pharmaceutical sector inquiry presentation of the ...€¦ · pharmaceutical sector inquiry...

Pharmaceutical Sector InquiryPharmaceutical Sector InquiryPresentation of the Preliminary ReportPresentation of the Preliminary Report

28 November 2008 28 November 2008

Pharmaceutical Sector Inquiry Presentation of the Preliminary Report

Dominik Schnichels and Philipp GasparonPharma Task Force

28 November 2008

3

Sector Inquiry into Pharmaceuticals in the EU

Background of the Sector Inquiry

Opening of the sector inquiry on 15 January 2008

Observations leading to the launch of the inquiry Delayed market entry of generic medicines Less market entry of new originator medicines

Sector inquiry investigates underlying causesFocus on company behaviourImportance of the regulatory framework

4


Structure of the presentation

• Main market features

• Company practices that can cause delay of generic entry

• Company practices that can contribute to the decline/delay in innovation

• Comments on the regulatory framework

5

Main market features The business model of originator companiesConventional Product Life Cycle: Three main phases

1. R&D phase

2. Exclusivity phase

3. Post-exclusivity phase


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Main market featuresOriginator companies’ dependency on blockbusters

13%2,228,470939,194Glivec (imatinib)Novartis

27%3,473,9271,059,341Zyprexa (olanzapine)Eli Lilly

9%1,637,5211,109,974Eprex (epoetin alfa)Johnson & Johnson

13%1,492,2011,159,947Enbrel (etanercept)Wyeth

55%1,685,0001,289,069Pantoprazole (pantoprazole)Nycomed

13%2,954,0411,345,193Herceptin (trastuzumab)Hoffmann-La Roche

9%2,424,0001,620,000Clopidogrel (clopidogrel)Sanofi-Aventis

35%6,232,6531,737,023Risperdal (risperidone)Johnson & Johnson

18%5,108,5401,795,800Seretide/Advair (fluticasone + salmeterol)

GlaxoSmith Kline

30%9,252,1011,917,151Lipitor (atorvastatin calcium)Pfizer

Product share of company turnover (global)

Global turnover (€thousand)

EU27 turnover (€thousand)

Product name (INN)Company

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1st focusCompetition between originator

companies and generic companies


• Impact of generic entry• Tool-box of originator companies

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Impact of generic entry

Average time to generic entry:• 12 months for the whole sample (non-weighted average)• 7 months for the whole sample (weighted average)• 4 months for the most valuable medicines • Considerable variations across Member State

Average time to generic entry after loss of exclusivity, by country

0

2

4

6

8

10

12

14

16

AT BE CZ DE DK ES FI FR GR HU IE IT LU NL PT SE UK

Mon

ths

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Impact of generic entry

Development of average price with and without generic entry

0

0.2

0.4

0.6

0.8

1

1.2

-36 -33 -30 -27 -24 -21 -18 -15 -12 -9 -6 -3 0 3 6 9 12 15 18 21 24 27 30 33 36

Months relative to loss of exclusivity

Pric

e in

dex

Markets with entry Markets without entry (moving average)

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Impact of generic entrySavings from Generic Entry

• Actual savings of € 14bn with generic entry delayed by 7 months• Potential savings of € 3bn more if generic entry is immediate

0

0,2

0,4

0,6

0,8

1

1,2

-36 -33 -30 -27 -24 -21 -18 -15 -12 -9 -6 -3 0 3 6 9 12 15 18 21 24 27 30 33 36

Months relative to loss of exclusivity (approximation)

Pric

e in

dex

ActualSeries4InmediateSeries5Series3

Aggregate expenditure (EUR 50 bn)

Potential additional savings if no delays (EUR 3 bn)

Aggregate expenditure: EUR 50 bn

Aggregate savings: EUR 14 bn

Potential additional savings if no delays: EUR 3 bn

(approximation; aggregate figures 2000-2007 after loss of exclusivity, evaluated at constant volumes)

Savings from Generic Entry

(EUR 14bn)

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Tool-box of originator companies

• Patent strategies• Patent disputes and litigation / EPO opposition• Settlement agreements• Interventions before authorities• Life cycle strategies for follow-on products

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Tool-box of originator companiesPatent strategies

• The Sector Inquiry does not put into question the importance of patent rights and of their efficient enforcement for the pharmaceutical industry.

• Strategies: aimed at extending the breadth and duration of protection - patent clusters


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Tool-box of originator companiesPatent strategies (Patent clusters)• Quotes of originator companies:

“I suppose we have all had conversations around "how can we block generic manufacturers" […]. Don't play games in patenting new salt forms too late, the generics are starting earlier and earlier. Get claims on key intermediates that cover a number of routes […] Process patents are not the biggest block but can put generics off if a superior chemistry job is done."“Secondary patents will not stop generic competition indefinitelybut may delay generics for a number of years, at best protecting the originator’s revenue for a period of time.”“[…] Inevitably there will be patents covering products on the market that can be, and will be challenged […] The strategy today is to try and provide a solid protection for the substance (has a limited time though) and a portfolio protecting different aspects of product providing extended protection both in brea(d)th and time but inevitable less solid and robust.”

