It’s time to completely redesign the European framework governing the life cycle of medicinal products, from R&D to dispensation. While still waiting for the European Commission to publish its new Pharmaceutical Strategy, the debate is flourishing between stakeholders on how to optimise the new system. 

The announcement of the Pharmaceutical Strategy should also parallel the launch by the EU Commission of the IP Action Plan, within which open issues such as the updating of the regulation on Supplementary Protection Certificates (SPCs) should also be addressed. 

Many barriers are still affecting the timely entry of generic and biosimilar medicines in the market, which have been discussed in a webinar organised by Medicines for Europe that saw the participation of experts also from DG Grow and DG Competition and of the the Polish government.

The association representing the European generic and biosimilar industry has published a white paper to deeply analyse the many factors which may impact the launch of a new off-patent medicine, and conversely the ability of the producing company to compete in the EU market. “This white paper informs stakeholders on IP issues that limit the full potential of the generic and biosimilar medicines sector. The paper provides clear legal alterations and competition law recommendations for policy makers to initiate reforms in the upcoming EU pharmaceutical strategy and Intellectual Property Action Plan”, said Medicines for Europe General Counsel and External Relations director Sergio Napolitano.

Many strategies to delay generic competition

Evidence suggests that the patent system is being exploited to artificially extend the duration of the monopoly beyond the period for which it was originally designed”, states the white paper. The European Parliament in March 2017 voted a Resolution on EU options for improving access to medicines in which it was deploring the litigation cases aiming to delay generic entry. Two reports examining the problem were then issued in 2018 (see here) and 2019 (here) by the EU Commission.

The white paper, authored by Pinsent Masons and co-sponsored by Medicines for Europe and Accord Healthcare, describes the many different strategies the innovator industry often uses to delay the entry of generic and biosimilar competitors in the market.

Secondary patents, for example, are widely used to create the so-called “evergreening” strategies. Patent thickets (where multiple “follow-on” overlapping patents cover different aspects of the same product and may be filed in multiple jurisdictions) were already mentioned in the 2009 report published by the EU Commission following the Inquiry run in 2008. 

Patent thickets may include protection of polymorph or hydrated forms of the active substance (API), its salts or isomeric forms, a substantially pure form of the API or an impurity formed in the manufacturing process, formulations, different concentrations of dosage forms, the manufacturing and analytical methods, the use in specific patients groups or for diagnosis, or a second medical use. “The practice of creating a ‘thicket’ of patents around devices is particularly problematic in the biosimilar space, where it is difficult for biosimilar companies to switch between devices”, says the white paper.

The proliferation of divisional patents

Divisional patents – deriving from an earlier parent application – are often used to overcome the unity requirement for patentability. Recent examples discussed in the 2019 report on Competition Enforcement in the Pharmaceutical Sector (2009-2017) published by the EU Commission include Pfizer’s glaucoma drug Xalatan and Boehringer Ingelheim’s patents on treatments for chronic obstructive pulmonary disease (COPD). 

Divisional applications have the same date of filing of the parent one and their contents cannot exceed the scope of the earlier application. The association of this practice with patent thickets results in the great increase of the risk of patent infringement, as a foggy network of related application is created. Divisional applications may be filed at any time while the parent application is pending, and they may maintain validity even after expiration of the first patent. This is also true in the case generic and biosimilar companies have already filed the application for marketing authorisation (MA), or have even launched the product, thus creating a great burden of uncertainty. “This can also be seen in patents covering routine clinical studies, adverse effects or dose adjustments that cannot be carved-out from the SmPC. Recently, we have seen an increase in the number of parent patents being abandoned before an adverse decision is made in appeal proceedings, sometimes even at the oral hearing itself, in favour of divisionals that are at early stage of examination or recently granted” is the comment by a member of Medicines for Europe reported in the white paper.

