[Ip-health] Europe Accuses Drug Makers of Padding Health Care Costs

[Riaz K Tayob]

The New York Times
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November 29, 2008
Europe Accuses Drug Makers of Padding Health Care Costs
By JAMES KANTER

BRUSSELS =97 The European Union accused drug companies on Friday of adding
billions of dollars to health care costs by delaying or blocking the
sale of less expensive generic medicines.

One common tactic, said Neelie Kroes, the European competition
commissioner, was for drug companies to amass patents to protect active
ingredients in the medicines =97 in one case, 1,300 patents for a single
drug. Another tactic, she said, was for pharmaceutical companies to sue
the makers of generic drugs for ostensible patent violations, which
tended to delay the availability of the lower-cost products for years.

Ms. Kroes made her comments Friday while presenting the preliminary
findings of a broad investigation into accusations of anticompetitive
practices in the drug sector. She also turned her sights on the generics
companies, which she said had received $200 million from pharmaceutical
companies over seven years in exchange for holding their products off
the market.

Patients and health care systems in Europe would have saved at least 3
billion euros, or $3.8 billion, from 2000 to 2007 =97 or shaved 5 percent
off the medical bills =97 if companies had let generics into the market
sooner, she said.

She did not identify the companies and did not say legal action was
imminent. But she did say that European officials "will not hesitate to
open antitrust cases against companies where there are indications that
the antitrust rules may have been breached."

The report "is likely to lead to enforcement action to test whether
individual companies' strategies infringe competition law," said Stephen
Rose, competition partner at the law firm Eversheds.

The pharmaceutical industry is facing the losses of patents on many of
its blockbuster products in coming years as well as new challenges in
the United States, where President-elect Barack Obama could give the
government's Medicare program the power to directly negotiate with
pharmaceutical companies =97 a change that the Bush administration has
resisted =97 though the impact on prices will depend on the authority
Congress grants.

Ms. Kroes began the investigation in January with a series of raids on
major drug companies, including GlaxoSmithKline, Pfizer and
Sanofi-Aventis, on suspicion that they and other companies were slowing
the availability of generics and new medicines. The European Commission
aims to speed generics to market and raise the number of new medications
available.

On Friday, European officials published documents retrieved from those
raids. They did not identify the authors, but the documents appeared to
come from brand-name pharmaceutical companies.

"I suppose we have all had conversations around 'how we can block
generic manufacturers,' " one document stated. "Don't play games in
patenting new salt forms too late, the generics manufacturers are
starting earlier and earlier," the document stated, apparently referring
to pharmaceutical ingredients.

Another document said, "We identify options to obtain or acquire patents
for the sole purpose of limiting the freedom of operation of our
competitors."

Major drug makers criticized officials for publishing the statements.

The officials "used selective quotations to seek to mischaracterize the
industry as anticompetitive," said the European Federation of
Pharmaceutical Industries and Associations, an industry trade group.

"Those quotes simply show how innovators have rightly sought to protect
their inventions and illustrate the highly competitive nature of
innovation in this sector, which is entirely to the benefit of society,"
the statement from the trade group said. "They are not evidence of
competition law infringements as the report itself recognizes =97 it
states expressly it reaches no such conclusion."

Generics makers in Europe said they welcomed the report, saying it
reflected the barriers patients face in buying less expensive drugs.
They aim to ease the process of placing generics on the market when
patents expire, and to raise the hurdles for pharmaceutical companies to
sue them for suspected patent violations.

Yet European investigators have also turned their focus to generic
companies, finding they have accepted payments from brand-name drug
makers as part of patent litigation, perhaps in exchange for delaying
generic medicines.

In the United States, the Federal Trade Commission has said these
so-called reverse payments violate antitrust law by dividing up the market.

On Friday, generics makers maintained that the practice was less
widespread in Europe. Ms. Kroes had identified such payments worth 200
million euros, representing more than 10 percent of settlements of
patent litigation involving generics companies from 2000 to 2007.

Generics makers said the value of settlements in Europe uncovered by Ms.
Kroes represented a relatively small sum compared with the size of
settlements in the United States.

They said problems could be fixed by changing laws and rules that govern
the way medicines are marketed.

Over all, the pharmaceutical market in Europe is worth 214 billion euros
a year ($276 billion), or 430 euros ($555) for each European resident,
according to the European Commission, the executive arm of the European
Union.


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