Brussels Cracks Down on Drug Companies

EU anti-competition authorities yesterday said they would act against pharmaceuticals groups that were suspected of delaying the launch of new medicines, adding that a lack of competition was harming patients and taxpayers.

However, the report was seen by many in the industry as a watered down version of interim findings published last November.

Neelie Kroes, the EU's competition commissioner said: "We must have more competition and less red tape in pharmaceuticals. The sector is too important to the health and finances of Europe's citizens and governments to accept anything less than the best."

Industry insiders were quick to jump on the differences between November's findings and the final draft, published yesterday, which found that regulatory aspects the drugs industry in Europe was also responsible for hampering competition, as well as the actions taken by the pharmaceutical giants.

"We have stated consistently that complex and divergent regulatory barriers are the primary cause of market entry delay for both generic and innovative medicines. We are pleased that the final report recognises this reality;" said Arthur J. Higgins, the chief executive of Bayer Healthcare and President of EFPIA, the body that represents the interests of big pharmaceutical companies in Europe.

The interim report squarely laid the blame for anti-competitive practices in the sector with the big groups, saying that the industry's aggressive use of patents and legal action has cost patients across Europe €3bn in extra medicine costs since the start of the decade.

Industry sources claimed that the report was a vindication of its stance that the use of patents was a vital and legitimate way of protecting revenues. Diana Sternfeld, head of patent litigation at Rouse, an intellectual property consultancy, said the report "recognises that intellectual property is key to innovation in the pharmaceutical sector."

However, the report did confirm that the commission is concerned that big pharmaceutical companies have relied on the patent system to extend the life of money-spinning medicines, at the costs of getting new drugs to market.

"The findings of the inquiry suggest that in recent years originator companies have changed their patent strategies. In particular, strategy documents of originator companies confirm that some of them aimed at developing strategies to extend the breadth and duration of their patent protection. "Documents gathered in the course of the inquiry confirm that an important objective of this approach is to delay or block the market entry of generic medicines."

This confirmed parts of the interim report, which accused Europe's big pharmaceutical companies, including the FTSE 100 listed GlaxoSmithKline (GSK) and AstraZeneca (AZN), of deliberately acted to stunt the growth of the generics drug market. The interim findings highlighted cases in which drugs have had more than 1300 patents filed against them: "the number of pharmaceutical-related patent applications before the European Patent Office nearly doubled between 2000 and 2007. Contrary to what might be assumed blockbuster [defined as treatments generating $1bn of revenue] medicines' patent portfolios show a steady rise in patent applications throughout the life cycle of a product."

The companies yesterday pointed out, however, that the commission has now also accepted other reasons for the delay in getting cheaper medicines to market, especially the de-centralised and highly complex nature of the various regulatory regimes across the EU.

The commission also pointed to pharmaceutical firms' reliance on litigation as a means to acting anti-competitively: "In certain instances originator companies may consider litigation not so much on its merits, but rather as a signal to deter generic entrants." The report pointed out that, "the number of patent litigation cases between originator and generic companies increased by a factor of four between 2000 and 2007."

Lawyers representing companies in the industry pointed to the report's focus on litigation as odd, however. "It is accepted that litigation is not an anti-trust issue," said Tony Woodgate, a competition partner in the life sciences group at law firm Simmons & Simmons.

The Commission said it was already investigating privately owned French drugmaker Servier, and several generics groups, over suspicions that they may have blocked generic cardio-vascular treatments from entering the market.

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