Generic pharmaceuticals and competition

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. At the same time, innovation in the pharmaceutical sector should be sustained, notably by allowing innovators to obtain intellectual property rights on their originator drug.

Competition concerns arise, however, when originator companies use their intellectual property rights to delay or to prevent generic entry. Some pharmaceutical companies are using new potentially anticompetitive strategies.

In June 2014 meeting, the OECD Competition Committee addressed recent developments regarding such strategies, building on earlier discussions (see 2009 Roundtable Proceedings as well as the 2014 Global Forum discussion). Participants have also looked at how competition law enforcement can contribute to enhancing effective competition in the pharmaceutical sector. An extract of the main findings from the discussion is below.

For more details, see the Executive Summary and the summary of the discussion.

Key findings from the discussion

SUMMARY DOCUMENTS

Executive Summary with key findings • Synthèse

Detailed summary of the discussion • Compte rendu en français

Full list of documents

SEE ALSO

Competition Issues in the Distribution of Pharmaceuticals (OECD 2014 Global Forum discussion)

Generic Pharmaceuticals (2009)

Competition, Patents and Innovation II (2009)

Competition, Patents and Innovation (2006)

Competition and Regulation Issues in the Pharmaceutical Industry (2000)

» Access the full list of Competition Policy Roundtables

» Link to the OECD Competition Home Page

Originator pharmaceutical companies play an important role…

They innovate and develop new or more effective treatments. On the other side, they count on patent protection to ensure return on their R&D investments.

Generic pharmaceuticals enhance competition…

They drive prices down to the benefit of consumers and governments.

Governments can therefore promote generic competition through a variety of tools, such as reimbursement procedures, ingredient-based substitution obligations or compulsory licensing.

Regulatory measures such as registration procedures and substitute limitations may have restrictive effects on competition.

To address these restrictions, competition authorities use advocacy tools, urging for the elimination of entry barriers. Co-operation between competition authorities and other agencies (e.g. IP offices or health authorities) can also provide useful synergies towards effective competition policies in the pharmaceutical sector.

Challenging characteristics for the competition assessment of pharmaceutical companies’ conduct include...

This particular industry does follow the usual market rules where quantities rise where prices fall. Should a competition authority then worry about higher prices where they might not have appreciable quantitative effects on consumer welfare?

A patent's holder monopolistic power over its patent does not necessarily mean market power. Switching from a medicine to another is rarely decided by consumers.

Originator companies lack a unified patent enforcement system and the difficulty in many jurisdictions to get adequate compensation for damaging patent infringements. Should originators and/or competition law enforcement compensate for the ineffectiveness of certain IP regimes?

Originators can adopt diverse and creative strategies to delay or prevent generic entry…

Such strategies include misuses of the patent system, 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 when the delay would harm consumers. In addressing pay-for-delay, competition enforcers face thorny questions pertaining to the applicable legal test, and whether the nature and strength of the patent (i.e. the level of innovation) and the nature and size of the payment are relevant factors in assessing the competition harm.