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EU report accuses industry of anti-competitive practices

Pharma companies have been accused of blocking or delaying the entry of cheaper drugs onto EU markets in an attempt to safeguard the price of branded medicines, according to a report from the EU Competition Commission

Pharma companies have been accused of blocking or delaying the entry of cheaper drugs onto EU markets in an attempt to safeguard the price of branded medicines, according to a report from the EU Competition Commission.

The interim report, released on November 28, highlights a number of anti-competitive practices by pharma companies and finds that competition in the industry 'does not work as well as it should'.

Neelie Kroes, European Commissioner for Competition Policy, believes that the report "really gets to the heart of how companies behave in the patent and other regulatory systems and mechanisms by which medicines reach consumers".

The 400-page report details a range of anti-competitive practices, the most damaging of which include: patent clustering, litigation against generic manufacturers and patent settlements.

According to the report, the worst example of patent clustering (where companies form a dense network of patents around a medicine) saw 1,300 separate patent filings across the EU for one drug.

The Competition Commission also found that patent settlements were used to constrain the entry to market of generic rivals and delay direct payments from orginator companies to generics firms – with payments totalling more than €200m.

"We also found that orginator companies engage in so called defensive patenting strategies to block or delay competition from other orginator companies," said Kroes.

"What could summarise our concerns better than the internal strategy document of a large orginator company. It reads: 'We identify options to obtain or acquire patents for the sole purpose of limiting the freedom of operation by our competitors.' Is that really the outcome we want from a strong intellectual property rights system. I don't think so."

Kroes was keen to stress that the interim report "does not seek to identify wrongdoing by indvidual companies", however she made it very clear that follow-up action would be taken against companies found in breach of European laws.

Commenting on the report, Edward Miller, partner in the competition team at law firm Reed Smith, said: "The truth is that there is really nothing new in any of these allegations or practices, many of which have already been extensively litigated by competition authorities and industry players in the US."

Miller said that it is only natural that powerful companies would wish to use the law to delay the entry of rivals to the market and vigorously defend intellectual property rights.

"The Commission will have its work cut out if it is going to mount legal challenges to the practices it has identified. Of course registration and vigorous defence of patents restricts competition – that's the whole point of having a patent. Neelie Kroes has picked a big fight with pharma – it certainly promises to keep her busy," Miller concluded.

EFPIA view
EFPIA believes the report is a missed opportunity to address the real issues impeding innovation and the development of and access to innovative medicines.

"The report also overstates the level as well as the reasons for delays in generic market access," said EFPIA president and Bayer Health Care CEO, Arthur J Higgins.

"In line with EFPIA's own findings, DG Competition's analysis has confirmed that where there is a strong commercial incentive, generics enter the market rapidy within four months or less. This compares very favourably with the delay in access by patients to innovative products which can be up to 14 months in some EU markets," he added.

2nd December 2008

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