European Commission Seeks Input on Patent Rules for APIs

By Patricia Van Arnum - DCAT Editorial Director

November 8, 2017

The European Commission has issued a public consultation to gain feedback on a proposal to allow for a waiver for supplementary protection certificates (SPCs) and other changes in an effort to bolster the competitiveness of European manufacturing sectors. So what is at issue?

SPCs are an intellectual property right that serve as an extension to a patent right. They apply to specific pharmaceutical and plant protection products that have been authorized by regulatory authorities, but they have created an issue for European active pharmaceutical ingredient (API) manufacturers in limiting the time in which they can begin development of APIs. DCAT Value Chain Insights examines the issues.

Seeking public input on SPCs

In October 2017, the European Commission (EC) issued a public consultation, open until January 4, 2018, to gain feedback on measures regarding waivers for supplementary protection certificates (SPCs), an issue of strong importance to innovator pharmaceutical companies, generic-drug companies, and manufacturers of active pharmaceutical ingredients (APIs). SPCs provide an incentive in the European Union (EU) that extends the protection of patented medicines by up to five years to compensate the time lost in obtaining regulatory approval of the medicine. During this period, European manufacturers of generic and biosimilar medicines cannot produce their medicines in the EU.

As part of the Single Market Strategy, adopted in October 2015, the EC said it would consult, consider, and propose further measures, as appropriate, to improve the patent system in Europe, notably for pharmaceutical and other industries whose products are subject to regulated market authorization. In particular, the strategy aimed to explore a recalibration of certain aspects of patent and SPC protection, and announced that this recalibration could comprise the following three elements: (1) the creation of a European SPC title; (2) an update of the scope of EU patent research exemptions; and (3) the introduction of an SPC manufacturing waiver.

SPCs are a unique intellectual property right that constitute an extension (of up to five years) to the term of a patent right (of 20 years). SPCs apply to innovative pharmaceutical and plant protection products that have been authorized by regulatory authorities. They aim to offset the loss of effective patent protection that occurs due to the compulsory and lengthy testing and clinical trials that products require prior to obtaining regulatory marketing approval. In addition, the Bolar patent exemption aims to speed entry of generic medicines into the market by allowing early preparatory development on generics to obtain pre-market regulatory approval even when the SPC of the reference medicine is still in force. The Bolar exemption is regulated at EU level for the pharmaceutical industry only. The scope of the EU Bolar exemption has been updated in some EU countries to meet new pharmaceutical-related requirements among other things. The Bolar exemption enables generic and biosimilar medicine developers to undertake R&D in order to obtain regulatory approval for their products.

With this consultation, the EC seeks the views of stakeholders on the SPC and patent research exemption of SPCs. The EC is seeking public input to evaluate the current legislation and impact assessment of any potential modification of the SPC and patent-exemption framework in the European Union. The EC will assess and summarize the results in a report, which will be made publicly available on the website of the EU’s Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs. The results of the consultation will provide input for the EC when preparing an evaluation of EU legislation on SPCs, and any future policy proposals on SPCs and patent exemptions, including the assessment of the impact of different policy options.

Potential impact for API suppliers

Groups, such as Medicines for Europe, the industry association representing generic-drug manufacturers in Europe, have advocated for a SPC manufacturing waiver to promote a strong manufacturing base in Europe. The SPC manufacturing waiver is a proposal to fix unintended side effects of the SPC by allowing developers of generic and biosimilar medicines to produce during the SPC period in order to supply unprotected markets as soon as possible after protections expire.

Under current legislation, generic and biosimilar medicines producers are not allowed to manufacture for commercial purposes during the patent period as it infringes the patent right, as outlined in a recent report by Medicines for Europe. In addition to patent protection, SPC regulation in Europe allows holders of patents to authorize medicinal products to partially extend their product exclusivity by up to five years. The purpose of the legislation was to recompense product-developing companies for the time taken to obtain regulatory approval of their medicines and give them longer market exclusivity in the form of a SPC. However, currently the SPC regulation has the unintended effect of putting the European generic and biosimilar medicines industries at competitive disadvantage vis-à-vis manufacturers producing in non-EU countries where no similar patent/SPC protection exists. “The latter [is] able to take advantage of export markets years earlier than European producers and to enter the EU market immediately as soon as SPCs expire in Europe,” concludes the Medicines for Europe report. Therefore, European manufacturers are currently required to outsource production outside Europe to supply countries without SPCs or where SPCs expire earlier than in Europe in order to provide competition as soon as SPCs expire in Europe.

According to the Medicines for Europe report, a SPC manufacturing waiver would allow European pharmaceutical producers to start manufacturing generic and biosimilar medicines during the SPC period in order to export to countries where intellectual property (IP) protection is no longer in place. It would also resolve the competitive disadvantage of European producers vis-à-vis producers in other regions with less rigid IP systems and avoid forcing European producers to invest abroad in order to seize business opportunities in unprotected markets (especially in biosimilars and complex products). The Medicines for Europe report also concludes that the SPC waiver would have no impact on originator industry IP protection, would provide an opportunity to maintain and create high-tech jobs in Europe, including manufacturing and R&D, would make it easier for regulators to deal with local manufacturing, and would create security of supply.

"The SPC compensates originator drug manufacturers for regulatory approval delays by extending their monopoly for up to five years after patent expiry. Whilst our industry does not challenge the principle of compensation for delays, the application of the SPC forces generic and biosimilar manufacturers to manufacture outside of Europe for export to countries without SPCs or whose SPC expires earlier than in Europe,” said Medicines for Europe in an October 18, 2017 statement. “With the SPC manufacturing waiver, European medicine manufacturers will be able to re-invest in high skill jobs in Europe. To improve access to life saving medicines for patients, the SPC manufacturing waiver complements the Bolar provision and enables European manufacturers to bring competition at the date of SPC expiry and without unnecessary delays.”