Pharmaceutical Executive Europe - February 2008 - (Page 33)

Pharmaceutical Executive Europe February 2008 Last Word 33 Under the Microscope The recent dawn raids on European pharma show the EC getting tough on anti-competitive behaviour. But will this actually help bring new drugs to market? Stephen Rose is sceptical. n 16 January, European Commission (EC) officials raided the premises of many of the largest pharmaceutical companies in Europe. Such dawn raids are normally used when the EC gets a whiff of cartels in smoke-filled rooms. But that is not the case here. Neelie Kroes, the European Commissioner for competition, has conceded that she does not have any positive evidence of wrongdoing by specific companies. Rather, the raids are just the starting point for a general sector inquiry. The official explanation for the strong arm tactics is that the sorts of documents that the EC are looking for are, by their very nature, highly confidential and could easily be withheld, concealed or destroyed. This in itself suggests a deeply suspicious mindset on the part of the EC and the raids will signal a ‘get tough’ attitude to the sector. But why is the Commission suddenly so suspicious? Neelie Kroes explains that she is concerned that the pharmaceutical market is not functioning optimally for the benefit of European consumers. She cites the statistics that from 1995 to 1999 an average of 40 novel molecular entities were launched in Europe each year, but that figure dropped to only 28 in the period 2000–2004. She also identifies a trend of delays in the emergence of generic drugs in Europe. Even assuming that these concerns are well founded, is the EC right to fear that anti-competitive behaviour lies at their root? The focus of the investigation will be the boundary between the justified exercise of patent rights and abusive conduct or restrictive agreements by a patent holder aimed at deterring generic entry. The EC will look, in particular, at patent holders playing the system unfairly to prolong patent life or stymie entry, as well as terms of patent settlement agreements. This potential conflict between exercise of patent rights and antitrust law has long been recognised, but European regulators have not subjected this difficult area to the same scrutiny as the US regulators and courts. This investigation signals the growing confidence of the Commission to do so, and provides an opportunity for it to swot up on the sector so as to match the efforts of its US counterparts. The EC certainly has powers of investigation to get to the bottom of the facts. Companies (including many that have not so O far been raided) can look forward to extensive and burdensome information requests, with the risk of fines if they fail to comply. This fact-gathering process will lead to a final report promised for spring 2009. An equivalent investigation into the business insurance sector resulted in a “shot across the bows” of the industry. The EC flagged a number of practices of which it was deeply suspicious and threatened the industry with specific investigations if it did not clean up its act. In the recent energy sector inquiry the Commission went one step further and initiated a series of major antitrust investigations as a result of evidence uncovered through a general inquiry. This is the prospect that pharmaceutical companies will fear the most. Such antitrust actions, even if ultimately unproven, last for years and can tie up extensive resources. In a worst-case scenario, fines of up to 10% of global turnover can be imposed. For example, in the one case on point so far, AstraZeneca is currently appealing a fine of €45 million imposed in 2005 for abusively delaying entry by generic rivals to Losec. The energy sector inquiry also led indirectly to legislative proposals from the Commission to liberalise the sector through separation of supply and distribution. Such Draconian measures are unlikely here. At this stage, the EC has indicated that the investigation will steer clear of interfering with intellectual property rules or national drug reimbursement regimes. So it is very much a case of “wait and see.” Whilst the investigation will be rigorous and may be uncomfortable for some, one has to be sceptical that this in itself will accelerate the rate of innovation or emergence of generic alternatives. To achieve that the Commission might need to take a long hard look at a whole array of factors to reduce the regulatory burden and encourage innovation in the EU. About the Author Stephen Rose is a competition partner at the international law firm, Eversheds LLP .

Table of Contents for the Digital Edition of Pharmaceutical Executive Europe - February 2008

Pharmaceutical Executive Europe - February 2008
From the Editor
News and Analysis
Brussels Report
R&D: Innovation - Learning to Share
Drug Launch - The Preparation Game
Q&A - Getting a Head Start
Regulatory Compliance - Credible Compliance
Clinical Trials - Establishing Trials in China
The Mix - Relevant ROI
Comment - Taming the Trader
Last Word - Under the Microscope

Pharmaceutical Executive Europe - February 2008