European Commission probes for evidence of foul play among pharmaceutical companies

The European Commission has delivered on its promise of increased scrutiny following the release of its final report into competition and patent issues in the European pharmaceutical industry.  Following its extensive inquiry, including unannounced raids on pharmaceutical companies, the Commission has now asked these companies to provide it with copies of all patent settlement agreements.

Requests for information were issued to particular pharmaceutical companies on 12 January 2010 in the hope that the Commission would be able to uncover concrete evidence that originator companies have “paid-off” a generic competitor in return for delayed market entry of a generic medicine.  The Commission has specifically asked the companies to submit copies of all settlement agreements covering EU patent disputes concluded between 1 July 2008 and 31 December 2009.  The Commission was tight-lipped about which companies had been targeted, however, AstraZeneca, GlaxoSmithKline, Sanofi-Aventis, Novartis, Roche and Merck have all confirmed that they have received requests.  The Commission has indicated that the requests could be repeated annually until it is satisfied that the problem is solved.

A report will be issued once the Commission has received the settlement agreements.  But questions remain about how the agreements will be scrutinized to determine if originator companies have in fact “paid off” generic companies in return for delayed entry.  Simply because an agreement requires a direct payment by an originator company to a generic company in return for the termination of infringement proceedings does not indicate any ulterior motive or wrongdoing.  Such arrangements are common in settlement agreements.

How will the Commission fairly and objectively assess the nature and quality of the agreements?  There are numerous legal and commercial considerations that the parties must evaluate before reaching any agreement to settle court proceedings.  Without a proper understanding of these considerations in each case, is there a real danger that the Commission may misunderstand the balance of factors that went into the settlement?

Click here for more information on the Commission’s request.

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