Tactics used by pharmaceutical manufacturers to delay or block the entry onto the market of cheaper generics mean that European Union member states spent around 3 billion euros more during 2000-2007 than they would have if the generics had been available without delay, according to the preliminary findings of an investigation by the European Commission.

On average, it takes about seven months for generics to reach the market, and four months for even the top-selling products to arrive, according to the report, which was presented this morning by Competition Commissioner Neelie Kroes.

When generics do come to market, drug prices drop around 20% on average, and their use created savings of around 14 billion euros during the seven-year period, say the investigators, who estimate that the 3 billion euros in lost savings to the member states could have reduce their bills for these products by 5%.

Anti-competitive tactics used by drugmakers have not only raised costs to taxpayers but also reduced the incentive for innovation, added Commissioner Kroes, and she hinted that Commission action against individual companies could now be expected.

According to the investigators’ report, drugmakers have been using a range of practices to block competition including: - “patent clusters,” or the making of multiple patent applications for the same product – in one case over 1,300 applications were made for one drug; - lengthy patent litigation - more than 700 cases brought during the seven-year period, each one lasting an average of three years and with generics firms winning around 60% of cases; - interventions before national authorities when generic companies ask for regulatory approvals, leading to a four-month delay on average; and – over 300 million euros paid by branded drugmakers to generics firms in “reverse payment settlements” to keep generics off the market.

The interim findings reveal that competition within the pharmaceutical is not working as well as it should, said Commissioner Kroes, adding: “we now have a solid view of what is happening and why – the next step is to discuss our findings with the stakeholders and to draw the necessary conclusions.”

“It is still early days, but the Commission will not hesitate to open antitrust cases against companies where there are indications that the antitrust rules may have been breached,” she warned.

A “missed opportunity, says industry
The interim report will now go out for consultation until January 31, 2009 and the Commission will present its final conclusions in the spring but, in an early response, the European Federation of Pharmaceutical Industries and Associations (EFPIA) said it was “disappointed” that the Commission “has used selective quotations to seek to mischaracterise the industry as anticompetitive. Those quotes simply show how innovators have "rightly sought to protect their inventions and illustrate the highly competitive nature of innovation in this sector, which is entirely to the benefit of society,” it says.

Moreover, while the report acknowledges that patents are key to pharmaceutical innovation and should be protected, it then contradicts itself by questioning the right of the industry to use perfectly lawful practices, such as patent portfolios, patent litigation and the release of improved medicines, which are essential for innovators to protect its “huge” investments in R&D, added the industry group.

“The preliminary report does not adequately recognise the complex and highly regulated nature of the pharmaceutical market in Europe and misses the opportunity to address the real issues impeding innovation and the development of and access to innovative medicines.” said EFPIA’s president, Arthur Higgins. Moreover, it “overstates the level as well as the reasons for delays in generic market access. In line with EFPIA’s own findings, DG Competition’s analysis has confirmed that where there is a strong commercial incentive, generics enter the market rapidly within four months or less. This compares very favourably with the delay in access by patients to innovative products which can be up to 14 months in some EU markets,” added Mr Higgins, who is chief executive of Bayer HealthCare.

The report also fails to address inefficiencies in the generic market and why EU citizens pay less for innovative medicines but more for generic medicines than those in the US, said the industry group, which believes a more market-oriented mechanism is necessary to ensure an efficient generic market that generates appropriate savings for healthcare systems.

EFPIA director-general, Brian Ager added that the report does not substantiate “in any respect” the Commission’s statement at the opening of the inquiry that the industry is impeding innovation. “Over the last few years pharmaceutical research companies have continued to make breakthrough advances in complex therapeutic areas such as cancer, rheumatoid arthritis and HIV/AIDS for the benefit of patients,” he said.

However, the EFPIA does support the recommendations made to the Commission investigoators by both brand-name and generics firms for the creationof a single Community Patent and a unified and specialised patent judiciary in Europe.

“A Community patent could reduce costs and bring more legal certainty. EFPIA is already actively engaged with the Commission on the development of a cost-effective litigation system that provides legal certainty and above all gives high-quality decisions,” said Mr Ager.

- The Commission investigation into claims of anti-competitive patent misuse and collusion by the industry began in January and was preceded by surprise dawn raids on the offices of a large number of drugmakers, both brand-name and generic, across the EU. Earlier this week, investigators from the Commission’s DG Competition raided the premises of a further group of companies.