Pharmaceutical industry in the spotlight in the EU – & its not good news!
10/12/2008

"Individuals and governments want a strong pharmaceuticals sector that delivers better products and value for money. But if innovative products are not being produced, and cheaper generic alternatives to existing products are being delayed, then we need to find out why and, if necessary, take action."
Neelie Kroes, European Commissioner for Competition

A sector enquiry into the pharmaceutical sector was launched by the European Commission, the sector being worth Є138 billion ex factory and Є214 billion in retail prices.

The preliminary findings of the European Commission were published towards the end of November 2008 and insofar as competition between originator companies and generic companies is concerned the European Commission found that although patents are key to the sector in order to allow for the recoupment of R&D costs, patenting strategies, such as the filing of patent clusters (in some instances up to 1300 patents around the same invention) delay a generic company’s entry into the market through protracted litigation. Similarly the strategy of patenting “follow on” medicines (i.e. those that follow the original medicine) were also found to make it more difficult to penetrate the market by a generic company.

Regulatory issues and disputes in front of the relevant regulator were also found to be used to delay entry into the market by a generic company, the average delay being about seven months.

As between competitors, the European Commission focused once again on the patenting of inventions and the strategies employed to hinder development of new chemical entities by competitors. Such strategies were identified as defensive strategies whereby patents are filed for new chemical entities that the patentee does not intend to pursue commercially but for the purpose of creating prior art to prevent others from patenting the new chemical entity and to create an enforceable right against a competitor who may wish to produce the new chemical entity and pursue the commercialization thereof.

The purpose of the report has been stated by the European Commission to simply allow the Commission to determine whether further action is needed in the sector, and from the looks of things, further action may indeed be taken.

From a South African perspective, and with the likely introduction of the market enquiry section in the present Competition Act No 89 of 1998,, which gives the Competition Commission greater powers to investigate markets as well as the complex monopoly provisions that are to be introduced, the Competition Commission may soon focus on the pharmaceutical sector and take a serious interest in its structure and modus operandi.

Should you require a copy of the Preliminary Report or have questions concerning the competition law and the amendments to the Competition Act, please contact our Mr Apostolidis.

Alexis Apostolidis
Partner
Alexis-a@adamsadams.co.za