EU Finds Anti-Competitive Abuse Of Pharmaceutical Patents, Launches Antitrust Action

Pharmaceutical companies are manipulating the intellectual property rights system and are “actively trying to delay the entry of generic medicines onto their markets,” a top EU official said of an EU inquiry into the pharmaceutical sector released Wednesday. As a result, there has been a decline in the number of innovative medicines getting to the market, it says.

Quotations from originator companies themselves illustrate the behaviour, according to a fact sheet [pdf] on the findings.

“We identify options to obtain or acquire patents for the sole purpose of limiting the freedom of operation of our competitors… rights covering competitive alternatives are maintained in major markets until risk of competing products appearing is minimal,” said one such quotation.

The final report of the inquiry will be posted here when it becomes available. An executive summary of the findings is available here [pdf].

In an immediate action related to the findings, European Commissioner for Competition Neelie Kroes announced that the first antitrust case resulting from the inquiry is now open. It alleges breaches of European rules on “restrictive business practices” and “abuse of a dominant market position,” and is against French company Les Laboratoires Servier and five generics with which it had made deals, according to a separate press release. Kroes was speaking at a press conference on 8 July.

“The sector is too important to the health and finances of Europe’s citizens and governments to accept anything less than the best. The inquiry has told us what is wrong with the sector, and now it is time to act,” she added in the press release.

The sector-wide inquiry was opened because the Commission suspected the slowdown in novel medicines entering the market – 27 annually since 2000 as compared to 40 annually between 1995 and 1999, a press release said – was a systemic problem, and they sought to find out what was causing it.

The European Generic Medicines Association (EGA) in a release emphasised the Commission’s finding showing “that originator companies use a variety of instruments to extend the commercial life of their products without generic entry for as long as possible.”

The EGA called for quick implementation of the recommendations. The organisation had itself made several, including more stringent patentability requirements (especially on inventive step), timelines for oppositions and litigation procedures, controls for medical advertisement, sanctions of misbehaviour, as well as community patents and a unified EU patent court.

Pharma Companies React

The European Federation of Pharmaceutical Industries and Associations (EFPIA) “acknowledged” the report, which it felt was toned down from what it called “the emotive language of the interim report.” This is because, the group’s press release says, there are more regulatory issues identified in this version.

The preliminary version released in late November sparked charges from the pharmaceutical industry (IPW, Public Health, 5 December 2008) that the numbers were “misleading,” and that the problem instead lay with problems in regulation. Intensive industry lobbying of EU officials followed in recent months, according to sources.

The final report says it should be viewed in the context of Commission regulatory activities on drug safety, transparency of pricing schemes, and protection of IP. However, it also says competition law enforcement “by itself will be an important component” for ameliorating current concerns, and the majority of the executive summary is dedicated to providing detail on company practices.

The EFPIA also said the final report “failed to substantiate the initial allegation that patenting strategies dampened innovation or delayed generic entry illegitimately,” and praised it for “recognis[ing] the importance of Europe’s innovative pharmaceutical sector” and the importance of IP to that sector.

EU Findings on Company Behaviour

The European Commission found that companies engaged in delaying strategies such as loading up a single medicine with up to 1,300 patents or engaging in litigation. These are won by generics about two-thirds of the time, the Commission said, but can last up to three years.

Meddling with regulators was also an issue, as the Commission found “originator companies intervened in national procedures for the approval of generic medicines in a significant number of cases, which on average led to four months of delay for the generic medicine.” Companies would release claims about the generic product’s safety and quality, the inquiry found.

The Commission also found “at least 200 settlement agreements between generic and originator companies,” many of which restrict generics, driving up prices for consumers, Kroes said at a press conference on 8 July.

Community Patent, Unified Litigation System “Needed Rapidly”

The “current lack of progress” on a community patent is “very damaging,” said Kroes. Further, nearly a third of national court cases on patents are happening in parallel in other jurisdictions, and in 11 percent of cases they “reach conflicting conclusions.”

“This is a waste of everyone’s time and money,” said Kroes.

All stakeholders, including originator companies also supported the idea of a community patent and a unified litigations system, the report says.

In case there were doubts, the Commission reports that it “will not be changing its tough approach to antitrust enforcement as a result of the [financial] crisis.”