Sunday, December 7, 2008

EU Commission's Antitrust probe

In Jan 2008 EU commission launched a competetition enquiry into the pharma sector. The Commission has the authority to launch sector inquiries when it has indications that competition in the Single Market may be restricted or distorted in a particular sector. The Commission uses this instrument to improve its knowledge about a sector and to identify its main shortcomings, caused by market participants.
The Jan 2008 enquiry was initiated because market information suggested that competition may be restricted or distorted in the pharmaceutical sector. Indicators included a decline in innovation measured by the number of novel medicines reaching the market.
The inquiry looks at competition between originator companies
and generic companies and at competition among originator companies.
A preliminary report by the commission is available here http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/index.html.
The report finds that originator companies have designed and implemented strategies (a
"tool-box" of instruments) aimed at ensuring continued revenue streams for their medicines. Although there may be other reasons for delays to generic entry, the successful
implementation of these strategies may have the effect of delaying or blocking such entry.
The strategies observed include filing for up to 1,300 patents EU-wide in relation to a single
medicine (so-called "patent clusters"), engaging in disputes with generic companies leading
to nearly 700 cases of reported patent litigation, concluding settlement agreements with
generic companies which may delay generic entry and intervening in national procedures
for the approval of generic medicines. The additional costs caused by delays to generic
entry can be very significant for the public health budgets and ultimately the consumer.
The sector inquiry confirms that generic entry in many instances occurs later than could be
expected. For a sample of medicines under investigation which had lost exclusivity in 2000
to 2007 the average time to enter after loss of exclusivity was about seven months on a
weighted average basis, whereas also for the most valuable medicines it took about four
months. On average, price levels for medicines in the sample that faced loss of exclusivity
in the period 2000 – 2007 decreased by almost 20% one year after the first generic entry.
However, the decreases in price levels were as high as 80-90% in rare cases for some
medicines in some Member States. Based on the sample of medicines under investigation
that faced loss of exclusivity in the period 2000 – 2007, representing an aggregate postexpiry
expenditure of about € 50 billion over the period (in 17 Member States), the preliminary report estimates that this expenditure would have been about € 14 billion higher without generic entry. However, the savings from generic entry could have been about € 3 billion more, further reducing expenditure for these medicines by more than 5%, if generic entry had taken place without delay. The findings of the inquiry suggest that the practices under investigation contribute to this.
The preliminary findings of the inquiry are that in recent years originator companies have
changed their patent strategies. In particular, originator companies confirm that they aim to
develop strategies to extend the breadth and duration of their patent protection. One commonly applied strategy is filing numerous patents for the same medicine (forming so called "patent clusters" or "patent thickets"). Documents gathered in the course of the inquiry confirm that an important objective of this strategy is to delay or block the market entry of generic medicines. A second instrument used by originator companies appears to be filing "divisional patent"applications.
Between 2000 and 2007, originator companies and generic companies entered into a large
number of agreements concerning the sale/distribution of generic medicines. One third of
these agreements concerned originator medicines which still benefited from exclusivity. Further details are available here http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/exec_summary_en.pdf

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