In 1992 the position of European pharmaceutical patent owners was much strengthened by the introduction of patent extensions known as Supplementary Protection Certificates (SPCs), part of a policy aimed at making the European Union one of the best places for innovative drug makers to be based.
Now, nearly 30 years on, the EU is taking a step back. In July 2019, against the backdrop of a massive increase in public demand for medicines globally and blossoming generics industries in countries (including China and India), which do not give extended patent protection, SPC reforms were introduced which weaken the SPC framework in favour of the generics.1
What is changing?
SPCs provide up to five years’ extra patent protection for certain authorised medicines to compensate pharmaceutical patent holders for patent time lost during the lengthy authorisation process when the product cannot be marketed. If the drug has been successful, the generics and biosimilar producers will be waiting in the wings at the end of this period of protection. Thanks to the EU ‘Bolar’ exemption they will have been able to carry out clinical trials for their generics and biosimilar products in readiness for launch when the SPC expires, but they would not be able to start manufacturing in the EU for the duration of the SPC.
The new reforms will change the position by allowing manufacture during the term of the SPC for two purposes only: first, for export to non-EU countries where patent protection did not exist or has expired and second, in the last six months of the SPC, for stockpiling, ready for entry into the EU market immediately the SPC expires (‘Day one entry’).
The waiver will be introduced gradually. At first it will only apply to SPCs applied for on or after 1 July 2019. From 2 July 2022 the waiver will apply to all SPCs taking effect on or after 1 July 2019.
Boosting the competitiveness of EU generics and biosimilars
The export waiver will allow EU generics and biosimilar producers to compete in international markets where there is no patent protection or protection has expired without moving production out of the EU. The stockpiling waiver should enable faster entry by EU manufacturers into the lucrative European market on expiry of the SPC which, in practice, is likely to reduce the period of exclusivity enjoyed by innovator companies, and will also be welcomed by health services as involving faster access to cheaper generic alternatives. It is telling that the legislation as originally proposed by the European Commission did not include the stockpiling exemption, which was added as a result of intensive lobbying by the generic and biosimilars sector and has been regarded by some as a bit of a ‘coup’. This may be seen as a reflection of an increasing drive worldwide towards the use of generic solutions.
Despite welcoming the reforms overall, the generic sector has pointed to what it regards as unnecessary obstacles in the new framework including potentially burdensome notification and labelling requirements.
Why is research-based pharma concerned?
The reforms represent a clear cutting down of the patent holder’s monopoly position and are likely to lead to a loss of revenues due, in particular, to faster market entry of generics on expiry of the SPC. The European Federation of Pharmaceutical Industries and Associations (EFPIA), which represents the European innovative biopharmaceutical industry, has estimated potential annual losses of between US$2.65bn and US$5.30bn and has warned that the reforms send ‘a negative signal to the world that Europe is devaluing its intellectual property framework.’2
On a practical note there is a major concern about leakage of exported products back into the EU. The legislation attempts to prevent this by obliging manufacturers to include a special logo (pictured below) on packaging indicating that the product is for export only. Manufacturers must also ensure that products for export do not bear ‘active unique identifier’ safety features, which might enable them to enter the EU’s end-to-end medicines verification scheme designed to stop falsified medicines entering European supply chains.3
A further concern for the innovative industry is that manufacturers may overstep the limits of what is permitted under the waiver. In response to such concerns, the legislation makes the waiver conditional on notification to the SPC holder and the intellectual property office in the relevant EU Member State at least three months before production starts. This notification must include, among other things, the name and address of the producer, the purpose of the manufacture and the Member State in which the manufacture and storage will take place. This will enable innovators to apply for prohibitory injunctions in appropriate cases. A source of dispute in this regard may include the scope of a provision allowing manufacturers to carry out ‘related acts’ which are ‘strictly necessary’ for manufacture, export and storage; these are not precisely defined. As referred to above, producers of generics and biosimilars have objected that the notification requirements oblige them to reveal confidential information about their business strategy not only to innovators but also to generic competitors as this information will be published.
How is the patient served?
As was to be expected, the reforms have had very different receptions from innovators and generics. Patients and health services are of course best served by having both a healthy innovative industry to produce new medicines and a healthy generic industry to achieve the affordability needed by cash-strapped public health services. Whether EU legislators have, as they claim, now got the balance right is of course, impossible to predict.
This article first appeared on the website of the Healthcare and Life Sciences Law Committee of the Legal Practice Division of the International Bar Association, and is reproduced by kind permission of the International Bar Association, London, UK. © International Bar Association.
1 Regulation (EU) 2019/933 20 of May 2019, amending existing Regulation (EC) 469/2009.
2 EFPIA, Redressing Europe’s Innovation Balance, 17 April 2019.
3 Falsified Medicines Directive 2011/62/EU.