EU Probes Pharma

Dec 03, 2008
By Pharmaceutical Executive Editors

The European Union, last week, released a preliminary report on anti-competitive issues in the pharmaceutical industry. The report, based in part on evidence gathered in a series of surprise dawn raids on pharma companies last January, accuses pharma companies of using a variety of tactics, from litigation to suing patent violators, to delay generics firms from releasing inexpensive versions of their drugs.

That is, it accuses companies of using tactics that generally are legal and accepted in the United States. “The things on which the EU focused in its report are done frequently in the States, including patenting, creating a patent thicket, and enforcing the patents,” said Michael McFalls, council at Jones Day.

The EU cited documents stating that the principal purpose of getting these patent clusters is to create a thicket that causes enough doubt and uncertainty to keep generics firms from trying to enter the market prior to patent expiration.

“European anti-trust [law] is a little more interventionist than in the States,” McFalls said. “They look at life-cycle management strategies that involve obtaining patents from other people that could extend the life of a drug nearing expiration or [tactics like] switching users to the new form of a drug. There’s been a little scrutiny of that in the US, but enforcers here aren’t quite as concerned.”

McFalls believes that the EU is much more focused on equal competition, while US regulators focus principally on consumer welfare. “The exclusion of rivals only matters if it hurts consumers,” he said. “It’s very hard to challenge unilateral product switches in the United States.”

There are exceptions, however. Abbott recently settled a legal case for $184 million over allegations that it was tweaking the formulation of its cholesterol drug TriCor to keep generics firms from making generic versions. “The conduct in that case also involved, allegedly, pulling the national drug code for TriCor from the national drug data file, which prevents mandatory generic substitution where that is allowed,” McFalls said.

The EU Commission stated that it would look into pricing and contracts that offer discounts based on market share. “The FTC is very aggressive, but not very successful in litigating. Public plaintiffs bring most of these cases and have managed to get pretty good settlements, because people are risk averse to going to a jury verdict,” McFalls said. “In cases that have been litigated to a conclusion, courts have generally sided with the branded companies.”

In Europe, according to the report, “generic[s] companies win in 62 percent of all patent trials, and win 75 percent of all European patent office oppositions. Yet by using [the tactics described in the report] Big Pharma delays the entry of generics by around three years, to a huge profit to itself—in one extreme instance, $350 million.”

“At a higher level, there is a political dimension to all of this which differentiates Europe from the United States,” stated Brian Sher, competition lawyer at Nabarro, in a release. “There is a bifurcation of responsibility for intellectual property rights, which are the province of individual member states, and European competition law, which is Brussels’ territory. We saw this tension play out in cases about BBC listings and pharmaceutical data, and in Microsoft—and we're going to see it again here.”

The final report will be released in spring.

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