Patent

Prelim report points to anti-competitive practices in EU’s pharma industry.


A preliminary report by the European Commission has revealed that blocking and delaying tactics of generic products by global drug companies have cost EU citizens about 3 billion euros every year. The Commission had launched a sector inquiry earlier this year, in the light of indication that there was a noticeable decline in the number of novel medicines reaching the market. From a study conducted across 17 EU states, the average of 40 per year (in the years 1995-1999), the number of innovations (new drugs) has dropped to an average of 27 per year (in the years 2000-2007). In the words of the Competition Commissioner Neelie Kroes, “Individuals and governments want a strong pharmaceuticals sector that delivers better products and value for money. But if innovative products are not being produced, and cheaper generic alternatives to existing products are being delayed, then we need to find out why and, if necessary, take action.”

The report shows that drug companies have resorted to a variety of practices in order to block or delay market entry of competing generic products. According to the report, ‘Patent clusters’ – filing an inordinately large number of patents across the EU on a single medicine, is one such method. (In one case, this number came up to 1300 patents!). What often happens in ‘patent clusters’ is that patents are filed in different states across the EU at different stages in the life cycle of the medicine. This often confuses generic manufacturers as to when and where they can start producing and selling a generic product without infringing upon a patent. Other methods include engaging the generics in disputes, leading to nearly 700 cases of patent litigation, of which, the generic companies won almost 60% of the concluded litigation. As for the cases which weren’t concluded by judgment, most often were cases where settlements included narrowing the market entry for generics. There was also the use of measures such as interventions during national authorized regulatory approval of generic products. Aside from their acts directed towards generic companies, the report also found that companies defensively patented compounds to prevent their competition from developing new medicine without any actual intention of using these patents to bring new medicines or innovations to the market.

According to the report, average price levels for medicines decrease by almost 20 percent after the first year following generic entry. “In rare cases, the decrease in price levels can be as high as 90 percent. For the sample under analysis, total savings gained by generic entry amounted to at least €14 billion over the period. Without these savings, total expenditure for the medicines analysed would have been over 25 percent higher,” the report shows.

According to Rory O’Riordan, Vice President of EGA, “almost half a billion euro were lost over the 7 year period in paying for unnecessary litigation. The report shows that originator brought almost 200 patent disputes a year of which less than 5% were substantiated by the courts.”

Meanwhile, in response, drug companies are expectedly not very happy with the report. “The preliminary report does not adequately recognize the complex and highly regulated nature of the pharmaceutical market in Europe and misses the opportunity to address the real issues impeding innovation and the development of and access to innovative medicines” said Arthur J. Higgins, chief executive officer of Bayer HealthCare (Harmondsworth, Middlesex, UK) and president of the European Federation of Pharmaceutical Industries and Associations (EFPIA), in an EFPIA statement. “The report also overstates the level as well as the reasons for delays in generic market access.”

One of the causes of the inquiry report was an EU case in 2005 against AstraZeneca. The Anglo-Swedish company was fined 60million Euros for providing misleading information to patent offices in order to delay generic versions of its stomach ulcer drug Losec from entering the market from 1993 to 2000. “We now have a solid view of what is happening and why: the next step is to discuss our findings with the stakeholders and to draw the necessary conclusions. It is still early days, but the commission will not hesitate to open antitrust cases against companies where there are indications that the antitrust rules may have been breached,” competition commissioner Neelie Kroes warned during a press conference on Friday (28 November).

However, Lord Justice Jacob rightly brings up some valid issues regarding the findings of the preliminary report. He quotes from Pied Piper of Hamelin to succinctly put forward his point of view.

“If I can rid your town of rats
Will you give me a thousand guilders?”
“One? fifty thousand!” — was the exclamation
Of the astonished Mayor and Corporation.

Later, when the rats had all been drowned, the Mayor said:

“So, friend, we’re not the folks to shrink
“From the duty of giving you something to drink,
“And a matter of money to put in your poke;
“But as for the guilders, what we spoke
“Of them, as you very well know, was in joke.
“Beside, our losses have made us thrifty.
“A thousand guilders! Come, take fifty!”

And so is the case in the pharmaceutical industry says Justice Jacob. (The full transcript of the speech is available here as made available by IPKat.)

The Commission has invited stakeholders to submit their views and observations on the primary findings. This public consultation will last till Jan 31st. The final report which will take these comments into account is expected in the spring of 2009.

(The Report is available here)

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