[READERS SHOULD BE AWARE THAT THE 2008 U.S. PRESIDENTIAL & CONGRESSIONAL ELECTIONS WILL ACTUALLY SERVE AS A PLEBISCITE TO DETERMINE WHETHER THE U.S. SHOULD FURTHER HARMONIZE ITS CONSTITUTIONAL & STATUTORY LAWS WITH THOSE OF EUROPE AND THE REST OF THE WORLD. IF EUROPE IS A 'STRONG DEMOCRACY', RELATIVELY SPEAKING, THAT LACKS CONSTITUTIONAL DUE PROCESS OF LAW AT U.S. STANDARDS, WHICH, AMONG OTHER THINGS, REQUIRES PROBABLE CAUSE BEFORE THE ISSUANCE OF A WARRANT, AND A PRESUMPTION OF INNOCENCE UNTIL ONE IS PROVEN GUILTY, WOULD THEN, SUCH HARMONIZATION ACTUALLY BE IN THE BEST INTERESTS OF AMERICAN CITIZENS???]
European Union: European Commission Raids Pharmaceutical Companies To Start Sector Inquiry
18 January 2008
Article by Jonathan Gowdy and Peter J. Edlind
On January 16, 2008, the European Commission launched a sector inquiry into the pharmaceuticals industry by carrying out a series of unannounced inspections of innovative and generic pharmaceutical companies. The targeted companies include both European and U.S. pharmaceutical companies with significant operations in Europe. The inquiry is likely to implicate important and controversial issues regarding the intersection of competition and intellectual property law, including the legality of patent litigation settlement agreements and conduct relating to the procurement and enforcement of intellectual property rights.
The sector inquiry is generally designed to provide the Commission with insight into commercial practices within the pharmaceutical industry; however, it was launched in response to the Commission’s concern that competition in the European pharmaceutical sector may not be working as it should. Specifically, the Commission noted that there has been a significant decrease in novel and generic medicines for human consumption entering the European pharmaceutical market in recent years.
The sector inquiry also follows two recent and significant enforcement actions by the Commission against firms in the pharmaceutical sector. In 2005, the Commission fined AstraZeneca €60 million for providing misleading representations to patent offices in the EU, and thereby restricting the entry of generic medicines to the market. Last year, the Commission also started proceedings against Boehringer for alleged misuse of the patent system to exclude competition in the area of chronic obstructive pulmonary disease drugs.
The Commission’s sector inquiry will focus on similar business practices; indeed the Commission’s announcement indicated it would examine whether the investigated parties’ exercise of patents and agreements between competitors, such as terms for litigation settlement agreements, are compatible with the EC Treaty’s rules on restrictive business practices. In addition, the inquiry will examine potential abuses of dominant position by market actors, including possible misuse of patent application procedures or frivolous lawsuits to prevent or deter launches of generic alternatives.
Enforcement actions in the United States on patent settlement agreements have proven controversial and even resulted in policy disagreements among the two U.S. antitrust agencies (i.e., the Department of Justice and the Federal Trade Commission) about the proper application of the antitrust laws. In addition, antitrust claims in the U.S. based on frivolous litigation or misuse of the patenting process generally must satisfy a high standard of proof. Thus, if the Commission’s sector inquiry results in any enforcement actions, they are likely to generate significant debate.
[DEAR EUROPEAN COMMISSION, WE IN AMERICA REFER TO THE SO-CALLED 'HIGH STANDARD OF PROOF' AS CONSTITUTIONAL DUE PROCESS OF LAW]
Finally, this sector inquiry is also notable because it is the first in which the Commission commenced the inquiry with dawn raids. (The Commission has in recent years carried out sector inquiries in the telecommunications, energy and financial services sectors, but all of these were initiated by sending out questionnaires to the targeted companies.) According to the Commission, the motivation to secure information in this manner stemmed from the fact that the information sought is usually considered by companies to be highly confidential and "may also be easily withheld, concealed or destroyed."
The Commission also recently used dawn raids in a merger investigation to investigate whether parties had integrated their business operations prior to obtaining clearance under the EU’s merger control regulations. It remains to be seen whether the Commission will continue to expand the use of dawn raids in non-cartel investigations; however, firms should ensure that their employees and in-house legal department are prepared for such an event.
The first results of the pharmaceutical sector inquiry are expected to be published in an interim report by the Commission this autumn and a final report due in the spring of 2009. Any subsequent competition law enforcement actions by the Commission (or EU member state competition authorities) against individual companies would be launched outside the framework of the sector inquiry.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved
Big drug companies raided in EU probe
By Andrew Jack in London and Tony Barber in Brussels
Published: January 17 2008 02:00 Last updated: January 17 2008 02:00
European regulators raided some of the world's biggest pharmaceutical companies yesterday in an inquiry into whether they conspired to keep up the price of drugs after patents expired.
Pfizer, GlaxoSmithKline, AstraZeneca and Sanofi-Aventis were among those that confirmed they had been visited as part of a European Commission-led probe into delays in the launch of low-cost generic drugs. Teva, the world's biggest generics company, was also targeted.
The inquiry will focus on whether the industry has abused patent rights to delay the introduction of low-cost generic alternatives. It will assess whether companies have made spurious attempts to extend the life of intellectual property rights or cut deals with one generic rival to the exclusion of others.
[WELL, THAT CERTAINLY JUSTIFIES SUSPENSION OF DUE PROCESS, DOESN'T IT!!]
The EU is increasingly concerned about the rising cost of medicines and declining innovation.
[WHY NOT THEN, PROVIDE A LEGAL ENVIRONMENT THAT PROMOTES MARKET-BASED INNOVATION, TECHNOLOGY TRANSFER AND COMMERCIAL LICENSING AND REDUCES NEEDLESS BUREAUCRATIC REGULATORY COSTS??]
Neelie Kroes, competition commissioner, said: "If we have the feeling that something is rotten in the state, then let's take the opportunity to find out."
[MS. KROES ACTS MORE LIKE A REGULATORY DICTATOR THAN A DIRECTOR - IS THE BUREAUCRATIC POWER GETTING TO HER HEAD??]
The raids, which began on Tuesday, broke with Commission practice in that no advance notice was given. Previous sectoral inquiries were launched with questionnaires sent to companies.
"It's certainly novel and rather aggressive, even. Dawn raids presuppose that the Commission has got a whiff of something they want to investigate," said one Brussels-based lawyer specialising in competition issues.
Europeans spent €200bn (£150bn) a year on pharmaceuticals, or €400 each, Ms Kroes said.
"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," she added.
[SOUNDS LIKE THE EUROPEAN COMMISSION IS ORDERING PHARMACEUTICAL COMPANIES TO PRODUCE INNOVATIVE HEALTH CARE PRODUCTS. SOUNDS LIKE THE 4TH REICH!!]
The Commission stressed that its visits were the starting point for a broad inquiry, rather than a response to "positive indications of wrongdoing" by the targeted companies. It said that the "unannounced inspections" were designed to gather "highly confidential . . . information [which] may also be easily withheld, concealed or destroyed".
[THIS ACTUALLY SOUNDS LIKE A 'FISHING EXPEDITION'. DOES THE EUROPEAN COMMISSION HAVE WHAT WE CALL IN THE UNITED STATES, 'PROBABLE CAUSE'???]
The inquiry is set to issue interim findings by the autumn and final results in spring 2009. It will examine whether pharmaceutical practices infringe EU treaty prohibitions on restrictive practices.
The generic drugs industry, which produces cheaper but chemically identical versions of medicines once their patents expire, has long accused innovative drug manufacturers of "ever-greening", or using spurious grounds to delay competition by extending their exclusive intellectual property rights.
[OF COURSE THEY HAVE! THEY'RE IN COMPETITION WITH THE BRAND NAME COMPANIES!! THEY WANT WHAT THOSE COMPANIES HAVE, FOR FREE!]
Pfizer, GSK, Teva, Sanofi-Aventis, AstraZeneca, Boehringer-Ingelheim and Merck of the US all confirmed that they were contacted by commission officials. Most would make no further comment. "We are co-operating with the inquiry," said AstraZeneca.
Pharma feels the heat as Brussels scrutinises competition
By Andrew Jack in London and Tony Barber in Brussels
Published: January 17 2008 02:00 Last updated: January 17 2008 02:00
The European Commission probe into the pharmaceutical industry, announced yesterday, illustrates how regulators are turning up the heat on a sector already suffering from falling productivity, growing competition and public discontent with the rising prices of new -medicines.
Competition lawyers say the inquiry also reflects a new appetite in Brussels for tackling intellectual property issues, driven by its success in cases such as the Microsoft prosecution, its growing experience in the drug industry and parallel moves by US regulators.
"The Commission is making sure everyone knows that it has decided to pursue a proactive, pro-competition agenda," said one Brussels-based lawyer.
[WHAT THIS LAWYER MEANT TO SAY IS THAT THE COMMISSION WANTS EVERYONE TO KNOW THAT THEY DON'T HAVE ANY CONSTITUTIONAL DUE PROCESS RIGHTS TO WHICH THE 'STATE' (EU COMMISSION) IS SUBJECT!!]
In 2005, the Commission fined AstraZeneca, the Anglo-Swedish group, €60m ($87.9m, £44.8m) in a ground-breaking case that highlighted practices likely to come under scrutiny in the latest investigation.
AstraZeneca, which is appealing the ruling, was found guilty of abuses to prevent generic rivals from competing against Losec, its anti-ulcer medicine.
It was accused of extending the duration of its intellectual property rights unfairly by providing misleading dates for its first filing with regulators in Europe.
It also de-registered older formulations of the drug in some countries, which added barriers to efforts by generic players to win regulatory approval for copies.
[THIS AMOUNTS TO A 'TAKING' OF PRIVATE PROPERTY FOR 'PUBLIC USE' WITHOUT 'JUST' COMPENSATION IN THE UNITED STATES]
Greg Perry, head of the European Generic Medicines Association, the trade body, said he welcomed the EU probe on condition that it studied issues of concern to his members.
These include "frivolous litigation", by which drug companies seeking to protect patents have succeeded in winning injunctions and authorisation for bailiffs' raids against generic rivals in lower courts across Europe to stall the launch of cheaper medicines.
He also expressed concern about "ever-greening", by which drug companies win additional patent protection on medicines by filing for minor modifications, such as reformulations to allow a pill to be taken once rather than twice a day.
Nellie Kroes, EU competition commissioner, said yesterday: "Pharmaceutical markets are not working as well as they might. Patent protection has never been stronger, but the number of patents coming to market has been declining."
[SOUNDS JUST LIKE THE STATEMENT OF A PHILOSOPHER KING BUREAUCRAT!]
The EU's probe may not prove entirely comfortable for generic companies. One practice likely to be scrutinised is when a pharmaceutical company pays a generic rival to drop a legal challenge to patents on its drugs.
[THIS IS A BACKHANDED WAY OF WARNING THE GENERIC COMPANIES THAT, IF THE EU COMMISSION CAN GET AWAY WITH DEPRIVING THE BRANDED PHARMA COMPANIES OF CONSTITUTIONAL DUE PROCESS, THEN THE GENERIC MANUFACTURERS ARE LIKELY TO BE TARGETED NEXT AND DEPRIVED OF THEIR CONSTITUTIONAL RIGHT TO DUE PROCESS! IN OTHER WORDS, WHAT GOES AROUND, ULTIMATELY COMES AROUND]
Another tactic involves signing an exclusive deal with an "authorised" generic manufacturer, and agreeing commercial terms that limit the normal sharp erosion in price of a generic medicine from that of the patented medicine on which it is based.
Nevertheless, the relatively modest discounts that often result in Europe - far less than in the US - are not simply the result of deals between companies. They also reflect national governments' policies on drug reimbursement and protectionism.
Copyright The Financial Times Limited 2008
Brussels rules OK
Sep 20th 2007
From The Economist print edition
How the European Union is becoming the world's chief regulator
A VICTORY for consumers and the free market. That was how the European Commission presented this week's ruling by European judges in favour of its multi-million euro fine on Microsoft for bullying competitors. American observers had qualms. Would a French company have been pursued with such vigour? Explain again why a squabble among American high-technology firms ends up being decided in Brussels and Luxembourg (where Euro-judges sit)? One congressman muttered about sneaky protectionism and “zealous European Commission regulators”. It certainly seemed zealous of the competition commissioner, Neelie Kroes, to say that a “significant drop” in the software giant's market share was “what we'd like to see”.
