InThqe Nuewisition
Both innovative
and generic
companies
nervously await
the E.C.’s findings
this fall.
—By Robert McLeod
European drug executives and their outside counsel
are as nervous as a suspect who has been hauled in
to the station house by the police and is waiting to
be charged. In November they expect to read the
interim report of Neelie Kroes, the competition
commissioner of the European Commission (E.C.), on the aggressive “sector inquiry” into both the branded and the generic drug
industries in Europe launched earlier this year.
If the E.C. wanted to show it was serious with this inquiry, it
was successful. Little more than a week after returning from their
2007 year-end recess, some 150 E.C. antitrust cops raided the
European offices of the world’s biggest branded pharmaceutical
companies. The “dawn raids,” which actually began the afternoon
of January 15 and continued for three days, resulted in thousands
of documents being boxed up and shipped back to Rue Josef II,
the Brussels headquarters of Europe’s top antitrust watchdog. The
Commission typically resorts to dawn raids in hard-core cartel
investigations; it’s never done so before in a sector-wide inquiry.
The antitrust watchdog says it was motivated by concerns that
fewer new drugs were being brought to market, and that the entry
of generic drugs seemed to be delayed. It says it is looking for evidence that drugmakers are abusing their patent rights to artificially
push prices up and keep generics off the market. If the E.C. finds
wrongdoing, it can use the documents it’s gathered to launch more
targeted investigations or prosecutions of companies for breaches
of European Union competition law. The inquiry is a potent
reminder that in the European Union, the assertion of patent rights
can bump up hard against competition law.
Generic drugs in Europe have lagged behind those in the U.S.
in gaining market share: They account for about 42 percent of the
European drug market by volume, compared with 57 percent in
the U.S. Competition commissioner Neelie Kroes has taken up
with vigor the generic companies’ allegations that the innovative
drugmakers are abusing their dominance by gaming Europe’s fractured patent system. Kroes earned the sobriquet “Nickel Neelie”
