Drug wars

On 8 July 2009 the European Commission published its final report on the Sector Inquiry into the pharmaceutical industry. In 2008, the Directorate-General for Competition of the European Commission (DG Competition), concerned about the decreasing ­number of novel medicines and the time it takes for generic pharmaceuticals to reach the market after the expiry of exclusive rights, launched an inquiry in the ­pharmaceutical sector.

In its preliminary report published in November 2008, DG Competition voiced concerns that the European patent system impedes innovation and unduly delays the market entry of generic products. It said it suspected that the reasons for the delay were “excessive” patent applications, ­”excessive” litigation for patent infringements and the ensuing settlement agreements.

pplications for and enforcement of IP rights had not been the focus of competition authorities for many years.

However, in the context of this report the Commission raised the issue of such ­practices on the basis of competition or antitrust law. It said it expected that ­several billion euros of healthcare costs could be saved if generic market products could enter the market without delay.

A preliminary report of November 2008 had been widely discussed and sharply ­criticised by both industry and the patent community. But in July 2009, DG Competition published its final report, which appears to be more balanced. It toned down substantially the language of the interim report, which was perceived by many as aggressive with regard to IP rights.

The Commission confirmed the ­essential importance of innovation in the pharmaceutical sector and the essential role of IP rights in enabling and encouraging innovation, in particular in pharmaceuticals, where innovation demands huge expenses for research and development.

In the final report, the Commission also shifted its focus to market approval procedures for pharmaceutical products, the ­pricing and reimbursement system and practices discrediting the quality of generic medicines by originator companies. It also found that a unified European patent and litigation system would be cost-effective and have a positive effect on the market.

Market view

In July, officials of the European Patent Office (EPO), judges of the Patent Courts, representatives of the originator and ­generic pharma industry and academic experts ­covering both competition and IP law met to discuss whether ­competition law should be called on in order to control IP law.

With regard to defensive patenting ­strategies that focus mainly on excluding competitors instead of implementing and using the patent – which the Commission referenced as being anticompetitive – EPO practitioners confirmed the EPO’s refusal to examine the intention pursued with the ­filing of a patent application.

Regarding the Commission’s concern that numerous patents are filed for one product only, many participants pointed out that, according to the patent law, a patent will not be granted anyway if it is devoid of any novel character, and that the EPO already pursued a ‘raising the bar’ approach with regard to this requirement.

The Commission’s concern of abusive patent litigation in actions without merit was inferred from its finding that 62 per cent of patent litigation cases in the EU between originator and generic companies are won by the generic company. But ­participants of the symposium argued that this could hardly be taken as a proof of ­abusive filing of actions without merit; there are similar figures in other areas, and ­statistics in general do not replace an ­examination of the cause of legal actions.

Many concurred with the Commission’s point of view that there may be an ­infringement of competition law involved in asserting IP, in particular in the case of a ­settlement providing for a reverse payment by the IP rights owner to the generic ­company in order to delay the market entry of the defendant’s generic product. ­However, the assertion and enforcement of an IP right per se cannot be considered an ­infringement of competition law unless specific circumstances are present, a point of view that the Commission has also adopted in its final report.

There has also been a broad consensus that a streamlining of the market approval and pricing/reimbursement procedures for pharmaceutical products would be helpful, as well as a Community Patent and a unified European patent litigation system that would also save costs. Still, many do not expect that the Commission’s inquiry would accelerate the achievement of a unified European patent system, since this has been debated already for many years.

In view of the final report, it might be expected that the Commission will ­sanction some particular cases in the pharmaceutical industry. Based on the results of the inquiry, the Commission has already started ­investigations against some originator and generic companies.

It might also be expected that the ­regulations of market approval and ­pricing/reimbursement procedures for pharmaceutical products will be revised in the future.

However, despite the aggressive approach adopted in the interim report, one cannot expect that the general use of procedural rights, such as filing patent applications or assertion and enforcement of patents or other IP rights before civil courts, will ­generally be sanctioned by the Commission as an infringement of competition law.

Stefan Abel is a partner and Thomas Friede a patent attorney at Bardehle Pagenberg Dost Altenburg Geissler, Munich