Healthy Skepticism Library item: 14701

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Publication type: news

Taylor L.
EU “has declared war on pharma,” expert warns
Pharma Times 2008 Dec 1
http://www.pharmatimes.com/WorldNews/article.aspx?id=14847

Full text:

European Commission investigators will carry out more dawn raids on pharmaceutical manufacturers, and both originator and generics companies will need to review they way they do business to ensure they do not become the subject of antitrust litigation, leading experts have warned.

The Commission has “declared war on the pharmaceutical sector by questioning the legitimacy of a range of well-established business practices including lifecycle management, defensive patent strategies and settlement agreements,” said Stephen Rose, competition partner at international law firm Eversheds, commenting on last week’s interim report from the Commission on alleged antitrust activities by drugmakers.

The report concluded that, as a result of the tactics used by both brand-name and generics firms to block or delay the entry of cheaper generics onto the market, the drugs bills of European Union (EU) member states were 3 billion euros higher than they would have been during 2000-2007 if the generics had become available without delay.

Announcing these findings, Competition Commissioner Neelie Kroes, who ordered the sector probe and the company raids, warned: “the Commission will not hesitate to open antitrust cases against companies where there are indications that the antitrust rules may have been breached.”

Global Insight’s pharma analyst Mitra Thompson points out that while there has so far been no public “naming and shaming” of companies by the Commission, it seems reasonable to expect, given the report’s accusatory tone, that some firms will be the subject of litigation once the Competition investigators’ report is published in mid- 2009.

Companies found guilty of breaching EU antitrust rules can be fined as much as 10% of their annual sales and, while such a fine would clearly be unwelcome, it is not the biggest hurdle faced by brand-name pharma companies in Europe, says Ms Thompson. What would be more damaging is the long-term implications that the probe could have on the way drugmakers defend their blockbusters against the onset of generic competition, she adds.

The European Federation of Pharmaceutical Industries and Associations (EFPIA) was also particularly critical of what it calls the report’s use of “selective quotations to seek to mischaracterize the industry as anticompetitive.” Those quotes “simply show how innovators have rightly sought to protect their inventions and illustrate the highly competitive nature of innovation in this sector, which is entirely to the benefit of society. They are not evidence of competition law infringements as the report itself recognizes,” the industry group emphasises.

Moreover, it adds that while the report acknowledges that patents are key to pharmaceutical innovation and should be protected, “it then contradicts itself by questioning the right of the industry to use perfectly lawful practices – such as patent portfolios, patent litigation and the release of improved medicines. These are essential for innovators to protect their huge investments in R&D,” says EFPIA.

As yet, there has been no sign of new EU laws to restrict the number of patents filed for individual drugs or the recourse to legal action, but the Commission is sending a strong signal that further reports of anti-competitive behaviour from the drugs industry will continue to be punished, Global Insight’s Ms Thompson points out. “Since brand-name drug companies are unlikely to voluntarily allow the genericisation of their products to occur earlier than absolutely necessary, the industry will now be faced with the threat of continued scrutiny from European regulatory authorities, which could persuade some to pursue new business opportunities elsewhere,” she adds.