[Ip-health] International Herald Tribune: European antitrust regulators raid drug companies

[Thiru Balasubramaniam]

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[ Picked text/plain from multipart/alternative ]

<SNIP>

Inspectors took confidential information about intellectual property
rights, litigation and settlements in patent disputes in a series of
surprise visits to major drug makers. The European Commission declined
to identify the companies, but GlaxoSmithKline, AstraZeneca, Wyeth,
Teva Pharmaceutical Industries, Sanofi-Aventis and Pfizer said they
had been contacted.

<SNIP>


"Fewer new pharmaceuticals are being brought to the market, and the
entry of generic pharmaceuticals sometimes seems to be delayed," the
commission said. "If innovative products are not being produced, and
cheaper generic alternatives to existing products are in some cases
being delayed, then we need to find out why and, if necessary, take
action."

<SNIP>

Part of the problem in Europe is that some companies that produce
branded pharmaceuticals have fought to slow down the introduction of
generic drugs that could lower government health care costs.

That fight is part of a larger struggle in Europe over health care.

Drug companies have long been at odds with governments that operate
socialized medical systems, which keep the prices of patented
medicines much lower than in far more profitable markets like the
United States.

<SNIP>


"Numerous competition authorities have experienced blatant document
destruction at the site of a dawn raid or search," the report said.
"Stories of hearing document shredders running in a back room, or
hearing toilets flushing, smelling smoke from burning documents or
finding documents in trash cans are not uncommon.


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http://www.iht.com/articles/2008/01/16/business/drug.php

European antitrust regulators raid drug companies
By Stephen Castle and James Kanter
Wednesday, January 16, 2008

BRUSSELS: European antitrust regulators raided some of the Continent's
biggest pharmaceutical companies Wednesday as part of a far-reaching
investigation into whether drug makers were preventing inexpensive
generic medicines from reaching millions of consumers in the European
market.

Inspectors took confidential information about intellectual property
rights, litigation and settlements in patent disputes in a series of
surprise visits to major drug makers. The European Commission declined
to identify the companies, but GlaxoSmithKline, AstraZeneca, Wyeth,
Teva Pharmaceutical Industries, Sanofi-Aventis and Pfizer said they
had been contacted.

Billions of euros are at stake as Brussels intensifies its scrutiny of
the European market for patented and generic drugs. These "copycats,"
as big pharmaceutical companies prefer to call them, have been far
less present in some parts of Europe, like France, than in the United
States. That has been a handicap for some European patients seeking
the most effective and up-to-date medicines in parts of the Continent.

Neelie Kroes, the European competition commissioner, said she decided
to investigate the entire sector because of new evidence that
competition in the European pharmaceutical market "may not be working
well." In particular, the number of new drugs reaching the market has
declined to an average of 28 a year between 2000 and 2004 from 40 a
year from 1995 to 1999.

"Fewer new pharmaceuticals are being brought to the market, and the
entry of generic pharmaceuticals sometimes seems to be delayed," the
commission said. "If innovative products are not being produced, and
cheaper generic alternatives to existing products are in some cases
being delayed, then we need to find out why and, if necessary, take
action."

Kroes added: "We're not the only one active in this."

Ian Forrester, a partner at the law firm White & Case in Brussels,
said that the sector inquiry might be a sign of "increased cooperation
in anti-trust prioritization between the EU and the US." But he added
that the commission is unique in seeking to use antitrust powers to
achieve integration of its internal market.

The commission wants to determine whether pharmaceutical companies
have made it extremely difficult, through the use of patent rights,
vexatious litigation or other means, for generic copies of their
patented drugs to enter the European market.

The European Federation of Pharmaceutical Industries and Associations,
a body representing the major drug companies, encouraged EU regulators
"to enforce competition rules and intellectual property rights, which
are the trigger to new investments and new discoveries in medicines."

