European Commission Investigates Biotech Industry

May 21, 2009
Stephanie Sutton

Stephanie Sutton was an assistant editor at Pharmaceutical Technology Europe.

ePT--the Electronic Newsletter of Pharmaceutical Technology

More than 70% of biotechnology executives fear that the European Commission's (EC) examination of anticompetitive behavior in the pharmaceutical industry, which began in January 2008, will weaken their patent protection, according to a new Marks & Clerk report.

More than 70% of biotechnology executives fear that the European Commission's (EC) examination of anticompetitive behavior in the pharmaceutical industry, which began in January 2008, will weaken their patent protection, according to a new Marks & Clerk report. This possibility, coupled with the biotechnology industry's ongoing financial crisis, could spell disastrous consequences for small biotechnology firms, which often undertake most of the speculative research and development (R&D) into new drug discovery.

"Big Pharma has made plenty of noise about the enquiry, as may be expected, but the EC needs to consider the ramifications for the biotech sector and, in particular, the small players for whom this is the worst possible time to weaken patent protection," said Gareth Williams, a partner at Marks & Clerk, a global intellectual property firm based in the United Kingdom and coauthor of the company's latest annual biotechnology report, in a May 18, 2009, release. "It is grimly ironic that the authorities are considering how to restrict patent activity at the very point the industry finds its patents are the only way of securing the vital funding it needs."

The report, based on an international survey of more than 360 executives in the biotechnology and pharmaceutical sectors, reveals fierce opposition to the investigation, with just over half of respondents (51%) believing that the inquiry has no justification. The majority also argued that reforming the patent system is not an effective solution.

"Patent law is complex and nuanced. Hasty reform could have unforeseen consequences that will hurt drug discovery, as well as punish other R&D-heavy industries that depend on the system," warned Williams in the release.

The sector inquiry began after reports revealed a significant decline in drug approvals by the US Food and Drug Administration and a belief by Neelie Kroes, European commissioner of competition, that generic manufacturers were not "jumping into the market as quickly as we would expect,” as she stated in a 2008 speech.

The preliminary findings were published in November 2008, when the EC said it had found evidence that originator companies were engaging in "shocking" practices to delay or block the market entry of competing medicines. These practices included using secondary patents to protect future modifications of a drug (i.e., evergreening) and using multiple patents to protect numerous aspects of a single drug and its production (i.e., patent thickets).

However, according to the Marks & Clerk report, more than 70% of respondents to the survey disputed the EC's claim that the way the patent system is used unfairly favors innovator companies over generic drug companies. In addition, 80% said that reforming the system in favor of generic drugs may reduce healthcare costs in the short-term, but would undermine drug innovation in the long run.

"It's not as simple as wanting to reduce healthcare costs," explained Williams in the release. "Biotechnology represents the future of healthcare. Crippling its profitability in relation to R&D will not reduce healthcare costs in the long term. It will simply undermine that discovery taking place in the first place. After all, an expensive drug represents better healthcare than no drug coming to market at all."

More than 80% of the survey respondents also felt that it was unfair to single out the use of patent thickets within the pharmaceutical sector when the technique is commonly used in other R&D-heavy industries. Notably, those that took part in the research were also not against the emergence of generic competition; 75% stated that the development of generic competition through the promotion of follow-on biologics poses more of a commercial opportunity than a threat to the industry.

Following the preliminary findings, a quarter of respondents now expect the EC to crack down on secondary patents. One potential reform that would be welcomed by the industry-the creation of a European Community patent-is, however, unlikely to pass, according to 40% of respondents.

"The creation of a European Community patent would genuinely support both parties, helping to 'set the bar' for European patents, while enabling corporate [firms] to secure and defend intellectual property rights much more easily. Yet while this idea has been circling for some time, it has never gained sufficient political momentum to become a reality," said Williams in the release. "It remains to be seen whether this inquiry will drum up the political will required to get it off the ground this time round."

The outcome of the EC's inquiry is expected this summer.

Stephanie Sutton is an assistant editor at Pharmaceutical Technology Europe.

Read more about the initiation of the inquiry.

Read more about the preliminary findings.