The Undetected Elephant in the Room: An Analysis of DG Competition's Preliminary Report on the Pharmaceutical Sector Inquiry
Killick, James R.M., Dawes, Anthony

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On November 28, 2008, DG Competition's ("DG COMP") published its Preliminary Report ("the Report") on the pharmaceutical sector inquiry. The Report claims that Research & Development ("R&D")-based pharmaceutical companies ("originator companies") have recourse to a toolbox ("toolbox") of practices in order to delay the entry of generic medicines onto the market and that these practices, where successful, result in significant additional costs for public health budgets and reduce incentives to innovate. The Report also states that originator companies applied defensive patenting strategies, primarily aimed at blocking other originator companies in the development of new medicines.

However, when one looks behind these headlines, it becomes clear that the Report is almost entirely silent on the key issue of causality, i.e. whether there can be said to be a causal link between the potentially anticompetitive practices which the Report identifies and the alleged resulting delays. This article analyzes this issue of causality
in an attempt to understand why the Report does not address this fundamental issue.

First, we explore whether the Report reveals any causal link between the practices it has identified between originator and generic companies (the so-called toolbox) and the delay in generic entry that the report hypothesizes. The Report does not itself analyze causation. Moreover, the data in the Report appears inconsistent with the idea that the toolbox was the major cause of the delay. On the contrary, the data suggests the primary source of the delay in generic entry may be regulatory in nature.

Second, we assess whether the Report reveals any causal link between the practices it has identified among originator companies and the decline in innovation (to which DG COMP attributes a decline in the number of new chemical entities ("NCEs") gaining marketing authorization). Again, there is no analysis of causation. Nor does the data in the Report obviously suggest a causal link. Instead, there are a number of regulatory factors which appear to be a plausible cause, none of which have been examined in the Report.