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Pharma Accused of Keeping Good Generics Down

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The European Commission has accused the pharmaceutical industry of delaying the entry of generic drugs to the market. As a result, it intends to step up its scrutiny of the sector under EU antitrust law. “We must have more competition and less red tape in pharmaceuticals,” claimed Competition Commissioner Neelie Kroes. “The inquiry has told us what is wrong with the sector, and now it is time to act. We will not hesitate to apply the antitrust rules where such delays result from anticompetitive practices.” The first of these antitrust investigations are already under way.

According to its final report on competition in the pharmaceutical sector, the cost of delayed generic entry is substantial. Based on a sample of medicines facing loss of exclusivity in 17 member states between 2000 and 2007, they found that patients waited an average of seven months for generics to become available after the patent expired. This increased spending by 20 percent.

The Commission cited a number of tactics that pharma companies use to delay generic entry. “[It] will be looking for things like false safety claims or obviously unfounded legal arguments on data exclusivity,” according to Christopher Thomas, a Brussels-based competition law partner at the law firm Lovells. “It is interested in settlements that both limit generic entry and have some element of value transfer to the generic company. That could be a cash payment, it could be a licence of some other product, and for me the most interesting thing is that within the Commission’s concept of a reverse payment settlement is a licence agreement enabling the generic company to enter the market early, before patent expiry, subject to the conditions of the licence agreement. The licence terms limit generic entry and the licence itself—the ability to go onto the market free of the risk of being sued—is the value transfer.”

It also expressed concerns about aspects of competition between originator companies. “This is rather vaguer and there will be fewer cases,” Thomas said. “What they have in mind is defensive patenting where it can be shown that the purpose of the patenting strategy is only to exclude a competitor without actually pursuing innovative efforts themselves. These are purely blocking tactics, though drawing the line between this and normal protection of a product is going to be very hard.” It also mentions refusal to grant a licence for unused patents. He adds that although this is mentioned in existing law, the circumstances of when it is actually unlawful is quite restricted.

The Commission also wants member states to actively encourage a greater use of generics. The report calls for them to introduce compulsory generic substitution for pharmacists, encourage doctors to prescribe the substance rather than the brand, and reimburse at the level of the lowest priced product. While some member states have had these policies for some time, Thomas said that it’s interesting the Commission is explicitly coming out in favour of these policies as part of a broader initiative to reduce drug costs for national health budgets. “To me, that’s the theme—when you look down the list of what the Commission is proposing, in reality they’re asking the member states to take action,” he said.

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