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EU says drug makers blocked cheaper medicines

European patients had to pay some euro3 billion ($3.87 billion) more for medicines in 2000-2007 because pharmaceutical companies deliberately stalled the sale of cheaper generic versions, EU antitrust regulators said Friday.
/ Source: The Associated Press

European patients had to pay some euro3 billion ($3.87 billion) more for medicines in 2000-2007 because pharmaceutical companies deliberately stalled the sale of cheaper generic versions, EU antitrust regulators said Friday.

An investigation of major pharmaceutical companies — including Pfizer Inc., GlaxoSmithKline and Sanofi-Aventis — showed they had blocked or delayed generic drugs from entering the market to prevent losing revenue on their more profitable drugs, the European Commission said.

The drug companies used costly legal action to stall generic drug companies from making their own versions of medicines once patents had expired, the EU executive said.

It said they launched disputes, lawsuits and multiple patent applications for the same drug. In one case, 1,300 applications were filed.

Patent litigation lasted on average three years, and generic companies won some 60 percent of the cases, the EU said.

Drug companies also struck deals that limited how the generic versions could be sold, sweetened with payments of more than euro200 million from the drug majors to generic rivals.

All in all, the EU said these tactics stopped a process where a drug's price typically falls 20 percent in the first year that a generic version becomes available.

The average delay for the generic drugs to go on sale was seven months, it said — and cost European health care systems some euro3 billion.

The European Union's 27 states spent euro214 billion on medicines last year, or euro430 per person. Most of that cost is carried by state health insurance programs.

EU Competition Commissioner Neelie Kroes told reporters that she hoped companies would change their ways.

"This matters greatly because more innovation and more affordable medicines would mean better lives and savings for patients ... and governments," she said.

She said the EU Commission would not hesitate to launch antitrust cases against companies that may have violated EU rules — even generic companies who took money to agree on curbing competition.

The EU is yet to charge any pharmaceutical company formally but regulators raided the offices of several drug makers in different EU states on Nov. 24.

Those raids are separate from Friday's report which is an outline of problems the EU sees in the pharmaceutical sector. A more detailed follow-up will be published in the spring.

The EU investigation found evidence that large pharmaceutical companies also use defensive patent strategies to block competition from major rivals, which likewise hinders innovation, keeps costs high and delays customer access to new products.

Only 27 new types of drugs were launched from 2000 to 2004, far fewer than the 40 that hit the market from 1995 to 1999, it said.

But drug companies claimed regulators had failed to look at other problems holding back competition, such as limited rivalry between generic drug makers. They also maintained the right "to use perfectly legal practices" to protect patents.

"These are essential for innovators to protect their huge investments in research and development," said EFPIA, an industry group representing 43 drug makers. It says 17 percent of turnover is spent on research — more than any other sector.

Kroes said she was sympathetic to industry complaints that Europe's patent system — split across 27 EU member states — is too complicated and costly. She said she backed a single European patent even though progress on this has been slow.

Pharmaceutical companies are under pressure from the loss of exclusive patents over top-selling drugs and higher costs for research and development. Many — such as Johnson & Johnson — are cutting costs and staff to try and stay profitable.

Launched in January, the EU probe gathered evidence from U.S.-based Pfizer, Britain's GlaxoSmithKline and Sanofi-Aventis of France — the world's three biggest drug makers.

Investigators also raided Anglo-Swedish AstraZeneca, Merck Sharp & Dohme, Johnson & Johnson's Belgian unit, Wyeth of Madison, New Jersey, and Sandoz International GmbH, the generics division of Swiss company Novartis, and consulted hospitals, pharmacies and insurers.

EU action was partly triggered by its 2005 case against AstraZeneca in which the company was fined euro60 million for filing misleading information to patent offices to delay generic versions of its ulcer drug Losec for most of the 1990s.