More broadly, the ruling confirms that Brussels is becoming the world's regulatory capital. The European Union's drive to set standards has many causes—and a protectionist impulse within some governments (eg, France's) may be one. But though the EU is a big market, with almost half a billion consumers, neither size, nor zeal, nor sneaky protectionism explains why it is usurping America's role as a source of global standards. A better answer lies in transatlantic philosophical differences.
The American model turns on cost-benefit analysis, with regulators weighing the effects of new rules on jobs and growth, as well as testing the significance of any risks. Companies enjoy a presumption of innocence for their products: should this prove mistaken, punishment is provided by the market (and a barrage of lawsuits).
The European model rests more on the “precautionary principle”, which underpins most environmental and health directives. This calls for pre-emptive action if scientists spot a credible hazard, even before the level of risk can be measured. Such a principle sparks many transatlantic disputes: over genetically modified organisms or climate change, for example.
In Europe corporate innocence is not assumed. Indeed, a vast slab of EU laws evaluating the safety of tens of thousands of chemicals, known as REACH, reverses the burden of proof, asking industry to demonstrate that substances are harmless. Some Eurocrats suggest that the philosophical gap reflects the American constitutional tradition that everything is allowed unless it is forbidden, against the Napoleonic tradition codifying what the state allows and banning everything else.
[THIS SOUNDS EERILY SIMILAR TO HOW THE 110TH CONGRESSIONAL MAJORITY IS TRYING TO CHANGE U.S. LAWS, AND WHAT MADAME CLINTON RECOMMENDS AS A 'SOLUTION' TO AMERICA'S PROBLEMS, & MONSIEUR OBAMA TOUTS AS THE TYPE OF 'CHANGE' NEEDED IN AMERICA!!]
Yet the more proscriptive European vision may better suit consumer and industry demands for certainty. If you manufacture globally, it is simpler to be bound by the toughest regulatory system in your supply chain. Self-regulation is also a harder sell when it comes to global trade, which involves trusting a long line of unknown participants from far-flung places (talk to parents who buy Chinese-made toys).
A gripping new book* by an American, Mark Schapiro, captures the change. When he began his research, he found firms resisting the notion that the American market would follow EU standards for items like cosmetics, insisting that their American products were already safe. But as the book neared completion, firm after firm gave in and began applying EU standards worldwide, as third countries copied European rules on things like suspected carcinogens in lipstick. Even China is leaning to the European approach, one Procter & Gamble executive tells Mr Schapiro, adding wistfully: “And that's a pretty big country.”
The book records similar American reactions to the spread of EU directives insisting that cars must be recycled, or banning toxins such as lead and mercury from electrical gadgets. Obey EU rules or watch your markets “evaporating”, a computer industry lobbyist tells Mr Schapiro. “We've been hit by a tsunami,” says a big wheel from General Motors. American multinationals that spend money adjusting to European rules may lose their taste for lighter domestic regulations that may serve only to offer a competitive advantage to rivals that do not export. Mr Schapiro is a campaigner for tougher regulation of American business. Yet you do not have to share his taste for banning chemicals to agree with his prediction that American industry will want stricter standards to create a level playing-field at home.
Winning the regulatory race
One American official says flatly that the EU is “winning” the regulatory race, adding: “And there is a sense that that is their precise intent.” He cites a speech by the trade commissioner, Peter Mandelson, claiming that the export of “our rules and standards around the world” was one source of European power. Noting that EU regulations are often written with the help of European incumbents, the official also claims that precaution can cloak “plain old-fashioned protectionism in disguise”.
Europe had no idea the rest of the world was going to copy its standards, retorts a Eurocrat sweetly. “It's a very pleasant side-effect, but we set out to create the legislation we thought that Europe needed.” At all events, America's strategy has changed. Frontal attempts to block new EU regulations are giving way to efforts to persuade Brussels to adopt a more American approach to cost-benefit analysis. That would placate students of rigour, who accuse some European governments of ignoring scientific data and pandering to consumer panic (as shown by European campaigns against “Frankenstein foods”).
But rigour can quickly look like rigidity when it involves resisting competition. There is a genuine competition to set global regulatory standards, as Europe and America have discovered. There are also rising protectionist pressures. Perhaps zealous EU regulators may be what jumpy consumers need if they are to keep faith with free trade and globalisation. Viewed in such a light, even Microsoft's champions might hope that this week's verdict will help global competition in future.