Big drug companies have cost European consumers €3 billion (£2.5 billion) through deliberately hindering the production of cheaper generic versions of their medicines, the European Union said today.

Neelie Kroes, European Competition Commissioner, attacked major pharmaceuticals producers in a preliminary report following a year long investigation into the industry.

Ms Kroes said practices such as applying for multiple patents for the same drug and suing generic producers to frustrate production of cheaper drugs has cost European consumers as much as €3 billion between 2000 and 2007.

“Market entry of generic companies and the development of new and more affordable medicines is sometimes blocked or delayed, at significant cost to healthcare systems, consumers and taxpayers,” Ms Kroes said.

“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.”

Drug companies can try and delay generic competition to their blockbuster drugs by filing multiple patents for different components to the drug. In one case, 1,300 patents were filed for a single medicine.

The report also criticised the amount of litigation undertaken to block generic entrants to the market. The litigation process can help delay generic versions of a drug by up to three years.

The increasingly common practice of patent settlements, which allow one generics company a period of exclusivity with their version of the drug, was also criticised. Such deals often involve direct payments from originator companies to generic companies. The Commission found that in total, these payments amounted to more than €200 million.

AstraZeneca recently struck one such deal with Teva Pharmaceutical Industries, the world’s largest generic drugs producer, which threatened to start producing a generic version of its billion-dollar selling asthma treatment Pulmicort Respules.

The EU report does not identify any individual companies but the EU investigation started with a series of raids on brand name and generic drugs companies including Pfizer, AstraZeneca, GlaxoSmithKline, Merck and Teva.

Big drug companies have been forced to be more protective of their top-selling drugs as, in many cases, they do not have enough new drugs in their pipeline to replace the lost sales.

The EU can fine pharmaceuticals if it finds evidence of anti-competitive behaviour. In 2005, it fined AstraZeneca €60 million for blocking production of a generic version of Losec, a popular ulcer medicine.

Stephen Rose, a competition partner at law firm Eversheds, said: “The European Commission has declared war on the pharmaceutical sector by questioning the legitimacy of a range of well established business practices.

"Today's provisional report is likely to lead to enforcement action to test whether individual companies' strategies infringe competition law."

But Edward Miller, a partner at Reed Smith, said the Commission would find it difficult to mount a successful legal challenge against large pharmaceuticals.

"It is natural that powerful companies will wish to use the law in order to delay the entry of competitors and will vigorously defend any challenges to their intellectual property rights. European law recognises the importance of those intellectual property rights and also recognises that it is not a breach of competition law just to be big and powerful."

European Federation of Pharmaceutical Industries and Associations (EFPIA), which represents over 2000 pharma companies, said: "The report fails to address real issues impeding patient access to innovative medicines and the urgent need for a more efficient generic market in Europe."

A spokesman for the ABPI, the British pharma industry body, said: “The important thing to remember is that in the UK we have the highest levels of generic prescribing in Europe.

“According to the UK industry model, generics rush in as soon as a branded medicine goes off-patent and within the first year, they have taken nearly half (47 per cent) of the market for that medicine."

The EU spends €200 billion on medicines every year, equal to €400 per person, the report said.

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