BRUSSELS (Dow Jones)--The European Court of Justice Thursday made it easier for generic makers to market competing versions of popular drugs, dealing a setback to Swiss drug maker Novartis AG (NVS).

Novartis brought the case against the U.K. Medicines Control Agency, which approved a generic product made by SangStat, now owned by Genzyme Corp. (GENZ.NQ).

The generic version competed with Novartis' transplant surgery drugs. Novartis said SangStat's version of the drug was different from the Novartis product even though both contained the same active ingredient.

Novartis argued the Medicines Control Agency shouldn't have used an earlier U.K. authorization for the Novartis product to clear SangStat's version for sale in the U.K.

The English Court of Appeal referred the case to Europe's highest court for clarification and SangStat won a preliminary round of the case last year after the court's top legal adviser ruled in its favor.

On Thursday the full court confirmed that ruling, saying that generic makers who make slight modifications to versions of drugs can still win swift approval to put them on the market. [ 29-04-04 0935GMT ]

Novartis said the ruling has little commercial impact but deals a blow to companies seeking to roll out new medicines. "The court's decision is a blow to the innovative, research-based industry," said Nehl Horton, spokesman for Novartis.

The case is important as big drug companies complain that European regulators and courts are undermining research and development by supporting generics makers as well as importers of discount medicines. European governments say the practices are fair and help avoid high prices paid by U.S. consumers, where drug costs have become a hot election-year issue.

"The pharma industry finds these rulings a bitter pill to swallow - but that's all to the benefit of the European consumer who benefits from lower drugs prices," said Tim Price of Brussels-based consultants GPlus Europe, which advises European drug discounters.

Thursday's ruling is similar to last October's judgment against AstraZeneca PLC (AZN), which had sought to prevent generic competitors from marketing older, capsule versions of its blockbuster Losec heartburn drug.

AstraZeneca wanted to restrict sales in Denmark to its newer, tablet version of Losec. But in that case, the court backed Generics U.K. Ltd.'s bid to market older, capsule versions under a fast-track procedure.

In Thursday's case, judges ruled that Novartis couldn't restrict marketing of generic products that have "the same pharmaceutical form" - even if patients' bloodstreams absorb the products in slightly different ways.

-By James Kanter, Dow Jones Newswires; 322-285-0136; james.kanter@dowjones.com [ 29-04-04 1007GMT ]

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