European Commission Releases Preliminary Report on Competition in Pharmaceutical Sector

    By Donald Zuhn --

Last Friday, the European Commission published a 426-page preliminary report regarding its competition inquiry into the European pharmaceutical sector.  The Commission commenced the sector inquiry last January to examine why fewer new medicines were being brought to market in Europe and why generic entry seemed to be delayed in some cases (the report notes that while 40 new medicines were introduced annually between 1995 and 1999, only 27 were introduced annually between 2000 and 2007).  The Commission, which announced the publication of its preliminary report at a public meeting in Brussels on Friday, has created a dedicated webpage providing additional information regarding the sector inquiry into pharmaceuticals competition.

In its press release announcing the release of the preliminary report, the Commission offered its initial finding that "there is evidence that originator companies have engaged in practices with the objective of delaying or blocking market entry of competing medicines" and that as a result, "competition in this industry does not work as well as it should."  The Commission reached this conclusion by examining a sample of 219 medicines facing a loss of exclusivity between 2000 and 2007, determining that but for delaying and blocking strategies employed by originator companies (i.e., innovator or brand companies that develop and sell new medicines), European consumers would have saved an additional € 3 billion ($3.79 billion) over this period.  The Commission concluded that the originators' strategies resulted in a delay of generic market entry of between four and seven months.

Among the blocking and delaying strategies outlined in the report are:

• The filing of "patent clusters" -- a large number of patent applications covering a single medicine -- by originator companies.  In one case, the Commission noted that 1,300 applications had been filed on a single medicine.

• The initiation of patent litigations by originators against generic companies.  The Commission noted that nearly 700 litigations had been filed against generics, with such litigations lasting an average of three years.  The Commission also noted that generics were ultimately successful in 60% of such litigations.

• Settlement agreements between originators and generics.  The Commission noted that more
than 200 such agreements had been reached in the EU, and that 10% of these agreements were "reverse payment settlements" which provide for payments from originators to generics, thereby limiting market entry for generic medicines.  The Commission also noted that such payments amounted to more than € 200 million ($252 million).

• Intervention by originators in national procedures for approving generic medicines.  The Commission concluded that such intervention led to an average delay of four months for market entry of generics.

In conducting the sector inquiry, the Commission sent out requests for information to 43 originator companies and 27 generic companies, engaged in a dialogue with industry associations at the European level, and consulted with representatives of consumer and patients associations, insurance companies, doctors, pharmacies, wholesalers, hospitals, parallel traders, patent offices, and competition authorities.  Interestingly, the report states that the two biggest stakeholders -- the originator and generic companies -- were in agreement regarding the need to create a single Community Patent and a unified and specialized patent judiciary in Europe.

Stakeholders and members of the public have until January 31, 2009 to submit comments concerning the Commission's preliminary findings, with the Commission expected to issue a final report sometime in the spring of 2009.

Comments

[kk]

Just FYI... The USPTO has appealed the Wyeth vs. Dudas decision regarding patent term adjustment under 35 USC 154. A Notice of Appeal was filed 11/28/2008 in PACER.

[Dan Feigelson]

Thanks for the link Don. I haven't read all 400+ pages in detail, but I did skim through a fair amount of it. Much of the report merely confirms what those of us who practice in the pharma area already know from experience (including the fact that things are more complicated in Europe than in the USA due to the multiplicity of local laws that come into play). I was amazed that companies were willing to go on record, even if unattributed, regarding the strategies they employ in this arena.

[Donald Zuhn]

Dan:

I get the feeling that the innovator and generic companies the Commission "surveyed" may not have had much choice but to cooperate -- especially given the Commission's penchant for early morning raids.

Don

[Humorless Democrat]

No 5th amendment in Europe..."you vill tell us everyting dat you dit to extend de period of excluzivity, yah?"