In an earlier blog, we had reported on an interesting litigation case concerning the legal scope of the market exclusivity right for orphan drugs in the EU. Meanwhile, there have been further developments in this court case and its key questions have now been referred to the European Court of Justice (“ECJ”) for a preliminary ruling. This blog post provides an update on the state of affairs.
In the present case, the Munich Regional Court I (“LG Munich”) and later the Higher Regional Court in Munich (“OLG Munich”) had to decide on whether the market exclusivity right for orphan drugs under the Regulation (EC) No. 141/2000 (“Orphan Drug Regulation”) grants the marketing authorization holder (“MAH”) of that medicinal product a subjective right to enforce the market exclusivity directly against competitor companies before civil courts. This is the key question for the litigation case we discuss here.
1. Legal Background
Article 8 (1) Orphan Drug Regulation sets forth the “market exclusivity” for orphan drugs in the EU. The German version of this article even bears the title “market exclusivity right” which is a nuance that became relevant in the underlying litigation. Pursuant to said Article 8, the EU and the EU Member States “shall not, for a period of 10 years, accept another application for a marketing authorization, or grant a marketing authorization or accept an application to extend an existing marketing authorization, for the same therapeutic indication, in respect of a similar medicinal product.” The recitals of the Regulation clarify that this market exclusivity is granted to companies as an incentive to invest into the development of orphan drugs. However, Article 8 does not explicitly state whether the market exclusivity also leads to a subjective right of the MAH to enforce the exclusivity directly by, for example, suing competitors before civil courts if they violate the market exclusivity.
2. Case Facts
What happened in this case? Pharma company A. has been marketing the orphan drug S. with four approved indications. Three of these indications still benefitted from orphan drug market exclusivity in the EU while this exclusivity had expired for the fourth indication (paroxysmal nocturnal haemoglobinuria or “PNH”). In April 2023, the competitor company B. received the marketing authorization for a biosimilar medicinal product for the indication PNH but not for the other three indications of drug S that are still under market exclusivity.
Company A. filed a civil action against company B. and requested a preliminary injunction due to concerns against the information activities of company B. around its biosimilar. B. had distributed a letter to doctors which included a note that the biosimilar is only authorized for PNH and not for other indications like the reference drug. In that information, company B. recommended that the biosimilar should not be used in indications for which it is currently not indicated. Company A. took the view that this letter was suggesting a “cross-label use” of the biosimilar in the three indications of product S that are still under market exclusivity. Accordingly, A. argued that by doing so, the competitor B. is violating the market exclusivity of drug S. for these three orphan indications. As an aside, we note that company A. apparently did not claim that company B. is (also) violating drug advertising laws by promoting the off-label use of the biosimilar.
3. Course of the Litigation
The case saw different stages of the German civil litigation system. Initially, it was subject to the (rapid-paced) preliminary injunction proceeding before the LG Munich and the OLG Munich (where the two courts arrived at different conclusions). Afterwards, the litigation on the merits was initiated before the LG Munich. In this stage, the LG Munich initiated the referral to the ECJ.
At the beginning, in May 2023, the LG Munich had ruled in favour of plaintiff company A and granted a preliminary injunction that ordered company B. to cease and desist from distributing its biosimilar unless B. takes specific and far-reaching measures that protect the three indications of drug S. that are still under market exclusivity.
Then, company B. appealed the preliminary injunction, and on 4 August 2023 the LG Munich issued a judgment that upheld the preliminary injunction. As reasons, LG Munich held that the market exclusivity for orphan drugs gives the MAH an absolute subjective right that can be enforced against competitors before civil courts. The court also found that company B. by distributing the said letter to doctors suggested a cross-label use of its biosimilar in the three orphan indications of drug S. In contrast, company B. had taken the view that Article 8 of the Orphan Drug Regulation does not grant such an absolute subjective right to MAHs but only prohibits regulatory authorities to grant a marketing authorization (“MA”) or accept applications for MAs for other products in the indications that are under market exclusivity. The LG Munich did not follow this argumentation.
However, after company B. appealed the last judgment, the OLG Munich decided on 1 February 2024 to set aside the decision of the LG Munich. According to the OLG Munich, Article 8 of the Orphan Drug Regulation does not grant an absolute subjective right to MAHs of orphan medicines. It qualified said Article 8 only as an administrative prohibition for authorities to process MA applications or approve them during the market exclusivity period. In so doing, the law ensures that no third party can obtain a marketing authorisation for the exclusive orphan indication. The OLG Munich held that if a third party nevertheless markets a drug without appropriate marketing authorisation or by promoting cross-label or off-label use, legal action could be taken under pharma laws, advertising and general trade laws. Also for other reasons, the OLG Munich concluded that the market exclusivity could not be enforced by the MAH under civil law. The OLG Munich also expressed doubts whether the activities of company B. in this case could really be qualified as a violation of the market exclusivity of drug S.
