Generic drugs online

European antitrust investigators are expanding the scope of a major inquiry into the €484 billion pharmaceutical market in a bid to determine whether companies are blocking generics makers from getting less-expensive medicines to market quickly.

Lawyers and European Union officials said Neelie Kroes, the European Union competition commissioner, was also casting her net widely in a bid to determine whether drug companies' efforts to block competitors by extending patents were also distracting them from developing new medicines, which have been slow in coming to market in recent years.

Investigators, who questioned about 100 companies early this year, including Pfizer, GlaxoSmithKline and Sanofi-Aventis, are now turning to about 80 medical organizations, including associations of doctors, patients and pharmacies, and government agencies that set the prices of prescription drugs in Europe. That could make it the broadest antitrust investigation ever in the EU.

If Kroes determines that companies that make and sell medicines are using unfair practices, she could eventually impose large fines - as happened once already to AstraZeneca - and could recommend changes to the way the industry operated.

"There is clearly a block in the system," said Greg Perry, the director general of the European Generic Medicines Association. "Access to the market in Europe still is less speedy than in the United States."

Generics, which cost less than brand-name drugs, make up 42 percent of the market by volume in Europe, compared with 63 percent in the United States, according to Perry, whose organization includes the three of the largest generics companies operating in Europe: ratiopharm, Teva Pharmaceutical Industries and Sandoz.

The inquiry could be a boon for Kroes, whom many analysts expect to seek a second term as Europe's antitrust chief next year. Although she oversaw part of the high-profile case against Microsoft, and has taken a tough line with electricity producers, her candidacy would be strengthened if she could point to another money-saving victory in an area of concern to consumers and governments. Commissioners are proposed by their home government and approved by the European Parliament.

Some health and consumer groups also argued that more competition would pressure pharmaceutical companies to develop more new medicines and rely less on extending patent protection and marketing of existing molecules - a practice known as evergreening.

"These companies should be spending money on discovering drugs for diseases that still go uncured," said David Ortega, in charge of competition issues at the Spanish consumers' organization OCU.

The EU investigation began in January with surprise inspections at a number of companies making both brand-name and generic medicines.

Kroes then requested expert help from the European Patent Office, a body based in Munich that operates separately from the European Commission. The patent office agreed to send an official to work with investigators on the case.

Members of the pharmaceutical industry and lawyers said they were surprised by the use of dawn raids - the first time such tactics were used in this type of antitrust investigation - and by the focus on patents, which the industry critically relies on to recoup the costs of research and development.

Dozens of pharmaceutical companies operating across Europe have had to respond to 42-page questionnaires, which require information on how they managed patents, conducted marketing campaigns and used 230 different active ingredients from 2000 to 2007.

Brian Ager, the director general of the European Federation of Pharmaceutical Industries and Associations, said drug companies were worried.

Generic medicines, Ager said, commonly reach the market in Europe within three months after patents expire. But generics manufacturers in Europe tend to market a narrower selection of best-selling medicines compared with their American counterparts because of price controls in Europe, he said.

"Let's hope antitrust officials reach a better understanding of our industry," Ager said. "There's a lot of nervousness in the industry because some of the real disincentives for innovation resulting from national pricing and reimbursement schemes are unlikely to be tackled in this investigation."

Jonathan Todd, a spokesman for Kroes, said antitrust officials were "not yet drawing any preliminary conclusions from the pharmaceutical sector inquiry as regards legislative changes or anything else because it is far too early to do so."

So far, analysts see little immediate threat to drug company profits. One reason, said Luisa Hector, an analyst in London for Lehman Brothers, is that pharmaceutical companies are more aggressive in the United States than in Europe about protecting drugs by marketing newer formulas of older drugs.

Even so, if investigators discover abuses in Europe, it would not be the first time.

In 2005, EU regulators fined AstraZeneca €60 million, or $93 million at current exchange rates, for giving misleading information to several national patent offices to extend the life of a blockbuster antacid drug, Losec, and delaying the entry of generic drugs into the market. Last year regulators began an antitrust case against the German company Boehringer Ingelheim for suspected misuse of the patent system to exclude competition in the market for chronic obstructive pulmonary disease drugs.

Antitrust officials already are considering recommending changes to EU legislation or to the way current legislation is enforced to chip away at the control pharmaceutical companies exert over some medicines, although they have not said what those changes would be.

Antitrust lawyers noted that the recommendations themselves were likely to have an impact as early as next year, even if Kroes does not go after any specific company.

"Practices that long have been widespread in the industry may need to change when EU antitrust officials clarify what kinds of behavior could infringe antitrust rules," said Stephen Kinsella, an antitrust partner with law firm Sidley Austin in Brussels.

Todd, the spokesman for Kroes, said antitrust officials were "not yet drawing any preliminary conclusions from the pharmaceutical sector inquiry as regards legislative changes or anything else because it is far too early to do so."

Perry, of the generics association, said any changes should aim to make it easier for generics companies to place less-expensive drugs on the market as soon as patents expire - on "Day 1" rather than months afterwards - and discourage big pharmaceutical companies from suing makers of generics drugs for suspected patent violations that later turn out to be unfounded.

Yet EU investigators also appear to be turning their investigation on generics companies, too, asking whether they have accepted payments from brand-name drug makers as part of patent litigation, perhaps in exchange for launching a medicine later than originally intended.

In the United States, the Federal Trade Commission has said these so-called reverse payments violate antitrust law by dividing up the market. But Perry said the practice was far less widespread in Europe.