The Commission has raided the offices of a number of top pharmaceutical companies to find out whether anti-competitive practices in the sector have hindered innovation and blocked the entry of cheap generics on the European market.
In a Decision adopted on 15 January, the Commission said it had "indications of commercial practices by pharmaceutical suppliers including notably patenting or the exercise of patents which may not serve to protect innovation but to block innovative and/or generic competition". The decision launched a major inquiry into competition in the European pharmaceuticals sector.
A series of unannounced inspections started immediately after the Commission decision, at 3pm, at the premises of a number of both innovative and generic pharmaceutical companies operating in Europe. The raids were co-ordinated with the competition authorities of those member states where the inspections took place.
At the very least, the UK's GlaxoSmithKline and AstraZeneca, France's Sanofi-Aventis, US pharmaceuticals giant Pfizer and the Swiss company Novartis AG have said their offices have been investigated. As to generic producers' offices, at least Teva Pharmaceutical Industries Ltd headquarted in Israel and the US-based Wyeth were visited.
According to the EU executive, the inquiry was launched because fewer new pharmaceuticals are being brought to market, and the entry of generic pharmaceuticals sometimes seems to be delayed. "Market monitoring suggests that these developments result from anti-competitive practices," said Competition Commissioner Neelie Kroes.
Anti-competitive and innovative practices include an innovative pharmaceuticals company buying a generic one off the market, abusive patent litigations delaying the entry onto the market of cheaper generics, a company using its dominant position to block its competitor from launching new products and an innovative pharma company paying a generic company for not launching a generic, Commission officials said.
"Such practices may limit consumer choice, reduce economic incentives to invest in research and development of new products and damage public and private health budgets," states the Commission decision.
The inquiry will examine:
- whether agreements between pharmaceutical companies, such as settlements in patent disputes, infringe the EC Treaty's prohibition of restrictive business practices (Article 81); and;
- whether companies may have created artificial barriers to entry, either through the misuse of patent rights, vexatious litigation or other means, and whether such practices infringe the EC Treaty's ban on abuses of dominant market positions (Article 82).
This is the first time a Commission sector inquiry has begun with unannounced inspections rather than with requests for information, because "the kind of information the Commission will be examining in this inquiry, notably concerning the use of intellectual property rights, litigation and settlement agreements covering the EU, is by its nature information that companies tend to consider highly confidential. Such information may also easily be withheld, concealed or destroyed," said the Commission.
"If we have proof of anti-competitive behaviour, we won't wait until the final inquiry report, but will immediately launch company-specific anti-trust cases," said Competition Commissioner Neelie Kroes.
According to the Commission, the number of new medicines reaching the market has considerably decreased over time, from an average of 40 novel molecular entities per year between 1995 and 1999 to an average of 28 between 2000 and 2004. "Patent protection in pharmaceuticals is huge and still the sector is going down," noted Commissioner 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 in some cases being delayed, then we need to find out why and, if necessary, take action," said Competition Commissioner Neelie Kroes.
"Vigorous competition in this sector is crucial for the public, as it ensures both access by patients to state-of-the-art medicines, and value for money for health spending by individuals, private health schemes and government health services in Europe," said the Commission in a statement.
The European Generic Medicines Association (EGA) agrees that "a weakness exists in the European patent system that allows the granting of weak patents which subsequently cause so-called evergreening of pharmaceutical blockbusters and in some cases creates unclear patent situations for certain molecules. In addition, the launch of generic medicines is sometimes blocked due to unjustified litigation based on weak evidence, which results in delays in patient access to affordable generic medicines."
EGA believes that "Europe needs strong patent legislation with strong criteria on what is an 'inventive step', guaranteeing that patents are granted in order to reward genuine innovation."
The association also agree with the Commission's observation that intellectual property rights have increased in the EU over the past 15 years, but that this has not resulted in an increased rate of innovation. "This is because the current intellectual property and pricing systems are not stimulating innovation, nor encouraging competition from generic medicines," states EGA.
The European Federation of Pharmaceutical Industries and Associations (EFPIA) said it hopes that the inquiry will enable the Commission to "better understand the nature and process of innovation in the pharmaceutical sector". EFPIA is set to provide "an in-depth analysis about the way competition works in the pharmaceutical sector, including the key role of patents in driving research and innovation".
The association also believes that the Commission inquiry's interim report (to be released in the autumn) "will stress the importance to enforce competition rules and intellectual property rights, which trigger new investments and new discoveries in medicines".
- Autumn 2008: The Commission will publish an interim report on the inquiry. Reactions to that report from the sector and from the public at large will be assessed.
- Spring 2009: The Commission will publish the final results of the inquiry. Based on the inquiry's findings, the Commission or national competition authorities will take action on the most serious competition concerns.