Healthy Skepticism Library item: 15949

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Publication type: news

Newman M.
EU May Open Antitrust Cases in Drug Industry Probe (Update1)
Bloomberg.com 2009 Jul 7
http://www.bloomberg.com/apps/news?pid=20601202&sid=a2TaLu0.SYCg

Full text:

European Union antitrust regulators may narrow the focus to a few companies in an industrywide probe of brand-name drugmakers’ use of patents to keep would-be generic rivals from selling less expensive copies of medicines.

European Competition Commissioner Neelie Kroes will release a report on drug-industry competition tomorrow at 11:30 a.m. Following an 18-month investigation, the Brussels-based agency may say the probe now centers on a handful of specific companies, according to antitrust lawyers.

“The commission may be preparing individual antitrust cases,” said David Hull, a competition lawyer at Covington & Burling LLP in Brussels, in an interview. Hull represents brand- name drug companies in licensing and structuring of their distribution networks.

In its preliminary report, the agency accused drugmakers of costing consumers in 17 countries as much as 3 billion euros ($4.2 billion) by using patent rules and lawsuit settlements to restrict sales of cheaper copies. Commission officials raided France’s Les Laboratoires Servier, Teva Pharmaceutical Industries Ltd., the world’s biggest generic-drug maker, and Slovenia’s Krka Group d.d. in November, searching for evidence that patent settlements harm consumers.

The commission said in November that various tactics are used to delay or block the sale of generics, including filing large numbers of patents for the same drug, suing generic companies, settling patent disputes and intervening in national procedures for generic-drug approvals.

Generic Competition

Brand-name drug companies typically file patent suits against generic companies to prevent them from getting regulatory approval for copies. Settlements involve brand-name drugmakers paying generic companies to keep their products off the market.

The commission’s final report follows a probe that began in January 2008 after raids at GlaxoSmithKline Plc, AstraZeneca, Sanofi-Aventis SA and several competitors. Makers of branded drugs face a decline in revenue starting in 2011 when products generating $150 billion a year will have generic competition, analysts and investment advisers said last year. The EU spends 214 billion euros on medicines a year, or 430 euros a person, the commission’s preliminary report said.

The European Federation of Pharmaceutical Industries and Associations, which represents the brand-name companies, has said the commission doesn’t recognize the highly regulated nature of the pharmaceutical market in Europe.

‘Legitimate’

“No other sector is as highly regulated,” Thomas Cueni, head of the industry group’s task force on the probe, said in an interview on June 17.

The industry group said in its response to the initial report that the threat of antitrust action against “legitimate practices” will undermine a “limited commercial window” to develop new drugs.

AstraZeneca spokeswoman Sarah Lindgreen and Glaxo spokesman Stephen Rea declined to comment because neither company has seen the report.

“Reverse patent settlements are a possibility for an investigation,” said Thomas Graf, an antitrust lawyer at Cleary, Gottlieb, Steen & Hamilton LLP in Brussels. “It’s not clear what the legal theory for an investigation would be.”

The agreements are known as “reverse payment settlements” and were worth about 200 million euros, the commission said. The accords are known as reverse payment settlements because, in the typical patent case, it’s the accused infringer and not the patent owner, who pays.

Legal Uncertainty

The commission should issue guidelines on reverse payments and settlements rather than its “ad hoc” approach of using antitrust cases, said Hull.

“The probe has caused a lot of legal uncertainty,” Hull said. “They should give us some guidance on when these agreements comply with EU law.”

In the U.S., the Federal Trade Commission has investigated so-called pay for delay deals, where brand-name drugmakers pay rivals to keep generic alternatives off the market. U.S. courts have upheld such agreements as long as they don’t delay the entry of the generic drug beyond the terms of patents held by the brand companies.