After the OLG Munich had set aside the decision of the LG Munich, company A. pursued the lawsuit on the merits before the LG Munich. Company A continued to argue that the market exclusivity grants a subjective right that A. can enforce against B. and that due to inter alia the German drug reimbursement laws, the marketing of the biosimilar without accompanying protective measures would carry the persisting risk of a cross-label use in indications that are still under market exclusivity. Company B. essentially presented arguments in line with those supported by the OLG Munich, including that the market exclusivity only confers rights to the MAH in relation to the regulatory agencies but not civil law rights towards third parties.
As the key issue of this case crystallizes to the question how the EU laws on the orphan market exclusivity have to be interpreted, the LG Munich referred the case on 25 October 2024 to the European Court of Justice in accordance with Article 267 (2) TFEU. The court requests clarification from the ECJ on the questions (1) whether Article 8 of the Orphan Drug Regulation or (2) the Orphan Drug Regulation from its purpose aims to grant the MAH of an orphan drug a subjective right that can be enforced in civil litigation against third parties that encroach upon the market exclusivity. In case, the answer to (1) or (2) is “yes”, the LG Munich asked a third question (3) whether any claims of holders of the subjective market exclusivity right in case of an encroachment of this right arise directly from EU law or from national laws.
In its referral, the LG Munich widely adheres to its earlier argumentation. An overall assessment of the Orphan Drug Regulation shows that the EU lawmaker enacted the orphan market exclusivity to create a commercial incentive and a legal position so that this goes beyond a mere administrative provision that just binds the authorities. The LG Munich also refers to the effet utile requirement and argues that without a civil law dimension of the market exclusivity, the MAH of an orphan drug would be de facto without rights in cases like this where there is no hook to enforce the exclusivity right against the authorities. The court also comprehensively discusses the different positions in German case law and legal literature.
4. Practical Implications and Outlook
Overall, this is a pharmaceutical litigation case with a quite specific fact-pattern that raises complex questions under German and EU laws. For the EU law angle, it will be very interesting to see how the ECJ will answer the referral questions. Since the underlying legal questions around the orphan market exclusivity are highly controversial, it would be helpful for the sector to have an EU-wide clarification by the ECJ.
Should the ECJ find that Article 8 of the Orphan Drug Regulation grants the MAH a subjective right to be enforced this also against competitors under civil law, this would obviously strengthen the position of MAHs of orphan drugs as well as the legal status of the orphan market exclusivity. In that case, there will likely also be more litigation in the area of orphan drugs to enforce the market exclusivity.
With respect to EU pharma regulatory rules, German courts have traditionally been reluctant with deriving subjective rights for pharmaceutical companies from regulatory provisions. As such, this was a chronic issue when complaints of MAHs of originator reference products were rejected by courts on the ground that they do not have a subjective right to challenge a generic authorization. On that issue, the ECJ had clarified in 2014 (Olainfarm case, C-104/13) that EU law grants legal standing for MAHs of reference products against generic authorizations on the basis of their data exclusivity rights. In so doing, the ECJ applied a broader concept of subjective public rights of MAHs (see our Client Alert on the Olainfarm case).
The discussed case also reminds practitioners of the importance of a careful legal review of all promotional material which should consider the implications of the promotion/information material in the market. As this case highlights, even seemingly neutral statements are sometimes interpreted as an attempt to (directly or indirectly) promote a particular (cross-label) use of a medicinal product.
In this regard it is not entirely clear why company A. apparently did not pursue enforcement under German drug advertising laws by claiming that company B. was promoting the biosimilar for an off-label use. Under German law (as under EU law), this is prohibited, and in this case the LG Munich did take the view that the letter of company B. was suggesting an off-label use (i.e., cross-label use) of the biosimilar. Perhaps company A.’s objective went beyond advertising laws and aimed to seek judicial clarification on the more fundamental question as to how the market exclusivity of its product can be protected in such a situation where there is a biosimilar with one overlapping indication. This desire may also have arisen in light of potential incentives for such cross-label use under drug reimbursement laws.
The case also shows that the situation for orphan drugs with multiple indications can be challenging when market exclusivity expires for one indication because in the EU, the market exclusivity under Article 8 of the Orphan Drug Regulation is indication-specific. Hence, when the exclusivity for one indication expires, an MA for this no-longer-exclusive indication can be obtained by a competitor while the orphan drug still keeps market exclusivity for the other indications. Once a competitor drug enters the market for the no-longer-exclusive indication, like in this litigation case, the question will arise what the competitor has to do (or not to do) to avoid an encroachment upon the market exclusivity of the still-exclusive orphan indications. This issue can become even more difficult if national drug reimbursement laws create incentives for a cross-label use of cheaper medicines that only have partial overlaps in their indications with an orphan drug.
What’s next in this case? The case is now pending with the ECJ. With respect to timing, a decision of the ECJ will probably be available by the end of 2025 or the beginning of 2026 (average time for preliminary rulings at the ECJ is 16,8 months according to latest statistics). Hence, there will be a next round in this interesting case and, hopefully, it will lead to an EU-wide clarification of the underlying legal questions.
The Life Sciences Team of Covington & Burling LLP in Frankfurt (Germany) will keep you posted about the next developments.
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