Watch this pharma space
In the face of spiralling European drugs bills, the rationale for the European Commission’s initial investigation was to learn more about company practices that cause delays to the market entry of cheaper generic medicines. The commission presented its preliminary report in November 2008.
On matters such as patent filing strategies and patent litigation (delaying) tactics, this preliminary report received a largely hostile response from originator pharmaceutical companies.
The recommendations proposed in the commission’s final report were much less contentious. The commission concluded that there is an urgent need to establish a Community Patent and a unified specialised patent litigation system in Europe. In addition, it welcomed recent initiatives of the European Patent Office (EPO) to accelerate certain of its prosecution procedures and ensure that only high-quality patents are granted.
Where to next for the commission?
The blaze of publicity that accompanied the commission’s initial dawn raids for documents and the publication of the preliminary report has faded. There has also been a changing of the guard at DG Competition, with new Commissioner Joaquín Almunia replacing Neelie Kroes, who instigated the sector inquiry during her tenure of the competition portfolio.
Although the recommendations in the final report were relatively benign, the pharmaceutical industry has been left in the unsatisfactory position of attempting to anticipate the commission’s next move.
Patent settlement agreements
One particular aspect of company behaviour flagged by the inquiry was the question of patent settlement agreements between originator and generic companies. Sometimes, generic companies will mount a challenge to the validity of an originator company’s patent rights to try and gain entry to a market before the patent expires. If a drug patent can be successfully challenged and invalidated in a court case, it may open the market up to generic competition.
Rather than fight a case to a conclusion, sometimes the originator companies prefer to enter into a settlement agreement with a company that is challenging an important patent, instead of running the risk that a court will invalidate the patent at trial.
The European Commission noted in its final report that the fundamental factor considered by originator companies when deciding whether to enter into a settlement agreement with generic companies is the strength of their position in the case. If an originator company is not confident of winning, it may negotiate a settlement instead.
There are different types of patent settlement agreements, but two possibilities are:
