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Brussels, 28th November 2008

Antitrust: preliminary report on pharmaceutical sector inquiry highlights cost of pharma companies' delaying tactics

The European Commission has published its preliminary report on the competition inquiry into the pharmaceutical sector, which finds that competition in this industry does not work as well as it should. According to the preliminary findings there is evidence that originator companies have engaged in practices with the objective of delaying or blocking market entry of competing medicines. Practices vis-à-vis generic companies include multiple patent applications for the same medicine (so-called patent clusters), initiation of disputes and litigation, conclusion of patent settlements which constrain market entry of generic companies and interventions before national authorities when generic companies ask for regulatory approvals. Where successful, these practices result in significant additional costs for public health budgets – and ultimately taxpayers and patients – and reduce incentives to innovate. The report takes a sample of medicines that faced loss of exclusivity in the period 2000 to 2007 in 17 Member States and estimates that additional savings of around € 3 billion would have been possible on that sample over this period if generic medicines had entered the market without delay. The report also finds that companies applied defensive patenting strategies, primarily aimed at blocking competitors in the development of new medicines.

Competition Commissioner Neelie Kroes said: “Competition in the pharmaceuticals market is vital for people to get affordable and innovative medicines, and to make sure that taxpayers get the best value for money out of their healthcare system. These preliminary results show that market entry of generic companies and the development of new and more affordable medicines is sometimes blocked or delayed, at significant cost to healthcare systems, consumers and taxpayers. We now have a solid view of what is happening and why: the next step is to discuss our findings with the stakeholders and to draw the necessary conclusions. It is still early days, but the Commission will not hesitate to open antitrust cases against companies where there are indications that the antitrust rules may have been breached."

Delays or blocks to market entry

The preliminary report shows that originator companies (that develop and sell new medicines) used a variety of methods with the objective of delaying or blocking market entry of generic companies (that sell medicines equivalent to original medicines once patents have expired) and other originator companies, and therefore maintain high income streams for the originator companies.

Documents found by the Commission during the sector inquiry included such declarations as:

  • "We identify options to obtain or acquire patents for the sole purpose of limiting the freedom of operation of our competitors... Rights covering competitive alternatives are maintained in major markets until risk of competing products appearing is minimal."
  • "I suppose we have all had conversations around 'how can we block generic manufacturers.' (...) Don't play games in patenting new salt forms too late, the generics are starting earlier and earlier. Get (...) claims on key intermediates that cover a number of routes. Process patents are not the biggest block but can put generics off if a superior chemistry job is done."
  • "Interchangeability issues were used in (several countries) to limit generic erosion. (...) Outcome: extra (...) sales of USD 61 m compared to expected generic erosion."

The preliminary report highlights several different specific delaying strategies, including the following aimed at generic companies:

  • originator companies filed so-called “patent clusters” - a large number of EU-wide patents (in one case 1300) filed for a single medicine
  • there were also nearly 700 cases of reported patent litigation with generic companies, which on average lasted nearly three years. The generic companies ultimately won more than 60% of these cases.
  • originator companies also concluded more than 200 settlement agreements with generic companies in the EU, in which they agreed on the terms for ending an ongoing litigation or dispute. More than 10% of the settlements were so-called “reverse payment settlements” which limited the entry to the market of the generic medicines and provided for payments from the originator to the generic companies. These payments amounted in total to more than €200 million.
  • originator companies intervened in national procedures for the approval of generic medicines in a significant number of cases, which on average led to four months of delay for the generic medicine.

The consequences of these practices are important for patients and taxpayers because generic entry on to the market leads to significant decreases in the prices for medicines. Based on a sample of medicines that faced generic entry in the period from 2000 to 2007, average price levels for medicines decrease by almost 20% after the first year following generic entry. In rare cases, the decrease in price levels can be as high as 90%. For the sample under analysis, total savings gained by generic entry amounted to at least € 14 billion over the period. Without these savings, total expenditure for the medicines analysed would have been over 25% higher.

The sector inquiry confirms that generic entry often occurs later than expected. On average it took about seven months for generic products to enter the market on a weighted average basis and even the top-selling medicines faced an average delay of four months. Given the strong impact of generic entry, this amounted to lost savings of about € 3 billion for the health systems during 2000 to 2007 for the chosen sample of medicines facing patent expiry in 17 Member States. In relative terms it could have reduced the bill for these medicines by over 5 %. The preliminary findings suggest that the practices under investigation contributed to these shortcomings.

The preliminary report also found evidence that originator companies also practice defensive patenting strategies to fence off competition from other originator companies. This may obstruct innovation, lead to higher costs for competing pharmaceutical companies and delay consumers' access to innovative medicines.

Stakeholders also made a significant number of comments on the regulatory framework. In particular, both generic companies and originator companies called for a single Community Patent and the creation of a unified and specialised patent judiciary in Europe. These calls are supported by the preliminary findings of the sector inquiry, that discovered 11% of contradictory final judgments in litigation cases and total direct costs associated with the patent litigation of €420 million. Such contradictions and the costs related to the litigation could be avoided, or as a strict minimum reduced, with a Community Patent and an unified specialised patent judiciary.


The sector inquiry began in January 2008 (see IP/08/49 and MEMO/08/20) to examine the reasons why fewer new medicines were brought to market and why generic entry seemed to be delayed in some cases.

A sector inquiry is an information gathering exercise that provides the Commission with in-depth knowledge about markets, with a view to better identifying obstacles to competition. Essentially, the Commission opens a sector inquiry when it has concerns that competition may not be working as it should, but the reason for that is not clear.

Next steps

The preliminary findings of the sector inquiry are presented to stakeholders at a public hearing in Brussels on 28 November 2008. Before reaching final conclusions, the Commission invites all stakeholders to submit their views and observations on the preliminary findings. The public consultation lasts until 31 January 2009. The final report will take into account comments received during the public consultation and is expected for spring 2009.

For further information, see also MEMO/08/746.

The preliminary report and more information on the pharmaceutical sector inquiry will be available at:

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