Tightening health budgets on both sides of the Atlantic leading to crackdowns on patent settlements, says EIU analyst

Later this month, following an inquiry launched in 2009, the European Commission is expected to impose significant fines on companies that have engaged in pharmaceutical patent settlements, or "pay-for-delay" deals, particularly Denmark's Lundbeck and Germany’s Merck KGaA, as well as eight generic drug manufacturers for limiting access of cheaper products to the market in the European Union, according to reports by EuroActive and Reuters.

Commenting on the news, Ana Nicholls, health care analyst for The Economist Intelligence Unit, said: “The combination of tightening health care budgets and widespread patent expiries is leading both the EU and USA to crack down on perceived threats to competition in the pharma market. Many of these involve what the industry calls reverse payment deals, whereby pharma companies pay generics companies an agreed sum in order to persuade them not to challenge particular patents - or to hold off competing with products whose patents have already expired. Proponents say this simply avoids expensive litigation, but critics call them pay-for-delay and claim they cost US health care payers around $3.5 billion a year.”

The cost of pay-for-delay is likely to be similar in Europe, where the price gap between patented and generic medicines is smaller, but take-up of generics is even lower - particularly in countries such as Italy and Spain, Ms Nicholls points out.