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Survey challenges EU Commission's findings

An annual biotechnology report reveals opposition to the EU's investigation into competition in the pharmaceutical sector and concern about any consequent reform of the patent system

Intellectual property firm, Marks & Clerk's latest annual biotechnology report reveals opposition to the EU's investigation into competition in the pharmaceutical sector and concern about any consequent reform of the patent system.

The study was based on an international survey of 365 executives across the biotechnology and pharmaceutical sectors and reveals strong disagreement with the Commission's preliminary findings published in November 2008 that the patent system is being used anti-competitively by drug originator ("innovator") companies. 72 per cent fear the enquiry will result in the “significant weakening” of patent protection for biotech companies, deterring funding and innovation. 

According to the research, opinion is divided as to whether the Commission has any basis for investigating alleged anti-competitive practises, with 51 per cent of respondents believing the pharmaceutical industry enquiry has no justification whatsoever. The majority argue against reform of the patent system by way of a solution. 73 per cent dispute the Commission's central claim that the way the patent system is used unfairly favours innovator companies over generics, with 23 per cent supporting patent reform to help generics compete.  80 per cent suggest reforming the system in favour of generics may reduce healthcare costs in the short term, but will undermine drug innovation over the long run.  

The survey results indicate that executives take issue with a number of claims made in the Commission's preliminary findings, particularly in relation to the extent of anti-competitive practises at play within the industry. In its November report, the Commission pointed to an average gap of 3 months between the expiry of originator patents and the market entry of corresponding generic alternatives as evidence, yet 89 per cent of those surveyed claim the time-lag does not automatically indicate that anti-competitive practises are taking place. 

Notably, those that took part in the research are not against the emergence of generic competition. 75 per cent state that the development of generic competition through the promotion of follow-on biologics poses more of a commercial opportunity than a threat to the industry. 

The EU Commission's investigation comes at a time of crisis for the fledging biotechnology industry as a result of increased risk aversion from investors. The research reveals that where capital is available, the terms for funding have deteriorated in the last 12 months. 93 per cent claim that investors are demanding a greater equity stake, or increasingly securing their investment against underlying IP rights. 87 per cent believe it is the small biotechs (which undertake the most speculative R&D into new drug discovery) that are most at risk in the current market. 89 per cent state that the economic climate should result in policymakers strengthening the rewards for innovator firms, not weakening them. 

Gareth Williams, a partner at Marks & Clerk and co-author of the report, comments: "The Commission needs to consider the ramifications for the biotech sector and in particular the small players for whom this is the worst possible time to weaken patent protection. It is grimly ironic that the authorities are considering how to restrict patent activity at the very point the industry finds its patents are the only way of securing the vital funding it needs."

18th May 2009

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