On the crest of a waiver? - European Supplemental Protection Certificates (SPCs)

There has been considerable legislative and political activity in the field of supplemental protection certificates since May 2018, when the European Commission announced a legislative proposal to introduce an "export manufacturing waiver" into the Regulation (EC) No. 469/2009. As of 16 January 2019, the Council’s negotiation mandate has been settled, which has been called a win for the Romanian Presidency and moves the amendment to the SPC Regulation one step closer to being achieved by May 2019. This article looks at where things stand, including in particular on the key issues such as stockpiling, the proportion of SPCs that could be subject to the waiver and the notification and safeguarding requirements.

There has been considerable activity in the field of supplemental protection certificates (SPCs) since May 2018, when the European Commission announced a legislative proposal to introduce an "export manufacturing waiver" into the Regulation (EC) No. 469/2009 (the SPC Regulation) (the Proposal).

This article looks at where things stand, following a bout of legislative and political activity at the end of 2018 and beginning of 2019.

Introduction

SPCs are an important incentive available for pharmaceutical products in the EU; compensating patentees for regulatory delays by awarding SPCs as a sui generis extension to patent protection. SPCs last for up to five years after the expiry of basic patent protection for a pharmaceutical product (or 5.5 years if an extension relating to paediatric studies is obtained).

SPCs have been subject to challenge since their introduction in the 1990s, in particular from the generic and biosimilar industries, who consider that the protection afforded by SPCs is too long and puts Europe at a competitive and economic disadvantage compared to the rest of the world. In contrast, the innovative pharmaceutical industry views SPCs as justified and an important part of a European incentives framework that generates billions in R&D investment in Europe and safeguards 100s of 1000s of jobs, ultimately leading to the discovery of new life-saving treatments and cures for patients. These contrasting views are where battle lines have been drawn, with organisations such as Medicines for Europe representing the generic and biosimilar industry on the one side and organisations such as EFPIA and EuropaBio supporting the innovator industry on the other.

The status of the Proposal

For a more detailed recap on the Proposal and the developments leading up to its announcement in May 2018, please see our last report. Since then, the "train has left the station" on the legislative reform; a metaphor not lost on the European Parliament’s own “legislative train schedule” webpage. As set out in one of the useful links thereon, the legislative observatory for the amended SPC Regulation also usefully summarises the key legislative framework and relevant parts of the EU machinery involved.

As set out in these online portals, the Legal Affairs committee (JURI) is in charge of the amending legislation, with Luis de Grandes Pascual appointed as the Rapporteur in September 2018. The three committees for opinion are: International Trade (INTA); Environment, Public Health and Food Safety (ENVI); and Industry, Research and Energy (ITRE). The former two committees, INTA and ENVI, published their opinions on 05 December and 27 November 2018, respectively. (ITRE is said to have decided not to give an opinion.) The INTA and ENVI opinions were welcomed by Medicines for Europe for their pro-waiver stance but were scorned by EFPIA due to the weakening commitment to IP incentives and innovation and adverse impact on investment.

In addition, JURI itself published its comments and proposal on 22 November ahead of a meeting of the Working Party of Intellectual Property - Patents.

According to the state of play from the Presidency on 22 November (albeit this date is curious as the summary appears to refer to the meeting of 28 November as if it had already taken place), a further JURI report was to be expected this month (January 2019), albeit several compromise proposals are said to have been discussed and “a few important issues are still unresolved”.

Nonetheless, right on track and illustrating the fast pace of the debate in relation to this legislation, JURI revised its proposal ahead of a further meeting of the same Working Party of Intellectual Property - Patents scheduled to have taken place on 08 January 2019 (15777/18). Following that, there is now final mandate from the Council for negotiations with the European Parliament, which was approved by the Permanent Representatives Committee on 16 January 2019. Save for a few areas, this is largely in accordance with JURI’s 08 January 2019 proposal.

Key issues

Since the outset, four areas have encompassed the key issues in debate.