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Patent strategies Patent clusters of up to 1300 patents and patent applications for ablockbuster medicine EU-wide

“Conventional” life cycle patent portfolio “Late” life cycle patent portfolio

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Years after first application filing

Prop

ortio

n of

tota

l num

ber o

f app

licat

ion

filin

gs

(pen

ding

and

gra

nted

) Launch of first product

Expiry of first patent

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30


Prop

ortio

n of

tota

l num

ber o

f app

licat

ions

file

d (p

endi

ng a

nd g

rant

ed)

Launch of first product

Expiry of SPC

Expiry of first patent

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Tool-box of originator companiesPatent strategies

0

100

200

300

400

500

600

700

800

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30


Cum

ulat

ive

num

ber o

f app

licat

ion

filin

gs (p

endi

ng a

nd g

rant

ed)

Launch of first product

Expiry of first patent / SPC

Development of Patent Application Filings for the top 20 best-selling medicines

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Tool-box of originator companiesPatent disputes and litigation• 457 patent disputes were initiated in the EU, originator companies started 91%

• 698 litigation cases were initiated in the EU, originator companies started 54%

Disputes in the EU

418

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Originator companiesGeneric companies

Litigation in the EU

378320 Originator companies

Generic companies

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Patent litigation• Nearly 700 cases of patent litigation

• Generic companies won more than 60% of patent litigation cases


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Tool-box of originator companiesPatent litigation

• Average duration of cases to reach final outcome: 2.8 years

• Interim injunctions granted in 112 cases: average duration 18 months

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75% success ratio for the generic opponent

25% defeat ratio for the generic opponent

0 10 20 30 40 50 60

Number of procedures

Patent revoked Patent amended Patent upheld

Tool-box of originator companiesPatent Oppositions

Final outcomes of opposition before the EPO• Generic companies won 75% of opposition cases


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Patent Oppositions

• Almost 80% of procedures before the EPO took more than 2 years


2%

19%

23%

20% 20%

8%

5%

0%

3%

0%

5%

10%

15%

20%

25%

0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9

Number of years

% o

f tot

al fi

nal p

roce

dure

s

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B. Limitation on generic entry

All settlement agreements

A. No limitation on generic entry

B.I. No value transfer from the originator company

B.II. Value transfer from the originator company

108 99

54 45


Tool-box of originator companiesSettlement agreements

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Tool-box of originator companiesSettlement agreements• In total, more than € 200m were paid from originator companies to generic companies in settlement agreements limiting generic entry.

0

2000

40006000

8000

1000012000

14000

16000

1800020000

2200024000

26000

28000

3000032000

34000

3600038000

40000

42000

Agr

eem

ent 1

Agr

eem

ent 2

Agr

eem

ent 3

Agre

emen

t 4

Agre

emen

t 5

Agre

emen

t 6

Agre

emen

t 7

Agre

emen

t 8

Agre

emen

t 9

Agr

eem

ent 1

0

Agr

eem

ent 1

1

Agr

eem

ent 1

2

Agre

emen

t 13

Agre

emen

t 14

Agre

emen

t 15

Agre

emen

t 16

Agre

emen

t 17

Agre

emen

t 18

Agr

eem

ent 1

9

Agr

eem

ent 2

0

Agr

eem

ent 2

1

Agr

eem

ent 2

2

Agr

eem

ent 2

3

€ th

ousa

nd

In total more than € 200 million were paid from originator

companies to generic companies

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Tool-box of originator companies – Interventions (regulatory bodies)


Marketing authorisation

ORIGINATOR

COMPANIES

Pricing

• Originator companies intervene before national regulatory bodiesclaiming that generic products are not equivalent, less effective, less safe, of inferior quality or protected by patent.

• Originator companies also launch litigation against decisions of national regulatory bodies.

Interventions

ReimbursementApplication by

generic companies

InterventionsInterventions

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Tool-box of originator companiesInterventions (regulatory bodies)

• Originator companies won only– 2% of cases where court upheld claims against decisions of

marketing authorisation bodies raising patent infringement and safety issues

– 19% of cases where court upheld claims against decisions of marketing authorisation bodies regarding data exclusivity

• Interventions before marketing authorisation bodies delayed generic entry on average by 4 months

• Quote of originator company:"Interchangeability issues were used in [several countries] to limit generic erosion […] Outcome: extra [originator] product sales of USD 61m in 2 years compared to expected generic erosion. […].

Delayed market entry of [generic product] due to requirement formore robust efficacy and safety data. Delay of entry of […] results in USD 350m extra […] sales […] “

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Tool-box of originator companiesLife cycle strategies for follow-on products• Originator companies launched second generation (follow-on) products for 40%

of the medicines in our sample.• Originator companies made intensive use of marketing and promotion strategies

in order to switch patients to the second generation product before generic entry.