Greg Perry, the director general of the European Generic Medicines
Association, an industry body based in Brussels, said that the
behavior of large pharmaceutical companies resulted in losses of sales
by generics makers totaling several hundred million euros each year.

"We have in the past raised questions with European regulators about
the abuse of patent systems, litigation systems and manipulative
marketing," said Perry, whose group had not made any formal complaint
to EU authorities.

Perry said the EU was likely investigating certain types of behavior
by large pharmaceutical companies, including "ring-fencing" - a
practice in which pharmaceutical companies develop a large number of
patents for a particular product in order to make it easier to claim
later that one of those patents had been infringed.

Another category of abuse involves companies making slight variations
to a product to maintain some exclusive marketing rights. In those
cases, said Perry, the new products marketed by pharmaceutical
companies often offered "no significant therapeutic value to patients"
compared to a generic product with much the same ingredients.

The tussle between generics makers and drug companies has often
resulted in litigation brought by drug companies. But those cases were
sometimes aimed at forcing generics companies to delay putting drugs
on the market rather than at winning such cases, according to Perry.

"We do spend a lot on this litigation," said a senior executive at a
generic medicines company in Europe who spoke on condition of
anonymity because his company was involved in the EU case. "There also
is litigation going on that is nonsense and just aimed at extending
the monopoly position for companies that originate drugs," the
executive said.

The commission has become more aggressive in recent years about
examining entire industries to determine if large companies are
engaged in anti-competitive behavior that raises prices and diminishes
choices for hundreds of millions of consumers in the European Union.
In its most recent investigation of the multi-billion euro market for
European energy supplies and distribution, Brussels pursued legal
action against some of the biggest European utilities.

David Hull, partner and head of the European competition team at the
law firm Covington & Burling, said the regulators' announcement marked
a shift in focus.

"The focus on generics is not surprising as the entry of generics onto
the market has been a major issue for the U.S. antitrust agencies in
recent years and it was only a matter of time before it arrived in
Europe," Hull said. "This will be a difficult issue for the
commission; whether or not such patent settlements violate the
competition rules is a highly controversial topic."

Europe spends an average annually of =80200 billion, or $293 billion, on
pharmaceuticals annually, or =80400 per person, the commission said.
Most of the tab is picked up by government programs, and certain
European governments have sought ways to reduce their expenses through
the use of more generics.

Part of the problem in Europe is that some companies that produce
branded pharmaceuticals have fought to slow down the introduction of
generic drugs that could lower government health care costs.

That fight is part of a larger struggle in Europe over health care.

Drug companies have long been at odds with governments that operate
socialized medical systems, which keep the prices of patented
medicines much lower than in far more profitable markets like the
United States.

Some of the fiercest fights in Europe have focused on next-generation
medicines made from so-called biological materials. In those cases,
drugs companies have argued that their manufacture is so complex that
copying them is nearly impossible.

Manufacturers of generic drugs agree that new technologies require new
rules on copying, but they accuse patent owners of seeking to impose
extra testing to delay production of generics and protect profit.

The EU began cracking down on drug makers in 2005. That June,
antitrust regulators fined AstraZeneca =8060 million for misleading them
about the timing of its patents on Losec, a drug for stomach ulcers
that became the world's best-selling drug in the 1990s.

Then, in October 2005, antitrust officials raided the offices of
pharmaceutical companies in Denmark, Italy and Hungary suspected of
colluding to shut out generic rivals.

Officials said that raids linked to the new drug sector inquiry went
ahead to eliminate the possibility that evidence will be destroyed.

Such obstruction is not unusual according to a report for the
International Competition Network in 2006.

"Numerous competition authorities have experienced blatant document
destruction at the site of a dawn raid or search," the report said.
"Stories of hearing document shredders running in a back room, or
hearing toilets flushing, smelling smoke from burning documents or
finding documents in trash cans are not uncommon."

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru@keionline.org


Tel: +41 22 791 6727
Mobile: +41 76 508 0997