Generic drug companies complain it is difficult to get drugs on the market
Drug companies are blocking or delaying the entry of cheaper generic medicines into the EU, pushing up medicine bills, the European Commission has said.
Their actions cost EU healthcare providers 3bn euros ($3.9bn; £2.5bn) in savings between 2000 and 2007, it said.
It added that drug firms used legal action and multiple patents to stop rivals getting to market.
Drug firms said the "perfectly lawful" measures were justified to protect investment in research and development.
Generic drug companies - which sell cheaper versions of drugs once the patent has expired - have long complained that it is difficult to get their drugs to market in Europe.
Big Pharma invests heavily in the development of new drugs
The Commission said that innovators filed multiple applications to stop generic drugs getting to market - in one case, there were 1,300 patents for a single drug.
The report found that owners of original drugs often intervened in national approval procedures for generic medicines.
There were nearly 700 cases of reported patent litigation and more than 200 settlements between brand name drug companies and generic companies.
More than 10% of these settlements limited the entry of the generic drug to the market.
"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," said Competition Commissioner Neelie Kroes.
"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," she added.
The Commission could impose large fines on drug companies if they have engaged in unfair practices.
In 2005, AstraZeneca was fined 60m euros for blocking cheaper rivals to Losec, its heartburn and ulcer pill.
Drug firms use "perfectly lawful practices - such as patent portfolios, patent litigation and the release of improved medicines," the European Federation of Pharmaceutical Industries and Associations (EFPIA) said.
"These [practices] are essential for innovators to protect their huge investment in R&D [research and development]," it said, adding that the 17% of turnover industry spent on R&D exceeds any other sector in Europe.
The EFPIA - which said the Commission's report missed the opportunity to tackle the real issues facing the industry - called for a more competitive market for generic drugs, pointing out that Europeans pay more for generic drugs than US citizens.
In response to claims that the delayed or blocked sale of generic drugs was pushing up healthcare costs, the EFPIA said: "A single member state, the Netherlands, achieved greater savings - up to 400m euros - in one year, on only 33 medicines, simply by promoting greater price competition between generics."
The Commission report increases the pressure on the global pharmaceuticals industry.
Barack Obama, the US President-elect, is also expected to try to cut costs as part of the reform of healthcare coverage in the US.