See the news release that corresponds to this position statement.
June 27, 2022 – Gatineau (Québec) — Promoting and protecting competition and innovation in the Canadian health care sector is a key priority for the Competition Bureau. As such, the Bureau is committed to providing guidance to the pharmaceutical industry on practices that may be of concern under the Competition Act (the Act).
Biologic drugs (biologics) are a type of pharmaceutical product derived from living organisms. There are two types of biologics:
- Originators, produced by the manufacturer who first developed and commercialized the drug; and
- Biosimilars, which are highly similar versions of an originator biologic generally offered at a lower price.
The Bureau recently closed a preliminary investigation into the introduction of certain secondary brand name originator biologics in Canada (referred to as relabelled biologics). The Bureau examined their potential for anticompetitive harm under the abuse of dominance provisions of the Act.
Information gathered suggests that, in some cases, introducing these drugs could harm competition by making it less likely that patients will switch away from the originator drug. In this way, introducing relabelled biologics may reduce incentives for pharmaceutical companies to develop and market biosimilars.
This preliminary investigation follows an earlier investigation into alleged anti-competitive conduct relating to biologics. The Bureau will be particularly concerned about the introduction of relabelled biologics if they are accompanied by other practices that may raise barriers to entry and expansion for biosimilars.
The Bureau closed its investigation because the drugs under review have not been marketed in Canada. In the event that a relabelled biologic is marketed in Canada and there is compelling evidence of harm to competition, the Bureau will investigate the conduct of the originator manufacturer and take appropriate action.
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Biologic drugs are derived from living organisms, such as a microorganism or animal cell. They tend to be larger, more complex and variable than traditional small molecule drugs, which are chemically synthesized. A biosimilar is a highly similar version of a brand name biologic already authorized for sale. Biosimilars must first obtain approval from Health Canada to be marketed in Canada and are generally priced lower than originators. Therefore, Canada's public and private insurers may realize cost savings by promoting the use of these drugs.
An important difference between biosimilars and small molecule generic drugs is that biosimilars are not deemed bioequivalent to the originator biologic. Accordingly, biosimilars do not benefit from some of the same policies that encourage the uptake of generic small molecule drugs, like provincial interchangeability designations.
Certain biologics are given to patients intravenously, requiring more assistance than with many small molecule drugs. This has resulted in manufacturers developing patient support programs where their products are dispensed at infusion clinics. Originator and biosimilar manufacturers may partner with third parties to develop networks of infusion clinics across the country, sometimes on an exclusive basis. As a result, switching from an originator to a biosimilar may require patients to switch support programs and clinics.
To promote the use of biosimilars, many provinces and territories have introduced, or are in the process of introducing, mandatory switching policies for patients who qualify for public reimbursement. While the details of these policies will vary among jurisdictions, they generally only cover biosimilars. With exceptions, patients must switch to a biosimilar to receive reimbursement from the provincial plan. Other policies may not cover originators for new patients where a biosimilar is available. Although private insurance companies can still provide coverage for originators, it is the Bureau’s understanding that some of them also promote the use of biosimilars to reduce the cost of their plans.
Following the introduction of these policies some manufacturers have sought approval to market their originator under a second brand name. These relabelled biologics are therefore the same product as their respective originator, and only require an administrative relabelling approval from Health Canada. Relabelled biologics may be priced similarly to biosimilars, and therefore may be more attractive for public and private payors than the originator. Pharmaceutical companies might prefer to introduce a relabelled biologic at a lower price rather than reduce the price of the originator. This can be done for various commercial reasons, such as avoiding international price comparisons that could result in a decrease in the price of the originator in other jurisdictions.
The abuse of dominance provisions
The Bureau considered the introduction of relabelled biologics under the abuse of dominance provisions (sections 78 and 79) of the Act. An abuse of dominance can occur when:
- The firm being investigated is dominant, meaning it has a substantial degree of market power – the ability to set prices above competitive levels or reduce other factors, such as product quality, below competitive levels.
- The dominant firm has engaged in a practice of anti-competitive acts that is intended to have a negative predatory, exclusionary, or disciplinary impact on a competitor.
