On 28 November 2008, the European Commission issued its preliminary report on the competition inquiry into the pharmaceutical sector. According to the preliminary findings there is evidence that originator companies (companies developing and selling new medicines) have engaged in practices with the objective of delaying or blocking market entry of competing medicines from other originator companies and, in particular, from generic companies (companies that sell medicines once the patents have expired).

The preliminary report highlights a number of “delaying” tactics adopted by the originators which restrict competition:

  • Originator companies filed so called “patent clusters” (a large number of EU-wide patents for a single medicine.
  • Another practice was litigation against the generic companies. The Commission found that the generics won over 60 per cent of these cases but, even where the generics had been successful, the litigation could lead to a substantial delay in the marketing of the generic product.
  • Originator companies concluded settlement agreements with generics, many of which contained restrictive agreements such as “reverse payment settlement” clauses whereby market entry was restricted in return for the generics receiving payment.
  • Originator companies practised defensive patent strategies to fence off competition from other originator companies.
  • Originator companies participated in national authorisation procedures for generics often with the result that approval of the generic is delayed (on average by four months).

The Commission considered that these practices, and others, were detrimental to competition and led to higher costs for consumers and health authorities as the entry of generics on the market usually led to a large reduction in prices.

The report underlines a significant number of comments from stakeholders 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, with the aim of decreasing the number of contradictory final judgments in litigation cases as well as the total direct costs associated with patent litigation.

Before reaching its final conclusions, the Commission invites all stakeholders to submit their views and observations on the preliminary findings by 31 January 2009. The final report will take into account comments received during the public consultation and is expected to be published in spring 2009.