Editor's blog Thursday 9 July 2009: patents are a virtue

Good morning. The Independentdraws our attention to the report from the EU on pharmaceutical industry competitiveness - or anti-competitiveness.

The press release for the report states, "Market entry of generic drugs is delayed and there is a decline in the number of novel medicines reaching the market, according to the European Commission's final report on competition in the pharmaceutical sector. The sector inquiry suggests that company practices are among the causes, but does not exclude other factors such as shortcomings in the regulatory framework". It promises further attention on anti-competitive practices.

Alistair Dawber's report in The Independent notes that this is a less strident tone than was used in the interim report, which found instances where drugs had over 1,300 patents filed against them: "the number of pharmaceutical-related patent applications before the European Patent Office nearly doubled between 2000 and 2007. Contrary to what might be assumed blockbuster [defined as treatments generating $1bn of revenue] medicines' patent portfolios show a steady rise in patent applications throughout the life cycle of a product.".

Nevertheless, the EU conclude that there are deliberate efforts to delay cost-saving generics, and finds "that originator companies use a variety of instruments to extend the commercial life of their products without generic entry for as long as possible.

"The inquiry also confirms a decline of novel medicines reaching the market and points to certain company practices that might contribute to this phenomenon. Further market monitoring is ongoing to identify all the factors that contribute to this decline in innovation".

The commission promises "increased scrutiny under EC Treaty antitrust law to the sector and bring specific cases where appropriate. The use of specific instruments by originator companies in order to delay generic entry will be subject to competition scrutiny if used in an anti-competitive way, which may constitute an infringement under Article 81 or 82 of the EC Treaty. Defensive patenting strategies that mainly focus on excluding competitors without pursuing innovative efforts will remain under scrutiny".

The full report can be found here. It remains to be seen whether, at a time when national governments want as little economic disruption as possible, the EU and its member states will seek to address the baleful power of the pharmaceutical industry. In the words of Adam Smith, godfather of market economics, "people of the same trade seldom meet together ... but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices".