Member Article

If a branded medicine and its generic version are put on the EEA market by economically linked undertakings, is a parallel importer then allowed to rebrand and repackage the imported generic version as the branded reference medicine? This has been a hotly debated issue in recent years and recently led the Brussels Court of Appeal (CoA) to refer three questions to the European Court of Justice (ECJ) (Cases C-253/20 and C-254/20). In anticipation of the advocate general's opinion and the ECJ's ruling, this article provides the factual background and explains why a parallel importer should not be allowed to rebrand in such cases to have the best of both markets.

Facts

In May 2020 the CoA referred three questions for a preliminary ruling to the ECJ in two cases in which parallel imported generic medicines were rebranded and repackaged as the branded reference medicine. Both cases involve the commercialisation in Belgium of branded products from the Swiss pharmaceutical company Novartis following the parallel import from the Netherlands of generic products of Novartis's generic division, Sandoz.

In the first case (C-253/20), Impexeco, a parallel importer, intended to import the generic letrozol sandoz from the Netherlands into Belgium as Novartis's branded reference medicine Femara. In the second case (C-254/20), PI Pharma, another parallel importer, tried to do the same thing for the generic methylfenidaat HCl sandoz and commercialise it as Novartis's branded reference medicine Rilatine.

Therefore, the background was similar in both cases. The reference medicine and generic version:

• were bio-equivalent;
• shared the same therapeutic indications; and
• were commercialised in both Belgium and the Netherlands.
  
  

The parallel importers had obtained a parallel import authorisation from the Belgian Federal Agency for Medicines and Health Products. The crux was that the parallel importers also sought to affix Novartis's respective trademarks for Femara and Rilatine on products that had not been marketed with those trademarks.

Belgian case law

In addition to the two cases above, several recent cases have resulted in contradictory decisions regarding the issue of whether parallel importers can rebrand and repackage an imported generic version as a branded reference medicine.

In the proceedings that led to the CoA's referral decisions,(1) the president of the Dutch-language Brussels Enterprise Court considered the parallel importers' actions as infringing Novartis's trademark rights and imposed injunctions on the parallel importers.(2) The first-instance decisions were based on the following grounds:

• Novartis's trademark rights had not been exhausted. According to Article 15(1)of the EU Trademark Regulation (2017/1001),(3) trademark rights are exhausted only for goods that have been put on the market in the European Economic Area under that trademark by or with the proprietor's consent. Given that the trademark had not been used by Novartis on the generic products that it marketed and which the parallel importer in the Netherlands had bought, exhaustion did not apply.
• The parallel importer's use of the branded medicine's trademark was not justified by virtue of the free movement of goods, given that Novartis's reliance on its trademark rights did not artificially partition the Belgian market. That is because artificial partitioning requires that the product market is identical, whereas generic medicines and branded medicines actually belong to distinct market segments. The existence of different market segments is an economic reality resulting from the system of (lapsed) patent protection and follows, from a regulatory and medical point of view, a different public perception and differences in pricing and reimbursement. Preventing the parallel importer from entering the originator market with a product from the generic market therefore does not constitute artificial partitioning of a market.
  
  

As a result, the parallel importer's use of Novartis's trademark was not justified by the rules on exhaustion or the free movement of goods and was held to amount to a trademark infringement.

These decisions contradict earlier rulings by the president of the Brussels Enterprise Court dating back to 2015,(4) (again) regarding the rebranding of letrozol sandoz as Femaraand and Valsartan Hydrochlorothiazide Sandoz as Co-Diovane. In those rulings, the president came to the opposite conclusion, holding that:

• Novartis's trademark rights had been exhausted; and
• Novartis's reliance on its trademark rights had led to the artificial partitioning of the market given that there were no separate market segments.
  
  

This conclusion was based on the considerations that:

• in one of the cases, the generic product was not commercialised in Belgium;
• healthcare practitioners did not often prescribe medicines on the basis of the compound name; and
• the name of the generic medicine was little known, so that 'reminder advertising' by the parallel importer would be of little use.
  
  

Questions referred for preliminary ruling

Due to the diverging case law at the first-instance level, the CoA's judgment on this issue was highly anticipated. The court set out the parties' positions regarding the issues above and referred to the fact that the legal question had been answered in various ways. Therefore, the CoA felt that there was considerable controversy and uncertainty as to whether the trademark holder could oppose the rebranding by a parallel importer of a generic to an originator product, where both products had been marketed in the European Economic Area by economically linked companies.

The questions can be consulted here and here and are in essence as follows:

• Where economically linked undertakings have put a branded reference medicine and a generic medicine on the EEA market, may a trademark proprietor's opposition to the parallel importer's commercialisation of the generic medicine, after the parallel importer has repackaged and rebranded it as the branded reference medicine, lead to an artificial partitioning of the member states' markets?
• If so, must this be assessed under the Bristol-Myers Squibb conditions?
• Is the above affected by the fact that the generic medicine and branded reference medicine are identical or have the same therapeutic effect?
  
  

Comment

The ECJ will decide on the above questions and its decision will likely have a considerable impact on the parallel trade of medicines.

Particularly relevant for what is the first and, arguably, the essential question (ie, is there artificial partitioning of the market) is the fact that the generic product is commercialised in the country of exportation as well as the country of importation. The parallel importers could therefore just as well import the generic product as the reference product into Belgium.

The argument that generic medicines and their branded counterparts belong to one and the same market seems unconvincing. Parallel importers' desire to rebrand generic medicines and commercialise them at the higher price of the reference medicine implicitly shows that parallel importers also perceive two markets.

The ECJ is expected to decide within the next 12 months whether parallel importers can have it both ways.

For further information on this topic please contact Kirian Claeyé or Laura Traest at ALTIUS by telephone (+32 2 426 1414) or email ([email protected] or [email protected]). The ALTIUS website can be accessed atwww.altius.com.