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The Intersection: Pharmaceutical Sector and EU Competition Law

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Pharmaceutical sector and the entities that are settled in this particular industry became subjects to EU’s regulations on competition since the beginning of the 2000s. The correlation between the pharmaceutical sector and competition law derives from the behavior of the originator companies which are the companies to develop and manufacture a drug for the first time. The attempts of the originator companies are directed to influence entry barriers for the pharmaceutical market by using various instruments in order to prevent the entry of generic drug companies -companies producing drugs that are equivalent to the original drug- and any other entity that can be considered as a competitor.

In order to acknowledge the instruments and methods used by the originator companies, patent system and the protection that comes along with it should be mentioned. A patent gives the exclusive right to exclude others from practicing the claimed invention, and since the research and development phase of manufacturing a new drug results in high costs and labor, drugs are considered worthy of benefiting from the exclusive protection that the patent system provides. If Supplementary Protection Certificates (SPC) system is not regarded, the term of the patent protection is 20 years starting from the filing date.  SPC is an exceptional right given to the patent holders to extend the duration of protection. This right has been vested to the patent holders in order to recoup the protection period that was deprived during the process of obtaining an authorization from the accredited institutions. SPC will me mentioned later on when discussing the exclusionary actions of originator companies.

The difference between brand name drugs and generic drugs is another issue that has to be referred in order to comprehend the main subject. Brand name drugs are drugs that are protected by patents. Therefore, after the expiration of the patent protection generic drugs which are nearly identical to brand name drugs become available to be manufactured. Essentially, the active substance is common for both types of drugs. Moreover, generic drugs should also be manufactured in the same quality.

Depending on the given information, the exclusionary behavior of originator companies, manufacturers of brand name drugs, and their consequences will be addressed and discussed. As it was mentioned above, SPC right is used to extend the term of patent protection. Although SPC is considered as a right, it can be misused by pharmaceutical companies to prolong and maintain an exclusive market dominance. For instance, the company AstraZeneca, gave incorrect information to the patent offices in order to “satisfy” the conditions for obtaining a SPC. Another instrument that is being used to suspend the entry of the generic drug companies to the pharmaceutical market, is the patent settlements that are formed as agreements between the originator company and the generic drug company. These commercial agreements are mainly depending on the disputes related to patent issues. In return for providing financial interests to generic drug companies, the originator companies close the market via these patent settlements. The third instrument that is being used is patent thickets which explains one drug that is protected by multiple patents. The originator companies, by obtaining several patents for one drug, tend to extend the term of protection and maintain a prolonged market exclusivity.

The referred behavior of the originator companies, that seek to apply limitations to the pharmaceutical market, has various implications regarding the competition law. The implications often arise in difference segments of social structure. Initially, the generic drug companies become deprived of the motive and incentive to enter to the pharmaceutical market due to the discomfort of the noncompetitive environment. Therefore, the pressure that has been brought by the originator companies does affect the attitude of the generic drug companies, resulting in the dominance of the originator companies. Moreover, there happens to be reflections of this obvious market-exclusivity on the economic scale. Monopolized companies keep the power to determine the prices to themselves. Hence, the prices appear much higher than it would be if there was competitors in the market. This augmentation in the prices also affect the consumers, community and social welfare. As a result, EU regulations regarding to competition law has been violated to a great extent by the mentioned behavior of the companies in question. Consequently, different segments of social structure such as consumers, legislative power of the government and private entities -like generic drug companies- become unable to respond to the ill affect that was generated by originator companies.

Due to these infringing actions of the originator companies, European Commission has started an inquiry to determine the specific violations resulting in the corrosion of the competition regulations, and to deliver solutions which appear as policy recommendations. Along with this inquiry, a specified litigation system for patents was formed and an agreement on the subject at issue was adopted by several member states of EU. This specified litigation system provides for a unified patent court. Besides, these attempts of the commission, aiming to smoothen the complications, influenced the nations to take action and enlarge the movement area of generic drug companies in the related market.

I believe that these actions which aim to correct the mistakes in the current patent system will manage to sustain an effective and properly operating structure. Along with the revised and reformed patent regulations, the pharmaceutical market will conduct as a competitive market which ensures the proper execution of the competition rules. Therefore, it is crucial to follow the recent legal developments in order to grasp the importance of the intersection of pharmaceutical sector and EU’s competition law. In order to establish a healthy competitive market, the subsequent regulations must be formed accordingly to the needs and the facts of the pharmaceutical market. Then, it would be possible to distinguish two notions; pharmaceutical sector and the violation of the competition law from each other.

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