European regulators have raided a number of drug companies across the European Union on suspicion they are pursuing restrictive practices, on the eve of a hard-hitting report into the pharmaceuticals sector.
The European Commission said on Tuesday the raids were not related to inspections carried out in January this year or part of a competition inquiry into the sector whose preliminary outcome is due to be published on Friday.
But it added that knowledge acquired during the broad inquiry meant officials could "draw conclusions on where Commission action based on competition law could be appropriate and effective".
Spokesmen for leading drug European companies including GlaxoSmithKline Plc, AstraZeneca Plc, Sanofi-Aventis SA and Novartis AG said they were not aware of the latest raids, which took place on Nov. 24.
"It looks rather that they (the European Commission) have found something during the course of the investigation but perhaps it involves smaller companies," said one lawyer.
An EU source familiar with the sector-wide probe said earlier that the interim report would criticise drug companies for the way they prolonged drug patents and conduct litigation.
So-called "strategic patenting", whereby drugmakers use minor product changes to win extra patent life for medicines, plus the process of litigation used to block cheap generic rivals, will both come under fire in the hard-hitting report.
"There is certainly plenty in the report for the pharma industry to worry about and if I was their lawyer I would certainly expect follow-up action by the Commission, targeting individual or groups of companies," the source, speaking on condition of anonymity, told Reuters.
Competition Commissioner Neelie Kroes kicked off the sector investigation in January with a series of unprecedented dawn raids, saying she suspected drugmakers had conspired to delay cheap generic alternatives to branded medicines.
Since then, hundreds of employees at many of the world's top drug groups have produced a mountain of evidence to convince her that competition in the sector is robust.
But executives are expecting some brickbats on Friday.
"They have looked at major industries in the past and there has never been a positive sector inquiry," Bayer HealthCare Chief Executive Arthur Higgins, who also heads the European Federation of Pharmaceutical Industries and Associations, told the Reuters Health Summit last week.
"There are always negative implications that come from it," he added.
Drug companies were taken aback by the draconian approach to the investigation when it was launched in January. Dawn raids in the past had been reserved for serious cartel probes and had never before been used in a sector-wide inquiry.
Those original raids involved makers of brand-name and generic drugs, including AstraZeneca, Glaxo, Pfizer, Merck and Sanofi, as well as Teva Pharmaceutical Industries Ltd and Novartis's generics unit Sandoz.
Delaying Tactics
Generic drug companies, whose medicines cost less than branded products, have long complained that they have trouble getting their products to market in Europe. Generics account for just over 40 percent of the market by volume in Europe, against more than 60 percent in the United States.
The suspicion is that branded companies use delaying tactics to extend the patent life of their products - a process sometimes also known as "evergreening".
Action has been taken in the past against certain drugmakers for using unfair practices, with AstraZeneca fined 60 million euros ($77 million) in 2005 for blocking rivals to its heartburn and ulcer pill Losec.
The European Commission is also concerned makers of branded drugs are slow to bring innovative new products to market. Companies argue they are keener than anyone to launch new drugs but are hampered by regulatory hurdles and scientific challenges.
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