Archive for November, 2008

EU accuses drugmakers of blocking cheaper generics (Reuters)

Friday, November 28th, 2008 | Finance News

BRUSSELS/LONDON (Reuters) –
Major drug companies are delaying or blocking the entry of cheaper generic medicines, pushing up bills for taxpayers and reducing the incentive for innovation, the European Commission said on Friday.

Competition Commissioner Neelie Kroes said preliminary results of a year-long probe showed competition in the pharmaceuticals industry "does not work as well as it should."

Practices such as multiple patent applications for the same drug, litigation and settlement deals that delayed generics meant governments ended up paying billions of euros more than they should for prescription drugs.

"It is still early days, but the Commission will not hesitate to open antitrust cases against companies where there are indications that the antitrust rules may have been breached," Kroes said.

Drug companies said her report exaggerated the extent of delays to generics and failed to recognize the complexity of the market.

The attack from the Commission -- the European Union's executive arm -- adds to pressure on a beleaguered global drugs sector that faces loss of patent protection on some of its biggest selling products over the next four years.

The industry also has big challenges in the United States, where incoming President Barack Obama is expected to seek ways to bear down on costs as he tries to extend healthcare coverage to millions of uninsured Americans.

3 BILLION EUROS TOO MUCH

Based on a sample of medicines that lost patent protection in 17 EU states between 2000 and 2007, the Commission estimated that delays in getting generics on the market had cost healthcare providers about 3 billion euros ($3.9 billion).

Kroes has the power to impose hefty fines on drugmakers if she finds they have engaged in unfair practices.

Such action has already been taken in the past, with AstraZeneca Plc (AZN.L) fined 60 million euros in 2005 for blocking cheaper rivals to its heartburn and ulcer pill Losec.

Kroes kicked off the sector investigation in January with a series of raids on makers of brand-name and generic drugs, including AstraZeneca, GlaxoSmithKline Plc (GSK.L), Pfizer Inc (PFE.N), Merck & Co Inc (MRK.N) and Sanofi-Aventis SA (SASY.PA), as well as Teva Pharmaceutical Industries Ltd (TEVA.O) and Novartis AG's (NOVN.VX) generics unit Sandoz.

There have also been a smaller number of raids involving seizing documents from generic drug companies this week.

Marc Dalby, a life science expert at legal firm Lovells, said the latest raids suggested the Commission was already working on company-specific investigations but it would likely be more than a year before these were concluded.

"I think the Commission will pick a handful of cases, probably involving very big companies, and pursue them relentlessly," he said.

The Commission said it had found documents during the inquiry, which contained admissions from brand-name companies that they had tried to stop generics, and many examples of obstacles being placed in way of less-expensive competitors.

In one case, no less than 1,300 patents were filed for a single drug medicine, the Commission said. There were also nearly 700 cases of reported patent litigation, lasting on average nearly three years, with generic companies ultimately prevailing in more than 60 percent.

There were also more than 200 settlement deals between brand-name and generic companies, of which more than 10 percent limited the entry of generics and provided for payments from the originator to the generic companies.

More than 200 million euros was paid to generic companies in

"reverse payment settlements" to limit the entry of generics.

Furthermore, owners of original drugs often intervened in national procedures for the approval of generic medicines, resulting in typical delays of around four months.

FEWER GENERICS THAN U.S.

The European Generic Medicines Association welcomed the report, which it said highlighted the need to deal with "loop holes" that allowed blocking strategies.

Generic drugs account for just over 40 percent of the market by volume in Europe, against more than 60 percent in the United States.

However, major branded drug companies insisted competition was robust, adding a fall in the number of new drugs since the 1990s reflected regulatory hurdles and scientific challenges.

Arthur Higgins, chief executive of Bayer HealthCare (BAYG.DE) and president of president of the European Federation of Pharmaceutical Industries and Associations, said the report overstated the extent and reasons for delays in generics.

"Where there is a strong commercial incentive, generics enter the market rapidly within four months or less," he said.

(Editing by Chris Wickham and Andrew Macdonald)

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Economic crisis sweeps deeper into Asia (AFP)

Friday, November 28th, 2008 | Finance News

LONDON (AFP) –
Asian economic giants Japan and India on Friday revealed fresh damage from the global financial crisis, which has battered international trade and consumer spending.

Japan slipped deeper into recession with factory output tumbling 3.1 percent and consumer spending dropping 3.8 percent in October, official data showed.

The figures were "stunningly bad," said Societe Generale's chief Asia economist, Glenn Maguire.

"Japan's industrial activity is set to worsen in the near-term, perhaps by an unprecedented degree, as exports to the US have plunged over the past year," he warned.

Rising economic powerhouse India, struggling with extremist attacks in the financial capital Mumbai, said its economic growth slowed to 7.6 percent in the third quarter of 2008, from 7.9 percent in the second.

While it was still a respectable performance at a time when many developed economies are in recession , the slowdown in India highlights the extent to which the US-born financial crisis has spread around the world.

