partnership, while the All Wales Drug Contracting Committee acts as the awarding body and ensures compliance with legal and governance requirements.15 Following Brexit, the UK became a signatory to the World Trade Organisation's Government Procurement Agreement (GPA) in its own right. It intends to simplify the procurement rules by having one set of rules (replacing public sector, utilities, concessions and defence)16 and launched a Green Paper in December 2020 ('Transforming Public Procurement') to consult on the proposed changes. There is no certainty that the devolved administrations for Scotland, Wales and Northern Ireland individually will adopt all of the proposed reforms and the Green Paper confirms continued engagement with the devolved administrations. The changes (Public Procurement (Amendment etc) (EU Exit) Regulations 2020)17 include a requirement for notices to be published in the UK e-notification service called Find a Tender instead of the Official Journal of the European Union, financial thresholds to be provided in sterling and reviewed every two years.

v Competition laws

For the time being, two sets of competition rules apply in parallel in the UK. UK-specific legislation comprises the Competition Act 1998 (Chapters I and II), which prohibits anticompetitive agreements and abuse of dominance that may affect trade within the UK, and the Enterprise Act 2002. Anticompetitive agreements that extend beyond the UK to other EU Member States are prohibited by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) and will continue to apply post-Brexit to agreements or conduct of UK businesses that have an effect within the EU, in much the same way as agreements or conduct of US and Asian businesses are currently subject to EU competition law where their agreements or conduct affect EU markets. A UK participant in a global cartel will therefore continue to face investigation and fines by the European Commission. A key difference is that the European Commission will have no power to carry out on-site investigations (dawn raids) in the UK, nor to ask the CMA to do so on its behalf. The Commission's powers of investigation would be limited to making written requests for information, as it currently does on a regular basis to businesses based outside of the EU.

Since 1 January 2021, the UK has complied with its commitments on subsidy control set out in its free trade agreements with other countries, including the UK-EU Trade and Cooperation Agreement (TCA). The TCA includes a commitment by both parties to maintain effective competition laws to address anticompetitive agreements and abuses of a dominant position, essentially maintaining the status quo of the existing EU and UK competition law rules. A number of changes have already been made to the UK rules including, as outlined below.

On 30 June 2021, the Subsidy Control Bill was introduced to parliament, which aims to move away from the 'bureaucratic' EU state-aid rules. Instead of requiring that all subsidies, except those falling under a block exemption, be notified, the new rules will operate on the basis of an assumption that the subsidy is permitted once certain UK-wide principles are followed; namely, that the subsidy delivers good value for the British taxpayer while being awarded in a timely and effective way. Importantly, more power is being delegated to the devolved governments of Scotland, Wales and Northern Ireland, who will now be responsible for deciding on issuance of subsidies in their own jurisdiction. The CMA is responsible for advising issuing authorities on the compatibility of certain subsidies with the applicable principles. The Competition Appeal Tribunal will have jurisdiction to judicially review decisions to award subsidies. On 16 March 2021, a multilateral working group, including the Federal Trade Commission (FTC), the US Department of Justice, the Canadian Competition Bureau, the European Commission's Directorate General for Competition and the CMA was launched at the initiative of the FTC to analyse the effects of mergers in the pharmaceutical sector. The European Commission stated that, because of the increasing number of mergers in the pharmaceutical sector, there is a need 'to scrutinise closely to detect those that could lead to higher prices, lower innovation or anticompetitive conduct'.18 A public consultation was carried out between 11 May and 25 June 2021 with a view to gathering ideas and views from stakeholders.

New drugs and biologics – approval, incentives and rights

i Overview of the national and international marketing authorisation pathways

Generally, prior to placing a new medicine on the UK market, irrespective of whether it is an innovative medicine, biological medicine, generic or biosimilar, an MA must be obtained. While the majority of MAs in the EU continue to be applied for under the decentralised procedure or the centralised procedure, following Brexit, the UK has established a new system for independent MA approval through the MHRA. The MHRA carries out all functions previously performed at the EU level, including the making of decisions on applications, variations and renewals. The MHRA has also taken over the renewal process for MAs granted through mutual recognition or decentralised procedures that were underway at the end of the Brexit transition period.

With effect 1 January 2021, (EU) centrally authorised products were, pursuant to the Human Medicines Regulations (Amendment etc.) (EU Exit) Regulations 2019, converted from EU to UK MAs (effective in Great Britain19 only), as if they were granted on the date the corresponding EU MA was granted. Such conversion is subject to the provision of essential baseline and other data to be submitted electronically by the MA holder by latest 31 December 2021.20 As a result of the implementation of the Northern Ireland Protocol, existing (EU) centrally authorised products will remain valid for marketing products in Northern Ireland.

