The Great Divide? Implications of the SPC Waiver

On 14 May 2019, the council of the European Union adopted a new regulation, which introduces a manufacturing waiver for supplementary protection certificates (SPCs) that is aimed at removing the competitive disadvantages faced by EU-developers of generic or biosimilar therapies. However, the introduction of this new SPC waiver has prompted polarized opinions throughout the pharmaceutical industry.

To learn more about the SPC waiver, and its implications for the European pharmaceutical industry, Pharmaceutical Technology Europe spoke with Ayesha Raghib, an associate at the law firm Powell Gilbert, which specializes in intellectual property (IP) and EU pharmaceutical regulatory law.

Specifics of the manufacturing waiver

PTE: Could you outline the key aspects of the SPC manufacturing waiver, recently introduced by the EU council? 

Raghib (Powell Gilbert): On 1 July 2019, EU Regulation 2019/933 (the ‘Regulation’) came into force, amending the current SPC Regulation 469/2009, and introducing an SPC manufacturing waiver (SMW). The SMW now permits manufacturing and storing of generic drugs/biosimilars of SPC-protected products in the EU during the entire term of the SPC for products intended exclusively for export to countries where patent protection for the original medicine does not exist or has expired, and manufacture and storing during the final six months of the SPC term for post-expiry Day 1 EU launch. 

Generics/biosimilar manufacturers must comply with certain legal obligations including notifying national IP offices and the SPC holder at least three months in advance of manufacture (or first related act); affixing a specific logo to products manufactured for export; and due diligence requirements in respect of parties in the supply chain. 

The SMW will apply to SPCs applied for on or after 1 July 2019 but not to SPCs in force before that date. However, for SPC applications applied for before 1 July 2019 and taking effect on or after that date, the SMW will apply from 2 July 2022, allowing for a three-year transition period. 

Generics vs. branded

PTE: How is the industry viewing the SMW differently?

Raghib (Powell Gilbert): On one hand, the aim of introducing the SMW is to create a level global playing field between generic drug/biosimilar manufacturers established in the EU and third-country manufacturers, thereby creating jobs and promoting the manufacturing industry in the EU. Thus, the SMW has understandably been welcomed by the generic drug and biosimilar industry. 

Conversely, from the perspective of the originator industry, introduction of the SMW has been vehemently opposed and perceived as a significant step towards eroding the EU IP framework, raising concerns that the EU does not fully support innovation. The European Federation of Pharmaceutical Industries and Associations (EFPIA), the voice of the originator industry operating in Europe, is of the view that (1): ‘The adoption of the SPC manufacturing waiver will ultimately impact on our capacity to develop new treatments for patients living with diseases like cancer, diabetes, and dementia. It sends a negative signal to the world that Europe is devaluing its intellectual property framework, making Europe a less attractive location for research and development, impacting on jobs and investment.’

The benefits are clearly in favour of the generic drug/biosimilar manufacturing industry as manufacturers of generic drugs or biosimilars can now compete on the global playing field. However, whether or not established global manufacturers will relocate their manufacturing facilities to the EU remains to be seen. Comparative cost of manufacture will of course be a driving factor. These factors could negate the intended effect of the SMW to some extent. The long-term impact of the SMW is very difficult to predict at this early stage.

IP and legal implications

PTE: Could you highlight the importance of IP in the pharma industry?

Raghib (Powell Gilbert): Drug development is very expensive and risky. Originator companies spend vast sums of money investing in the research and development of innovative medicines, and seeking marketing approval to place those medicines on the market. 

In the pharmaceutical industry, IP rights-specifically patents and SPCs-are a means of protecting these new medicines by affording the patent/SPC owners a limited monopoly for the new medicines and preventing other companies from ‘copying’ the medicines. As a result of these monopolies, innovator companies are able to maintain the prices of their medicines and recoup the costs of development as well as invest in the development of new therapies. Thus, IP rights provide an incentive for innovation, which in turn means that patients have access to new therapies to meet their needs. 

PTE: What impact might the newly passed SPC waiver have on legal disputes concerning IP in pharma?

Raghib (Powell Gilbert): To date, the SPC regulation has led to the launch of many court cases to try to clarify its operation, and it is likely that the legislation underlying the SMW will add further questions over the scope and effect of SPCs. For example, ‘storing’ for the purpose of Day 1 EU Launch is expressly permitted; however, it appears that only ‘temporary storing’ is permissible as a ‘related act’ for the exclusive purpose of export. In fact, the term ‘related act’ is also not defined clearly in the regulation and could be the subject of litigation. 

