Competition and Generic Pharmaceuticals

It is widely recognised that entry by generic pharmaceuticals can enhance competition in the drug market, by offering more choice and by lowering drug prices to the benefit of health customers (including all buyers of medicines, from hospitals to end users). At the same time, innovation in the pharmaceutical sector should be sustained, notably by allowing innovators to obtain and to enforce intellectual property rights on their originator drug. Competition concerns arise when originator companies use their intellectual property (“IP”) rights or develop new strategies to delay or to prevent generic entry.

After a first roundtable in 2009 on the topic, the OECD Competition Committee decided to hold another discussion in June 2014 to explore new potentially anticompetitive strategies developed by pharmaceutical companies and how competition authorities and courts ruled on specific types of infringements, such as pay-for delay agreements between originator and generic companies.

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• The existence of originator drugs and innovation by originator companies is vital to develop new treatments against different illnesses and diseases. Following originator innovation, generic substitutes increase competition and result in lower drug prices, which contribute to the reduction of public healthcare expenditure. That is why governments often use a variety of tools to promote generic competition. However, certain regulatory measures may have restrictive effects and should be reformed to promote originator-generic drug competition.  
• Competition enforcement plays an important role in preserving and promoting competition to stimulate innovation and reduce prices in pharmaceutical markets. Entry by generic drug companies does not only reduce prices of existing medicines, it also stimulates originator companies to innovate and develop new drugs. The pharmaceutical industry features a number of characteristics that are worthwhile bearing in mind when assessing the conducts of pharmaceutical companies.  
• Antitrust cases against unilateral conducts reveal that originator companies can adopt diverse and creative strategies to delay or prevent generic entry. Such strategies include misuses of the patent system (e.g. ever-greening or patent clustering), spreading misleading information, inducing product switching and refusal to licence an essential patent. Competition enforcement in this context is essential, but it also seems to be sometimes compensating for the failures of the IP and regulatory systems.  
• Pay-for-delay agreements have attracted increasing antitrust attention around the world. Action has been taken against such agreements where the originator would obtain from the generic drug competitor to delay entry to the detriment of consumers. In addressing pay-for delay, competition enforcers face key questions pertaining to the applicable legal test, to whether the nature of the patent (i.e. the level of innovation) and the nature and size of payment are relevant in assessing the competition harm. 

Read the full summary of the discussion and its key findings.

Executive summary with key findings | Résumé avec les points clefs

Detailed summary of the discussion | Compte rendu détaillé

Unjustified Delays in Generic Drug Competition by Scott Hemphill

The implications of the imperfect European patent enforcement system  on the assessment of reverse payment settlements by Romano Subiotto

Presentation by Scott Hemphill