Development of sales of second generation product vs. sales of first generation product

IN N 2

0

5 00

10 00

15 00

20 00

25 00

30 00

35 00

40 00

45 00

50 00

1 13 2 5 3 7 49 61 73 8 5

T im elin e ( in m o n th s )

Nat

iona

l mar

ket s

ales

(in

€ '0

00s)

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Tool-box of originator companies Life cycle strategies for follow-on products

• Quotes of originator companies:

“[Our second generation product] represents the most effectiveinitiative to counter generic [versions of the first generation product]”

“[Our second generation product] is a new formulation of [our firstgeneration product], launched initially as a line extension to maintain the growth momentum of the product”

“ If [generic products] come together with or prior to [second generation product] the switch rate is dramatically reduced. […] Once [generic products] come in it becomes more difficult to getswitches from [old originator product].”

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Tool-box of originator companiesCumulative use of practices against generic companies

Number of tools used by originator companies for the top 30 best-selling products

0 1 2 3 4 5

INN 30INN 29INN 28INN 27INN 26INN 25INN 24INN 23INN 22INN 21INN 20INN 19INN 18INN 17INN 16INN 15INN 14INN 13INN 12INN 11INN 10INN 9INN 8INN 7INN 6INN 5INN 4INN 3INN 2INN 1

Secondary patenting Disputes and contacts Litigation Settlements Interventions

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2nd focusCompetition between originator companies


• Patent strategies• Patent-related exchanges• Patent litigation• Agreements between originator

companies

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Competition between originator companiesPatent strategies: Defensive patenting

• The sector inquiry does not put into question the importance of patent rights and of their efficient enforcement for the pharmaceutical industry.

• “Defensive patents”

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Competition between originator companiesPatent strategies: Defensive patenting

• Quotes of originator companies:“We identify options to obtain or acquire patents for the solepurpose of limiting the freedom of operation of our competitors […]Rights covering competitive alternatives are maintained in major markets until risk of competing products appearing is minimal.“ (emphasis added)”Defensive patents (“Limited list” patents) serve to protect compounds closely related to [our company’s ] candidates or products. They do not cover [our company’s] candidates or products. They protect compounds that would be of interest to a direct competitor.”

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Competition between originator companiesPotential overlaps and patent-related exchanges

• In 1100 instances: overlap between products/R&D poles and patents of competing originator companies

• Requests for licence:• 99 requests for license.• Nearly 20% of refusals by patent-holder

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Competition between originator companiesPatent litigation

• Almost 40% of respondent originator companies were involved in patent litigation with another originator company

• Two thirds of litigations between originator companies were settled, the majority of these settlements contained a licence agreement.


38%

62%

litigation reported no litigation reported

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• More than 1450 agreements were concluded between originator companies

• More than 50% of agreements concerned marketing and commercialisation

• A particularly high number of agreements concerned Italy, Spain, Germany and Portugal

Competition between originator companiesAgreements between originator companies

Research cooperation

2%

Development cooperation

8%

Supply and manufacturing

agreements20%

Distribution agreements

26%

Marketing and promotion

agreements29%

Other type of agreements

15%

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3rd focusComments on

the regulatory framework


• European patent system• Marketing Authorisation • Pricing and Reimbursement

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Comments on the regulatory frameworkThe European patent system• Both generic and originator companies support:

– the creation of a Community patent– the creation of a unified and specialised patent judiciary in

Europe

• Support for the Community patent and unified judiciary to be putin the context of:– 700 cases of patent litigation in the EU– Conflicting judgements reported in 11% of all final cases– Total cost of patent litigation estimated to exceed 420m EUR

• Generic companies (and to some extent originator companies) call upon the EPO to:– ensure the high quality of granted patents– effectively counter patent strategies that may cause

unnecessary delays

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Comments on the regulatory frameworkMarketing Authorisation• Companies, industry association and agencies reported

bottlenecks in the marketing authorisation procedures which can lead to obstacles/delays and administrative burden

• Some originator companies also call for further international harmonisation of marketing authorisation procedures

Pricing and Reimbursement• Originator companies complained about delays and uncertainty

created by national pricing and reimbursement procedures• Generic companies also complain about delays in particular

since some Member States have introduced additional requirements to obtain pricing and reimbursement status

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Next steps

• Public consultation until 31 January 2009

• Final Report expected for spring 2009

• Preliminary Report is available at:http://ec.europa.eu/comm/competition/sectors/pharmaceuticals/inquiry/index.html

Pharmaceutical Sector InquiryPharmaceutical Sector InquiryPresentation of the Preliminary ReportPresentation of the Preliminary Report

28 November 200828 November 2008

pharmaceutical sector inquiry presentation of the ...€¦ · pharmaceutical sector inquiry...

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