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EC calls for more competitive practices

European Commission calls for pharma industry to reduce red tape and more competitiveness in its business practices

There needs to be more competition and less red tape in the pharmaceutical industry, according to Competition Commissioner Neelie Kroes. The proclamation comes as the European Commission publishes it final report on competition in the sector and steps up its scrutiny of business practices under EC antitrust laws.

"The sector is too important to the health and finances of Europe's citizens and governments to accept anything less than best. The enquiry has told us what is wrong with the sector, and now it is time to act. When it comes to generic entry, every week and month of delay costs money to patients and taxpayers," said Kroes. "We will not hesitate to apply the antitrust rules where such delays result from anticompetitive practices," she added.

The report, based on findings of an investigation started in January 2008, suggests that company business practices result in delays in generic drugs reaching the market and a decline in the number of novel medicines, both of which are exacerbated by shortcomings in the regulatory framework, the Commission has conceded.

The report calls for Member States to introduce legislation to facilitate the uptake of generic drugs. Antitrust investigations are already under way to monitor settlements between originator and generics manufacturers. Companies under investigation include Servier, Teva, Krka and Lupin.

Main findings
The enquiry uncovered that in 17 Member States between 2000 and 2007, patients waited more than seven months after patent expiry for cheaper generic drugs – resulting in increased costs to them of 20 per cent. According to the report, originator companies still employ a number of tactics to extend the commercial life of their products, delaying generic entry for as long as possible.

In addition the enquiry confirmed that the fall in the number of novel medicines reaching the market is likely to be the result of business practices within the industry. On both counts, the European Commission has pledged to monitor such practices on an ongoing basis to identify all factors relating to the reduction in innovation.

Reacting to the findings, the Commission will apply increased scrutiny under EC Treaty antitrust law to the sector and bring specific cases where appropriate. Originator companies that use specific instruments to delay generic entry will be subject to scrutiny if their actions are deemed anti-competitive - this may constitute an infringement under Article 81 or 82 of the EC Treaty.

In addition, defensive patenting strategies that mainly focus on excluding competitors without pursuing innovative efforts will remain under scrutiny. To avoid settlements between originator and generic companies at the expense of consumers, the Commission undertakes to carry out further focused monitoring of settlements that limit or delay the market entry of generic drugs. On regulatory issues the enquiry finds that:
1. There is an urgent need to establish a Community patent and a unified specialised patent litigation system in Europe to reduce administrative burdens and uncertainty for companies. A full 30 per cent of patent court cases are conducted in parallel in several Member States, and in 11 per cent of cases national courts reach conflicting judgments.
2. Recent initiatives of the European Patent Office (EPO) to ensure a high quality standard of patents granted and to accelerate procedures are welcome. This includes measures taken in March 2009 to limit the possibilities and time periods during which voluntary divisional patent applications can be filed (so called "raising the bar exercise").

The Commission is also urging Member States to:
1. Ensure that third-party submissions do not occur and in any event do not lead to delays for generic approvals
2. Significantly accelerate approval procedures for generic medicines – for example, the Commission believes that generic products should automatically/immediately receive pricing and reimbursement status where the originator drug already benefits from such status, which would allow for a faster product launch in certain cases
3. Take action if misleading information campaigns questioning the quality of generic medicines are detected in their territory
4. Streamline trials that test the added value of novel medicines.

Despite the promise of heightened regulations and increased scrutiny, observers have welcomed the report findings and believe planned future moves will benefit the industry.

Gareth Williams, partner at intellectual property specilislists, Marks & Clerk, said: "Today's final report represents an olive branch to industry. Largely gone is the Commission's previous baffling hostility toward legitimate applications of IP law and the fear of ill-conceived, damaging reform of the patent system.

"Importantly, the final report recognises the legitimacy of secondary patents, stressing that all patents must meet the same basic criteria. The pharmaceutical industry will instead be breathing a sigh of relief at the decision to investigate individual abuses via targeted application of competition law, rather than the blunt instrument of wholesale patent reform which would undermine innovation," he added.

9th July 2009


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