1. Stockpiling: Should the waiver be just for export or extend to stockpiling?

2. Application: What SPCs should be subject to the waiver, including in particular as between pending applications, granted SPCs and SPCs in force as at the date of its implementation?

3. Notices and safeguards: Are the proposed safeguards appropriate and sufficient?

4. Further reform: Will the legislative reform be limited to the waiver or will further, orbiting issues be introduced, in particular any of the many recommendations set out in the European Commission-sponsored legal study conducted by the Max Planck Institute (published simultaneously with the Proposal) (the MPI Legal Study).

We consider each of these issues in more detail below.

1. Stockpiling - will and/or should it come into play?

Stockpiling would allow generic and biosimilar manufacturers to build up stocks of products in Europe during SPC term for post-expiry sales on the EU market. From a patent law perspective, this would extend any exemption permitting manufacture (for export) to further infringing acts, including in particular keeping. A discussion about stockpiling goes hand-in-hand with an export waiver because stockpiling represents a key concern that might result from a waiver’s introduction and/or abuse of its scope.

Accordingly, stockpiling has also been mentioned as part of a number of economic and legal studies on SPCs. For example, the Commission-sponsored economic study conducted by the Charles River Associates (October 2017) stated that a stockpiling waiver would increase incentives for investment by generic and biosimilar producers in manufacturing and R&D production in Europe as well as reducing pharmaceutical expenditures by reducing delays in entry by generic and biosimilar producers. The more recent MPI Legal Study concluded that a stockpiling exemption was, from a legal perspective, consistent with the purpose of Europe’s SPC regime; albeit noting that this exemption appears to be more problematic (and aggravating to SPC owners) than the export waiver as it concerns the manufacturing of goods destined for the same market and for the same purposes as those covered by the MA.

When the Proposal was introduced and did not extend to stockpiling, this was welcomed by the innovator pharmaceutical industry. Since then it has been a redline that has been vehemently fought to be upheld by innovator organisations.

The JURI report from 08 January acknowledged the contest to extend the Proposal to stockpiling. It also indicated that certain delegations have been suggesting that the lack of the extension to stockpiling may be acceptable provided that the waiver applies to a sufficient proportion of pending and granted SPCs (discussed in key issue no. 2 below). The issue was said to be “reserved for COREPER level” (referring to the Committee of Permanent Representatives of the EU) and stockpiling has now not been included in the latest 16 January mandate. No doubt this will be a position which the innovator industry will be keen to maintain in the final legislation.

2. Application - what proportion of SPCs will be subject to the waiver?

The Proposal originally provided for the application of the waiver to all SPCs granted three months after its envisaged entry into force, so around Oct 2019 (paragraph five). On the whole this was viewed positively by the innovative industry in that SPCs granted before its introduction would not be subject to the waiver. However, certain organisations nonetheless urged that the waiver should also not apply to any pending SPC applications on the basis of adversely impacting the legitimate expectations of applicants who filed such applications before the waiver was proposed.

A further factor brought into play was fragmentation, in that drawing the line as between pending versus granted SPCs did not adequately take into account that, while subject to an EU Regulation, SPCs are national rights that are applied for and granted with different guidelines and, more importantly, varying timetables. Accordingly, this division might have led to a situation where SPCs on the same product could be granted in some European countries and so not be subject to the waiver, whereas pending in other countries and so become subject to the waiver. This would introduce a level of complexity that might adversely impact European distribution networks, as well as the free movement of goods.

As a result, in the first JURI report at the end of November 2018, the Proposal was amended to cover two general categories: (i) all SPCs applied for after the entry into force of the waiver; and (ii) from 01 July 2024, all SPCs (including granted and pending SPCs at the date of entry into force of the waiver) that come into effect after the entry into force of the waiver. This proposal was explained in a diagram (reproduced) as follows:

proposal

The revised approach solved the issue of fragmentation as the dates do not take into account grant dates and will apply to all SPCs for any particular product.

