A Supplementary Protection Certificate (SPC) extends patent protection for medicinal products which must undergo lengthy testing and clinical trials before being authorised to be placed on the EU market.
SPCs take effect immediately after the patent expires, and can last for up to five years, depending on the time needed for the testing and trials period. The average duration of SPCs granted in the EU is 3.5 years.
Manufacturers usually rely on SPCs to secure an extension of their market exclusivity to recoup the research and development investments made. The number of annual SPC applications has tripled from 1993 to 2013. Many SPCs will start to lapse from 2020, with a significant number of medicinal products entering the public domain. This will generate significant new opportunities in the fast-growing market of generics and biosimilar products.
What is the issue you are addressing?
EU SPC rules are the most stringent in the world. They aim to reward investment in innovation, protect intellectual property and prevent the relocation of cutting-edge pharmaceutical research outside of the EU.
However, SPCs can put EU based manufacturers of generics and biosimilar products at a disadvantage with non-EU based industry. Indeed, during the SPC period of protection, EU-based manufacturers of generics and/or biosimilars cannot currently manufacture for any purpose, including export outside the EU to countries where SPC protection has expired or does not exist, while manufacturers based in those non-EU countries can do so. This competitive disadvantage entails a risk of delocalisation of manufacturing outside of Europe, loss of investment opportunities, and a brake on further innovation and job creation in Europe. It is therefore urgent to restore the global competitiveness of EU-based manufacturers of generics and biosimilars by levelling the playing field in highly competitive and expanding third country markets vis-à-vis non-EU based manufacturers.
The certificate also makes it more difficult for EU manufacturers to enter the EU market immediately after its expiry, given that they are not in a position to build up production capacity until the protection provided by the certificate has lapsed.
The 'manufacturing waiver' therefore introduces a targeted and balanced exception to the current system. EU-based companies will be entitled to manufacture a generic or biosimilar version of an SPC-protected medicine during the term of the certificate, if done exclusively for the purpose of exporting to a non-EU market where protection has expired or never existed.
Which medicinal products will the SPC manufacturing waiver apply to?
The SPC manufacturing waiver will benefit EU-based generics and biosimilars manufacturers who will be able to compete, in third countries where there is no protection or where protection has expired, with locally produced generics and biosimilars, and with ‘original' or 'reference medicines'.
A generic medicinal product is a ‘copy' of an original non-biologic reference medicine whose protection has expired. A generic medicine is usually manufactured by a different company and costs, on average, 50% less.
A biosimilar medicine is a biological medicine highly similar to another already approved biological medicine (the ‘reference medicine') whose IP and/or regulatory data protection has expired. Biological medicines contain active substances from a biological source, such as living cells or organisms. Biosimilars are strictly regulated, and are assessed according to the same standards of pharmaceutical quality, safety and efficacy that apply to all biological medicines.
The first biosimilar to be authorised in the EU was Omnitrope in 2006, a product that can be used for the treatment of growth disturbance and growth hormone deficiency in children and adults.
Who will benefit from the proposal?
We all stand to gain from the EU remaining a hub for pharmaceutical research and manufacturing.
The SPC manufacturing waiver is expected to generate extra growth of at least €1 billion per year in net additional export sales in the EU pharmaceutical sector, creating up to 25 000 extra high-skilled jobs over 10 years. It will particularly benefit the many small and medium-sized enterprises in the field, which cannot easily outsource or relocate their production outside the EU during the period of SPC protection.
The exception for export can, over time, contribute to a more timely onset of competition in EU markets for medicines upon expiry of SPCs, as manufacturing capacity established for export purposes could then be used to enter the market in the EU as and from day 1.
In the medium term, more competition will improve patients' access to a wider choice of medicines and alleviate public budgets with savings potentially reaching 4% of public health spending on pharmaceutical products over the coming decade.
Is the exception a first step to a weakening of the SPC regime?
No. The core protection and the enforcement of SPC rights in the EU will remain as strong as today.
The exception constitutes a limited adjustment which will not affect in any way the duration and the core objective of the SPC regime: namely to provide SPC holders with the exclusive right of placing their products on the EU market throughout the SPC term.
How will you prevent circumvention of the waiver?
The proposal for a manufacturing waiver includes clear safeguards to ensure transparency and avoid the possible illicit diversion onto the Union market of the generics and biosimilars that are produced for export:
Businesses intending to start manufacturing will be obliged to notify the competent authorities, and the information contained in that notification will be made public.
There will be a requirement on the manufacturer to inform its supply chain that the products in question are only for export.
Any export of SPC-protected products outside the EU will be subject to compliance with a specific labelling requirements, involving affixing a logo (e.g. ‘EU Export').
How is this proposal consistent with the EU objective of reinforcing IPR enforcement in the EU and globally?
This proposal, and notably its safeguard measures to prevent the diversion of IPR-infringing medicines onto the EU market, dovetails with the Commission's overall work on Intellectual Property Rights enforcement which aims to facilitate reducing the volume of counterfeited products reaching the EU market. All rights and remedies under relevant EU legislation will continue to apply in full, and the Commission's support to effective protection of IPR in the EU and third countries remains as strong as ever.
In November 2017, as a deliverable from the Single Market Strategy, the Commission presented a package of measures to further reinforce enforcement, including providing guidance on implementing the EU Directive on the enforcement of intellectual property rights.
In that context, the Commission is working actively with industry players, platforms and rightholders to develop further industry-led initiatives to tackle the problem of online infringement of IPRs.
The Commission is also working to reduce the volume of IPR-infringing products reaching the EU market, stepping up co-operation between EU customs authorities, notably by assessing the implementation of the EU Customs Action Plan on IP infringements for 2013-2017 and proposing more targeted assistance to national customs authorities. In February 2018, the Commission presented its latest report on the protection and enforcement of intellectual property rights in third countries, with a focus on certain priority countries that require particular attention in the context of our IPR Dialogues. The Commission is also preparing a watch-list of markets that are reported to engage in, or facilitate, substantial IPR infringement.
How big is the market for pharmaceutical products?
The fast-growing global pharma market now represents over €1 000 billion annually, with the most rapid growth in emerging economies. 80% of medicines dispensed worldwide are generics or biosimilars.
The EU represents 14% of the global market, with 4 000 companies, 570 000 jobs, €220bn annual exports, and annual investments of €27bn in R&D. 3 724 SMEs are active in pharma manufacturing, of which 1 362 export outside the EU.
Generic and biosimilar firms constitute a growing part of the EU pharma industry, account for 160 000 jobs, 350 manufacturing sites and invest between 7% and 17% (in the case of biosimilars and complex generics) of their turnover in R&D.