Big pharma expresses relief over EU inquiry

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The European pharmaceutical industry has expressed satisfaction with the publication of a long-awaited investigation into alleged anti-competitive practices in the sector, saying the final report is softer than a preliminary version released in November 2008.

EFPIA, the trade group representing large pharmaceutical companies, highlighted a shift in tone in the EU executive’s final report on the sector and welcomed the “constructive policy recommendations”. 

At a briefing yesterday (8 July), EU Competition Commissioner Neelie Kroes pressed for greater use of cheaper generic medicines in caring for an ageing population, and was critical of what she described as “rotten” agreements between some firms which hold up the release of new drugs. 

However, the report puts considerable emphasis on the need for patent reforms and well-flagged plans for a single patent court system. This was welcomed by EFPIA, which said streamlining the European patent system would cut costs and reduce current legal uncertainties. 

The pharma group also said the final report “failed to substantiate” earlier allegations that patenting strategies dampen innovation and illegitimately delay generic entry. It welcomed the acknowledgment in the report of the importance of Europe’s research-based pharmaceutical industry. 

Controversial deals 

EFPIA board member Thomas Cueni said the EU has also accepted that not all “settlement agreements” between patent-holding pharma firms and generic manufacturers are necessarily improper. 

The industry expressed concern that the push towards greater use of generics, coupled with the rising costs of conducting R&D in Europe, would damage the European pharmaceutical sector. 

“The report demonstrates a welcome shift away from the emotive language of the interim report, with a better balanced, more holistic view of the issues facing the sector,” EFPIA said. 

However, Commissioner Kroes did have some harsh words for the industry, saying the report confirms that company practices are a significant factor behind “competition problems” in the pharma sector. 

New competition case 

She also announced a fresh antitrust investigation against a French pharmaceutical firm for suspected breaches of rules on restrictive businesses practices and on abuse of a dominant market position. 

The European Commission is to probe agreements between Les Laboratoires Servier and a number of generic companies over “possibly restrictive” practices which may have delayed the availability of a generic heart medication. 

EU officials suggested further cases could follow, saying the new report would pave the way for increased regulatory scrutiny of settlement agreements in which brand-name companies pay generics manufacturers for not competing with them. 

“It will look at this on a case-by-case basis to see if there is enough evidence that merits further scrutiny,” an official said. 

The generic medicines industry also welcomed the publication of the report and called for the swift implementation of its findings. 

However, consumer groups were less impressed. BEUC, the European consumers organisation, said questions remain over anti-competitive practices in the pharma sector and patients are getting a raw deal. 

Key findings of the pharmaceutical sector inquiry: 

  • A Community patent and unified specialised patent litigation system in Europe would reduce administrative burdens and uncertainty for companies. A full 30% of patent court cases are conducted in parallel in several member states, and in 11% of cases national courts reach conflicting judgements. 
  • Recent initiatives of the European Patent Office (EPO) to ensure a high quality standard of patents granted and to accelerate procedures are welcome. This includes measures taken in March 2009 to limit the possibilities and time periods during which voluntary divisional patent applications can be filed (so-called “raising the bar exercise”).

The Commission is also urging member states to: 

  • Ensure that third party submissions do not occur and in any event do not lead to delays for generic approvals, and;
  • Significantly accelerate approval procedures for generic medicines – for example, the Commission believes that generic products should automatically/immediately receive pricing and reimbursement status where the originator drug already benefits from such status, which would allow for a faster product launch in certain cases; 
  • Take action if misleading information campaigns questioning the quality of generic medicines are detected in their territory, and;
  • Streamline trials that test the added value of novel medicines. 

EU Competition Commissioner Neelie Kroes said increasing competition and reducing red tape in pharmaceuticals is essential to the health and finances of Europe's citizens and governments. 

"The inquiry has told us what is wrong with the sector, and now it is time to act. When it comes to generic entry, every week and month of delay costs money to patients and taxpayers. We will not hesitate to apply the antitrust rules where such delays result from anticompetitive practices. The first antitrust investigations are already under way, and regulatory adjustments are expected to follow dealing with a range of problems in the sector," she said.

In a statement, the Servier Research Group took note of the procedure launched against it and said it "will reply in due course", but was first "waiting to hear what eventual grounds for complaint the EC might bring to bear". 

Noting that the Commission's objective in the inquiry was "to promote innovation" in the pharmaceutical sector, Servier underlined that 25% of its annual turnover was invested in research of new medicines and said it had launched three innovative medicines in the last four years, "each first in class in the cardiovascular, neuroscience and rheumatology domains". 

"Servier considers that the respect of intellectual property rights is a key condition for the research and development necessary to find tomorrow's new medicines, and will continue to defend their rights in this domain in accordance with the law." 

Arthur J. Higgins, CEO of Bayer Healthcare and president of EFPIA, welcomed the report and focused on streamlining intellectual property infrastructure. 

"We have stated consistently that complex and divergent regulatory barriers are the primary cause of market entry delay for both generic and innovative medicines. We are pleased that the final report recognises this reality," he said. 

"We welcome many of the policy recommendations, such as a more streamlined patent system that reduces costs and increases legal and commercial certainty. We commit to working constructively with the internal market commissioner, member states, and the European Patent Office to push reforms forward under the Swedish Presidency." 

"What is important is that the Commission uses this report to address the issue of competition in the off-patent market. This is an area that can generate savings which could be reinvested to fund innovative medicines." 

The European Generic Medicines Association (EGA) said generics have been facing severe delays in getting on the market for too long now. 

"We welcome the importance given by the European Commission to the need of high quality patents and raising the bar for patent applications. The existence of certain dubious secondary patents has indeed created a block against competition and undermined confidence in real innovation," commented Greg Perry, director-general of EGA. 

He reiterated the EGA's longstanding plea for an urgent reform in the pharmaceutical sector, calling for Europe's legislative framework to be tightened in the areas of patent law, pharmaceutical legislation, price and reimbursement rules and competition law. 

Monique Goyens, director-general of European consumer organisation BEUC, said the sector inquiry shows the pharma industry is not working properly and that "vicious tactics" are used to delay or prevent the entry of more affordable and innovative medicines into the market. 

"Millions of euros are spent in promotional activities, in legal disputes and settlement agreements instead of in the development of new medicines to meet patients' needs," Goyens said. She called for concrete actions at EU and member state level to address unethical practices. 

"We hope the outcome of the inquiry will lead to a review of the regulatory framework to find a better balance between companies' commercial interests and general public health interests, i.e. the interest of many patients who are still waiting for a new medicine to treat their disease and for new and effective medicines that can improve their quality of life."

The European Union has spent more than a year investigating competition issues in the pharmaceutical sector. The investigation was launched in January 2008 in response to concerns that fewer new medicines were being brought to market, amid allegations that generic drugs were being delayed from reaching consumers. 

Tensions have been high between the industry and the EU executive following a dramatic series of unannounced raids on the offices of top pharmaceutical companies in January and November 2008 (EURACTIV 17/1/08EURACTIV 26/11/08). 

A damning preliminary report was published in November 2008, which alleged that anti-competitive practices in the sector are hampering innovation and blocking the entry of cheap generics onto the European market (EURACTIV 28/11/08). According to the November report, big pharma firms were applying for multiple patents for the same medicine and seeking to prevent competitors from developing new drugs. 

  • More cases: The European Commission has left the door open for additional inquiries into other pharmaceutical companies and will review around 200 agreements between companies over the coming months.

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