European Commission launches dawn raids against pharmaceutical companies despite having no ‘specific evidence of wrongdoing’

Patent settlement agreements a major focus of the investigation

Yesterday, the European Commission launched an inquiry into the pharmaceuticals sector by carrying out dawn raids on several of the world’s largest pharmaceuticals companies – including GlaxoSmithKline, AstraZeneca, Sanofi-Aventis and Pfizer.

The inquiry will focus on two main issues:

• whether agreements between pharmaceutical companies, including in particular settlement agreements in relation to patent disputes, may infringe the prohibition on anti-competitive agreements in Article 81 of the EC Treaty; and

• whether companies may be engaging in the misuse of patent rights, vexatious litigation or other means to create artificial barriers to entry in pharmaceuticals markets in breach of the prohibition on abuse of dominant market positions in Article 82 of the EC Treaty.

The inquiry is a response to what the Commission claims are ‘indications that competition in pharmaceutical markets in Europe may not be working well’. Specifically, that ‘fewer new pharmaceuticals are being brought to market, and the entry of generic pharmaceuticals sometimes seems to be delayed’. The Commission made it clear that the raids did not target companies suspected of wrongdoing and that it has no specific evidence for infringements.

Under Art 17 of Regulation 1/2003, the Commission has powers to launch wide ranging ‘sector inquiries’ when the trend of trade, price developments or other circumstances suggest that competition in a particular industry may be distorted. Such inquiries are not aimed at particular companies or individual infringements. They are primarily an information gathering exercise and the Commission has indicated that pharmaceutical companies – including those not involved in the raids – will be receiving requests for further information. Where individual infringements of EC competition rules are identified, separate investigations of the companies involved will be launched.

The Commission intends to publish an interim report of its findings this autumn and will invite comments from industry and others. It expects to publish a final report in spring 2009.

This is another example of an increasing willingness on the part of the Commission to exercise its broad investigatory powers. In December, the Commission for the first time carried out dawn raids under the EC Merger Regulation on two PVC manufacturers suspected of ‘gun-jumping’.