Opposition before the European Patent Office (EPO) or revocation actions at national courts can be filed only upon granting of the innovator’s patent, thus leading to great delays in market access. “A patentee can choose to maintain the legal uncertainty by keeping a series of divisional patent applications pending for an extended period of time. Every time one patent approaches grant, another may be published and thus restarts the lengthy grant process creating an interminable version of legal ‘Whack-A-Mole’ ”, state the white paper.

The document also addresses the process known as “divisional game”, leading to filing of “cascades” of divisional patents and their exploitation before the EPO and national courts. This complexity may be overcome, as proposed by the white paper, through the imposition of specific time limits for the filing of such patents, especially with respect to the third, fourth, fifth etc generation divisional patents. The analysts considers less useful the “Arrow declarations” introduced for example by UK and Dutch’s courts to declare a certain product or process is not new or it’s obvious at a specific point in time. Other countries, i.e. Italy and Germany, have enforced their own vision of “unfair competition” to prevent the illegitimate use of a legitimate right. The availability of increased resources for EPO to reduce the time needed to reach granting of patents is also envisaged. 

Medicines for Europe also suggests the possible revisions of the European Patent Convention, for example in order to decide within a unique opposition or appeal proceeding the validity of an entire family of patents. Appropriate compensation by the patentee in the case no patent infringement had been found would restore the generic company from the negative impact caused by injustice provisional preliminary injunction (including compensation of losses). To achieve this goal, a uniform implementation of article 9 of the IP Enforcement Directive (2004/48/EC) should be reached in all EU’s member states. A similar provision may also apply to national healthcare providers and other payers which had sustained improper costs.

The deterrent action of identified cases of abuse of dominant position and the potential introduction of the Commission Competition Tool are other suggestions made by the report. Sharing of collaborative actions between several generic and biosimilar companies may also help to reduce the high costs for litigations and to address the asymmetry of resources with respect to the defendant originator industry and the impossibility to access its internal strategy documentation. 

SPCs still looking for a solution

New formulations or new indications are often the object of secondary patents, filed after the primary one which protects the drug substance itself. Multiple SPCs granted for the same product are also a frequent burden, even if the Court of Justice of the European Union (CJEU) has judged SPCs may not be granted in the case of a new medical use for an existing product. The opacity of the SPCs’ granting process is contributing to the great uncertainty for companies wishing to invest in the development of a generic or biosimilar medicinal product. Another source of uncertainty is represented by the timeframe during which paediatric studies are run by innovators under a Paediatric Investigation Plan (PIP) filed with EMA; in this case, the final paediatric line extension is reflected by a six months increase of market exclusivity (two years in the case of an orphan medicine). 

The innovator industry has a long track record in requesting the legislators for a strong IP European framework as a tool to support R&D and to remunerate the high costs for research and development ($1,9 billion estimated in 2012) through the 20 years market exclusivity (+5y for SPCs protection). This approach often conflicts with the need to ensure broader access for patients to affordable medicines, resulting from the pressure on pharmaceutical expenditure posed in many countries by the economic crisis. According to the white paper, in 2016 the total EU’s retail expenditure on pharmaceuticals (excluding hospital care) was more than EUR 210 billion, a 5% increase vs 2010. Medicines also represent approx. 20% of total healthcare expenditure (9.6% of EU’s GDP in 2017).

The white paper also recalls the data from the European Patent Office’s 2019 Quality Report showing that just 76.9% of patents granted last year were found to be compliant with legal requirements, compared to 85,4% in 2016. Furthermore, in the case of a litigation the patentees often requests the Court to issue a preliminary injunctive relief (and in some cases also the payment of provisional damages) to prevent the generic product to be commercialised in a certain market. “This is because in some markets there is no obligation to provide a cross-undertaking to compensate the competitor for the time they were wrongly held off the market by the injunction”, explains the white paper. And the economic gain obtained by patentees may well exceed the possible financial burden represented by a possible damages award.

