News Item

EC investigates pharma patent settlements

The European Commission (EC) has launched a probe over patent settlements made between drug companies and generics manufacturers and whether their use is preventing consumers from accessing cheaper medicines. The EC has asked a number of pharmaceutical companies for copies of patent settlements they have made, dating between July 2008 and December 2009.

While the Commission has not named the parties involved, several key market players have come forward and said they have been approached. According to Reuters this includes, among originator companies, AstraZeneca and GlaxoSmithKline. Generics manufacturers also approached include Niche Generics (part of Unichem) and Teva.

Gareth Williams, Partner at Marks & Clerk, comments: “Today’s investigation is a logical step in progressing the Commission’s agenda to ascertain whether or not there are unnecessary, anti-competitive delays in generic drug manufacture. There can often be as much commercial incentive for generic companies to restrict competition as there is for major pharmaceutical companies – everyone is in business to turn a profit.

“It is important, however, that clarification is given over the scope of this probe and the nature of the settlements involved. It is likely that larger financial deals designed to restrict a number of generic entrants coming to market for a given period of time will be put under the microscope. Such deals of course keep prices artificially high (if not higher), since the entry of any generic is delayed.

“However, we would caution that the mere existence of a settlement is not in itself evidence of collusion. Patent settlements can represent a perfectly reasonable and commercial response to the threat of patent infringement litigation or challenges to patent validity. Without them, pharmaceutical firms may have no option but to become involved in costly litigation to protect their essential patents, which would in turn result in costs being passed on to consumers. While the EU is right to investigate the possibility of anti-competitive patent agreements, a clearer stance needs to be taken regarding the effectiveness and legitimate use of these vehicles. The market will be cautious until more information is made available, to provide the assurance needed that these often justifiable arrangements are not being treated as inherently suspicious.”

The Commission’s move is the latest episode following its publication of a critical pharmaceutical sector inquiry report in July last year. The EC has pledged to improve the speed with which generic medicines come to market and weed out any market delays caused by anti-competitive behaviour.

For more information please contact your usual attorney or Gareth Williams at gwilliams@marks-clerk.com.

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