Free Movement and Competition in the European Market for Pharmaceuticals

Abstract

Very few industries are as profoundly influenced by regulation as the pharmaceutical industry. All aspects of the life-cycle of new drugs are regulated, from patent application, to marketing approval, commercial exploitation, patent expiration and competition with generics. The nature of demand for drugs, the identity of drugs brought to market, and the nature of competition in the drug market over time are all shaped by regulation. Throughout much of the world, administrative regulation, rather than competition policy, dominates efforts to afford consumers and governments adequate access to affordable drugs.

As a result, the nature of competition in this market is sui generis. A significant number of infringements to competition law in this sphere across the world are concerned with practices that seek to take advantage of or manipulate the regulatory framework, including misuses of the patent system (e.g. ever-greening or patent clustering), spreading misleading information or inducing product switching, among others. A proper understanding of how competition law works in this area requires a solid knowledge of the structure of the market and its regulation. In the European context, any such analysis must also take into account free movement law, which provides a regulatory underpinning for integrated European markets in pharmaceutical products while also acting as a parallel tool to competition law in promoting and deepening market integration.

This chapter will provide an overview of free movement cases on pharmaceuticals, with a view to frame such case law within the European regulatory framework and to identify its impact on competition law enforcement. It is structured as follows: a first section will provide an overview of the structure of the European market for pharmaceuticals, including the basic European regulatory framework; a second section will review the case law on free movement and pharmaceuticals; and a last section will detail how the basic pharmaceutical regulatory framework, free movement law and competition law interact to determine the shape of European pharmaceutical markets.

Keywords: Pharmaceuticals, Competition Law, Free Movement Law, Pharma, Free Movement of Goods, Re-Packaging, Parallel Trade, Exhaustion, Marketing Authorisation, Social Security

JEL Classification: K21, K23, K32, K33, L11, L12, L13, H51, I11, I13, I18, H51