Currently, all new UK and Great Britain national MA applications must be submitted through the MHRA Submissions Portal.21 There are a number of routes to obtain an MA in the UK, Great Britain or Northern Ireland, and the choice of an option depends on the intended market and type of application.22 In summary, the available routes include:

  1. the 150-day assessment for national applications for medicines, which is available for all high-quality MA applications, aiming at accelerating the availability of medicines (particularly new active substances and biosimilar products) for patients in the UK within a 150-day timeline;23
  2. the rolling review for MA applications, which is a new route for MA applications, where an applicant for an MA for a new active substance submits modules of the electronic common technical document (eCTD) dossier incrementally for pre-assessment by the MHRA rather than as part of a consolidated full dossier submission;24
  3. the European Commission (EC) decision reliance procedure, which is another new route in terms of which, for a period of two years from 1 January 2021, when determining an application for a Great Britain MA, the MHRA may rely on a decision taken by the EC on the approval of a new MA in the EC centralised procedure. The intention is that the MHRA determines the Great Britain MA as soon as possible after EC approval, but within 67 days;25
  4. the decentralised and mutual recognition reliance procedure for MAs, in terms of which the MHRA may have regard to MAs approved in EU Member States (or Iceland, Liechtenstein, Norway) through decentralised and mutual recognition procedures with a view to granting the MA in the UK or Great Britain within 67 days of MA application validation;26
  5. the unfettered access procedure for MAs approved in Northern Ireland, in terms of which holders of MAs approved in Northern Ireland or the EU/European Economic Area (EEA) member states apply to bring a product to market in Great Britain. The intention is that acceptable MAs should be granted within 67 days of MA application validation;27 and
  6. the Project Orbis process coordinated by the United States Food and Drug Administration (FDA), which provides a framework for concurrent submission and review of oncology products among international partners (including the UK MHRA, and the equivalent authorities of Australia, Canada, Brazil, Switzerland and Singapore).28
    ii New medicines and biological medicines

Legal basis

With regard to new innovative medicines (including biological medicines), Part 5 of the UK HMR contains the basic requirements for an application for an MA in respect of such medicines (regardless of the pathway to be followed).


Fees payable to the MHRA depend on the type and pathway of application.29 As at the time of writing, the fees vary from £18,437 for the 'unfettered access route' to £92,753 for the 'National fee (any other case including hybrid application)' process.

Expedited approvals for new or innovative medicines

Applications may be expedited where it can be shown that there is compelling evidence that a medicine could provide a major breakthrough in the treatment of certain conditions, such as: (1) chronic, debilitating, life-threatening or severe diseases for which available treatments are ineffective or otherwise inadequate; (2) the emergence of a disease with wide-spread resistance to treatment with currently available treatments; or (3) the emergence of a new disease entity that has severe or life-threatening effects and for which currently available treatments are ineffective or inadequate. Applications may, subject to the approval of the DHSC, also be expedited if there is shortage of supply of essential medicines.30 More recently, with the outbreak of the covid-19 pandemic and the unprecedented conditions it has resulted in, the MHRA has put in place certain measures to expedite the applications of any medicines aimed at the prevention or treatment of covid-19.31 From a practical perspective, for an application to be fast-tracked, the applicant must contact the MHRA via email32 and provide a short letter that includes a brief description of: (1) the relevant disease category; (2) the major clinical properties of the product; and (3) evidence supporting the claimed benefits of the product for the proposed indication or indications. The fast-tracking of an application is free of charge.

Regulatory incentives

The UK HMR implements the EU concept of regulatory data protection and data exclusivity in the UK. For generally 1033 years after the granting of the first MA in the EEA for the product, applications for MAs for generic versions of the product cannot be granted because, according to legislative provisions defining the 'regulatory data protection' period, for the first eight years of that period, the originator company's MA dossier data cannot be cross-referred to by generic competitors. The data protection period runs concurrently with any patent or SPC protection.

Authorised orphan-designated drugs (to treat rare diseases) also qualify for a period of market exclusivity. The basic period is 10 years from the date of MA (extended to 12 years if approved paediatric studies have been completed – in which case the SPC paediatric extension referred to above is not available). This market exclusivity is different in scope from regulatory data protection. Subject to certain exceptions (notably, if a competitor develops a clinically superior medicine), market exclusivity prevents authorisation of any other 'similar' product for the same therapeutic indication, notwithstanding full independent development of that alternative product. As with regulatory data protection, market exclusivity runs concurrently with any patent (or SPC) protection, and runs concurrently with any remaining regulatory data protection for the product. The UK government had said that as far as possible it will replicate this incentive after Brexit, and this remains the case.

iii Generics and biosimilars

Legal basis

As mentioned above, with regard to new generic medicines (and biosimilars) being placed on the market, Part 5 of the UK HMR contains the basic requirements for an application for an MA in respect of such medicines (regardless of the pathway to be followed).

As regards generics, Regulation 51 of the UK HMR provides the legal framework for obtaining an MA for generic products by reference to an originator's product registration dossier, which essentially results in the MA application process being an abridged form of the 'full' Article 8 process mentioned above.

With reference to biosimilars, because of the nature of these medicines, Regulation 53 of the UK HMR states that where a biological medicinal product that is similar to a reference biological product does not meet the conditions in the definition of generic medicinal products, owing to, in particular, differences relating to raw materials or differences in manufacturing processes of the similar biological medicinal product and the reference biological medicinal product, the results of appropriate preclinical tests or clinical trials relating to these conditions must be provided. The type and quantity of supplementary data to be provided must comply with the relevant criteria stated in Annex I of Directive 2001/83/EC (as retained as at 31 December 2020) and related detailed guidelines.


As was the case above, fees payable to the MHRA depend on the type and pathway of the abridged application.34 At the time of writing, the fees for 'licence applications: marketing authorisations (including extension applications)' are, for example, £9,402 for abridged (standard) applications for the 'national fee (all other cases)', etc.

Expedited approvals for generics and biosimilars

The fast-tracking process mentioned above in the context of new medicines and biological medicines shall also apply to MA applications pertaining to generics and biosimilars.

Regulatory incentives

Unlike in the United States where an exclusivity period of a certain period of time may be obtained for the first-approved generic or biosimilar, there are currently no specific regulatory incentives in the UK to encourage generics and biosimilar manufacturers to bring their product to market.

Patent linkage

In England and Wales, patents may be challenged in court or in the UK Intellectual Property Office (UK-IPO). The majority of patent revocation actions commence in the High Court, which has a division for patent disputes staffed by specialist judges. A minority of patent disputes, mostly relating to mechanical or other simpler kinds of technologies, commence in the IP Enterprise Court. The latter is a specialist forum for IP disputes, staffed by specialists, but designed for lower-value and more straightforward disputes involving, for example, small- and medium-sized enterprises or simpler technologies. Very few patent revocation actions are commenced in the UK-IPO because there is no clear cost saving in using that forum. These three forums are each exclusive of the other35 meaning that a challenger must choose which to proceed in. Patents may also be challenged in the courts of Scotland or, in principle, of Northern Ireland, each of which are separate legal jurisdictions within the United Kingdom alongside the jurisdiction of England and Wales.

During the opposition period – nine months following grant – European patents may also be challenged by opposition in the European Patent Office (EPO). This forum, where available, operates in parallel to the three above, meaning that a patent challenger may potentially have two chances of revoking the patent. If successful in the EPO, the revocation will have European-wide effect whereas if successful in the English courts the decision will, formally, only have effect in the UK, although the reasons for the decision may be persuasive in other European countries in some cases. Where an opposition is ongoing, a person threatened with or sued for infringement may file an opposition within the existing opposition proceedings.

Revocation actions are neither dependent upon nor are they formally linked to MAs for medicinal products. There is no specific procedural link between the forums discussed above and the process for obtaining marketing approval. However, English courts operate under a doctrine known as 'clearing the path' in the medicinal products sector. The effect of this is that a person wishing to launch a product (whether this is a generic pharmaceutical or a biosimilar) must revoke the relevant patent or patents or seek other relief from the courts such as a declaration of non-infringement (DNI) prior to launching their product or they will in most cases be subject to an interim injunction restraining the launch. An interim injunction does not follow as of right to a patentee even here and will be assessed according to principles taking account of, in particular, whether the damage caused to either party by the granting or refusing of the injunction may be adequately compensated in damages later. The clearing the path doctrine applies up to at least the first appellate level: product launches for products protected by patents must be planned a significant time in advance because the usual time to trial is approximately 1–1.5 years and a similar time until appeal. Expedited trials or appeals, or both, may be ordered in certain cases to speed up this process. The fastest resolution of which we are aware was 6 months from commencement of proceedings to determination of appeal, but this case involved a declaration of infringement only.36

In addition to revocation and a DNI, the High Court has jurisdiction to grant declarations that serve a useful commercial purpose. One now-recognised form is the 'Arrow' declaration intended to provide commercial certainty in the face of pending patents. Such a declaration, if available, will be to the effect that a certain product or process was known or obvious at a particular date (for example, the priority date of known pending patents). The product or process the subject of the declaration will be that of the third party seeking to launch, thereby giving an indirect defence to that third party against future infringement on the basis that any patent that it would putatively infringe would be invalid.

Patents may be revoked in the UK courts, UK-IPO and EPO on essentially the same grounds, although the differing procedures in the courts, UK-IPO and EPO make some bases better suited to one forum than another. The main grounds are:

  1. the patent is not novel;
  2. the patent does not involve an inventive step (i.e., it is obvious);
  3. the patent is not capable of industrial application;
  4. the patent is not disclosed sufficiently;
  5. the patent has been amended in an impermissible way (e.g., to extend its subject matter or to add matter not comprised in the application as filed); and
  6. the patent claims excluded subject matter.

This last category includes inventions the exploitation of which would be contrary to public policy or morality and inventions falling within certain defined categories. These categories include, among other things, methods of treatment or diagnoses. However, use-limited therapeutic claims have been permitted to give novelty for second medical uses of known medicinal products. In particular, 'Swiss-form' claims (use of X in the manufacture of a medicament for the treatment of Y) were permitted until legislative changes at the end of 2007 abolished such claims, with prospective effect only, and introduced instead 'EPC 2000' (X for use in the treatment of Y). The abolition of Swiss-form claims and introduction of EPC-2000 claims mean therapeutic use claims were previously in the form of a process and now in the form of a product. This may have knock-on effects on infringement that are yet to be explored.

Competition enforcers

i Brexit

The UK left the EU on 31 January 2020, and the transition period ended on 31 December 2020. However, the fundamental principles of EU, namely the prohibitions on anticompetitive agreements and abusing a dominant position, based on Articles 101 and 102 of the TFEU, continue to operate much as before in the UK, as they formed the basis for the corresponding prohibitions in UK competition law.

While the UK has also retained the existing EU block exemptions,37 the impending expiry of the Vertical Block Exemption Regulation (VBER) on 31 May 2022 has provided the CMA with the opportunity to examine what changes could be made to any replacement regulation. On 10 February 2021, the CMA launched a public consultation to gather feedback on the VBER and identify areas in need of improvement. While many foresee this as an opportunity for the UK to 'make its mark', it cannot be ignored that significant differences between the EU and UK regimes would complicate matters for businesses operating in the UK and the EU. In reality, it seems that a balance will be struck. On 17 June 2021, the CMA published a consultation document setting out its proposed recommendations to the UK government for a 'new' competition regime for verticals (Vertical Agreements Block Exemption Order VABEO). The document references the ongoing EU evaluation as a key source and retains many aspects of the original VBER, including the same core definitions and market threshold, the same list of hardcore restrictions and the option for the competition authority to withdraw the benefit if concerns are raised about the particular agreement. However, the CMA has called on the government to exclude wide parity and 'most-favoured nation' clauses, a subject that is still under discussion at EU level with diverging views across Member States. The document also foresees a more permissive treatment of certain dual-distribution agreements, dual-pricing agreements and the setting of selective distribution criteria for online sales, as well as guidance on active-versus-passive sales, agency agreements and environmental sustainability agreements.

It is also noteworthy that a leniency application made to the Commission before or after the end of the transition period will not protect a firm from being subject to fines in the UK.

ii The CMA

The CMA is the main UK national competition authority and is the investigation and enforcement authority. The CMA's antitrust law powers are set out in the Competition Act 1998 and its merger control powers are set out in the Enterprise Act 2002.

The CMA has been very active in enforcing the Competition Act in the pharmaceuticals sector. It is actively engaged in several excessive pricing (abuse of dominance) cases. Last year, it concluded a reinvestigation of certain patent settlement agreements of GSK's following a European Court preliminary reference request in a pay-for-delay generics case, and successfully defended an appeal against its March 2020 nortriptyline decision finding an information sharing agreement in the sector to infringe the Competition Act.

Merger control

There is no requirement to pre-notify or obtain prior clearance for mergers under UK law, the pre-notification regime being voluntary. However, the CMA has the power to intervene and investigate mergers, including those that have not been notified or that have been completed, or both, and it frequently does so. Where the CMA reaches an adverse competition assessment following a second-phase investigation, it can prohibit an anticipated merger or impose remedial measures for a completed merger, including divestment requirements.

The acquisition of material influence, not just the acquisition of control, is subject to the UK merger control regime. For most sectors, including pharmaceuticals, the thresholds for a transaction qualifying for investigation are the target having a UK turnover of over £70 million or the parties having an overlapping share of supply of 25 per cent or more in the UK (or a substantial part of the UK). The 'share of supply' test is interpreted very flexibly – the Competition Appeal Tribunal recently upheld a CMA decision finding that it had jurisdiction even where one of the parties supplied services only indirectly to UK customers.