The impact of regulatory barriers

Regulatory barriers, especially at the national level, are also delaying generic competition. The practice known as “patent linkage”, for example, connects the approval of the MA for a generic or biosimilar medicine to the status of a patent (or patent application) of the reference product. Even if prohibited by the European law (Art. 126 of the 2001/83/EC directive), this misbehaviour still represents a problem, as recognised by the 2017 Resolution of the EU Parliament. This impact also on the Bolar exemption, under which generic and biosimilar companies can conduct clinical trials before patent expiration – without the risk of patent infringement – in order to shorten the timeline to reach approval. 

Pricing and reimbursement procedures are highly critical, as the Transparency directive (89/105/EEC) does not contain a similar provision; in 2017 the EU Parliament indicated the need to revise this directive, but the request is still pending. This type of misbehaviour takes different forms in several countries, e.g. Portugal, France, Italy, Poland, Germany; examples are provided in the white paper, also with respect to the similar “procurement linkage” and “prescription listing based linkage”. Medicines for Europe asks for the insertion in the new European Pharmaceutical Strategy of an express prohibition of patent linkage with reference to pricing and reimbursement activities, which should be possible also for generic and biosimilar companies during the market exclusivity period.

This last two practices may result in possible infringements should the generic product enter procurement procedures or be listed in the formulary of prescription medicines. “Put simply, regulatory competent authorities are experts in matters other than patent infringement or validity and may be pushed to make assessments on those questions based upon incomplete information”, states the white paper with reference to the overlapping of competences with national courts.

Improved formulations and dominant market positions

The practice known as “product hopping” sees innovator companies replacing (partially or completely) a product in the market which is going to lose patent protection with a new, improved formulation with an extended market exclusivity. According to Medicines for Europe, this behaviour forces patients to switch to the second generation product, often more expensive than the parent one. Prescribers’ inertia may also contribute to the difficulties encountered by first generation generic competitors to successfully enter the market. The white paper provide extensive examples of the price and hard/soft switching strategies put in place to maintain or conquer patients and prescribers’s trust. A forced switch, for example, is highly probable in the case the first generation product is withdrawn from the market just before the expiration date of its patent. 

Medicines for Europe asks the EU Commission to consider a possible new legislation to contrast product hopping, similar to the one pending since September 2019 at the US House of Representatives. The target of the American proposal is to justify hard or soft switches towards follow-on medicines only in the case the company can demonstrate the same withdrawal actions would have been taken regardless of generic competition. Innovators should also maintain access to first generation products on the market until patent expiry allows for generic and biosimilar entry, to ensure full awareness of the significant cost benefits for patients.

The abuse of dominant position

The excess of dominant position is prohibited by the European and national legislations, but there are many examples of malpractices leading to abuses in this area, such as predatory pricing and anti-competitive rebates, which are common also to industrial sector other than the pharmaceuticals. 

Predatory pricing sees the originator marketing a certain product at loss in order to exclude competitors from the market. Rebates on pricing may result to be anti-competitive whenever the customer would buy more than 80% of its supply needs for a certain product from a single dominant company. Various examples are discussed in the white paper, including the Napp Pharmaceuticals and Remicade cases investigated by the UK Competition and Markets Authority (CMA). 

In the pharmaceutical market, misleading information may have a particularly detrimental impact, as given the characteristics of the medicinal products market, it is likely that the dissemination of such information will encourage doctors to refrain from prescribing that product, thus resulting in the expected reduction in demand for that type of use”, explains the white paper, with reference to the possible denigration of generic or biosimilar products made by dominant companies. The reference case to this instance is represented by the Avastin-Lucentis disputes ruled by the Italian and French competition authority, where Novartis has been judged responsible for having exaggerated the risks related to the off-label use of the competitor drug Avastin. A fine of €444 million was issued in September 2020 by the French authority on Novartis, Genentech and Roche for abuse of dominant position.