EU regulators launch another pay-for-delay exercise

Europe's antitrust cops are at it again. The European Commission has asked "selected pharmaceutical companies" for copies of their 2010 patent settlements with generics makers. It didn't identify the companies, but Bayer and Roche confirm they are two of them. Previous antitrust forays have touched AstraZeneca, Nycomed, GlaxoSmithKline, Sanofi-Aventis and Novartis.

The EU has been hot on the trail of any anti-competitive practices in the pharma business, claiming that certain patent settlements have hurt European consumers and government health payers. Otherwise known as "pay-for-delay" deals, the settlements regulators find suspect involve a payoff from a branded drugmaker to a generics firm to forestall copycat versions of their meds. "Patent settlements are an area of particular concern because they may delay the market entry of generic medicines," Competition Commissioner Joaquin Almunia says in a statement.

The U.S. Federal Trade Commission has also been dogging companies who've settled patent fights with copycat drugmakers, citing the same concerns as European regulators--generic competition is delayed, costing U.S. consumers and the government billions of dollars.

The FTC has had limited success at going after companies that settle their patent disputes this way, however. And the EU hasn't prosecuted many companies for off-kilter settlements. But if experts are right, the probes themselves may be creating a chilling effect. "Continuing the monitoring will in itself tend to discourage the sorts of reverse-payment deals that the EC and U.S. authorities are concerned about," Hogan Lovells attorney Lesley Ainsworth tells Bloomberg.

In fact, Almunia says these deals have already declined. "The outcome of our first monitoring exercise showed that potentially problematic agreements had decreased significantly," he said, with suspect settlements dropping to 10 percent of all settlements from July 2008 to December 2009, compared with 22 percent from January 2000 to June 2008. The amount of cash changing hands also dropped, to less than €1 million from more than €200 million, the EC said. "The 2011 monitoring exercise is important to assess whether this positive trend is confirmed," he said.

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