In 2018, the UK amended the Enterprise Act to lower the applicable threshold for intervention in mergers or acquisitions in three specified sectors: (1) dual-use goods; (2) quantum technology; and (3) computing hardware. In 2020, these thresholds were again lowered, resulting in the CMA having jurisdiction to investigate a transaction where the target business has a UK turnover of above £1 million, or has a share of supply of 25 per cent or more of relevant goods or services in the UK (or a substantial part of it), even if the transaction does not lead to an increase in the merging parties' share of supply. Three additional categories were added: artificial intelligence, advanced materials and cryptographic authentication.

The CMA's investigation and enforcement powers apply to foreign-to-foreign mergers where the parties (and especially the target) supply (or supplies) the UK market and the relevant criteria for investigation are met. The definition of 'supply' is broad. For example, in the pharmaceuticals sector, in 2019 the CMA investigated, on its own initiative, the acquisition by Roche Holdings, Inc, a subsidiary of the Swiss-based Roche group, of Spark Therapeutics, Inc, a US biotechnology company active in developing gene therapy treatments. Roche was supplying the relevant UK market, but Spark's relevant products were still in clinical development. The ultimate test in UK merger control is whether the merger is likely to result in a substantial lessening of competition in the UK. The CMA concluded that there would not be in this case.

Following Brexit, mergers in the UK may now be subject to parallel investigations by the CMA and the European Commission, as the 'one stop shop' principle no longer applies.

Anticompetitive behaviour

i UK Competition Act 1998 Chapter I – Restrictive Agreements

Reverse payment agreements (pay-for-delay)

Under specific circumstances, it is clear that a settlement agreement between a holder of a pharmaceutical patent and a manufacturer of generic medicines can be contrary to UK competition law. In 2016, the CMA adopted its first decision on reverse payment agreements. GSK and various generic medicines manufacturers concluded patent settlement agreements whereby the generics suppliers agreed to refrain from entering the market with their own generic medicines, in return for payments and supply by GSK of specified volumes of generic paroxetine tablets for resale on the UK market. The CMA found that the agreements in question infringed the prohibition of restrictive agreements under Article 101 of the TFEU and its UK equivalent (Chapter I of the Competition Act 1998) and constituted an abuse of GSK's dominant position in the relevant market on the basis of Chapter II of the UK Competition Act.

The CMA's 2016 GSK decision38 was appealed to the Competition Appeal Tribunal (CAT), which made a reference for a preliminary ruling to the EU Court of Justice (CJEU).39

The CJEU formulated general principles to be applied to reverse payment agreements, on fundamental issues relating to the application of potential competition, object, effect, definition of the relevant market and abuse. The court held that reverse payment settlement agreements may be considered as 'by object' infringements of competition law, thus breaching antitrust rules by their very nature, without needing proof of the effects that the conduct has had on the market.

Following the CJEU's judgment, the CAT applied the ruling to the facts of the four referred cases in its decision of 10 May 2021.40 It reduced the imposed fine from £37.6 million to £22 million and also reduced several other related fines. The CMA had advocated for a smaller reduction of closer to 10 per cent. However, the CAT held that on grounds of proportionality, a reduction of closer to 40 per cent was more appropriate.

ii Ongoing CMA Chapter I investigations


In a decision on 4 March 2020, the CMA found that four drug makers, including Lexon, were involved in the exchange of commercially sensitive information – including about prices, volumes and entry plans – to try to keep the price of nortriptyline high. The companies were collectively fined £3.4 million, with Lexon appealing to the CAT.

On 1 June 2020, the CMA announced that it secured a legally binding disqualification undertaking from Mr Amit Patel, a former director of Auden Mckenzie (Pharma Division) Limited and Auden Mckenzie Holdings Limited. Mr Patel has given an undertaking not to act as a director of any UK company for five years from 13 July 2020. On 21 August 2020, the CMA secured a legally binding disqualification undertaking from Mr Robin Davies, director of Alissa Healthcare Research Limited. Mr Davies gave an undertaking not to act as a director of any UK company for two years as of 24 November 2020. However, On 10 November 2020, Mr Davies applied to the High Court for permission to act as director and take part in the management of certain companies and on 17 December 2020 he was granted such permission, subject to strict conditions. The court was influenced by Alissa's status as a pharmaceutical supply company during a pandemic, the fact that Mr Davies was the only executive director and the lack of a suitable replacement for him. On 27 August 2020, the CMA issued proceedings in the High Court of Justice, Business and Property Courts, seeking the disqualification of Mr Pritesh Sonpal, a director of Lexon (UK) Limited. However, given the pending appeal against the CMA's decision before the CAT, the assigned judge made an order transferring the disqualification proceedings to the CAT, so that both could be heard together. On 25 February 2021, the CAT upheld the CMA's findings and dismissed the appeal, while also unanimously determining that the first condition of the disqualification proceedings was fulfilled.41

Nitrofurantoin and prochlorperazine

On 7 April 2020, the CMA announced a pause in two investigations, concerning alleged anticompetitive agreements in the supply of prochlorperazine and nitrofurantoin, respectively, to reallocate resources to enable the CMA to focus on urgent work during the covid-19 pandemic. Each of these investigations was the subject of statements of objections issued in 2019.

