The European Commission Finds That Competition in the EU Pharmaceutical Sector Is Not Working as Well as It Should

Originally published 1 December 2008

Keywords: European Commission, EU

Pharmaceutical Sector, Pharmaceutical Sector Inquiry, generic

medicines, cheaper generic medicine, EC competition rules, EFPIA,

patent strategies

On 28 November 2008, the European Commission

("Commission") presented a Preliminary

Report on its Pharmaceutical Sector Inquiry at a public workshop

held in Brussels.1 In her opening remarks, EU

Competition Commissioner Neelie Kroes announced: "we find

that competition in this industry does not work as well as it

should."

According to the Commission, pharmaceutical companies are

blocking or delaying the entry of cheaper generic medicines into

the EU. This delay has allegedly resulted in a loss of EUR 3

billion in savings for national healthcare systems between 2000 and

2007 across the EU Member States. The Commission also suggests that

pharmaceutical companies use defensive patent strategies to block

or delay the development of new medicines by innovators. However,

it recognises that there may be other concurrent causes for the

delay of generics' entry and the reduced number of new

medicines on the market.

The Commission has invited all stakeholders to submit their

written observations on the Preliminary Report by 31

January 2009 and will not decide what action to take until

next Spring. Possible outcomes may include guidelines on how to

assess certain types of practices under EC competition rules,

investigations against individual companies whose conducts were

suspected to breach EC competition rules, or industry-wide

legislative proposals. Commissioner Kroes warned her audience that

the Commission will not hesitate to open antitrust cases

against companies where there are indications that the antitrust

rules may have been breached.

Background

The pharmaceutical sector inquiry relates to the period

2000-2007 and involves the investigation of a sample of

219 molecules2 used for prescription

medicines for human use across all EU Member

States. The Commission maintains that the aim of the

inquiry is to identify the reasons why fewer novel medicines were

introduced into the market since 2000 and why generic versions of

such medicines were delayed in some instances. It does not cover

medicines sold over the counter (OTC) and products for animal use.

In addition, it does not deal with competition between generics

themselves or with the issue of parallel trade.

The Commission launched its sector inquiry in the pharmaceutical

sector on 15 January 2008 with unannounced inspections (so-called

"dawn raids") at the premises of a

number of major pharmaceutical companies. This was the first time

that a sector inquiry was launched with dawn raids. The Commission

has been strongly criticised for conducting dawn raids in the

absence of any allegation of wrongdoing.

The on-site inspections were followed by extensive and detailed

questionnaires to pharmaceutical companies,

generic producers, wholesalers, national regulatory and competition

authorities. In this respect, some stakeholders have also

criticized the Commission for requesting too much information and

giving little time to respond.

The Commission uses sector inquiries (under Article 17 of

Regulation 1/2003) when it wants to improve its knowledge about a

particular sector with a view to better identifying possible

obstacles to competition. Previous sector inquiries have been

launched in the telecommunications, energy and financial services

sectors.3 Some of these inquiries have resulted into

investigation against individual companies and fines being imposed

on them. Others have resulted in legislative proposals aimed at

tackling industry-wide spread...