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Friday, February 22, 2008

A pharmacy trust under inspection from EC

Big pharma groups raided in EU antitrust probe

17 January 2008

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.

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

The information obtained is used to understand how the market works and why it works that way. Based on the inquiry, the Commission may open company-specific investigations to ensure that Community rules on restrictive agreements and abuse of dominant position are respected (Articles 81 and 82external of the EC Treatyexternal ).

Sector inquiries have already been conducted, for example, on energyexternal and financial servicesexternal .

In a DecisionPdf external 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 81external ); 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 82external ).

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.


My comment: Well, it becomes a common practice for EU companies to negotiate in secret and abuse the market. I hope the EC will find a way to counteract such activities, because we must not be a country of companies, but a country of the people.

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