Drugmakers Block Generics

Drug companies are blocking or delaying the entry of cheaper generic medicines from coming to the market, according to an EU report released on Friday, Nov. 28.

"The Commission will not hesitate to open anti-trust cases against companies where there are indications that the anti-trust rules may have been breached," said Neelie Kroes, the 27-nation bloc's competition commissioner.

The report examined a sampling of medication from 17 European Union member states in which the patents have expired and estimated that the delays involved in getting generic versions of those brand names on the market had cost health care providers around three billion euros ($3.9 billion) between 2000 and 2007.

The results of the sample probe prompted Kroes to comment that competition in the pharmaceutical industry was not functioning as well as it should.

Drug companies say EU report is exaggerated

Drug companies invest enormous sums in research and development and, when they emerge with a breakthrough drug, patents enable them to recoup costs by giving them a monopoly on selling their brand product at a premium. When the patent expires, copy-cat manufacturers are then legally able to offer the same no-name drug at considerably lower prices.

Kroes added that practices that involve multiple patent applications for similar drugs, litigation and settlement deals also contributed to delays in getting generics on the market.

Pharmaceutical companies said that the report exaggerated the length of generic delays and failed to take into account the complexity of the market.

Hefty fines for breaching competition rules

The attack from the Commission, which is the EU's executive arm, puts even more pressure on a beleaguered global industry that faces loss of patent protection on some of its biggest selling products over the next four years.

European drug companies also face major challenges in the United States, where President-elect Barack Obama is expected to seek ways to trim costs as he tries to extend universal healthcare coverage to millions of uninsured Americans.

Kroes has the mandate to impose substantial fines on drug makers deemed to have engaged in unfair competition practices. Back in 2005, Britain's AstraZeneca was fined 60 million euros for blocking generic rivals from bringing its heartburn and ulcer medication Losec onto the market.

Raids on big-name drug makers

In January this year, Kroes started launching an investigation with a number of raids on some of the biggest names in the pharmaceutical industry, such as GlaxoSmithKline, Pfizer, Merck and Sanofi-Aventis.

The Commission said it had found documents containing admissions from brand-name companies that they had tried to stop generics. The documents were also said to include many examples of obstacles placed in way of generic rivals.

In one case, a whopping 1,300 patents were filed for a single medication, the Commission said. There were also nearly 700 cases of patent litigation that lasted for three years on average, in which generic firms mostly prevailed.

More generic competition in US

Compared to the United States, where generic drugs account for most of the market, the sale of less expensive no-name brands in Europe accounts for little more than 40 percent of the overall volume.

The big pharmaceutical companies insist that competition is alive and well in the industry and argue that they are hampered by too much regulation from Brussels.

Arthur Higgins, CEO of Bayer HealthCare and president of the European Federation of Pharmaceutical Industries and Associations told Reuters news agency that the report overstated the extent and reasons for delays in generics.

"Where there is a strong commercial incentive, generics enter the market rapidly within four months or less," he said.