It is category (ii) which has now taken on particular significance as it proposes that, as of a particular date, the waiver applies to all SPCs that enter into force after the waiver legislation is passed. This mechanism could mean that the waiver might cover SPCs that have been applied for and/or granted before the legislation is passed. Further, as the figure illustrates (Example 2), some SPCs might come into force without being subject to a waiver, but subsequently become subject to the waiver after such particular date. Compared to the Proposal, this significantly extends the scope of waiver.

The particular date in category (ii) was originally proposed to be 01 July 2024 (provisionally five years after the legislation could come into force). This was brought forwards to 01 July 2023, and is now 01 July 2022 in the latest mandate (on the basis that this will be the 3rd anniversary of the legislation being passed). As noted above, this date is presumably a compromise reached between competing delegates and may have also been brought in exchange for stockpiling being ruled out. Notwithstanding the flexibility in any negotiation, if the former is correct, this would not seem to have been a like-for-like exchange as the issue of application date is a reasonably stand-alone, top level issue; whereas the potential for stockpiling is more relevant to the issue of notifications and safeguards, the next key issue discussed below. Considering the potential timelines, it also raises the question of whether generic and/or biosimilar companies could feasibly establish new manufacturing facilities within such a timeframe in order to benefit from the waiver.

3. Notices and safeguards - are rights holders’ legitimate interests adequately protected?

The notices and safeguards are of course a critical aspect of the waiver to ensure that SPC holders are adequately notified and to ensure that the export waiver operates within its contemplated and permissible scope. Since the Proposal, there have been some developments in this respect, which are reflected in the latest mandate, including:

  • The notice is to be given directly to the SPC holder, and not just local IP authority (who will still publish the notice and may also now charge an administrative fee).
  • The notice period is extended to three months prior to the relevant activities (not potentially as little as a few weeks as originally envisaged).
  • There have also been developments in the requirements concerning the content and updating of the notification, including:
    • a carve out permitting the limitation of the notification to the SPC holder so not to include confidential or commercially sensitive information (which is not particularly clear, nor defined or explained further in the text), and
    • removing the requirement to set out the intended start date (meaning the SPC holder will only know that it is at least three months away).
  • The application of an "EU Export" logo is one the primary measures included in the proposed legislation to try to ensure that the waiver is really for export only. In the Proposal, this was to be affixed to the outer packaging and (only where there is no outer packaging), the immediate packaging. This has been marginally extended to require the logo to be affixed to the outer packaging and “where feasible” the immediate packaging. Given the ease of circumvention, inner packaging was a minimum extension sought by the innovator industry. But it seems that attempts to extend this further to rely on the European Medicines Verification System (EMVS), mandated by the Falsified Medicines Directive (FMD) - which would mean that exported products would lack the unique identifier required to permit dispensation in the EU - have not thus far gained traction.
4. Further reform - room for more issues?

As well as the issue of stockpiling (discussed above), the MPI Legal Study contains multiple recommendations concerning the European SPC regime, including a number of potential reforms to the central grounds of SPC validity. Despite certain aspects being likely handled in respect of other developments, such as the Bolar exemption or the impact of Unified Patent Court, there is thus far no sign of these recommendations being escalated so to be included within the amendment of the SPC Regulation bringing in the waiver.

Including due to the time constraints on implementing the export waiver within the existing term of the European Parliament (by May 2019), it seems more likely than not other issues will not be included. This is also consistent with the impression given by the Commission representative at the MPI’s conference addressing the MPI Legal Study held in November 2018, which did not suggest any broader legislative agenda or intent for amending the SPC Regulation.

So what next?

The agreement of the Council’s negotiation position in the latest mandate has been called a win for the Romanian Presidency and moves the amendment to the SPC Regulation one step closer to being achieved by May 2019.

As for the UK, if it is not passed by 29 March 2019, the timing and continued uncertainty surrounding if or when Brexit will occur and whether it will do so with or without a Withdrawal Agreement continue to have significant implications as to whether this legislation will apply in the UK.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.