In addition, there may also be disputes in regard to alleged non-compliance with the notification obligations placed upon generics/biosimilar manufacturers. When commencing manufacture in the EU for export, issues may also arise as to whether, in fact, the product is not (or is no longer) protected by patents in the countries for intended export. It would not be surprising to see litigation as a result of the SMW and its operation.  

PTE: Supplementary to the potential IP disputes, could there be other legal ramifications of the SPC waiver for pharmaceutical companies?

Raghib (Powell Gilbert): In order to offset the narrowing of IP rights under the SMW, we may see an increase in applications for secondary patents (e.g., patents for manufacturing methods, formulations, and uses) by originator companies. This in turn may lead to increased litigation in respect of these patents.

Also, as patent and SPC rights are no longer co-extensive (i.e., previously the same acts were prohibited under both patents and SPCs), we expect that national legislation will need to be amended to reflect the changes introduced by the SMW. 

Global plans? 

PTE: Do you believe there are, or will be, any plans for legislation, such as the SMW, to be introduced globally?

Raghib (Powell Gilbert): With regard to possible globalization, the first point to note is that SPCs (or equivalent patent-term extensions) are not available globally and only exist in certain countries, such as the United States, Japan, Canada, and Australia. Whether or not a SMW is introduced in those countries would depend upon the size and influence of the local generic-drug/biosimilar industry. 

For example, in Canada, as a result of strong lobbying by the generic‑drug industry, generic-drug companies are already permitted to manufacture for export while the Canadian equivalent of the SPC (Certificate of Supplementary Protection) is in force. Whereas, in Australia, the introduction of an export waiver with a similar scope to that in Europe has been considered in the past, these efforts appear to have been abandoned for the time being.  

Potential deterrent?

PTE: Do you think there is the possibility that the SMW could discourage companies from basing pharma manufacturing in Europe?

Raghib (Powell Gilbert): It may be that the notification obligations placed upon generic‑drug/biosimilar manufacturers may discourage EU-based manufacturing from making use of the SMW opportunities as much of the information required to be disclosed to SPC-holders/national IP offices is considered to be sensitive and/or commercially confidential (for example, the name and address of manufacturers) and could also provide an indication regarding generic drug/biosimilar launch plans. However, Medicines for Europe-which represents the generic drug/biosimilar industry-while opposed to the notification requirements in the legislation, remains optimistic and considers that the SMW will ‘create manufacturing opportunity and jobs and to increase Europe’s capacity to manufacture and supply its own medicines’ (2). 

Nevertheless, the envisaged stimulus to the EU manufacturing industry may be hampered by the prospect of generic‑drug/biosimilar manufacturers becoming embroiled in litigation with SPC-holders. There is unlikely to be any immediate impact on EU-based manufacturing from the perspective of originator companies, unless it transpires that the SMW has a negative impact on the research and development of new medicines in the long run as feared by EFPIA. 

Brexit

PTE: Will the UK’s exit from the EU have any effect on the implementation of the SMW?

Raghib (Powell Gilbert): In preparation for a ‘no-deal’ exit, the UK has enacted legislation that will enable EU law relating to SPCs to be retained in UK law at the point of leaving the EU. The regulation underlying the SMW will, therefore, automatically become part of UK law. In addition, the UK IP Office has recently opened a consultation regarding proposed draft legislation amending certain parts of the regulation to ensure that the SMW operates correctly, for example, references to the ‘Union’ instead refer to the ‘United Kingdom’ (3). 

Otherwise, the proposed legislation is intended to operate in an equivalent manner to the SMW such that manufacture of SPC‑protected medicines for export outside the UK, and stockpiling for sale on the UK market immediately after SPC expiry will be permitted. EU-based manufacturers will also be free to export to the UK as it will have third-country status after Brexit. 

In the event that there is a deal between the UK and the EU, under the current withdrawal agreement-which has not been ratified by the UK Parliament-EU law would continue to apply to the UK during the transition period, which currently ends on 31 December 2020, so the SMW would apply during the transition period. 

References

1. EFPIA, “Redressing Europe’s Innovation Balance,” Press Release, 17 April 2019.

2. Medicines for Europe, “Medicines for Europe Applauds Compromise on SPC Manufacturing Waiver,” Press Release, 14 Feb. 2019.

3. UK IPO, “Supplementary Protection Certificate Manufacturing Waiver in a ‘No Deal’ Outcome,” Draft Legislation, www.gov.uk/ipo, July 2019.

Article Details

Pharmaceutical Technology Europe
Vol. 31, No. 8
July 2019
Pages: 55–57

Citation 

When referring to this article, please cite it as F. Thomas, “The Great Divide? Implications of the SPC Waiver,” Pharmaceutical Technology Europe 31 (8) 2019.