Branded drugs' competition-free days numbered

Authorities in the US and Europe are to look carefully at the tactics pharmaceutical firms use to delay competition from generic versions of their branded drugs. The European Commission (EC) is to increase its scrutiny of the industry following the publication of its final report on competition in the sector, while the US Department of Justice is hardening its line on ’pay for delay’ deals.

The EC believes that pharma companies delay generic version of their medicines from reaching the market, which reduces the uptake of generics. The Commission found that on average it takes seven months for generics to reach patients after a drug’s patent has expired, adding 20 per cent to medical bill of EU citizens. It claims pharma companies use a variety of tactics slow down generics, and it will be looking closely at these. ’We will not hesitate to apply the antitrust rules where delays [to generic entry] result from anticompetitive practices,’ said Competition commissioner Neelie Kroes. The first investigations are already under way.

’The Commission will be looking for things like false safety claims or obviously unfounded legal arguments on data exclusivity,’ says Christopher Thomas, a Brussels-based competition law partner at Lovells. ’It is interested in settlements that both limit generic entry and have some element of value transfer to the generic company.’ This value transfer could be a cash payment, a licence of some other product, or an agreement that allows the generic company to sell its version before the patent expires, without the risk of being sued.

Prescribe the substance

Also buried in the report is an indication that the Commission will focus on persuading member states to encourage generics. ’It explicitly invites member states to introduce compulsory generic substitution for pharmacists, encourage doctors to prescribe the substance rather than the brand, and reimburse at the level of the lowest priced product,’ he says. ’These are policies that some states have had for some time, but it’s interesting that the Commission is explicitly coming out in favour of these policies as part of a broader initiative to reduce drug costs for national health budgets.’

Meanwhile, in the US, the latest brief from the Department of Justice (DoJ) suggests it has shifted it’s position on pay-for-delay deals, and is now aligned with the Federal Trade Commission (FTC), which has long called for pay-for-delay deals to be banned, claiming it could save patients $3.5 billion a year. Pharma companies use these deals to reduce the impact of generic entry on patent expiry. The generic company is given cash in return for an agreement that it won’t launch its own version. 

The FTC thought it had managed to stop these deals, but the US courts have begun to overturn the bans. The most recent case, launched by a health and welfare fund in Arkansas, was settled in late June in favour of Bayer and Barr (now part of Teva). Barr had been paid $398 million not to sell a version of Bayer’s big-selling antibiotic ciprofloxacin (Cipro). The case has now gone to appeal - and the court asked the DoJ for its position on such deals.

’The FTC has always had a strong and consistent position, and they have always been strongly and consistently opposed by the DoJ - although the DoJ has now changed its mind,’ Thomas says. ’But the US courts have consistently found the FTC to be wrong. It may be that there will be a clear alliance of approaches between the FTC, the DoJ and the EC, and enforcement action of the antitrust cases may be more effective in Europe, with the courts reviewing the EC’s decisions more sympathetic than the US courts have been to the FTC.’

Sarah Houlton