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European antitrust investigators are expanding the scope of a major inquiry into the €484 billion pharmaceutical market in a bid to determine whether companies are blocking generics makers from getting less-expensive medicines to market quickly.

Neelie Kroes, the European Union competition commissioner, is trying 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 approximately 100 companies earlier this year, including Pfizer, GlaxoSmithKline and Sanofi-Aventis, are now turning to other organisations, including associations of doctors, patients and pharmacists, as well as 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 who make and sell medicines are using unfair practices, she could impose large fines – as has already happened once to AstraZeneca – and recommend changes to the operation of the industry.

Background

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 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.

In 2005, EU regulators fined AstraZeneca €60 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.

Comments

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.

EPHA urges the EU to adopt changes in the current legislation so as 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 large 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.

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