EU probes drug companies

By David Lawsky and Ben Hirschler

BRUSSELS/LONDON (Reuters) - The European Commission raided some of the world's largest drugmakers on Wednesday, launching a broad investigation into whether they made illegal deals or abused patents to limit competition and harm consumers.

Competition Commissioner Neelie Kroes said the European Union regulator suspected companies had conspired to delay cheap generic alternatives to branded medicines.

The sweep involved collecting confidential information from firms including Pfizer Inc (PFE.N), GlaxoSmithKline Plc (GSK.L), AstraZeneca Plc (AZN.L), Johnson & Johnson (JNJ.N), Merck & Co Inc (MRK.N) and Sanofi-Aventis SA (SASY.PA).

The dawn raids and sector inquiry, which the Commission said was not based on specific suspected violations, could lead to cartel charges against companies and potentially huge fines.

Patents are the life blood of the pharmaceutical industry but critics allege some companies misuse patent rights to delay the introduction of generic medicines in unjustified ways.

The cost of medicines is a vexed issue in Europe, where governments are seeking to clamp down on runaway healthcare bills at the same time as encouraging the development of the high-tech pharmaceutical and biotechnology sectors.

Kroes said the aim was to ensure governments and consumers got more new products and value for money. She said Europeans spent around 200 billion euros ($300 billion) annually on pharmaceuticals, or about 400 euros for each person.

"If innovative products are not being produced, and cheaper generic alternatives to existing products are in some cases being delayed, then we need to find out why and, if necessary, take action," she said in the statement.

Mike Ward, an industry analyst at stockbroker Nomura Code, said the probe highlighted the pressure on drugmakers worldwide to prove their patent maneuvers were above board.

"There have been mutterings in the United States as well, particularly with regards to deals that have been struck by companies to keep certain generics off the market," he said.

ASTRAZENECA IN FOCUS

During a news conference, Kroes cited AstraZeneca as a clear example of a company in which competition was not functioning optimally, referring to a 2005 decision in which the Commission fined the company 60 million euros.

The Commission found that AstraZeneca had misused the patent system to delay market entry of rivals to its ulcer drug Losec.

AstraZeneca and other firms involved with the new investigation said they were cooperating fully with officials.

Other companies, including Roche Holding AG (ROG.VX), Merck KGaA (MRCG.DE) and Bayer Schering Pharma (BAYG.DE) said they were not aware that they were involved or had not received inquiries from officials.