The EC Commission has launched a sector inquiry into the pharmaceuticals industry in the EU, on the basis that there are a number of indications that competition may not be working well in this sector.

The inquiry will focus in particular on two issues:

  • whether certain agreements between pharmaceutical companies, such as settlements in patent disputes, infringe Article 81 EC Treaty (prohibition on anti competitive agreements) and
  • whether companies have created artificial barriers to innovative or generic products, through the misuse of patent rights, vexatious litigation or other such practices which may infringe Article 82 EC Treaty (on abuse of dominance)

The Commission uses sector inquiries (under Article 17 of Regulation 1/2003) where it has concerns that a market is not working effectively and wishes to conduct a further investigation to understand the reasons why. Sector inquiries are therefore in the first instance an information gathering exercise that provides the Commission with in-depth knowledge about the markets it has concerns about. The knowledge gained about the market can form the basis of specific enforcement initiatives at a later stage. Following the Commission's energy sector inquiry for example, the Commission proposed a package of regulatory measures aimed at dealing with the issues identified in the inquiry. To the extent that an inquiry confirms the existence of anti-competitive agreements or abuses of dominant position by individual companies, the Commission or the national competition authorities can use the information collected in order to take the appropriate measures to restore competition in the relevant markets.

Unusually for sector inquiries, this investigation was launched by a number of unannounced inspections at the premises of several large pharmaceutical companies. These inspections do not indicate, as would be the case with standard competition dawn raids, that the Commission suspects that these companies have committed competition law infringements. In this case, the inspections aim to ensure that the Commission has immediate access to all relevant information, which will be seen by companies as highly confidential and which the Commission believes may be at risk of being withheld, concealed or destroyed.

The Commission aims to publish an interim report in the autumn and to complete the investigation in the spring of 2009.