Manufacturing Waiver Weakens SPC Protection in Europe

On May 14, 2019, the Council of the European Union adopted the amending Regulation (EC) No. 469/2009, effectively exempting certain manufacturing activities in the EU from the scope of Supplementary Protection Certificates that have not yet been granted (“New SPC Regulation”). The New SPC Regulation will enter into force 20 days after its publication in the Official Journal of the European Union and will be binding in all Member States of the EU without any further act of national implementation.

Background

A Supplementary Protection Certificate (“SPC”) enables a patent holder to extend the market exclusivity of an approved medicinal product for a maximum of five years after the patent covering such product expires. The SPC is intended to compensate the patent holder for the revenue lost as a result of not being able to market the product during the lengthy regulatory approval process, and to amortize the patented product’s high research and development costs. Hence, the EU, by offering strong and extended patent protection, intends for SPCs to promote the research and innovation necessary to develop medicinal products and prevent pharmaceutical companies’ relocation to countries outside the Union market. For a structured guide on the Court of Justice of the European Union (“CJEU”) recent case law on SPCs in Europe, read our client alert.

The generic’s industry, however, also deserves a certain level of protection. Ensuring access to competitively priced pharmaceuticals, the timely availability of generics and biosimilars is tremendously important in healthcare systems in Europe and around the world.

Yet, the current regime on SPC protection in Europe has resulted in a double standard. Generics companies located outside the EU are allowed to (1) produce generics and biosimilars that will be exported to countries outside the EU, or (2) stockpile such products in order to launch them in the EU on the day after an SPC has expired. Manufacturers of generics or biosimilars based in the EU, however, are prohibited from taking similar actions while the respective SPC is in force, even if they intend to export the product outside the EU. This major competitive disadvantage has the potential to delocalize manufacturing and discourage investment in Europe.

The New SPC Regulation aims to correct this imbalance and level the playing field between manufacturers of generics and biosimilars based inside and outside the EU.

What will change?

The New SPC Regulation allows companies to manufacture generics or biosimilars in the EU for the purpose of (1) exporting them to countries outside the EU where protection does not exist or has expired and (2) stockpiling the product for six months or less in order to launch those products in the EU on the day after the corresponding SPCs have expired, in each case contingent on their fulfillment of the following obligations, which are laid out in the New SPC Regulation.

Manufacturers of generics or biosimilars are obliged to:

  • inform (1) the competent authority in the Member State where the manufacturing is to take place or where the first related act prior to the manufacturing is to take place, and (2) the SPC holder with a standard form for notification that is attached to the New SPC Regulation; and
  • inform the competent authority and the SPC holder no later than three months before (1) the start date of the manufacturing in the relevant Member State, or (2) the first related act prior to manufacture, whichever is earlier; and
  • notify the competent authority as well as the SPC holder about any changes before those changes take effect; and
  • in cases of manufacturing for the purpose of export, affix the black and white logo on the outer packaging of products in a size as to be sufficiently visible:


Source: http://www.europarl.europa.eu/doceo/document/TA-8-2019-0401_EN.html?redirect;

  • pay fees that a Member State may require for notifications to be made to the competent authorities which should be set out at a level which does not exceed the costs considering the expenditures for the administration; and
  • ensure that all of the relevant contractual parties are fully informed and aware that (1) manufacturing is taking place under the manufacturing waiver regime and (2) any act outside the scope of the manufacturing waiver infringes the SPC as long as the SPC applies.

Does the manufacturing waiver apply to all SPCs?

The regime of the manufacturing waiver applies to SPCs with applications that were filed on or after the date the New SPC Regulation enters into force (“Effective Date”). The manufacturing waiver will not apply to SPCs that have been granted before the Effective Date. Beginning on July 1, 2022, the manufacturing waiver will apply to SPCs with applications that were filed before the Effective Date and that take effect on or after the Effective Date.

What will not change?

During the term of the SPC, a diversion in the EU of a product made under the exception remains prohibited (e.g., a product that was manufactured for export purposes cannot be placed or re-imported into the EU; a product manufactured for storing purposes to be placed on the market in the EU one day after the SPC expires cannot not be commercialized in the EU as long as the SPC is in force). Furthermore, the manufacturing waiver does not apply to any act carried out to import products into the EU market merely for the purpose of repackaging, re-exporting or storing (i.e., any act outside the scope of the New SPC Regulation remains prohibited).

Outlook

The manufacturing waiver’s effect on the research, development, and production of innovative medicines in the EU remains to be seen. Whether the New SPC Regulation’s objectives will be achieved is also uncertain. Of particular interest is whether the waiver will sufficiently balance patent holders’ and generics and biosimilars manufacturers’ different interests. So too is the waiver’s ability to correct the imbalance between manufacturers of generics and biosimilars inside and outside the EU, and whether six months is a sufficient period of stockpiling to achieve the day-one launch. Finally, one hopes the manufacturing waiver will have a positive effect on public health expenditures, and result in better and more affordable access to medicines.