Info Service on Health Issues (April 07/02)
Italy forces drug firms to give licences for generics rivals
developing countries issue compulsory licences to enable access to affordable
medicines, they attract controversy and negative media coverage. Less
publicised is the fact that some developed countries are also taking
steps to provide cheaper drugs to their people.
following article describes measures Italy took to reduce the costs
of medicines. It is reproduced with permission from South-North Development
Monitor (SUNS) #6228, 11 April 2007.
Health: Italy compels
drug companies to give licenses for generics rivals
By Sangeeta Shashikant, Geneva, 9 April 2007
Thailand's issuing of three
compulsory licences in the last few months to enable access to more
affordable generic medicines was hailed by many health-related organisations
around the world and also considered by experts as a legally valid measure
under international and national law.
However, despite repeated attempts by the Thai government to explain
the process it undertook to issue the licences and the rationale for
issuing the licences, showing that the licences would not affect the
profits of the multinational companies, some multinational drug companies
have tried to use many methods to undermine the measures taken by the
Thai authorities. Some established media have also criticised the Thai
measure, while other media have strongly supported it.
While controversy seems to follow compulsory license measures in developing
countries, less publicised is the fact that some developed countries
are also taking measures to provide cheaper medicines to their people.
And these measures have not attracted such controversy or negative press
Recently, Italy took measures to reduce the costs of medicines by introducing
as early as possible competition (from generic medicines) into the market.
Italy's Competition Authority has in recent years compelled pharmaceutical
companies to issue licences to generic competitors without any provision
for royalty to remedy the abuse by a company of its dominant position
in the market.
The Italian Competition Authority decided at its meeting on 21 March
that the Merck Group will be obliged to grant free licences to allow
the manufacture and sale in Italy of the active ingredient Finasteride
and related generic drugs, two years before the 2009 expiration of the
Supplementary Protection Certificate (a patent-like IP right) provided
in European Union law. Finasteride is used in the treatment of hypertrophy
of the prostate as well as male pattern hair loss.
The decision brought to a close an investigation launched in February
2005 into the possible abuse of a dominant position by the companies
Merck & Co. Inc. and Merck Sharp & Dohme (Italia).
According to a 26 March press release by the authority, the "corporation's
commitment to remove an obstacle to the production in Italy of Finasteride
and a generic version of related pharmaceuticals, among the most important
drugs used in the treatment of hypertrophy of the prostate, will encourage
greater competition in this market and may lead to significant reductions
in retail prices and in costs for the National Health System in Italy
and in other European countries."
The press release added that "This ruling needs to be seen in the
wider context of the Authority's efforts to encourage businesses to
adopt commitments aimed at improving market conditions, competition
and consumer choice. In the pharmaceuticals sector, in particular, the
Antitrust Authority's initiative is aimed at encouraging more widespread
use of generic products, taking advantage of notifications from the
Italian Office of Patents and Trademarks within the Ministry of Economic
Development which are based on regulations governing patents in this
Previously, in two other cases relating to pharmaceuticals, the Italian
Competition Authority also reached similar conclusions.
The first case involves a GSK (Glaxo Smith Kline) product used to treat
migraine headaches. On 23 February 2005, the Competition Authority began
investigating (under Article 82 of the European Community Treaty) the
alleged anti-competitive behaviour of Glaxo Group Limited, when it refused
to grant a licence to Fabbrica Italiana Sintetici SpA (FIS), a chemical
company that produces active ingredients for the manufacturing in Italy
of sumatriptan succinate and for the commercialisation of that ingredient
in other EC countries where the relevant patent has or will have expired.
The competition authority decided that Glaxo was abusing its dominant
position by refusing to grant third parties the licence to produce the
sumatriptan succinate active ingredient (although the patent was to
expire soon). If a licence was granted by Glaxo, the generic product
would be able to enter the market as soon as the patent expired. However,
if no licence was granted, then the generic company would take longer
to enter the market since the proceedings to obtain authorisation to
commercialise pharmaceutical products in EU member states normally takes
a long time.
According to Luciano Vasques from Studio Legale Agnoli Bernardi e Associati
in an article titled 'Dominance in Italy' featured in Global Competition
Review, Italian law provides that third parties wishing to produce and
commercialise medical products outside Italy using products that are
still under patent protection in Italy (but not in other EU countries),
may start to negotiate with the patent owner in proceedings initiated
before the Ministry of Productive Activities to obtain an export licence.
According to the law (DM 10/2002), the request for the export licence
should be submitted to the Italian Patent and Trademark Office.
If no agreement is reached among the parties concerned, the Ministry
shall help the parties reach an agreement. However, if the intervention
does not lead to any positive result, the Ministry will transmit a copy
of the file of the proceedings to the Competition Authority.
Such a settlement was not accepted by Glaxo, which led to an investigation
by the Competition Authority. Glaxo however took remedial actions, which
led the Competition Authority to state that Glaxo's remedial actions
put a stop to improper conduct, preventing delays in bringing generic
medicines to market.
It is important to note that Glaxo's original refusal to deal was seen
by the Authority as an abuse of dominant position. The Authority stated
that a refusal to deal of a patent holder is illegal if the holder is
a dominant firm and if the refusal could impede or delay access to a
competitor, even one in a different geographic market.
The second case involves an antibiotic whose patent is owned by the
drug firm Merck. Merck had an industrial patent in Italy giving it exclusive
rights to the sale of a pharmaceutical product "Tienam" (an
antibiotic intended for the treatment of particularly serious infections,
most often contracted in hospitals) based on the active ingredient Imipenem
In 2005, the Competition Authority found evidence of possible abuse
of dominant position by Merck as it refused to grant a licence for the
production in Italy of Imipenem Cilastatina to be exported for the manufacture
of generic pharmaceuticals in countries not covered by patents. The
Italian Competition Authority decided to order an interim measure on
Merck & Co. Inc., a company of the pharmaceuticals group Merck,
based on EU competition law.
Its decision obliged Merck to allow by granting a licence, the manufacture
and warehousing in Italy of the active ingredient Imipenem Cilastatina.
This would permit chemical companies having plants in Italy to be already
in a position, at the completion of the proceedings, to export the product
in question to European countries where Merck has already lost all patent
rights, in advance of the arrival in those markets of generic drugs
which will compete with Merck's Tienam product.
These are some cases in which the Italian Competition Authority had
to assess the abusive nature of unjustified refusals to grant licences
by the patent holder, which were necessary for the production of active
ingredients in quantities sufficient to allow wide distribution of generic
drugs, to the benefit of competition and consequently of consumers.
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