[Ip-health] IHT: EU broadens antitrust inquiry into drug market

[Judit Rius Sanjuan]

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[ Picked text/plain from multipart/alternative ]
http://www.iht.com/articles/2008/05/14/business/pharma.php

EU broadens inquiry into drug market
By James Kanter
Wednesday, May 14, 2008

BRUSSELS: European antitrust investigators are expanding the scope of
a major inquiry into the =80484 billion pharmaceutical market in a bid
to determine whether companies are blocking generics makers from
getting less-expensive medicines to market quickly.

Lawyers and European Union officials said Neelie Kroes, the European
Union competition commissioner, was also casting her net widely in a
bid to determine whether drug companies' efforts to block competitors
by extending patents were also distracting them from developing new
medicines, which have been slow in coming to market in recent years.

Investigators, who questioned about 100 companies early this year,
including Pfizer, GlaxoSmithKline and Sanofi-Aventis, are now turning
to about 80 medical organizations, including associations of doctors,
patients and pharmacies, and government agencies that set the prices
of prescription drugs in Europe. That could make it the broadest
antitrust investigation ever in the EU.

If Kroes determines that companies that make and sell medicines are
using unfair practices, she could eventually impose large fines - as
happened once already to AstraZeneca - and could recommend changes to
the way the industry operated.

"There is clearly a block in the system," said Greg Perry, the
director general of the European Generic Medicines Association.
"Access to the market in Europe still is less speedy than in the
United States."

Generics, which cost less than brand-name drugs, make up 42 percent of
the market by volume in Europe, compared with 63 percent in the United
States, according to Perry, whose organization includes the three of
the largest generics companies operating in Europe: ratiopharm, Teva
Pharmaceutical Industries and Sandoz.

The inquiry could be a boon for Kroes, whom many analysts expect to
seek a second term as Europe's antitrust chief next year. Although she
oversaw part of the high-profile case against Microsoft, and has taken
a tough line with electricity producers, her candidacy would be
strengthened if she could point to another money-saving victory in an
area of concern to consumers and governments. Commissioners are
proposed by their home government and approved by the European
Parliament.

Some health and consumer groups also argued that more competition
would pressure pharmaceutical companies to develop more new medicines
and rely less on extending patent protection and marketing of existing
molecules - a practice known as evergreening.

"These companies should be spending money on discovering drugs for
diseases that still go uncured," said David Ortega, in charge of
competition issues at the Spanish consumers' organization OCU.

The EU investigation began in January with surprise inspections at a
number of companies making both brand-name and generic medicines.

Kroes then requested expert help from the European Patent Office, a
body based in Munich that operates separately from the European
Commission. The patent office agreed to send an official to work with
investigators on the case.

Members of the pharmaceutical industry and lawyers said they were
surprised by the use of dawn raids - the first time such tactics were
used in this type of antitrust investigation - and by the focus on
patents, which the industry critically relies on to recoup the costs
of research and development.

Dozens of pharmaceutical companies operating across Europe have had to
respond to 42-page questionnaires, which require information on how
they managed patents, conducted marketing campaigns and used 230
different active ingredients from 2000 to 2007.

Brian Ager, the director general of the European Federation of
Pharmaceutical Industries and Associations, said drug companies were
worried.

Generic medicines, Ager said, commonly reach the market in Europe
within three months after patents expire. But generics manufacturers
in Europe tend to market a narrower selection of best-selling
medicines compared with their American counterparts because of price
controls in Europe, he said.

"Let's hope antitrust officials reach a better understanding of our
industry," Ager said. "There's a lot of nervousness in the industry
because some of the real disincentives for innovation resulting from
national pricing and reimbursement schemes are unlikely to be tackled
in this investigation."

Jonathan Todd, a spokesman for Kroes, said antitrust officials were
"not yet drawing any preliminary conclusions from the pharmaceutical
sector inquiry as regards legislative changes or anything else because
it is far too early to do so."

So far, analysts see little immediate threat to drug company profits.
One reason, said Luisa Hector, an analyst in London for Lehman
Brothers, is that pharmaceutical companies are more aggressive in the
United States than in Europe about protecting drugs by marketing newer
formulas of older drugs.

Even so, if investigators discover abuses in Europe, it would not be
the first time.

In 2005, EU regulators fined AstraZeneca =8060 million, or $93 million
at current exchange rates, for giving misleading information to
several national patent offices to extend the life of a blockbuster
antacid drug, Losec, and delaying the entry of generic drugs into the
market. Last year regulators began an antitrust case against the
German company Boehringer Ingelheim for suspected misuse of the patent
system to exclude competition in the market for chronic obstructive
pulmonary disease drugs.

Antitrust officials already are considering recommending changes to EU
legislation or to the way current legislation is enforced to chip away
at the control pharmaceutical companies exert over some medicines,
although they have not said what those changes would be.

Antitrust lawyers noted that the recommendations themselves were
likely to have an impact as early as next year, even if Kroes does not
go after any specific company.

"Practices that long have been widespread in the industry may need to
change when EU antitrust officials clarify what kinds of behavior
could infringe antitrust rules," said Stephen Kinsella, an antitrust
partner with law firm Sidley Austin in Brussels.

Todd, the spokesman for Kroes, said antitrust officials were "not yet
drawing any preliminary conclusions from the pharmaceutical sector
inquiry as regards legislative changes or anything else because it is
far too early to do so."

Perry, of the generics association, said any changes should aim to
make it easier for generics companies to place less-expensive drugs on
the market as soon as patents expire - on "Day 1" rather than months
afterwards - and discourage big pharmaceutical companies from suing
makers of generics drugs for suspected patent violations that later
turn out to be unfounded.

Yet EU investigators also appear to be turning their investigation on
generics companies, too, asking whether they have accepted payments
from brand-name drug makers as part of patent litigation, perhaps in
exchange for launching a medicine later than originally intended.

In the United States, the Federal Trade Commission has said these so-
called reverse payments violate antitrust law by dividing up the
market. But Perry said the practice was far less widespread in Europe.


Judit Rius Sanjuan
Attorney at Knowledge Ecology International
www.keionline.org / www.cptech.org
Phone: +1.202.332.2670, x18
Email: judit.rius@keionline.org