SEVILLE, Spain - Europe's pharmaceutical industry hit back at the European Commission on Thursday, saying a probe into lack of competition in the sector was exaggerated and misleading.

The industry was caught on the back foot last November when Competition Commissioner Neelie Kroes published preliminary results of an inquiry that concluded major drug companies were delaying or blocking the entry of cheaper generic medicines.

She found delays in getting generics to market had cost healthcare providers about 3 billion euros ($4.1 billion) between 2000 and 2007.

But Thomas Cueni, leader of a drug industry taskforce on the issue, said this equated to less than 1 euro out of an average 430 euros per capita spent on medicines in Europe each year.

Furthermore, most of the delays were down to regulatory and other bureacratic issues, rather than deliberate action by companies, he said.

It appears that DG Competition (Directorate General for Competition) officials got seduced by the anecdotes they collected and they missed the big picture, Cueni said at the the European Federation of Pharmaceutical Industries and Associations annual meeting in Spain.

The Commission -- the European Union's executive arm -- is expected to issue its final report in July and drugmakers are braced for a bruising battle.

Kroes kicked off the sector investigation in January 2008 with a series of raids on makers of brand-name drugs, including AstraZeneca (AZN.L), GlaxoSmithKline (GSK.L), Pfizer (PFE.N), Merck (MRK.N) and Sanofi-Aventis (SASY.PA).

There were also raids on generic drugmakers suspected of colluding to limit the entry of generics, sometimes in exchange for payments from originator companies.

The Commission's findings could open the door to action against individual companies, with the potential for large fines down the road.

So far, however, Cueni said he was not aware aware of any investigations against specific manufacturers.

The branded industry, which denies wrongdoing, says the Commission has failed to recognise the complexity of the market and the vital importance of defending patents, though it does accept there may be room for improving the patent system.

This could include the introduction of a common European patent, applicable in all EU countries, and the introduction of a specilaised patent litigation system.

There is a continued need to talk about improvements in processes in the European patent system, Cueni said.

But what we can't afford and what we don't need is general questioning of the legitimate defence of intellectual property rights in an industry which needs them more than anybody else.

Any weakening of patents would both undermine incentives for investment and jeopardise attempts by Europe to persuade developing countries to respect intellectual property, he said.

(Editing by Dan Lalor) ($1 = 0.7377 euro)