Updated: April 29, 2010 (Initial publication: Feb. 26, 2010)
Bibliographic Reports : Grey Litterature
III-2.1 : The European Commission publishes its Final Report on its competition inquiry into the pharmaceutical sector on July 8th 2009
The European Commission, sensing potential anticompetitive behaviour in the pharmaceutical sector, conducted an inquiry into this sector, and adopted its final report on the matter on July 8th 2009. The Commission’s suspicion was that anticompetitive behaviours could be slowing down the entry of generic drugs into national markets, whereas the burden of drug spending on public finances and public health policy make rapid generic entry an important issue. The Commission concluded that delays are due in part to pharmaceutical companies’ behaviour, especially as concerns the use they make of their intellectual property rights. However, on the other hand, one may also sustain that the strategic use of an acquired legal right is no less than legitimate, and that public health policy is a matter for national regulation. Indeed, it is for Member States, rather than European competition law, to determine the level of healthcare coverage that their society is financially willing to bear.
Public health policy is regulated by ex ante administrative rules that, amongst other things, set drug prices. Moreover, drugs are simply goods that are freely circulated on a market where the consumers are patients requiring medication. But what makes the situation economically and politically specific is the following: from an economic perspective, the method of payment is unusual because society, rather than the actual consumer, bears the cost of the medication purchased; as for politics, the situation is particular because there is a strong political commitment to providing universal access to medication, free of charge.
Nonetheless, it seems the Commission prefers to look at this complex situation through the lens of competition law, since it asserted last July that the drug market was being affected by barriers to entry, barriers due to the exercise of intellectual property rights, an act deemed by the Commission to be responsible for slowing down the entry of generic drugs into the market.
Anticompetitive is therefore the adjective the Commission decided to apply to the way pharmaceutical companies accumulate patents (so-called patent clusters), or extend the length of their protection. Moreover, the report also designates as anticompetitive the fact for pharmaceutical companies to exercise of their patent rights to the fullest when they sue competitors in order to defend their prerogatives. Once in court, pharmaceutical companies then use their leverage to get their competitors to enter a settlement agreement. Another example is their interference in the administrative procedure granting Market Authorisations to generic drug companies.
The report underlines that these kinds of behaviours are facilitated by the numerous and heterogeneous intellectual property regulations within Europe, and therefore strongly recommends the implementation of a harmonised European IP law. Indeed, this is far from being the case: the poor quality of patents delivered in every country are at the root—their repercussions leading to anticompetitive situations—of market distortions that do nothing to boost innovation, and only weaken public finances.
Therefore, the implications of the report go beyond merely criticising a perverted system, and suggests improving patent law in order for it to benefit not only pharmaceutical companies themselves, but also patients, countries, free-market competition, and innovation.
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