- The dominant firm’s anti competitive practices have substantially reduced the overall level of competition in a market or are likely to do so.
Where these conditions are met, the Bureau can seek an order from the Competition Tribunal for various kinds of corrective measures and administrative monetary penalties.
Because the relabelled biologics under investigation had not been marketed, the Bureau closed its investigation. However, the investigation suggested that if relabelled biologics were to be marketed and covered by public and private payors as an option for patients, they may harm competition in certain circumstances. In markets where patients remain stable on a medication for a significant duration and have non-medical preferences for staying with an originator, the existence of a relabelled biologic may exclude an important patient base that would otherwise switch to biosimilars.
In some cases, patient support programs may contribute to these preferences. As highlighted above, where biologics are infused intravenously, switching patient support programs may require patients to go to a different infusion clinic. This sort of dynamic may provide significant advantages to a brand manufacturer simply due to the patient having taken an originator historically, rather than due to the quality of the product or service.
If originator biologics were able to leverage these dynamics to transfer their customer base over to the relabelled version, there may be little market for biosimilars to compete for. This could reduce incentives for biosimilars to enter, or expand in the market, and reduce competition. Even where relabelled biologics have similar prices to biosimilars, this may only be because of the threat of biosimilar competition. If biosimilar competition is excluded or deterred, the manufacturer of an originator may be able to maintain prices above competitive levels.
The Bureau expects that a key contextual factor in any future investigation will be how relabelled biologics are reimbursed by public and private payors. The Bureau expects transferring a customer base to a relabelled biologic would be substantially more difficult in the absence of reimbursement. Public and private payors may appear to have incentives to reimburse relabelled biologics, such as where they are priced lower than their originator. However, there would be a greater probability for the harms described above to occur if relabelled biologics qualify for equivalent reimbursement to biosimilars.
The Bureau believes that the presence of other potentially anti-competitive conduct may significantly increase the likelihood of competitive harm from relabelled biologics, aligning to form a practice of anti-competitive acts. For example, the Bureau’s inquiry into the conduct of Janssen Inc. determined that manufacturers of originators may at times provide free medication to hospitals and patients. Such conduct may induce consumers to start or remain on an originator and, if coupled with the introduction of a relabelled biologic, may anti-competitively shield the brand manufacturer from biosimilar competition. Alternatively, if the relabelled biologic is marketed below an appropriate measure of its cost of production, this could undercut competitors in a predatory manner and increase the harm from the introduction of the relabelled biologic. In future investigations, the Bureau will consider whether the introduction of a relabelled biologic, accompanied by other potentially anti-competitive conduct, has the cumulative effect of causing a substantial prevention or lessening of competition.
While the Bureau’s analysis is focused on the potential competitive concerns that may be raised by relabelled biologics, there may be situations where the marketing of a relabelled biologic does not raise concerns under the Act, for example where it does not cause a substantial lessening or prevention of competition.
This guidance is being provided in the specific context of biologic drugs, where particular market dynamics, regulatory systems and experience in previous investigations informed the Bureau’s decision to investigate relabelled biologics. In most cases, an incumbent manufacturer launching a new brand or product line following the entry of competitors does not raise issues under the abuse of dominance provisionsFootnote 1.
The Bureau remains very mindful of the importance of competition in the pharmaceutical industry given the significant existing barriers to entry stemming from patent protection, stringent regulations and development costs.
While relabelled biologics have yet to be marketed in Canada, the Bureau is of the view that manufacturers engaging in the type of conduct described in this statement has the potential to contravene the abuse of dominance provisions of the Act – particularly if accompanied by other potentially anti-competitive conduct.
In the event that a relabelled biologic is marketed in Canada and there is compelling evidence of harm to competition, the Bureau will investigate the conduct of the originator manufacturer and take appropriate action.
This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.
However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.
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The Competition Bureau is an independent law enforcement agency that protects and promotes competition for the benefit of Canadian consumers and businesses. Competition drives lower prices and innovation while fueling economic growth.