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BUSINESS NEWS JAN 17, 2008
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Big drugs companies raided by European competition regulators

Big drugs companies raided by European competition regulators

The Eli Lilly plant at Dunderrow, near the seaside town of Kinsale, 11 miles west of Cork City. About 450 people are employed there.

European competition regulators on Wednesday raided some of the world’s biggest pharmaceutical companies as part of an investigation to check whether the drugs companies conspired to keep the the price of drugs high after patents expired.

Pfizer, GlaxoSmithKline, AstraZeneca and Sanofi-Aventis were among those that confirmed they had been visited as part of a European Commission-led probe into delays in the launch of low-cost generic drugs. Teva, the world’s biggest generics company, was also raided.

The European Commission announced that has launched a sector inquiry into competition in the pharmaceuticals sector and is conducting inspections at the premises of a number of innovative and generic pharmaceutical companies. The inquiry is a response to indications that competition in pharmaceutical markets in Europe may not be working well: fewer new pharmaceuticals are being brought to market, and the entry of generic pharmaceuticals sometimes seems to be delayed.

The inquiry will therefore look at the reasons for this. In particular, the inquiry will examine whether agreements between pharmaceutical companies, such as settlements in patent disputes, may infringe the EC

 
"With respect to novel medicines, the number of such medicines reaching the market has decreased over time. From 1995-1999 an average of 40 novel molecular entities were launched per year. From 2000-2004 the figure was only 28. The Commission wants to investigate the reasons for this and in particular whether any agreements restricting competition or unilateral abuses of dominant position are connected to it.

With respect to generic medicines, the Commission has indications that the entry of such medicines into the market place is, in some cases, delayed. Here also, the Commission will investigate the causes of this trend and in particular whether it results from any restrictions of competition between producers or any unilateral abuses of dominant positions." - European Commission

 Treaty's prohibition on restrictive business practices. It will also look into whether companies may have created artificial barriers to entry, whether through the misuse of patent rights, vexatious litigation or other means, and whether such practices may infringe the EC Treaty's ban on abuses of dominant market positions.

Vigorous competition in this sector is crucial for the public, as it ensures both access by patients to state-of-the-art medicines, and value for money for health spending by individuals, private health schemes and government health services in Europe. An interim report is planned for autumn 2008 and final results are expected in the spring of 2009. The inquiry's findings will allow the Commission or national competition authorities to focus any future action on the most serious competition concerns, and to identify remedies to resolve the specific competition problems in individual cases.

Competition Commissioner Neelie Kroes said: "Individuals and governments want a strong pharmaceuticals sector that delivers better products and value for money. But 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."

Europeans spend €200bn a year on pharmaceuticals, or €400 each, Kroes added.


European Competition Commissioner Neelie Kroes

Unlike cartel cases, where the Commission carries out inspections when it has indications that specific companies have committed competition law infringements, these inspections are not aimed at investigating practices of companies which the Commission has already positive indications of wrong-doing. They are just the starting point of this general sector inquiry and aim to ensure that the Commission has immediate access to relevant information that will guide the next steps in the inquiry. The kind of information the Commission will be examining, such as the use of intellectual property rights, litigation and settlement agreements covering the EU, is by its nature information that companies tend to consider highly confidential. Such information may also be easily withheld, concealed or destroyed. This is why inspections have been considered appropriate.

Innovation in the pharmaceutical sector is driven by patents and other intellectual property rights, and the inquiry will be conducted taking into account these existing rights. The Commission's action will therefore complement, not challenge, intellectual property law, as both systems share the objectives of fostering innovation, and increasing consumer welfare. The inquiry will also take due account of the specificities of the relevant regulatory frameworks. It will not in any way put into question the various health schemes in force in the Member States. The inquiry is limited to medicines for human consumption.

To carry out the inquiry, the Commission can use a wide range of investigative tools to gather information from companies and trade associations, including requests for information. During the inquiry, the Commission will maintain an open dialogue with all stake-holders, and will keep the sector informed about progress.

On 22 February 2007, the Commission decided to initiate antitrust proceedings against German drugs firm Boehringer following concern about misuse of the patent system in order to exclude potential competition in the area of chronic obstructive pulmonary disease (COPD) drugs.

AstraZeneca was fined €60 million in June 2005, for by misusing public procedures and regulations in a number of EEA (European Economic Area) States with a view to excluding generic firms and parallel traders from competing against AstraZeneca's anti-ulcer product Losec.

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