Healthy Skepticism Library item: 12435

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Publication type: news

Newman M, Kelley T.
Glaxo, AstraZeneca, Other Drugmakers Probed by EU
Bloomberg.com 2008 Jan 16
http://www.bloomberg.com/apps/news?pid=20601087&sid=aK40RRK8h_n8&refer=worldwide

Full text:

GlaxoSmithKline Plc, AstraZeneca Plc and at least seven competitors were raided as part of a European Union probe into whether patents and lawsuit settlements were improperly used to keep generic drugs off the market.

Inspectors from the EU’s antitrust authority collected “confidential” information about intellectual property rights, litigation and settlements in patent disputes, the European Commission said today. Glaxo, Johnson & Johnson, Wyeth, Novartis AG, Teva Pharmaceutical Industries Ltd., AstraZeneca, Pfizer Inc. Merck & Co., and Sanofi-Aventis SA said they had been contacted.

The makers of branded drugs face a decline in revenue starting in 2011 when products generating $150 billion a year will be hurt by generic competition. The EU may look at how companies use lawsuits and other tactics to keep cheaper copies off the market. The EU spends 200 billion euros ($296 billion) on medicines every year, or 400 euros per person.

“In the past, strategies have been used to favor a brand- name drug over a generic,” Mirabaud analyst Nick Turner said in a telephone interview. He has a “neutral” rating on AstraZeneca and Glaxo shares and rates Sanofi as “underweight.”

The inspections follow signs that “competition in the pharmaceutical markets in Europe may not be working well,” the commission said. The number of new drugs reaching the market has dropped to an average of 28 a year between 2000 and 2004 from 40 a year from 1995 to 1999.

‘Take Action’

“If innovative products are not being produced, and cheaper generic alternatives to existing products are in some cases being delayed, then we need to find out why and, if necessary, take action,” European Competition Commissioner Neelie Kroes said in a statement from Brussels. The commission didn’t identify the companies involved in the probe.

Teva, the world’s biggest generic-drug manufacturer, is part of the investigation and is cooperating with authorities, spokeswoman Ayala Miller said today in a telephone interview. She declined to comment further. The Petah Tikva, Israel-based company has operations in Hungary, the U.K. and other EU nations.

A spokeswoman for Madison, New Jersey-based Wyeth said EU officials were at the company’s offices in Maidenhead, England today. Amelia James, a spokeswoman for Merck & Co., said two offices were visited yesterday, while J&J spokesman Siegfried Marynissen said officials visited the Brussels office.

Raids Ongoing

“They’re going through our files, what they’re looking for we’re unsure,” Gill Markham, a spokeswoman for Wyeth said in a telephone interview. She said the company is cooperating fully.

London-based Glaxo and AstraZeneca, the U.K.‘s two largest pharmaceutical companies, said in e-mailed statements that they are cooperating with the EU probe. New York-based Pfizer said in a separate statement that it had also been contacted.

Jean-Marc Podvin, a spokesman for Paris-based Sanofi- Aventis, also said the company was raided and it was cooperating with the investigation. Basel, Switzerland-based Novartis said commission officials went to the Kolzkirchen, Germany site of its Sandoz generic-drug making unit yesterday.

“Generic manufacturers are not jumping into the market as quickly as we would expect,” Kroes told a Brussels press conference. “We need to know why this is happening, and what can be done about it.”

The commission wants to ensure “vigorous competition” among drug companies because the industry is “crucial to the public.” Kroes said. A final report will be ready in the first half of 2009, Kroes said.

Cooperation

The EU regulator is working with national competition authorities, which have also probed drug companies for possible antitrust abuses, Kroes said.

“We’re not the only ones who are active,” she said. “We need to do it together.”

In the U.S., the Federal Trade Commission has investigated brand-name drugmakers for paying rivals to keep generic alternatives off the market.

Opponents of the payments argue that brand-name companies benefit from exclusive rights to sell patented medications while the generic manufacturers get a handsome settlement to keep cheaper drugs off the market. The U.S. public is the only loser, they say.

The commission has conducted similar probes into the 27- nation’s telecommunications, electricity, gas and financial services industries. The regulator may force individual companies to change their practices. Companies can also be fined as much as 10 percent of annual sales for breaking antitrust rules.

‘Significant Interest’

“Over the last couple of years we have seen a significant increase in interest by the commission in intellectual property,” said Nicola Dagg, an attorney at London-based Allen & Overy LLP. “What’s hot within the commission is the use or misuse of intellectual property rights. We’ve seen them going after the high-tech sector. They’ve complained about AstraZeneca’s behavior.”

The regulator learned of potential antitrust problems in the drug business through specific cases against companies. In June 2005, the commission fined AstraZeneca 60 million euros for misleading regulators to delay competition to its Prilosec ulcer medicine, once the world’s best-selling drug.

“My fear would be that in the long run the actions of central governments to bring cheaper generics to market would disincentivize the pharmaceutical sector from producing innovative drugs,” Turner said.