Criticism leveled at pharmaceutical companies for their competitive practices has taken on a new dimension with the preliminary report from an inquiry of the European Commission (EC). The report on the Pharmaceutical Sector Inquiry, released November 28, confirms the existence of business tactics that are restricting competition in the European pharmaceutical market.
The inquiry was initiated in January 2008 because the EC felt that the pharmaceutical markets may not be working as efficiently as they should. The EC also expressed the concern that the entry of generic medicines into the market were being delayed and restricted. Since the pharmaceutical sector is, in the words of the preliminary report, “vital to the health of Europe’s citizens,” it is no surprise that the EC decided to take action. Their findings implicate industry use of the current patent system as being a major cause for concern.
According to the report, one of the biggest issues revolves around “ever-greening.” This term refers to the over-abundant filing of patent applications of arguably dubious value which relate in some way to a medicine already covered by patent. According to the EC, ever-greening takes place throughout the commercial life of the most profitable medicines and in some cases increases as the expiry date of the original patent approaches. The commission found that this strategy discourages generic companies from entering a market due to litigation risks associated with so many patents, even ones of questionable relevance or validity. The EC pointed out that even though the majority of patent litigation between 2000 and 2007 was initiated by originator companies, generic companies won 62% of cases where final judgment was given.
During public presentation of the report this point was addressed by Lord Justice Jacob of the UK Court of Appeals, who agreed that “There is no doubt, [as] the Canadian Supreme Court observed about two weeks ago, ever-greening is a legitimate concern.” But Jacob LJ. suggested that innovator companies are not the only barriers to affordable medicine, asking “Why is it… that after a product is off-patent, the generic price may be as much as 80%? …Generic companies are not in favour of lower prices; just as everybody is in, they’re in it for the money.”
The report also discussed other factors that tend to diminish pharmaceutical competition. For example, there have calls from both the innovator and generic pharmaceutical industry for a centralized patent court to eliminate the requirement that European patents be litigated in individual European countries. There are numerous cases where different countries have given conflicting final judgments on the same issues, creating a climate of uncertainty and dissuading companies from attempting to market a drug product covered by a patent that may or may not be valid.
The final report is to be published in the Spring of 2009, and the take-home message right now appears to be that the balance between competition and patent protection needs to be adjusted. This is clearly an important issue, especially since it has potential to affect access to medicines. But there is at least one other view of the matter: corporations compete on many different fronts in order to provide the best return for their investors, why should they not be allowed to compete through the use of defensive patenting strategies?