The number of patent settlements that are potentially problematic under anti-trust rules, between originator pharmaceutical companies and producers of generic drugs, declined in the European Union in the period 1 July 2008 to 31 December 2009. The European Commission welcomes this evolution, detailed in a report published on 5 July, which notes that this type of settlement has decreased in both market value and number.

This type of settlement has dropped to 10% of all out-of-court settlements concluded in the sector, from 22% in the previous sectoral inquiry (January 2000-June 2008). The amounts involved in such settlements have also declined: from €200 million in the previous sector inquiry published last year to less than €1 million for the 18 months under review in the new report. This development suggests that the pharmaceutical industry is being more cautious with this type of settlement, which can lead to a probe by the competition authorities.

The patent settlement of 41 originator companies and 45 manufacturers of generic drugs were scrutinised by the Commission for this study, which is meant to offer better understanding of the use of patent settlements in the EU and to help identify those that might need further review.

How can such settlements be problematic? First, they can limit the entry of a generic drug on the market; second, they can provide for a value transfer from the originator to the generic company through direct payments or commercial advantages. They may also contain restrictions that go beyond the exclusive rights granted by the patent (such as protection against the entry of generics that extends beyond the duration, purpose or geographical scope of the patent).

The EU executive notes, however, that “not all settlements falling into the potentially problematic category warrant an immediate in-depth anti-trust investigation by the Commission”. Different parameters come into play: size of the markets concerned, value transferred by the originator company to the manufacturers of generics, nature of the restriction on the entry of generics. For now, the Commission has opened two inquiries concerning the French company Servier and the multinational Lundbeck.

Consumers can welcome the fact that the placing on the market of less costly generic medicines is not being unduly prevented or delayed. “Patent settlements are an effective means to end patent-related disputes and litigation. Nobody disputes this. However, some of them may be anti-competitive. Our report appears to show the sector’s increased awareness of the potential competition concerns, but the Commission will remain attentive to ensure that the sale of safe, affordable medicines is not delayed by unfair practices. This is all the more important in times of crisis and of serious budgetary constraints,” said Joaquín Almunia, Commission vice-president in charge of competition policy.

The report follows a Commission inquiry on competition in the pharmaceutical sector, completed in July 2009.

The monitoring exercise, launched in January 2010, revealed that 93 out-of-court patent settlements were concluded between originator and generic companies during the 18-month period, compared with 207 for the period covered by last year’s sector inquiry (January 2000-June 2008). The Commission plans to repeat the monitoring exercise, which is a limited burden for the companies concerned, in 2011.

The study is available at www.europolitics.info > Search = 275944

“Not all settlements falling into the potentially problematic category warrant an immediate in-depth anti-trust investigation”