This article first appeared in World Trademark Review issue 62, published by Globe Business Media Group - IP Division. To view the issue in full, please go to www.worldtrademarkreview.com.
The question of parallel importation of pharmaceutical products has recently been considered by the Chancery Division of the UK’s High Court in the case of Flynn Pharma Limited v Drugsrus Limited and Others. The decision provides a useful review of English law on parallel importation of pharmaceutical products. The decision of the High Court is currently under appeal and is listed to be heard in late February or early March 2017.
Flynn Pharma is a speciality pharmaceutical company that trades in both generic medicines and speciality brands. Its business model is to acquire marketing authorisations and to sell branded products once the patents on the products have expired - although generic versions of the products in question are usually competing in the market, there is still a demand for the branded product as they are often still prescribed by name by doctors. Flynn Pharma are generally responsible for the manufacture as well as the marketing and distribution of those products.
Drugsrus is a wholesaler of pharmaceutical products. The second defendant was a company that was set up to apply for and hold the product licences for parallel imports (PLPIs).
Flynn Pharma holds the UK marketing authorisation for a drug called phenytoin sodium, which is marketed in the UK as “Phenytoin Sodium Flynn”. Flynn are therefore responsible for making sure that the regulatory requirements in relation to the quality of the manufacture of the product and the marketing of the product in the UK are met. In this case Flynn Pharma contracts out the manufacture of the product but remains responsible for the quality of the product.
Before September 2012, all phenytoin sodium supplied in the UK was made by Pfizer and sold under Pfizer’s brand name EPANUTIN. Flynn Pharma and Pfizer entered into various agreements so that the marketing authorisations were assigned to Flynn Pharma in the UK, while Pfizer continued to market the product in some other Member States as EPANUTIN.
Drugsrus planned to import into the UK Epanutin which was being sold in other EU Member States, rebranded as “Phenytoin Sodium Flynn”.
Flynn Pharma, the proprietor of a UK and an EU trade mark for the word FLYNN in class 5 for pharmaceutical products, objected to Drugsrus’ plan to apply their trade mark, FLYNN, to the products they were going to be importing for sale on the UK market. Consequently they brought the infringement claim against Drugsrus asking the court to grant an injunction.
The UK prescription drug market
The High Court looked the UK prescription pharmaceutical market. The control of the price at which a prescription pharmaceutical product can be sold in the UK depends on whether the product is a branded or generic product. The price at which branded products can be sold to pharmacists is regulated by the pharmaceutical price regulation scheme (PPRS). The price of generic products (ie those sold under the drug’s international non-proprietary name (INN)) are not regulated by the PPRS. Instead the price paid by the NHS is determined by what the pharmacies are charged for the products.
In the UK, most prescriptions are written by a doctor and are filled by retail pharmacists who buy their stock from wholesalers. Pharmacies receive the same payment for prescriptions they fulfil whether the generically written prescription is filled by a branded product or a generic product. They will obviously make more profit if they can supply a generic product. If the prescription written by the doctor refers to a specific branded product then the pharmacist must fill the prescription with the branded product. If the prescription refers to the product only by its generic name then the pharmacist can choose which product to use, the generic or the branded.
Drugsrus initially imported the product under the brand name EPANUTIN, but due to the difference in price it could command for this product in the UK they looked about for an alternative. Drugsrus applied to vary their PLPI to permit the marketing of the imported product under the INN. The MHRA (the UK government medicines regulatory body) would not accept this. In the context of this type of drug, their guidance is that the name for the parallel import product should be the name under which the UK cross-referred product is marketed (Phenytoin Sodium Flynn) or the name of the product in the source country.
Using the name EPANUTIN was not attractive to Drugsrus because it would mean that pharmacists would not be able to use their product to fulfil prescriptions written for “Phenytoin Sodium Flynn” but only for prescriptions for Epanutin or phenytoin sodium. There was also an issue with guaranteeing a continuous supply of the drug by way of parallel importation. It would be less of an issue if the product was named Phenytoin Sodium Flynn which was available from other sources if the supply from Drugsrus was ever interrupted.
Trade mark use?
Turning to the questions of trade mark law to be addressed, firstly Drugsrus tried to argue that the use they were making of the FLYNN name was not “trade mark use”. Drugsrus tried to rely on a defence under section 11(2)(b) of the 1994 Trade Marks Act arguing that the use of FLYNN was as a description of the goods not an indication of their origin. The court did not accept this. It was of the view that the mark FLYNN would be perceived by consumers as a mark of origin as they will interpret it as being an indication of the holder of the marketing authorisation and therefore the origin of the goods. This was the case even if there was a disclaimer printed on the packaging.
The court then considered whether there was a defence to infringement on the basis that as a result of the relationship between Flynn and Pfizer, Flynn’s rights to prevent the products being placed on the market in the UK under the FLYNN trade mark where exhausted. The court looked at whether the parallel imported goods must have placed in the market in the EU by the same entity that owns the trade mark in the UK.
After a detailed review of the case law, the court held that the entity needed to be the same. It said that it would not be right to say that the owner of the right in the importing Member State is, directly or indirectly, able to determine the products to which the trade mark may be affixed in the exporting Member State and to control their quality. It went on to hold that Flynn Pharma's trade mark rights in the name Phenytoin Sodium Flynn were not exhausted in respect of packages of Epanutin placed on the market in other Member States. Flynn Pharma was therefore entitled to prevent the relabelling of the parallel imported product by the Defendants.
Unlawful restriction on trade?
For the sake of completeness, the court then went on to consider the question of whether the use of trade mark law to prevent the parallel importation of these goods was contrary to EU law. The court reviewed the extensive jurisprudence on this issue including Bristol-Meyers Squibb v Paranova and then Pharmacia & Upjohn v Paranova. The court looked at the requirement that a trade mark owner may not enforce its mark against parallel imported goods which are re-branded if it is shown that it is necessary to re-brand in order to gain effective access to the market.
This was the main issue considered by the Court of Appeal in the Speciality European Pharma case. In that case, Mr Justice Floyd held that “the condition of necessity is satisfied if, in a specific case, the prohibition imposed on the importer against replacing the trade mark hinders effective access to the market of the importing member state…it is saying that he must not be hindered from access to a substantial part of the market” (emphasis added).
Following Specialty European Pharma, the court held that Drugsrus had established that it was necessary for them to rebrand the Epanutin as Phenytoin Sodium Flynn. This was because of the data provided to the court showed that while 90 per cent of prescriptions were written generically about seven to nine per cent were written for Phenytoin Sodium Flynn. Where the branded product is named on the prescription the pharmacist can only supply the branded product. This meant that Drugsrus were excluded from the seven to nine per cent of the market where the branded product was named in the prescription and the court held that this share of the market could not be considered insignificant. On this basis the court held that it was necessary for the Epanutin to be rebranded as Phenytoin Sodium Flynn in order to gain access to the market.
While it is not surprising that the court held that this would be trade mark infringement given the lack of control Flynn Pharma would have had on the products going on the market under their trade mark it is always helpful to have further explanations of the key issues at stake by the court. The decision is interesting in the reasoning that being shut out of such a low percentage of the market was considered enough to make it necessary for the product to be rebranded. It will be interesting to see how this decision is treated by the Court of Appeal on appeal early next year.