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?
4 Responses
As it seems, the main concern of the EC is that pharmaceutical companies use ‘ever-greening’ as a business tactic to keep competition out of the market. Once EC’s official report is published, it would be interesting to see how this problem could be addressed.
One way is to try and reform the patent system of each member state of the EU. Thus EU members may use tools that better screen patent applications and avoid ‘ever-greening’. This, however, might be a rather daunting task for EU because it would require substantial investment of time, money and other resources.
Another way of addressing this issue is by enacting regulations under Competition Law. However, it will be difficult for EC to impose such regulations independent of the patent system of each member. This is because the assessment of whether a pharmaceutical company is infringing the regulations under Competition Law would depend on whether a subsequent patent application constitutes ‘ever-greening’ of an existent patent. The latter inevitably depends on the assessment done by the patent office of each member.
Ever-greening is, In-Fact, Part of the Competition Landscape
There exists in this debate a conundrum: brand pharmaceutical companies are not breaking any of the rules of patent law. They are doing what they are entitled to do – as innovators, they are registering patents for inventions that comply with the requirements for patentability: new; useful, and; not obvious. Furthermore, as Jacobs LJ clearly insisted, “generic companies are not in favour of lower prices…they’re in it for the money.” Generics may capitalize on the “public interest” argument to amass a mob of supporters for their efforts to crush the Berlin Wall of their existence – patent law – but they are no less culpable as regards their thirst for profit and the myriad benefits of a free market economy.
As it exists, the environment in patent law, particularly as regards PMNOCs, is a precarious balancing act; innovators rabidly defend their boundaries, and generics rabidly mount offensives at every opportunity. It is a balance that still yields profit for both sides. As Barry Sherman has reminded us, Apotex only needs to win one in one hundred law suits to remain very profitable. Indeed, Mr. Sherman seems to be doing better than that; Mr. Giraldi highlights that 62% of patent litigation between 2000 and 2007 was won by Generic companies. If ever-greening were so prohibitive, Generics would not be enjoying the market share that they currently do. We must be careful not to be too cavalier or overzealous in championing policy issues that might, in fact, be Trojan horses. Sweeping policy or regulatory reform, as suggested by Ms. Shahid, might not be the most prudent approach to the apparent, and possibly illusive, challenge. Creating more onerous registration requirements could yield consequences in the pharmaceutical industry that might not necessarily be fruitful or beneficial to the masses. I suggest that the solution already exists in the form of the common law, which as an organic process that has the tendency to evolve gradually, and most often, as necessary. If there is a need for change, the common law will recognize this need, and adapt the landscape to address such. Subsequent to this, legislation can be gradually modified to attend to the prospective needs akin to those recognized by the common law. While the common law is not perfect, it is our foundation, and has proven itself to be most efficacious at navigating turbulent waters such as these.
I agree with Essien that the common law might potentially be a powerful tool in correcting insufficiencies in the patent system. However, very few countries in continental Europe are governed by the common law tradition. Most of them have a civil code, where legislation is seen as the primary source of law. Thus judge-made law plays a very minor role and might not be available to EC. In this respect, I believe legislation would be more appropriate in the case of Europe. However, as I mentioned in my previous comment, since EU members have different patent systems, it will be a challenge for the EC to create an omnibus legislation that address all of them.
Thank you Anna; Indeed, civil law is in practice different that the common law, and so rectification of deficits in the law might require different approaches than on this side of the pond. Nonetheless, curial scrutiny still lends itself to a more prudent approach for instigating change. Still, one must be cautious in interpreting who is David and who is Goliath; the principles championed by the alleged underdog can be illusive.
I like the idea of a central patent court, but am not sure about omnibus legislation. It leans a bit too far toward the regulatory side of the spectrum, and a bit away from the individual strength and freedom afforded by the free market; more social, less capital. While the variety in laws governing different States may pose its challenges, it presents competitive benefits not only for the pharma companies, but for the States themselves, as between themselves (much like Delaware business law proves competitively fruitful for Delaware in relation to other States in the USA as regards attracting businesses searching to incorporate). Omnibius legislation, I would think, might be viewed with resistance by some States whose attractive laws prove fruitful for their economy; laws which might subsequently be rendered less beneficial.
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