EU Examines Patent Settlements

January 21, 2011

The EU Commission is on the lookout for "potentially problematic patent settlements" and has asked several pharma companies to submit copies of their patent settlement agreements made between originator and generic companies.

The EU Commission is on the lookout for “potentially problematic patent settlements” and has asked several pharma companies to submit copies of their patent settlement agreements made between originator and generic companies.

This monitoring exercise is the second of its kind since the EC concluded its competition sector inquiry in 2009, which was initiated to examine why fewer new medicines were being brought to market and why the entry of generic medicines appeared to be delayed. Among other factors, the inquiry found that patent settlements could be a problem, particularly if an originator company pays off a generic competitor in return for delayed market entry.

“Patent settlements are an area of particular concern because they may delay the market entry of generic medicines. The outcome of our first monitoring exercise showed that potentially problematic agreements had decreased significantly since the Commission’s sector inquiry,” Joaquín Almunia, EC Vice President in charge of competition policy, said in a statement. "The 2011 monitoring exercise is important to assess whether this positive trend is confirmed and to identify potentially problematic patent settlements."

The 2011 monitoring exercise will look at certain patent settlement agreements relevant for the EU/EEA markets concluded between 1 January 2010 and 31 December 2010. A number of companies have been asked for copies of their patent settlement agreements, together with annexes, related agreements and amendments. To limit the administrative burden on companies, the EC has asked for limited additional background information. A report providing a statistical overview will be published in the first half of 2011.

If a specific settlement raises additional questions, a more targeted request for information could follow.

Although the EC did not name which companies it had approached, third party sources believe that AstraZeneca, GlaxoSmithKline, Novartis, Roche and sanofi aventis have been contacted.

The first monitoring exercise was conducted in 2010. According to the findings, only 10% of the total patent settlements between July 2008 and December 2009 were potentially problematic, compared with 22% in the period covered by the sector inquiry — January 2000 to June 2008. The amount of money involved in these settlements also decreased from more than €200 million recorded in the sector inquiry period to less than €1 million during the first monitoring exercise.

“This suggested an increased awareness of the industry of which settlement agreements may attract competition law scrutiny,” said the EC statement. “It was also good news for consumers that cheaper generic drugs are not being unduly kept out or delayed into the market.”

Although the monitoring exercises are only taking place in Europe, the US is also examining so-called “pay-to-delay” patent agreements (see a related PharmTech blog), with the possibility that such strategies may be considered illegal in the future.