European Commission opens public consultation on SPCs and patent research exemptions

On 12 October 2017 the European Commission opened a public consultation on supplementary protection certificates (SPCs) and patent research exemptions. All citizens and organisations, wherever based, are welcome to contribute by completing an on line questionnaire. The consultation closes on 4 January 2018.

The Commission is particularly interested in assessing the impact on growth, jobs and innovation of a recalibration of patent and SPC protection by:

• the creation of a European SPC;
• an update of the scope of EU patent research exemptions, the “Bolar” exemption, which protects companies from claims for patent/SPC infringement when medicinal products are used in a study or clinical trial to obtain a marketing authorisation in the EU; and
• the introduction of an SPC manufacturing and export waiver, which would be designed to protect companies from claims for patent/SPC infringement when manufacturing for export or for launch in an EU Member State where the protection had expired.

The reference documents posted on the consultation website make an interesting read.

Malwina Mejer, from the Chief Economist Team at DG Growth, attributes an annual tripling in the filing of SPC applications since 1993 to the establishment of the centralised procedure in 1995, as well as to the enlargement of the EU. She finds that SPCs for innovative products are now being filed in 20 member states on average but concludes that efforts to harmonize the scope of SPC protection are needed as for one out of four products SPC applications result in different outcomes in different member states. This could be achieved, she believes, through increased clarity on the scope of medicinal product protection and harmonization of national SPC granting procedures. Coordination across national patent offices and exchange of information on SPC applications might facilitate this process further. This would improve legal certainty for generic entrants, she predicts.

Margaret Kyle, a distinguished Professor of Economics at the Ecole des Mines in Paris, also supports efforts to harmonize SPCs across member states. She observes that changes in the timescale of the development of medicinal products has increased the relevance of SPCs over time since fewer products are now developed very quickly (in fewer than 5 years) or very slowly (in more than 15 years). Innovators can now expect 12.46 years of protection before generic entry. Professor Kyle questions, however, whether the SPC incentive favours, as she believes it should, the development of therapeutically important medicines. Her own findings actually show that products with SPCs tend to have a faster generic entry than those without. This probably reflects the fact that products thought to be worth seeking the additional protection of an SPC are those that are most attractive to generic companies because they are likely to generate bigger profits. Centrally authorised products also tend to have faster generic entry because, she speculates, they are associated with a lower fixed cost for the generic industry. Lowering the costs associated with generic entry overall is likely to increase the availability of generics in all member states which would be especially beneficial in smaller markets.

Finally, Charles River Associates, an independent economics consultancy commissioned by DG Growth, weigh in with a very detailed economic analysis of the impact of changing exemption provisions during patent and SPC protection in the EU. Their conclusions are that:

• extending the Bolar exemption to cover any medicines and marketing authorisations in any country would benefit the European pharmaceutical industry (both innovator and generic) by reducing legal cost, reducing the need to duplicate clinical trials and streamlining strategic planning. Such measures are also expected to benefit skilled employment in the EU in the research industry and the patient population through the faster introduction of innovative products.
• extending the scope of the Bolar exemption to cover third party active pharmaceutical ingredient (API) supply would benefit EU-based API suppliers potentially producing 2,000 new jobs in API manufacturing by 2030. EU-based generic producers would also benefit from more choice of locally produced APIs.
• creating an SPC export waiver to third countries could result in net additional sales of €7.3 billion to € 9.5 billion by 2025 for the EU based pharmaceutical industry, both innovators and generics. This could mean 20,000 to 25,000 new jobs in pharmaceutical manufacturing among other consequences.
• an SPC export waiver within the EU could result in net additional sales for the EU based pharmaceutical industry of €208 million to €416 million by 2025 with a beneficial impact on jobs of up to 1,000.
• A stockpiling exemption would benefit EU based generic and biosimilar producers by enabling them to enter domestic markets immediately on patent or SPC expiry. This could also result in savings of 1-4% on pharmaceutical expenditure across the EU from the timelier introduction of generics and biosimilars.

These findings have found a predictably enthusiastic welcome from Medicines for Europe, the European trade association for generic pharmaceutical manufacturers.

EFPIA has not made any comment on those reference documents for the time being, but Nathalie Moll, the Director General of EFPIA, is quoted as saying that an SPC manufacturing waiver would be detrimental to innovation, to research and development in Europe and to the economy as a whole. Such a waiver would make attracting investment more difficult as investors look for the most favourable intellectual property environment to decide on their investments and can find such environments elsewhere. It would send a worrying signal about the EU’s respect for, and seriousness about, building a knowledge-based economy.

The economic evidence from Charles Rivers Associates on job creation and the savings resulting from earlier generic entry may be open to challenge by consultees. Indeed, it appears that the US Chamber of Commerce has already commissioned research that reaches an opposite conclusion. We expect the evidence from innovator companies to focus on the impact these changes could have on attracting research to the EU, investment incentives, competition through innovation and the promotion of essential innovation for patients. The Commission expressly seeks such evidence from stakeholders on their experience with SPCs and the Bolar exemption.

The Commission will publish a summary and assessment of the consultation outcome in a report on its website and will use the report to inform any future policy and legislative proposals on SPCs and patent exemptions.