Brussels condemns drug firms' use of patents

The European Commission condemned what it believes are anti-competitive practices in the pharmaceutical sector yesterday, saying that the industry’s aggressive use of patents and legal action has cost patients across Europe €3bn in extra medicine costs since the start of the decade.

As part of an investigation that began in January, an interim report published by the commission said that Europe’s big pharmaceutical companies, including the FTSE 100 listed GlaxoSmithKline (GSK) and AstraZeneca, have deliberately acted to stunt the growth of the generics drug market. The report highlighted cases in which drugs have had more than 1,300 patents filed against them: “the number of pharmaceutical-related patent applications before the European Patent Office nearly doubled between 2000 and 2007. Contrary to what might be assumed blockbuster [defined as treatments generating $1bn of revenue] medicines’ patent portfolios show a steady rise in patent applications throughout the life cycle of a product,” the report said.

Generic drug companies, which copy branded medicines and typically sell them at cheaper prices than the original, have long complained that the established pharmaceutical groups erect anti-competitive barriers to entry. The bigger drugs companies in turn argue that patents and legal action against the generic firms that copy their medicines are vital for securing revenue for products that are often a decade or more in development. They also warn that greater generic competition will lead to a fall in research and development spending.

GSK, which was one of several companies targeted in a raid by investigators looking for evidence of anti-competitive practices in January, issued a statement yesterday: “GSK is reviewing the content of the Pharmaceutical Sector Inquiry interim report and we will respond to the European Commission in due course. We remain committed to co-operating fully with the inquiry. Innovation is the life blood of the pharmaceutical industry and our goal is to deliver medicines of genuine value and benefit to patients and payors. It is vital that the European Commission works on initiatives to broaden access to treatments and support innovation.”

AstraZeneca, which on Wednesday settled a patent dispute with Teva, an Israeli generics group over its asthma treatment Pulmicort and was also raided in January, said that it was too early to comment on the 426 page report.

While the drugs companies themselves were guarded in their reaction to the commission’s report, the industry’s European body, the EFPIA, said the report was a missed opportunity: “The preliminary report does not adequately recognize the complex and highly regulated nature of the pharmaceutical market in Europe and misses the opportunity to address the real issues impeding innovation and the development of and access to innovative medicines,” Arthur Higgins, the chief executive of Bayer HealthCare and the president of EFPIA, said. “The report also overstates the level as well as the reasons for delays in generic market access.”

However, in a speech yesterday Neelie Kroes, the EU’s Competition Commissioner, said that the initial findings of the investigation showed that: “competition in this industry does not work as well as it should,” suggesting that the commission’s full report, which is due to be published next spring, will be critical of the industry. The EFPIA argued that the commission’s decision was pre-determined.