Abuse of patent rights by major pharmaceutical firms is costing consumers in 17 European Union countries as much as 3 billion euros ($3.9 billion) a year, EU regulators said in a preliminary report.
The European Commission's preliminary report on the pharma sector inquiry, published on 28 November, alleges that "competition in this industry does not work as well as it should".
The EC has accused drugmakers of using patent lawsuits and other tactics to keep cheaper generic medicines off the market.
The EU spends 214 billion euros on medicines every year, or 430 euros per person. The report found that savings from generics, which can cost as much as 90 per cent less than branded drugs, were about 14 billion euros from 2000 to 2007.
The EC report said competition in the industry does not work as well as it should as originator companies engage in practices with the objective of delaying or blocking market entry of competing medicines.
''Practices vis-à-vis generic companies include multiple patent applications for the same medicine (so-called patent clusters), initiation of disputes and litigation, conclusion of patent settlements which constrain market entry of generic companies and interventions before national authorities when generic companies ask for regulatory approvals,'' the EC said.
Where successful, these practices result in significant additional costs for public health budgets – and ultimately taxpayers and patients – and reduce incentives to innovate.
The report takes a sample of medicines that faced loss of exclusivity in the period 2000 to 2007 in 17 member states and estimates that additional savings of around €3 billion would have been possible on that sample over this period if generic medicines had entered the market without delay.
The report also finds that companies applied defensive patenting strategies, primarily aimed at blocking competitors in the development of new medicines.
The report said originator companies have filed a large number of cluster patent cases EU-wide (in one case 1300) for a single medicine and said there were nearly 700 cases of reported patent litigation with generic companies, which on average lasted nearly three years.
The generic companies ultimately won more than 60 per cent of these cases.
Originator companies also concluded more than 200 settlement agreements with generic companies in the EU, in which they agreed on the terms for ending an ongoing litigation or dispute.
More than 10 per cent of the settlements were so-called ''reverse payment settlements'' which limited the entry to the market of the generic medicines and provided for payments from the originator to the generic companies. These payments amounted in total to more than €200 million, the report said.
''Competition in the pharmaceuticals market is vital for people to get affordable and innovative medicines, and to make sure that taxpayers get the best value for money out of their healthcare system. These preliminary results show that market entry of generic companies and the development of new and more affordable medicines is sometimes blocked or delayed, at significant cost to healthcare systems, consumers and taxpayers. We now have a solid view of what is happening and why: the next step is to discuss our findings with the stakeholders and to draw the necessary conclusions. It is still early days, but the commission will not hesitate to open antitrust cases against companies where there are indications that the antitrust rules may have been breached," competition commissioner Neelie Kroes said.
The preliminary report shows that originator companies (that develop and sell new medicines) used a variety of methods with the objective of delaying or blocking market entry of generic companies (that sell medicines equivalent to original medicines once patents have expired) and other originator companies, and therefore maintain high income streams for the originator companies.
The European Commission report was based partly on evidence collected during January raids at GlaxoSmithKline Plc, AstraZeneca Plc and at least seven other competitors.
EU competition commissioner Neelie Kroes also said the commission would not hesitate to open antitrust cases when there's evidence of restrictive business practices.
The commission's findings come amidst reports that branded drugs are facing a decline in revenue starting in 2011 when products generating $150 billion a year will be hurt by generic competition.