The EC has launched a sector inquiry into competition in the pharmaceutical sector. The regulator aims to investigate why the number of new drugs brought to the market has decreased in recent years. It also seeks to determine whether pharmaceutical companies are preventing the development of generic drugs through misuse of patent rights and vexatious litigation.

In order to collect evidence, according to the EC, it conducted unannounced inspections at the premises of several major pharmaceutical companies. It is planning to issue an interim report in 2008 and to publish the final results of its investigation in the spring of 2009. Based on the results of the sector inquiry, the EC may decide to open individual enforcement actions against certain pharmaceutical companies, although it remains to be seen if the EC can make out its case.

The EC has previously investigated allegations that pharmaceutical companies were abusing patent protection. In 2005, it fined AstraZeneca e60 million for obstructing the development of generic alternatives to its ulcer drug Losec. AstraZenecca has appealed the EC’s decision.

More recently, the EC opened proceedings against Boehringer in relation to its alleged misuse of patent rights in the area of pulmonary disease drugs; this investigation is ongoing.

The UK’s authorities are also taking a keen interest in the functioning of the pharmaceutical industry. The OFT has recently published a market study into the distribution of medicines. This study was prompted by complaints about the introduction of the so-called “direct to pharmacy” (DTP) distribution model, under which a manufacturer sells its branded medicines directly to pharmacies using a single wholesaler as an exclusive logistics services provider. Because manufacturers enjoy a very strong negotiating position compared with pharmacies, the DTP schemes are likely to result in pharmacies receiving lower discounts from list prices.

The OFT recommended that the Department of Health reduce regulated list prices of branded drugs in order to offset the reduction in the level of discounts received by pharmacies.