Both cases resumed in July 2020. On 25 April 2021, the CMA announced it needed further time to consider the responses to the statement of objections sent in the nitrofurantoin investigation. The end date for that investigation is now scheduled to be in the autumn of 2021. In the prochlorperazine investigation, the CMA announced on 22 January 2021 that it had taken the administrative decision to focus on the overarching agreement rather than individual breaches. A final decision in that case is expected in the autumn of 2021.

iii UK Competition Act 1998 Chapter II – Abuse of Dominance

UK Court of Appeal clarifies the legal test to be applied in excessive pricing cases

Phenytoin sodium – Pfizer/Flynn

In December 2016, the CMA imposed a record fine of £84.2 million on Pfizer Limited and £5.2 million on Flynn Pharma Limited for charging excessive prices and abuse of dominance in the market for the manufacture and distribution of phenytoin sodium capsules. The UK CAT quashed the CMA's decision (June 2018) finding that the CMA had misapplied the legal test for excessive pricing, not properly applied the evidence adduced by the companies by not taking sufficient account of the prices of comparable products (phenytoin sodium tablets in particular) and not properly considered the economic value of phenytoin sodium capsules. The CMA appealed the CAT judgment to the Court of Appeal (supported by the European Commission) and on 20 March 2020, the Court of Appeal broadly upheld the CAT's ruling.

Pfizer supplied phenytoin sodium, a prescription anti-epilepsy drug, in capsule form under the brand name Epanutin in the UK. In 2012, it transferred to Flynn the marketing authorisation for the capsule form that it continued to manufacture for Flynn, which in turn supplied it to the NHS. Flynn de-branded Epanutin and supplied it as a generic. As a consequence of this de-branding, the capsule form was no longer subject to price regulation. Pfizer increased its manufacturing price to Flynn for capsules by between 783 per cent and 1,615 per cent. Flynn raised its price to the NHS by an eyebrow-raising 2,387 per cent to 2,656 per cent.

The Court of Appeal considered the application of the legal test for excessive pricing established by the CJEU in its seminal United Brands judgment. Here, the court stated that the excessive nature of a price could be determined inter alia through the application of a two-limb test:42 (1) the price must be excessive when the difference between the cost of production and the selling price of the product is excessive (the excessive limb); and (2) the price must be unfair either in itself or when compared to competing products (the unfair limb).

However, the Court of Appeal said that this two-limbed test is not the only method for assessing excessive pricing and that the CMA has a margin of manoeuvre or appreciation in deciding which methodology to use and which evidence to rely upon.

On 8 June 2020, the CMA announced the timetable for its investigation in the Pfizer/Flynn excessive pricing case, following remittal of issues by the CAT and by the Court of Appeal judgment. The initial re-investigation was carried out between June and October 2020 and in March of 2021, the CMA took the decision to continue with the investigation.


The CMA investigation relates to suspected unfair and excessive pricing by Advanz Pharma (formerly Concordia International RX (UK) Limited) in the supply of liothyronine tablets, including to the NHS).

The CMA's case, contained in two statements of objections, alleges that Advanz Pharma/Concordia abused its dominant position in breach of the Chapter II prohibition of the Competition Act and Article 102 of the TFEU, by charging excessive and unfair prices to the NHS. A third statement of objections was issued in July 2020, which addresses issues arising from the Court of Appeal's judgment of 10 May 2020 in the phenytoin investigation, discussed above and states that the CMA continues to provisionally find a breach of competition law.

Liothyronine tablets are primarily used to treat hypothyroidism. Until 2017, Concordia was the only supplier. The CMA has found that the amount that the price that the NHS paid per pack of this drug rose from around £4.46 before it was de-branded in 2007 to £258.19 by July 2017, an increase of almost 6,000 per cent, while production costs remained broadly stable.


