updated 1/16/2008 11:34:05 AM ET 2008-01-16T16:34:05

European Union antitrust regulators said Wednesday they were raiding pharmaceutical companies — including Pfizer Inc., AstraZeneca PLC, Sanofi-Aventis SA and GlaxoSmithKline PLC — in a probe into why so few new medicines and drug makers are emerging.

EU antitrust chief Neelie Kroes said she was looking at the entire pharmaceutical industry and wanted to know why generic drugs were so slow to hit the market in Europe. Generic medicines are made by other companies after the original developer of the drug loses its exclusive patent rights.

The European Commission said it was conducting inspections at the European premises of a number of pharmaceutical makers — both research-based and generic — including some based outside Europe.

U.S.-based Pfizer, Anglo-Swedish AstraZeneca, Britain's GlaxoSmithKline and Sanofi-Aventis of France confirmed they had been the target of surprise raids and were cooperating with regulators.

Sandoz International GmbH, the generics division of Swiss company Novartis, also said it had been visited as part of the investigation.

Kroes said the EU was working closely with U.S. officials. "We're not the only one active in this," she said.

The EU executive will examine whether companies were deliberately preventing new firms from entering the market by abusing patent rights and launching "vexatious litigation" to ward off potential rivals.

It said the probe was partly triggered by its 2005 case against AstraZeneca in which the company was fined $73 million for filing misleading information to patent offices to delay generic versions of its ulcer drug Losec for most of the 1990s.

Fewer new medicines are reaching the market, it said, one sign that competition may not be working. Only 28 new types of drugs were launched from 2000 to 2004, far fewer than the 40 that hit the market from 1995 to 1999.

"The Commission wants to investigate the reasons for this and in particular whether any agreements restricting competition or unilateral abuses of dominant position are connected to it," the EU said.

Regulators said they would also look into deals between drug companies — such as settlements in patent disputes — that might violate EU cartel rules.

Pharmaceutical companies have argued that EU action to restrict patents would cost them billions of euros worth of research and development invested in new drugs, which get little or no return if cheaper generic drugs are allowed on the market.

Some major health businesses — such as Johnson & Johnson — are now cutting costs and jobs as revenue streams from medicines dry up when patents expire in the next few years.

But Kroes said this cannot come at the expense of innovation that customers need to see in an industry essential to public health and the economy.

"Without new pharmaceuticals, the quality of some medical treatments will stagnate; without generic products, the cost of some medical treatments will remain high," she said. "We need to know why this is happening, and what can be done about it."

Europe spends $298 billion on medicines every year, or $595 per person. Most of that cost is carried by state health insurance programs.

Kroes said officials will likely follow up the raids with requests for information — both from the companies it has raided and from others. That is a precursor to launching formal probes into individual companies that can eventually lead to fines of up to 10 percent of annual global sales.

The EU executive will issue a first report on its findings into problems in the sector later in the year, with its final conclusions published in early 2009.

U.S.-based Merck & Co., Roche Holding AG of Switzerland and several German companies — Bayer Schering Pharma AG, Boehringer Ingelheim GmbH and Stada Arzneimittel AG — all said they were not under investigation.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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