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SPC regulation amendment and export manufacturing waiver: in-depth analysis
Oct. 31, 2019
A supplementary protection certificate (SPC) is an EEA-wide IP right that extends the duration of certain rights associated with a patent (particularly human or veterinary medicinal and plant protection products) and which enters into force after expiry of a patent on which it is based.
SPCs are currently regulated by EU Regulation 469/2009 on medicinal product SPCs (SPC regulation).
Export manufacturing waiver: origin and chronology
In June 2015 the European Parliament requested the European Commission to start the approval process for an export manufacturing waiver, in the wake of a welcoming report by the Italian MEP Alessia Mosca, who defended the benefits of the early export of generics and biosimilars to non-EU countries (where such products enjoy no patent protection, despite existing in Europe).
In October 2015 the European Commission first mentioned the possibility of implementing an export manufacturing waiver within the overall framework of its Single Market Strategy:
To strengthen EU-based manufacturing and competitiveness in industry sectors whose products are subject to regulated market authorisations, the Commission will explore a recalibration of certain aspects of patent and SPC protection. An SPC manufacturing waiver could allow the European generic and biosimilar medicines industries to create thousands of high-tech jobs in the EU and many new companies.
Further, in May 2016 the European Parliament emphasised the need to implement an export manufacturing waiver before 2019:
[the European Parliament] urges the Commission to introduce and implement before 2019 an SPC manufacturing waiver to boost the competitiveness of the European Generics and Biosimilar Industry in a global environment, as well as to maintain and create additional jobs and growth in the EU.
Since then, there have been various studies and public consultations on the amendment of the SPC regulation.
Proposal to amend SPC regulation
On 28 May 2018, as a result of what had begun in June 2015 when the European Parliament called on the European Commission to approve an export manufacturing waiver, the European Commission submitted its proposal for a regulation to amend the SPC regulation and produce an impact assessment report.
The proposal sought to amend Article 4 of the SPC regulation to include a provision whereby a certificate would not protect against an action for which the basic patent is protected, provided that the action comprises making products for the exclusive purpose of exporting to third countries or any related action that is strictly necessary to make or export the products.
The proposal required that the authority (ie, the state) responsible for granting an SPC be notified by the company which aims to make the products at least 25 days in advance. In addition, the maker should ensure that the parties in a contractual relationship with it and that take part in the production of medicinal products are fully aware that the act was covered by the exception to the right to the SPC and the fact that the product's placing on the market, import or reimport might infringe the SPC.
JURI report
The proposal of 28 May 2018 provoked much criticism from the European pharmaceutical industry.
Following the proposal, the Opinion of the Committee on the Environment, Public Health and Food Safety of 13 September 2018 and the Opinion of the Committee on International Trade of 15 October 2018, which were addressed to the European Parliament Committee on Legal Affairs (JURI), proposed to extend the exemption of stockpiling.
On 30 October 2018 JURI published its draft report, which adopted substantial proposals for amending the proposal of 28 May 2018.
The most significant changes proposed in this draft report are as follows:
• A company intending to manufacture a SPC-protected medicinal product for the exclusive purpose of exporting it to a third country outside the European Union will be required not only to notify the respective national patent office in each EU member state where the manufacturing will take place, but will also need to directly inform in writing the SPC holder of its intention.
• The national patent office(s) and the SPC holder must be notified no later than three months before the start date of the intended manufacture (a significant change compared with the 25-day period required in the proposal of 28 May 2018).
• There will be no obligation to inform SPC holders. Further, national patent offices need not publish information considered confidential or commercially sensitive.
• The export manufacturing exemption will apply to all SPCs for which the basic patent expires on or after 1 January 2023.
JURI's proposed changes would be a considerable improvement on the proposal of 28 May 2018, particularly in terms of safeguarding SPC holders' industrial property rights.
Further negotiations
The Committee of Permanent Representatives commenced inter-institutional negotiations on 23 January 2019. However, by April 2019 the major pharmaceutical market players and EU institutions had failed to reach a consensus regarding the amendment of the SPC regulation and the limits and conditions of the manufacturing clause for exports.
The European Council considered that generic and biosimilar manufacturers which are covered by an SPC for the exclusive purposes of exporting them outside the European Union should be allowed to manufacture medicinal products in the European Union. However, in line with the European Commission's proposal of 28 May 2018, the exemption should not be extended to stockpiling. In other words, the storage of a medicinal product would not be possible in a country where such medicinal product is covered by an SPC, even though it is intended to be marketed when the SPC protection has expired.