There was also bad news from South Korea, where industrial production fell 2.3 percent in October in a sign that the export-driven economy was slowing faster than expected.

Investors mostly managed to look beyond the gloomy news, hoping that interest rate cuts and stimulus spending would eventually turn things around.

Tokyo ended up 1.7 percent in light trade after Thursday's Thanksgiving holiday in the United States, while Seoul rose 1.2 percent and Sydney jumped 4.3 percent.

But Shanghai finished with a loss of 2.4 percent as investors took profits after the previous day's strong gains.

The main Bombay Stock Exchange opened 1.4 percent lower Friday, a day after being forced to shut down due to a coordinated attack by gunmen across the city, which left at least 130 people dead.

While some analysts believe stocks are now looking cheap, others see little prospect of a recovery in the current climate of fear and gloom over the global economy.

European markets got off to a lacklustre start. The London FTSE 100 rose 0.15 percent at the open while the Paris CAC 40 slipped 0.29 percent and the Frankfurt DAX was flat.

The region continued to feel the fallout from the financial crisis.

Britain's Royal Bank of Scotland said the government would end up with a 57.9 percent stake in the bank after a share issue to raise funds to help it cope with the financial crisis.

RBS said that ordinary shareholders had agreed to take up only 0.24 percent of the share issue, with the government then taking up the balance, as provided for in its recapitalisation plan for the British banking system.

Last week, shareholders approved plans to raise 20 billion pounds (23.5 billion euros, 29.5 billion dollars) in fresh capital as part of a state rescue deal for Britain's banking sector.

Sweden fell into recession in the third quarter after its economy contracted 0.1 percent for two successive quarters, the national statistics agency (SCB) said on Friday.

Sweden's economy shrank by 0.1 percent in the second and third quarters on a sequential basis, the SCB said, adding that it had revised downwards its second quarter figure which in August it had said was flat.

With developed nations focused on efforts to boost their own recession-ridden economies, the World Bank urged donors not to abandon poor countries hit by the financial crisis.

Developing countries "find themselves at the mercy of a crisis not of their making," World Bank President Robert Zoellick said ahead of a UN development conference this weekend.

"A retreat to protectionism or economic nationalism by developed countries will hurt them even further," he added.

Talk of another US interest rate cut next month weighed on the dollar, which dropped to 95.32 yen in Tokyo afternoon trade, down from 95.58 late Thursday. The euro firmed to 1.2923 dollars from 1.2879.

Oil prices fell on Friday as the market waited to see whether the OPEC producers cartel would decide at a weekend meeting in Cairo to slash its crude output.

Light sweet crude for delivery in January was down 1.39 dollars to 53.05 dollars a barrel on the New York Mercantile Exchange (NYMEX).

On London's InterContinental Exchange (ICE), Brent North Sea crude for January dropped 71 cents to 52.42 dollars in morning trade.

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UK takes 58 percent RBS stake as investors shun deal (Reuters)

Friday, November 28th, 2008 | Finance News

LONDON (Reuters) –
Britain bought a 58 percent stake in Royal Bank of Scotland (RBS.L) on Friday as the state picked up 15 billion pounds ($23 billion) of shares in the lender after investors shunned a rescue plan.

It marks the latest attempt by European countries and the United States to shore up ailing banks to halt the fallout from a global credit crisis, and adds to UK taxpayers' exposure to the sector after the nationalization of two smaller lenders earlier in the year.

RBS said its investors took just 0.2 percent of the shares on offer -- including purchases by board members -- to leave the government with the remaining 22.8 billion shares.

Take-up was expected to be minimal after RBS shares fell below the 65.5 pence per share offer price.

Evolution Securities analyst Bruce Packard said: "The weekend papers will be full of it, but it didn't surprise anyone in the City.

"It was expected because the share price was trading below the rights price."

SHARES FALL

By 5:03 a.m. EST RBS shares were down 4.55 percent at 52.5 pence, giving the state a paper loss of over 2.6 billion pounds on the purchase.

Britain is also buying 5 billion pounds of preference shares from RBS, and is set to take big stakes in merger partners Lloyds TSB (LLOY.L) and HBOS (HBOS.L) under a 37 billion pound bailout plan unveiled last month.

UK Financial Investments, the company set up by the government to manage its banking stakes, on Thursday hired John Crompton from Merrill Lynch (MER.N), an experienced equity capital markets banker, to devise and execute a strategy for the sale of the holdings.

Sales are not expected until markets recover, which could leave the state holding the stakes for several years, analysts said.

RBS Chief Executive Stephen Hester said: "We regret that existing shareholders did not take up their pre-emptive rights but understand that market sentiment toward the banking sector made this uneconomic in the short term."

"We must put the past behind us and move forward with a clear focus on what we need to do next. There remain substantial uncertainties and challenges outside our control but for our part the job is underway."

RBS, once the second-biggest bank in the UK, was left short of capital as a result of hefty write-offs against debt-backed securities. Last year's acquisition of parts of Dutch rival ABN AMRO put further strain on its capital reserves.

(Editing by Sharon Lindores)

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