EU probe finds companies block cheap drugs

By Nikki Tait in Brussels

Published: November 28 2008

Drug companies have blocked or delayed the market entry of cheaper generic medicines to Europe, adding billions to the cost of medicines to patients, a high-profile report from Brussels has found. Anti-competitive practices range from initiating dispute and litigation to hold up competing products, and filing multiple patent applications for the same medicine, to concluding legal settlements with generic companies which constrain their ability to enter the market.
The European Comission report cited one example where “patent clustering” led to 1,300 patents being filed for a single medicine. Patent ligitation cases involving generics, meanwhile, lasted on average nearly three years, with the generic companies ultimately winning more than 60 per cent of these, it calculated.
Originator companies also concluded more than 200 settlement agreements with generic companies in the EU, according to the report. More than 10 per cent were “reverse payment settlements” which limited the entry of generic medicines and involved payments from the originator to the generics. These payments, the report says, totalled more than €200m.
“These preliminary results show that market entry of generic companies and the development of new and more affordable medicines is sometimes blocked or delayed at significant cost to healthcare systems, consumers and taxpayers,” said Neelie Kroes, EU competition commissioner, as she released the preliminary findings of a pharmaceutical sector inquiry.
Although the report does not name individual companies, Ms Kroes said there was likely to be follow-up action against companies which had breached EU laws.
“It is still early days, but the commission will not hesitate to open antitrust cases against companies where there are indications that the antitrust rules may have been breached,” she said.
But the pharmaceuticals companies accused Brussels of using ”selective quotations to mischaracterise the industry as anticompetitive”, and of overstating the level and reasons for delays in generic market access.
”The commission’s report does not substantiate in any respect their statement made at the opening of the inquiry that the industry is impeding innovation,” said Brian Ager, director-general of the European Federation of Pharmaceutical Industries and Associations.
The report comes days after the commission announced that it had launched dawn raids on a number of companies – including the UK offices of Teva, the world’s largest generic manufacturer - saying it was concerned about breaches of competition rules or abuse of a dominant position.
The report also backs changes to Europe’s patent system – including introduction of a community patent (a single unitary intellectual property right applying across the continent) and changes to its fragmented patent litigation system.
The sector inquiry was established this year, amid signs that there were fewer new medicines in the industry’s pipeline – a development which drug companies themselves say reflects changing a regulatory environment, rather than any abuse. It began in unprecedented fashion with dawn raids on the offices of large pharmaceutical groups, as the commission tried to gather evidence.

Copyright The Financial Times Limited 2008

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