Healthy Skepticism Library item: 16279

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Publication type: Journal Article

den Exter A
European Commission takes on Big Pharma
The Lancet 2009 Aug 22; 374:(9690):599 - 600
http://www.thelancet.com/journals/lancet/article/PIIS0140673609613702/fulltext?rss=yes

Full text:

For more than a year, European Commissioner Neelie Kroes (taking action
against business practices that restrict competition in the European Union)
has awaited the conclusion of an investigation of the antitrust behaviour of
large multinational drug companies.1 This thorough investigation paints an
alarming picture of how the large multinationals bar generic producers from
entering the market.

The investigation presents a dilemma for the European Commission: how can it
create an ideal business environment for pharmaceutical multinationals while
at the same time ensuring universal access to drugs? Research into new drugs
needs ample patent protection to cover the company’s investments. Patenting
new drugs creates a monopoly for innovators, leading to artificially high
prices and threatening affordability. Because most prescription drugs are
financed by social health insurance, the Member States’ concern is how to
achieve low prices. By allowing generic drugs (ie, patent-expired drugs)
onto the market, the monopoly of the large multinationals will be
eliminated, which will result in lower prices. However, the companies’
practice of preventing generic producers from entering the market1 makes
drugs unnecessarily expensive. Such practice forced the European Commission
to launch its investigation into the anticompetitive activities of the large
multinationals. The results showed that intervention is required to protect
consumers’ interests.

What did the Commission’s antitrust report find? To protect market share,
the large multinationals use several controversial techniques. Effective
delaying tactics include litigation for infringement of patent against
generic companies and customers, despite patent expirations which render the
allegation unfounded. Competitors and customers subsequently abstain from
becoming involved in patent infringements. This tactic is open for judicial
review, but that will take some time to complete (3 years on average), time
which will help the large multinationals delay generic producers from
obtaining market access. When it comes to blockbuster drugs, which have a
market value of several billion Euros, every month that access is denied is
crucial.

Another method detailed in the investigation involves the agreement between
the large multinationals and generic manufacturers to pay the generic
manufacturers compensation for postponing market participation. Parties
share the resulting monopoly profits. Such patent payment agreements hamper
free competition and harm consumers. When parties cannot agree on the level
of compensation, acquisition by a large multinational is an alternative.2
Thus the new owner acquires control of the introduction of the new generic
medicine.

Other interventions in the report focus on national authorisation of generic
medicines. Before drugs are allowed on the market, authorisation must be
obtained. One of the delaying tactics of the large multinationals is to
challenge such registration, while holding registration authorities liable
for a breach of patent. During the subsequent legal proceedings, most such
claims (nearly 60%) will be withdrawn, allowing authorisation and therefore
market access but with considerable delay. A similar practice occurs when
local authorities are involved in decision making about health-care
packages.

Another tactic before patent expiration, according to the investigation, is
that the large multinationals can opt to introduce a modified formulation of
the drug. Put simply, rather than offering the drug in its existing
formulation, a slow-release version is produced thereby extending patent
rights.

Where to go from here? The examples above confirm the reputation of the
large multinational drug companies as a group with little social
responsibility. This image was confirmed by the 2008 report of the UN’s
Special Rapporteur on Health,3 in which he formulated guidelines on the role
of the large multinationals to achieve global access to medicines. As early
as the consultation stage, major pharmaceutical companies (with some
exceptions) failed to cooperate and rejected company responsibilities as
formulated in the guidelines. Acknowledgment by the large multinationals of
their social responsibility by upholding UN ethics guidelines about
essential medicines would be a step in the right direction. Without doubt,
the pharmaceutical market cannot survive without such a code of ethics.

Even though patent rights require protection, delaying tactics as identified
in the Commission’s report should carry sanctions. Additionally, the Member
States should step up the introduction of a so-called European patent to
replace the current combination of national patents. Supposed patent
breaches can be reviewed by the European Patent Office, which will improve
the quality of patents and prevent unnecessary delays.

I declare that I have no conflicts of interest.

References

1 European Commission, Pharmaceutical sector inquiry
http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry (July 8,
2009) (accessed July 8, 2009).

2 European Commission, DG Competition. Pharmaceutical sector inquiry:
preliminary report
http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry (Nov 28,
2008) (accessed Jan 1, 2009).

3 UN General Secretary, Promotion and protection of human rights: human
rights questions, including alternative approaches for improving the
effective enjoyment of human rights and fundamental freedoms. The right to
health
http://daccessdds.un.org/doc/UNDOC/GEN/N08/456/47/PDF/N0845647.pdf?OpenEleme
nt (Aug 11, 2008) (accessed July 9, 2009).