In its mandate for negotiations with the European Parliament, the European Council determined as follows:
(8) In these specific and limited circumstances, and in order to create a level playing field between Union-based makers and third country makers, it is appropriate to restrict the protection conferred by a certificate so as to allow making for the exclusive purpose of export to third countries and any related acts in the Union strictly necessary for making or for the actual export itself, where such acts would otherwise require the consent of a certificate holder ('related acts')…
Moreover, it should not cover any act or activity for the purpose of import products or medicinal products into the Union merely for the purposes of repackaging and re-exporting. It should not cover temporary storage of the product or medicinal product containing that product for any purposes other than those set out in this Regulation". (Emphasis added.)
The European Council differed greatly from the approach adopted by the European Parliament Committee on the Environment, Public Health and Food Safety in its draft opinion of 13 September 2018, which was addressed to JURI, in favour of extending the exception to stockpiling:
The rapporteur therefore intends to restore the level playing field between EU-based generic and biosimilar manufacturers and non EU-based ones, boosting the competitiveness of EU based generic and biosimilar manufacturers especially in respect to the export to those countries where no supplementary protection certificate is in place, as well as facilitating Day-1 entry within the Union. For this, the rapporteur not only supports a manufacturing waiver for export, but also supports introducing a stockpiling waiver, giving generic and/or biosimilar manufacturers more incentives to manufacture within the Union and not in third countries…
Introducing the manufacturing and stockpiling waiver will also strengthen the generic and biosimilar sector in Europe, and reinforce the EU's position as a hub for pharmaceutical innovation and manufacture, especially in the field of biosimilars, creating jobs and ensuring expertise remains within the Union. (Emphasis added.)
Likewise, the European Council departed from the position of the Committee on International Trade of the European Parliament in its draft opinion of 15 October 2018 and its final opinion of 2 December 2018, which was also in favour of extending the exception to stockpiling:
That exception should cover the making of the product, including the product which corresponds to the medicinal product protected by a supplementary protection certificate in the territory of a Member State, for the exclusive purpose of export to third countries, and/or day-1 entry into the Union market, as well as any upstream or downstream acts by the maker or by third parties in a contractual relationship with the maker, where such acts would otherwise require the consent of the certificate-holder, and are strictly necessary for making for the purpose of export, for the actual export itself, or for day-1 entry.
For instance, such acts may include the supply and import of active ingredients for the purpose of making the medicinal product to which the product covered by the certificate corresponds, or temporary storage of the product or advertising for the exclusive purpose of export to third country destinations, or day-1 entry. (Amendment Recital 9.) …
(11) By limiting the scope of the exception to making for the purpose of export outside the Union and acts strictly necessary for such making or for the actual export itself, or for day-1 entry the exception introduced by this Regulation will not unreasonably conflict with normal exploitation of the product in the Member State where the certificate is in force, nor unreasonably prejudice the legitimate interests of the certificate-holder, taking account of the legitimate interests of third parties.
The Commission's study states that "neither the production for export, nor the production for stockpiling purposes run counter to the legal objectives of the SPC system", and "arguably the only effect of prohibiting stockpiling would be to boost the business opportunities of non-EU companies to the disadvantage of generic manufacturers established here." (Amendment Recital 11.) (Emphasis added.)
The last step in the amendment procedure came from JURI's final report of 28 January 2019 (plenary session).
However, this final report seemed to agree (in contrast with the European Commission's proposal of 28 May 2018, the text proposed by the European Council in its mandate of 16 January 2019 and JURI's report draft of 30 October 2018) with extending the exception to stockpiling.
Recital 2bis (a newly created recital) states that the amendment of the SPC regulation cannot interfere or harm IP rights:
Amending Regulation (EC) No 469/2009 so as to allow the production of generics and biosimilars for export and storage should not conflict with intellectual property rights, which remain one of the cornerstones of innovation, competitiveness and growth in the Member States. This Regulation should not interfere with the duration of market exclusivity rights during the term of a patent. (Emphasis added.)
