Healthy Skepticism Library item: 14704

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Publication type: news

Newman M.
Drugmaker Delay on Generics Cost EU3 Billion, EU Says
Bloomberg.com 2008 Nov 28
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=acRoYpuVxkEA

Full text:

European Union regulators accused drugmakers of costing consumers in 17 countries as much as 3 billion euros ($3.9 billion) by using patent lawsuits and other tactics to keep cheaper generic medicines off the market.

The claim, part of an interim report by the European Commission today, was based on evidence collected during January raids at GlaxoSmithKline Plc, AstraZeneca Plc and at least seven other competitors. EU Competition Commissioner Neelie Kroes in Brussels said she “would not hesitate” to open antitrust cases when there’s evidence of restrictive business practices.

“I don’t think there’s been a general abuse of patent litigation by the pharma companies,” said Andrew Weiss, an analyst at Bank Vontobel in Zurich. The real question is “should some of the patents have been there in the first place.”

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 spends 214 billion euros on medicines every year, or 430 euros per person. The report found that savings from generics, which can cost as much as 90 percent less than branded drugs, were about 14 billion euros from 2000 to 2007.

Missed Opportunity

Drugmakers said the EU report doesn’t recognize the highly regulated nature of the pharmaceutical market in Europe. Arthur J. Higgins, chief executive officer of Bayer AG’s health-care unit, said that other EU antitrust officials indicate that generic drugs can reach the market in as little as four months.

The report “misses the opportunity to address the real issues impeding the innovation and the development” of medicines,’ Higgins, who is also president of European Federation of Pharmaceutical Industries and Associations, which represents the research-based companies, said in a statement.

The EU based the lost 3 billion euros on a sample of medicines that faced the loss of exclusivity from 2000 to 2007 in 17 countries. The savings could have been realized if the generic medicines had been approved for sale without delay.

Thomas Cueni, head of the industry group’s task force on the probe, said the amount saved represents 75 euro cents a person.

“The savings on generic delay is dwarfed if you focus on a competitive generic market,” Cueni said in an interview.

New Raids

EU inspectors conducted a second round of inspections earlier this week. Teva Pharmaceutical Industries Ltd., the world’s biggest generic-drug maker, France’s Les Laboratoires Servier and Slovenia’s Krka Group d.d. said they were raided.

“The raids on Monday are the beginning of actions against individual companies,” Marc Dalby, a life science expert at law firm Lovells, said in an interview. “The commission will want to see concrete action and it may be a handful of cases.”

Higgins questioned the motives of the commission’s raids this week.

“It creates a perception that we are guilty,” he said in an interview. “The timing was a little questionable. But that’s life, we are big boys and live in a big boys’ and girls’ world.”

The commission said a variety of tactics are used to delay or block the sale of generic drugs, including filing large numbers of patents for the same drug, suing generic companies, settling patent disputes and intervening in national procedures for generic-drug approvals.

‘All Had Conversations’

Companies seek patents for so-called replacement therapies when the original protection is about to expire. They may broaden uses for the drug or change its form, such as a liquid or capsule. In one case, the EU found 1,300 patents for a single medicine.

“I suppose we have all had conversations around how can we block generic manufacturers,” according to one document found by the commission. “Don’t play games in patenting new salt forms too late, the generics are starting earlier and earlier,” the document said.

A pharmaceutical group in the U.K. disputed EU claims on generic drugs, saying that last year 82.6 percent of all prescriptions were written out for copycat medicines.

“There is a huge amount of generic prescribing,” said Crispin Slee, a spokesman in London for the Association of the British Pharmaceutical Industry. “The level of generic prescribing in the U.K. is the highest in Europe.”

Patent Settlements

The EU also probed whether patent lawsuit settlements harm consumers. Innovative drug companies often file patent suits against generic companies to prevent them from getting regulatory approval for copies.

Settlements involve research-based companies paying generics makers to keep their products off the market, a practice known as “reverse payment settlements.” The commission said such payments made up 10 percent of settlements and involved more than 200 million euros.

Greg Perry, of the European Generic Medicines Association, said “the vast amount of settlements are legitimate out of court settlements.”

The commission “reviewed in their report 200 settlements — none of these was a problem,” he said in an interview.

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