On 12 February 2020, the CMA joined together three separate investigations into alleged excessive and unfair pricing, anticompetitive agreements and abusive conduct in relation to the supply of hydrocortisone tablets in the UK. The CMA issued statements of objections between December 2016 and February 2019 and a final decision is expected during the summer of 2021.43

Lithium-based medication for the treatment of bipolar disease

On 5 October 2020, the CMA opened an investigation into Essential Pharma's intention to discontinue the supply of Priadel, a lithium-based medication for the treatment of bipolar disorder. The Department of Health and Social Care requested that the CMA impose interim measures on Essential Pharma preventing them from following through with the discontinuance, until the investigation was concluded. However, Essential Pharma agreed to continue supplying the drug to facilitate continued discussions on pricing. On 24 November 2020, the CMA announced its intention to accept commitments from Essential Pharma and input was sought from stakeholders on the suitability of the proposed commitments. On 18 December, following minor modifications, the CMA officially accepted the commitments and the investigation was closed.

iv Market definition in abuse cases

In its GSK preliminary ruling, the CJEU provided guidance on the key issue of market definition, in the context of abuses of dominance, which will have wider implications for the pharmaceutical industry than patent settlement agreements alone. The guidance from the CJEU is that if the generic medicines are as a matter of fact (to be determined by the national court) in a position to enter the market within a short period with sufficient strength to compete with the originator, they are to be considered as being within the relevant market. Indeed, this reasoning has already been applied in the recent Lundbeck judgment, where the Court of Justice confirmed that the General Court was correct in upholding the Commission's finding that at the time the agreements were concluded, Lundbeck and the manufacturers of generic medicines were potential competitors.44

The court also stated that it is for the national court to determine whether the strategy to conclude settlement agreements with the object or effect of delaying generic entry, has the capacity to restrict competition and, in particular, to have exclusionary effects, going beyond the specific anticompetitive effects of each of the settlement agreements that are part of that strategy.

On 6 November 2020,45 the UK Supreme Court confirmed the scope of the res iudicata principle in EU law, holding that findings of fact made in an EU General Court judgment in the course of a judgment annulling a finding of breach of Article 102 TFEU were not binding on a UK Court assessing the damages payable for a breach of Article 101 TFEU. This resulted from a damages action brought before the English High Court, in which the respective health authorities of England, Wales, Scotland and Northern Ireland sought to recover compensation for Servier's anticompetitive behaviour.46 Servier argued that the health authorities had failed to mitigate their loss, or had negligently contributed to their loss in that they failed to encourage prescribers to prescribe alternative substitutable blood pressure drugs instead of perindopril.

In that context, Servier sought to rely on findings made by the General Court about the degree of substitutability of other drugs for perindopril. Servier contended that those findings were binding as a matter of EU law and that it was an abuse of process for the health authorities to dispute them. The High Court rejected both arguments, but granted permission to appeal on the EU law point. The Court of Appeal likewise rejected the EU law argument, but Servier obtained permission from the Supreme Court to argue that a reference should be made to the CJEU. The UK Supreme Court held that no reference could be made while the General Court judgment remained subject to appeal. On the substance, it held that the General Court's findings were not binding in the context in which Servier sought to rely on them (i.e., seeking to borrow findings of fact from an annulling judgment made in the context of abuse of dominance under Article 102 TFEU and to deploy them in the entirely different context of mitigation of loss, which had nothing to do with Article 102 or with the consequences of the annulling judgment).

Outlook and conclusions

We have referred numerous times to the issues raised by the implementation of Brexit – the relationship not only with the EU but with other major economies, including US and Japan, will affect considerably how the sector looks in the near future. There remains optimism in the sector, and the continued investments made in research and development facilities by both UK-based companies and others demonstrate this optimism. The UK is seen favourably as a place for entrepreneurs in this sector, too, and while they, as well as the government as promised, and big pharma, continue to invest, talent will be attracted and IP created. The competition regime is unlikely to change in any significant way (with the exception of the new UK subsidy regime), but it will be interesting to see whether the independence of the MHRA results in a deviation from established EMA standards, or whether the UK becomes a 'white label' territory.


1 Sally Shorthose, Peter Willis and Chris de Mauny are partners, and Bróna Heenan and Pieter Erasmus are associates at Bird & Bird LLP.

3 For example, nitrofurantoin tablets (case 50511-1) and prescription-only prochlorperazine tablets (case 50511-2).

4 For example, nortriptyline tablets.

5 For example, hydrocortisone tablets (case 50277-1).

6 For example, fludrocortisone acetate tablets (case 50455).

7 The Human Medicines Regulations 2012 (SI 2012/1916), as amended.

8 Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to medicinal products for human use, as amended.

9 Section 25 of the Patents Act 1977, as amended.

10 Regulation (EC) No. 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products as amended, in particular by the Supplementary Protection Certificates (Amendment) (EU Exit) Regulations 2020 (SI 2020/1471).

11 Following Brexit, a new SPC in the UK must in most cases be based on a UK marketing authorisation. EU marketing authorisations still have effect in Northern Ireland and therefore an SPC may be based on such an authorisation but will have effect only in Northern Ireland.

12 Regulation (EC) No. 726/2004 of the European Parliament and of the Council of 31 March 2004 laying down Community procedures for the authorisation and supervision of medicinal products for human and veterinary use and establishing a European Medicines Agency, as amended.