However, the final report, whose rapporteur was the Spanish MEP Luis de Grandes Pascual, set out a significant number of amendments to the European Commission's proposal of 28 May 2018, in favour of stockpiling:
(17) This Regulation does not affect the application of Union measures that aim to prevent infringements and facilitate enforcement of intellectual property rights, including Directive 2004/48/EC of the European Parliament and of the Council 41 and Regulation (EU) No 608/2013 of the European Parliament and of the Council 42. Furthermore, a medicinal product bearing an active Unique Identifier as per Articles 3(d) of Commission Delegated Regulation (EU) 2016/161 42a would indicate that the product is not exclusively intended for the purpose of export to third countries. Therefore, this Regulation should only prohibit a product exclusively intended for the purpose of export to third countries bearing such an active Unique Identifier. That prohibition shall not apply to products intended for the purpose of storage for EU-Day-1 Entry. (Recital 17.) (Emphasis added.)
(20) The Commission should carry out a regular evaluation of this Regulation (…) Such regular evaluation should also address the effects of this Regulation on manufacturing within the Union by Union established makers forreasons of stockpiling with a view to Day-1 entry into the Union market when a certificate expires. In this context, it would be important to ascertain whether manufacturing previously taking place outside of the Union, would be moved to within its territory." (Recital 20.) (Emphasis added.)
Article 21bis states that:
Every three years, the Commission shall carry out an evaluation of the SPC manufacturing waiver […] Special account shall be taken on the effects of stockpiling with a view to Day-1 entry into the Union market when acertificate expires. (Emphasis added.)
Thus, the substantial amendments finally approved by JURI, which significantly disagree with its draft report of 30 October 2018, were as follows:
• The manufacturing waiver is extended to allow not only the manufacturing of SPC-protected medicine for exporting to third countries, but also the manufacturing and stockpiling for day-one entry to the EU market immediately after SPC expiry. Such stockpiling is to be allowed during the final two years of validity of the respective SPC.
• Any company intending to benefit from the manufacturing waiver must notify not only the national patent office that granted the SPC, but also directly inform the SPC holder in writing. This must be done no later than two months before the start date of the manufacturing (which is less than the three months provided by JURI's draft report and longer than the 28 days foreseen in the European Commission's proposal).
• A definition of the producer benefitting from the manufacturing waiver is to be added, which defines the 'maker' as:
a legal person established in the Union on whose behalf the making of a product or a medicinal product containing that product, for the purpose of export to third countries or storing during the final 2 years of validity of the certificate is done.
• The text envisages two transitional regimes for the applicability of the manufacturing waiver:
o it will apply to all SPCs for which the underlying basic patent expires on or after 1 January 2021; and
o it will apply to all SPCs that are applied for on or after the entry into force of the SPC regulation introducing the manufacturing waiver (even if the underlying basic patent expires before 1 January 2021).
Therefore, not only did JURI merely consider including the proposals from the European Parliament committees (ie, the Committee on the Environment, Public Health and Food Safety, and the Committee on International Trade), it actually did so, against its own initial opinion.
Interim agreement
Under pressure from the European elections scheduled for May 2019, European institutions held a meeting to reach a provisional compromise, which was published on 20 February 2019 (interim agreement).
By virtue of the compromise reached and in contrast to the exception of manufacturing for export, the stockpiling exception would apply only during the final six months of an SPCs validity, against the two-year period approved in JURI's final report of 28 January 2019 (plenary session):
(a) the acts comprise:
…
(iii) making, no earlier than 6 months before the expiry of the certificate, a product, or a medicinal product containing that product, for the purpose of storing it in the Member State of making in order to place that product, or a medicinal product containing that product, on the market of Member States after the expiry of the certificate; or
(iv) any related act that is strictly necessary for the making in the Union as referred to in point (iii), or for the actual storing itself, provided that such related act is carried out no earlier than 6 months before the expiry of the certificate. (Emphasis added.)
Further, JURI held an extraordinary meeting on 26 February 2018 with a view to voting on the interim agreement reached in the tripartite negotiations, which received 24 votes in favour and one against.
Although the date of the plenary session (in which the text of the interim agreement reached in the tripartite negotiations between the European Parliament, the European Council and the European Commission must be formally approved by the European Parliament and the European Council, which may accept it or establish amendments and modifications) was scheduled for 3 April 2019, the debate actually took place on 16 April 2019. The European Parliament examined the proposal and it was voted on the following day.
As a result – and probably due to the urgency arising from the European elections – the interim agreement was adopted at first reading, without additional amendments, leading to the European Parliament's legislative resolution of 17 April 2019 on the medicinal product SPCs.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide.
Source: Lexology
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