Generic drugs in new EU countries. Screwing the brand names

EU intellectual-property rules clash with ex-communist practice

STAND by for generic Viagra. Perfectly legal, says Polpharma, Poland's biggest drug company, which plans to produce it. Ripped-off Viagra, fumes Pfizer, which owns the patent and has summoned its lawyers. And this won't be the first or last such clash between intellectual-property rights, as the European Union conceives them, and the copycat drug-makers in the countries of ex-communist central and eastern Europe.

The enlargement of the EU in May brought in eight such countries. With low incomes per head and meagre health-care budgets, they rely heavily on cheap generics: in Poland and the Czech Republic, these account for over two-thirds of prescriptions dispensed, far higher than in Germany and Britain, the leading west European generics markets.

Many also are produced locally. With scant opportunities under communism to join in the costly business of finding new drugs, the newcomers' drug companies all produce almost nothing but generics, except for Pliva, a Croatian firm that has developed a well-selling antibiotic. In the early 1990s, they faced an onslaught from international, research-based companies, which cashed in on the burgeoning demand for new treatments. Unencumbered by price controls on locally produced drugs, imports rapidly gained market share. In Poland, imports - not all, but more than half of them branded products - hold two-thirds of the $3.5bn drugs market, the largest in the region.

Yet the multinationals are not rejoicing. The EU's new members are cutting their budget deficits to meet its supposed standard of fiscal virtue. Local drugs that cost a third or a quarter of what foreign brand-name ones do have an obvious charm.

Not that local generics are escaping the knife, though they take only about a third of governments' drug spending. In April, Hungary's government slashed the price of drugs by 15% by decree, including those sold over the counter, and imposed a six-month price freeze for good measure. When the country's constitutional court ruled against the decree, the drug-makers still lost out: they were made to cover part of the shortfall in the health-care fund. Unfair, says Erik Bogsch, head of Gedeon Richter, Hungary's leading drugmaker: “The overspending on pharmaceuticals stems from the aggressive promotion of brand-name products,” he argues.

Poland's government seems to think so too. Even though Poles have to pay 65% of the cost of their medicines - the highest figure in the EU - it is threatening to refuse reimbursement of any drug whose price is 50% or more above that of the cheapest copies. It says this will free funds for other advanced drugs. Oh yeah, say the brand-name makers. The government, they say, is further endangering access to high-quality medicines. “Already no new chemical entities have been added to the reimbursement list in the past six years,” laments Mark Loughran, head of the Polish operations of GlaxoSmithKline.

What for the generics, now that their countries have brought their patent laws into line with the EU's ideas? The new entrants have to comply with EU legislation favouring brand-name producers. This includes a recently lengthened period of data exclusivity - the years after a patent expires during which copycats are excluded from using data from the original inventor's tests or clinical trials of a drug to get authorisation for a generic version. This will hamper generic firms' ability to copy. The newcomers have also given way on rules on patent extensions, which give drugmakers more time to recoup their investments in new medicines. But the multinationals wonder how zealously the new provisions will be applied. Some of the new countries anyway have legislative safeguards, known as “Bolar provisions”, which allow generic firms to undertake research and development work on drugs still under patent.

In one high-profile dispute, Eli Lilly, a large American drugmaker, launched legal action in Poland against Adamed, a local generics company, alleging infringement of its patent on Zyprexa, a drug for schizophrenia that brought Lilly half of its sales in Poland. Adamed claims that, though its version may have the same basic molecule as Zyprexa, it has a different crystal structure. Lilly, which lost its case last November, has now gone to appeal. But it has been unable to gain access to its rival's drug-registration file, fuelling its suspicions that Adamed did indeed simply break its patent. Pfizer's apart, other such disputes look sure to follow.

EU intellectual property rules clash with the practice in the ex-communist countries now members of the EU.

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