Commission clashes with pharma groups over drug patents

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The EU executive and European pharmaceutical giants engaged in a high-profile clash in Brussels today (28 November) as the European Commission produced a report on alleged breaches of competition by the industry.

The Commission’s preliminary report on the pharma sector inquiry, published on 28 November, alleges that “competition in this industry does not work as well as it should”. 

However, pharma industry federation EFPIA immediately shot back, ridiculing the Commission’s “very selective use of facts” and claiming that the report “focused on the wrong issues”.

The main findings of the report point to “problems” in how so-called “originator companies” that develop and sell new medicines delay market entry of cheap generics, blocking one another’s innovation and thus the discovery of new drugs.

Competition between originator companies and generic companies

According to the report, originator companies are using “a variety of methods” with the objective of delaying or blocking market entry of generic companies to maintain high income streams for themselves. They also result in “significant additional costs for public health budgets – and ultimately taxpayers and patients,” noted the EU executive. 

The practices identified include:

  • Multiple patent applications for the same medicine (so-called patent clusters); 
  • initiation of disputes and litigation; 
  • conclusion of patent settlements which constrain market entry of generic companies, and;
  • interventions before national authorities when generic companies ask for regulatory approvals.  

Competition among originator companies themselves

The report also found that companies that create new medicines applied defensive patenting strategies “primarily aimed at blocking competitors in the development of new medicines,” which resulted in a decline in innovation “as evidenced by the decline of new chemical entities reaching the market”.

According to the Commission, the sector inquiry showed that originator companies defensively patent compounds to block the development of a new medicine from a competitor, with no intention of pursuing these patents in order to bring a new or improved medicine to the market. 

Originator companies were also found to have concluded agreements in case of patient litigations. A high density of contractual agreements between originator companies was observed, in particular concerning the marketing and commercialisation of drugs.

Myths and mischaracterisations, says big pharma

Meanwhile, leading industry players in the innovative pharmaceutical sector voiced their disappointment over the report, which they claimed “would make good headlines but will in the end only serve those who want to undermine this industry”.

Arthur J. Higgins, CEO of Bayer HealthCare and president of the European Federation of Pharmaceutical Industries and Associations (EFPIA), argued that the report had “not reached any conclusions that the industry’s activities have impeded competition” and claimed that the Commission’s conclusions were rife with “myths and mischaracterisations”.

Higgins argued that the Commission had misunderstood the dynamics of the industry and overemphasised the issue of defensive patent strategies, which he described as a “red herring”. “Patents only work if you have the right to defend them,” he said.

Rather, he argued that the Commission should focus on the lack of competition in the generics sector: “Why do we pay more for our generics than US citizens?,” he asked.

Higgins said he believed the Commission had been “overwhelmed by how much data we gave them” and asked the EU executive to focus on the facts. “This industry has nothing to hide,” he concluded.

"While our initial observations about competition in the sector are confirmed, I stress that the preliminary report does not seek to identify wrongdoing by individual companies. Nor does it advocate regulatory solutions to any problems. That may come at a later stage," said Competition Commissioner Neelie Kroes.

Ahead of the publication of the preliminary results, European pharmaceutical law experts, speaking to EURACTIV on condition of anonymity, claimed that the "Commission seems to have wrongly convinced itself that almost all 'big pharma' companies are out to stop everybody else getting on the market". 

In that respect, the sector inquiry might be useful, they said, "if for no other reason than to educate the Commission as to the real world of the pharmaceutical sector".

On the subject of this week's second round of raids on the pharma industry, Arthur J. Higgins, CEO of Bayer HealthCare and president of the European Federation of Pharmaceutical Industries and Associations (EFPIA), said the manner in which the raids were carried out "seemed to create an impression of 'guilty until proven innocent' which is never constructive". "I have some sympathy for the Commission," he added, describing the issues as "enormously complex". However, he concluded that the EU executive seemed to have launched the initiative "with some preconceived ideas". 

Meanwhile, Greg Perry, director general of the European Generic Medicines Association (EGA) welcomed the report's findings, saying: "There is still tremendous potential for greater generic uptake in Europe. We at the EGA believe that this preliminary report has identified some key problems in the EU system. We should now be looking for effective ways to improve the sector for patients throughout Europe."

Sector inquiries are investigations that the European Commission may decide to carry out in economic sectors that do not seem to be working as well as they should or whenever there are indications of anti-competitive practices. 

The Commission launched an inquiry into the pharmaceutical sector by raiding the offices of a number of top pharmaceutical companies in January 2008 (EURACTIV 17/01/08), to find out whether anti-competitive practices in the sector have hindered innovation and blocked the entry of cheap generics into the European market. 

Again, just days before the announcement of the preliminary results of the inquiry, new raids were conducted on the night of 24 November 2008 (EURACTIV 26/11/08).

  • 28 Nov. 2008Conference on the preliminary report of the pharma sector inquiry.
  • 31 Jan. 2009: Public consultation on the premliminary results closes.
  • Spring 2009: Final results expected.

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