Pharmaceutical firms blocked competitors, Brussels says (Roundup)

Nov 28, 2008, 8:29 GMT

Brussels - Pharmaceutical companies in Europe have regularly tried to block cheaper products made by their rivals, costing consumers and taxpayers some 3 billion euros (3.9 billion dollars) in extra bills, European Union officials said Friday.

'Competition in this industry does not work as well as it should,' and this causes 'significant additional costs for public health budgets - and ultimately consumers - and reduces incentives to innovate,' EU Competition Commissioner Neelie Kroes said.

Kroes was speaking as the European Commission - the EU's executive - unveiled a preliminary report on the relationship between so-called 'originator' companies, which discover and develop new medicines, and 'generic' firms, which produce the same medicines at a much lower cost once their patents have run out.

'There is evidence that originator companies have engaged in practices with the objective of delaying or blocking market entry of competing (generic) medicines,' the report said.

The pharmaceutical market in Europe is worth some 214 billion euros per year, or roughly 430 euros for every single European citizen in 2007, Kroes said.

And the tactics which originator firms use to delay the entry of generic rivals into markets they control have added considerably to that cost, the report said.

'Additional savings of around 3 billion euros would have been possible on (a sample of medicines in 17 countries) over this period (2000-07) if generic medicines had entered the market without delay,' it said.

According to the commission, originator companies have set up an arsenal of policies to slow generic rivals down.

Tactics include patenting critical formulae many times over - 1,300 in a single case - to block copies, launching large numbers of patent cases to forestall rival drugs, and intervening in national drug-approval schemes to block rivals, Kroes said.

She said one major originator company even circulated an internal memo which read, 'We identify options to obtain or acquire patents for the sole purpose of limiting the freedom of operation by our competitors.'

'Is that really the outcome we want from a strong intellectual property rights system? I don't think so,' she said.

Tactics also involve out-of-court deals in which originator companies pay generic firms not to move into their markets - deals totalling over 200 million euros, the report said.

Such deals call into question the integrity of both originator and generic rival, Kroes stressed, saying, 'in such cases, it takes two to tango, and we will act like that.'

The commission is now set to present a final report on the workings of the pharmaceutical industry in the spring, and could take legal action based on its findings. As part of its investigations, EU inspectors on Monday raided a number of firms in several EU states.

But Kroes stressed that legal action remained a tool of last resort, calling instead for voluntary improvements by the industry.

The commission hopes that the report's 'clear language is a reason for companies to change their attitude already,' she said.