13 Branded Health Service Medicines (Costs) Regulations 2018 (SI 2018/345), as amended.

14 Public Contracts Regulations 2015 (SI 2015/102), as amended. The National Health Service (Procurement Patient Choice and Competition) (No. 2) Regulations 2013 will continue to apply to healthcare commissioning; however, consultations are expected that will build on previous NHS recommendations to remove the two current procurement regimes applicable to clinical healthcare services and replace them with a new procurement regime.

15 'Guide to medicine procurement in the UK' (updated October 2020), by the NHS Specialist Pharmacy Service.

16 The Public Contracts Regulations 2015 (which implemented Directive 2014/24/EU); the Utilities Contracts Regulations 2016 (which implemented Directive 2014/25/EU); the Concession Contracts Regulations 2016 (which implemented Directive 2014/23/EU) and the Defence and Security Public Contracts Regulations (which implemented Directive 2009/81/EC).

17 UK Statutory Instruments 2020 No. 1319.

18 European Commission Press Release, 'Competition: The European Commission forms a Multilateral Working Group with leading competition authorities to exchange best practices on pharmaceutical mergers',

19 That is, England, Wales and Scotland.

21 See further at (last accessed 25 June 2021). Submission Portal accessible from this link: (last accessed 25 June 2021).

22 See further at (last accessed 25 June 2021).

28 See further at (last accessed 25 June 2021).

29 See further at, especially at item 14 (last accessed 25 June 2021).

30 In these cases, the DHSC should first be contacted via email at [email protected]

32 As at June 2021, at [email protected]

33 For the first eight years, no generic MA application may be filed using the data in the innovator's MA dossier. For a further two years, any generic MA application may not be granted. The overall 10-year period may be extended to 11 years if, during the first eight years, the same product is authorised for a new therapeutic indication with significant clinical benefits compared to pre-existing therapies.

34 See further at (last accessed 25 June 2021).

35 There is a mechanism of transfer between the High Court and the IP Enterprise Court, but a claim cannot be maintained in more than one of these forums in respect of the same patent or patents.

36 Napp v. Dr Reddy's Laboratories [2016] EWCA Civ 1053. The court permitted one issue of validity to be raised by way of a 'squeeze' on interpretation of the claims for the purpose of infringement.

37 Part 3 of the Enterprise Act 2002.

38 GlaxoSmithKline PLC v. Competition and Markets Authority, Case 1252/1/12/16.

39 Generics (UK) Ltd and Others v. Competition and Markets Authority, Case C-307/18, 30 January 2020, ECLI:EU:C:2020:52.

40 1251/1/12/16 Generics UK Limited v. Competition and Markets Authority; 1252/1/12/16 GlaxoSmithKline PLC v. Competition and Markets Authority; 1253/1/12/16 (1) Xellia Pharmaceuticals APS (2) Alpharma LLC v. Competition and Markets Authority; 1255/1/12/16 Merck KGaA v. Competition and Markets Authority; 1251-1255/1/12/16 Generics UK Limited v. Competition and Markets Authority [2021] CAT 9.

41 1344/1/12/20 Lexon (UK) Limited v. Competition and Markets Authority [2021] CAT 5.

42 EU:C:1978:22, United Brands Company and United Brands Continentaal BV v. Commission, paras 251 and 252.

43 August 2017 (Case 50277-1), March 2017 (Case 50277-2) and February 2019 (Case 50277-3).

44 Cases C-586/16 P Sun Pharmaceutical Industries and Ranbaxy (UK) v. Commission, C-588/16 P Generics (UK) v. Commission, C-591/16 P Lundbeck v. Commission, C-601/16 P Arrow Group and Arrow Generics v. Commission, C-611/16 P Xellia Pharmaceuticals and Alpharma v. Commission, and C-614/16 P Merck v. Commission. 2 Case C-307/18 Generics (UK) and Others.

45 Judgment 6 November 2020, Secretary of State for Health and others v. Servier Laboratories Ltd and others [2020] UKSC 44.

46 In 2014, Servier, a French pharmaceutical company, was found by the European Commission to have infringed competition law in relation to the supply of Perindopril, a blood pressure drug. The Commission found that Servier had breached Article 101 TFEU by entering into 'pay for delay' agreements, under which generic companies agreed not to enter the market for supplying Perindopril. The Commission also found that Servier had breached Article 102 TFEU both by entering into those agreements, and by acquiring certain technology for the production of Perindopril. On appeal, the General Court upheld the Commission decision in relation to Article 101 TFEU, but annulled it in respect of Article 102 TFEU on the basis that the Commission had erred in defining the relevant market, and therefore in its assessment that Servier was in a dominant position. Both parties have appealed.

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