Antitrust: Commission launches sector inquiry into pharmaceuticals with unannounced inspections

Antitrust: Commission launches sector inquiry into pharmaceuticals with unannounced inspections

The European Commission has launched a sector inquiry into competition in the pharmaceuticals sector (under Article 17 of Regulation 1/2003), and is conducting inspections at the premises of a number of innovative and generic pharmaceutical companies. The inquiry is a response to indications that competition in pharmaceutical markets in Europe may not be working well: fewer new pharmaceuticals are being brought to market, and the entry of generic pharmaceuticals sometimes seems to be delayed. The inquiry will therefore look at the reasons for this. In particular, the inquiry will examine whether agreements between pharmaceutical companies, such as settlements in patent disputes, may infringe the EC Treaty's prohibition on restrictive business practices (Article 81). It will also look into whether companies may have created artificial barriers to entry, whether through the misuse of patent rights, vexatious litigation or other means, and whether such practices may infringe the EC Treaty's ban on abuses of dominant market positions (Article 82). Vigorous competition in this sector is crucial for the public, as it ensures both access by patients to state-of-the-art medicines, and value for money for health spending by individuals, private health schemes and government health services in Europe. An interim report is planned for autumn 2008 and final results are expected in the spring of 2009. The inquiry's findings will allow the Commission or national competition authorities to focus any future action on the most serious competition concerns, and to identify remedies to resolve the specific competition problems in individual cases.
Competition Commissioner Neelie Kroes said: "Individuals and governments want a strong pharmaceuticals sector that delivers better products and value for money. But if innovative products are not being produced, and cheaper generic alternatives to existing products are in some cases being delayed, then we need to find out why and, if necessary, take action."

Unlike cartel cases, where the Commission carries out inspections when it has indications that specific companies have committed competition law infringements, these inspections are not aimed at investigating practices of companies which the Commission has already positive indications of wrong-doing. They are just the starting point of this general sector inquiry and aim to ensure that the Commission has immediate access to relevant information that will guide the next steps in the inquiry. The kind of information the Commission will be examining, such as the use of intellectual property rights, litigation and settlement agreements covering the EU, is by its nature information that companies tend to consider highly confidential. Such information may also be easily withheld, concealed or destroyed. This is why inspections have been considered appropriate.

Innovation in the pharmaceutical sector is driven by patents and other intellectual property rights, and the inquiry will be conducted taking into account these existing rights. The Commission's action will therefore complement, not challenge, intellectual property law, as both systems share the objectives of fostering innovation, and increasing consumer welfare. The inquiry will also take due account of the specificities of the relevant regulatory frameworks. It will not in any way put into question the various health schemes in force in the Member States. The inquiry is limited to medicines for human consumption.

To carry out the inquiry, the Commission can use a wide range of investigative tools to gather information from companies and trade associations, including requests for information. During the inquiry, the Commission will maintain an open dialogue with all stake-holders, and will keep the sector informed about progress.

Background on sector inquiries

Sector inquiries are investigations that the European Commission may decide to carry out into sectors of the economy, when a sector does not seem to be working as well as it should. The Commission uses the information obtained in the inquiry to better understand the market from the point of view of competition policy, as analysed in its report on the sector. Should there be grounds for doing so, the Commission may – at a later stage - assess whether it needs to open specific investigations to ensure the respect of Community rules on restrictive agreements and abuse of dominant position (Articles 81 and 82 of the EC Treaty).