On the rise of ‘Robin Hood’ pharmacies

On the rise of ‘Robin Hood’ pharmacies

2.6 billion British pound sterling. That is the average cost of bringing a new drug to market. Pharmaceutical companies willing and able to make such an investment will, in the first instance, try to protect their intellectual property through patents.
While patent protection is generally deemed sufficient, in the United Kingdom, section 60(5)(c) of the patents act may provide a loophole:
An act which would constitute an infringement of a patent for an invention shall not do so if it consists of the extemporaneous preparation in a pharmacy of a medicine for an individual in accordance with a prescription given by a registered medical or dental practitioner or consists of dealing with a medicine so prepared.
In the Netherlands, the Geneesmiddelenwet, which regulates drugs and therapeutic devices, offers a similar provision. In 2017, the Transvaal pharmacy in the Hague announced their plans to use the provision and commence magistral preparation of the cystic fibrosis drug ORKAMBI, because they believed the price of ORKAMBI was too high—we reported on this here.
It is important to strike a good balance between the need for affordable medicine and the need for better medicine. The Dutch government and Vertex Pharmaceuticals, the proprietor of ORKAMBI, have now agreed a price for ORKAMBI. Despite this, the pharmacists have commented that they may still proceed with magistral preparation of ORKAMBI, thereby potentially weakening the commercial incentives for pharmaceutical companies to develop orphan drugs.

Just a minute. Robin Hood steals money from my pocket, forcing me to hurt the public, and they love him for it?!” – the sherriff of Nottingham, in Robin Hood: Prince of Thieves

