Saturday, February 16, 2008

Comment on the EC's Pharmaceutical Dawn Raids

Posted by D. Daniel Sokol

The pharmaceutical industry remains under close examination by antitrust enforcers on both sides of the Atlantic. The U.S. Federal Trade Commission’s (FTC) enforcement activities—challenging both unilateral and concerted action undertaken by pharmaceutical firms—have been ongoing for more than a decade.

Concerns regarding anticompetitive conduct by pharmaceutical firms in Europe contributed to the European Community’s (EC) decision several weeks ago to commence a broad probe into the pharmaceutical industry. The stated purpose of this “sector inquiry” is to determine whether anticompetitive conduct is responsible for either the sharp decline in the launch of new drugs in Europe or the relative hesitancy of generic drug manufacturers to enter the market with cheaper bio-equivalent alternatives to branded drugs that are still on patent.

That the EC has a keen interest in understanding the competitive dynamics of the pharmaceutical industry is hardly exceptional. The EC’s inquiry is unique, however, because it commenced with the seizure of documents and data through targeted dawn raids, without a publicly acknowledged reason to suspect ongoing cartel activity or other exigent circumstances. Naturally, this has left many wondering why the need for the EC to undertake such extreme measures.

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