On 15 January 2008, the European Commission initiated an inquiry into the pharmaceutical sector in relation to the launch of innovative and generic drugs.  The Commission's main objective in this investigation is to scrutinise business practices such as (i) obtaining or enforcing patents in a way that does not serve the protection of innovation but restricts competition for innovative drugs and/or generics, (ii) vexatious litigation and (iii) settlement agreements.  This is thus the first EC investigation into settlement agreements in the pharmaceutical sector, following on from the considerable controversy on this issue in the United States.

The Commission is entitled to carry out sector inquiries if the rigidity of prices or other circumstances suggest that competition may be restricted or distorted.  The opening of a sector inquiry does not, however, imply that the Commission already has evidence of infringements of EC competition law by specific undertakings or associations.

In the course of the inquiry, the Commission may require undertakings or associations to supply relevant information and documents.  The Commission may impose fines or periodic penalty payments.  It may also gather relevant information through onsite inspections.  The Commission may ask the governments and competition authorities of the Member States to provide information.  In principle, the Commission will treat the information provided in the course of the inquiry as confidential. 

Should the inquiry reveal the existence of anticompetitive practices, the Commission may take appropriate measures to restore competition in the relevant markets.  The Commission may - as it has done in a previous inquiry into the telecommunications sector - open for-mal infringement proceedings against individual undertakings or associations (in which case, evidence originally obtained in the course of the sector inquiry may become public).

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