The Transvaal pharmacy are not the only party in the Netherlands promoting magistral preparation. Last year, when Leadiant increased the price for chenodeoxycholic acid (CDCA) from about 30.000 to about 160.000 euros per patient per year, the Amsterdam academic medical centre started preparing the drug for about 25.000 euros per patient per year. Although the medical centre was ordered to stop its magistral preparation of CDCA (due to the presence of potentially harmful impurities in its version of CDCA), it recently received a 5 million euro grant to improve the availability of orphan drugs. Within five years, the medical centre wishes to prepare “expensive medicines” in-house.
This begs the question: if patent proprietors are unable to enforce their patents against pharmacies, could they leverage other intellectual property rights to obtain compensation for their investments into developing new drugs?
We believe they could. Trade mark rights might be one reason why.
Trade mark use by pharmacies: the precedent
The Transvaal pharmacy have been sued for trade mark infringement before. In Orphan Europe SARL v Haagse Transvaal en Sport Apotheek B.V. (292027/KG ZA 07-931), Orphan Europe sought, amongst other things, a preliminary injunction to stop the pharmacy from using its CARBAGLU trade mark. The court refused to grant a preliminary injunction on the basis the mark had only been used once, but did not discuss trade mark infringement in detail.
Aside from this case, there has been no (substantive) judgment considering trade mark use in the context of magistral preparation of drugs by pharmacies, let alone a substantive judgment considering all the relevant factors. Two relevant factors may be whether such use is ‘honest use’ under the Trade Mark Directive (TMD; 2015/2436), and whether such use is permitted under the Comparative Advertising Directive (CAD; 2006/114/EC).
Why the use of ORKAMBI may not comply with the TMD
Use of a trade mark by a third party cannot be prevented in circumstances where the use is a) ‘necessary’ to describe the intended purpose of a product or service, and b) in accordance with ‘honest practices’ in industrial or commercial matters (see, Gillette Co. v LA-Laboratories Ltd Oy, C-228/03).
According to the Court of Justice of the European Union (CJEU), use of a trade mark is ‘necessary’ when the use is the “only means of providing the public with comprehensible and complete information on that intended purpose”. In assessing this, the nature of the public, the means available to communicate the intended purpose of the product to the relevant public, and the existence of ‘technical standards or norms’ should be considered.
If the mark ORKAMBI is used by a doctor to describe the drug to a pharmacist, or vice versa, the public is highly specialised. Such a specialised public could equally use the international non-proprietary names (INNs) of the active substances in ORKAMBI, lumacaftor and ivacaftor, to define the drug and its intended purpose. Even if the public was less specialised, INNs could potentially provide the public with comprehensible and complete information on the product and its intended purpose.
‘Honest practice’, according to the CJEU in Gillette v LA-Laboratories, is a duty to act fairly in relation to the legitimate interests of the trade mark owner. Examples of dishonest practices cited by the court include copying, or imitating, products associated with the trade mark, and discrediting the trade mark.
To help treat its cystic fibrosis patients, the pharmacy would have to copy, or at least imitate, the combination of active ingredients, i.e. the product, associated with ORKAMBI. Moreover, it is arguable that the use of the trade mark by the pharmacy has discredited the trade mark. The pharmacist’s comments on e.g. ORKAMBI’s price have not been particularly flattering.
Accordingly, use of the ORKAMBI mark by the pharmacy may not be ‘necessary’, and it may not be in accordance with ‘honest practices’. Bearing this in mind, it seems unlikely that the pharmacy could successfully rely upon the defence set out in the TMD that a trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade, the trade mark for the purpose of identifying or referring to goods […], where the use made by the third party is in accordance with honest practices in industrial or commercial matters.
Could the pharmacy’s use of the ORKAMBI mark(s) comply with the CAD?
The TMD further states that comparative advertising that is contrary to the CAD can amount to trade mark infringement. Put differently, any comparative advertising that uses a trade mark, but complies with the requirements of the CAD is permitted.
To comply with the CAD, a comparative advertisement that uses a competitor’s trade mark must: not be misleading; compare goods that meet the same needs or are intended for the same purpose; objectively compare one or more material, relevant, verifiable, and representative features of those goods; not discredit or denigrate the trade mark of a competitor; not take unfair advantage of the reputation of the trade mark of a competitor; present goods or services as imitations or replicas of goods bearing a protected trade mark; or create confusion between traders or between the advertiser’s goods and those of a competitor.
Of these, the most relevant to the ORKAMBI scenario would likely be that the use by the pharmacy may not take unfair advantage of the reputation of the trade mark of the competitor. According to the CJEU in L’Oréal SA & Ots v Bellure NV & Ots (C-252/07), ‘unfair advantage’ in the context of the CAD must be given the same interpretation of ‘unfair advantage’ in the TMD.
It was held in L’Oréal that where a third party attempts to ride on the coat-tails of a mark with a reputation in order to benefit from its power of attraction, reputation, and prestige and to exploit the marketing effort expanded by the proprietor of the mark (without paying compensation and without having to make its own marketing efforts), the advantage must be considered unfair.
Assuming that ORKAMBI is a mark with a reputation in the sense of, e.g., General Motors Co. v Yplon SA (C-375/97) and PAGO International GmbH v Tirolmilch GmbH (C-301/07), it could be argued that the pharmacy intends to benefit from the power of attraction, reputation, and prestige of the mark—the mark is, after all, associated with an effective cystic fibrosis drug. It could also be argued that the pharmacy would exploit the marketing effort expended by the proprietor of the mark to create that image, without paying compensation.
Of course, it is unlikely that the pharmacy expects to make extraordinary profits. Nevertheless, it also seems unlikely that the pharmacy’s preparation of ORKAMBI for patients in need thereof would be entirely altruistic. Therefore, the chances are that a comparative advertisement by the pharmacy that uses the ORKAMBI mark(s) would take an unfair advantage of the reputation of the trade mark of a competitor, and be contrary to the requirements of the CAD.
Reap what you sow: the benefits of a diverse intellectual property portfolio
The above analysis, albeit largely theoretical, points us to a finding of trade mark infringement when a pharmacy, during the magistral preparation of a drug, uses a registered trade mark.
Accordingly, in the ORKAMBI scenario, the use of the ORKAMBI marks may be prevented via an injunction should this scenario turn into a trial. Moreover, the proprietor of the trade mark would likely be granted compensation for the use of the mark.
This shows the benefit of having a diverse intellectual property portfolio. It is becoming clearer and clearer that pharmaceutical companies wishing to protect the results of their investments cannot solely rely on patent protection. A diverse portfolio, comprising patents, trade marks, and even designs, may be required to prevent the exploitation of potential loopholes in the law.

For more information on this, please contact Wouter MooijClaudia Festen, or your usual Kilburn & Strode advisor.

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