This analysis is the first in a series relating to the European Commission Pharmaceutical Sector Inquiry Preliminary Report of 28 November 2008. Comments upon the preliminary report are required by the European Commission (EC) before 31 January.
The analyses that follow will address the intellectual property, pricing and reimbursement and finally, competition law matters raised in the preliminary report. This first analysis will focus on the regulatory issues considered by the report, including so called 'patent linkage'.
The EC launched the Sector Inquiry in January 2008 because of its concerns that "competition may be restricted or distorted" in respect of the markets for innovative and generic medicines, as fewer novel medicines were reaching the market than in the past and alleged delays in generic products entering the market after loss of exclusivity.
The preliminary report provides an overview of the regulatory system in Europe. Under this system there are three procedures for the approval of pharmaceutical products within the European Union; centralised, mutual recognition and decentralised.
The centralised procedure is sometimes mandatory (see below). Marketing authorisations obtained via a national procedure may be extended to other EU member states via the mutual recognition procedure (MRP) or in cases where there has not been a marketing authorisation granted by any Member State previously, the decentralised procedure (DCP) may be used.
The centralised procedure is mandatory for certain products including high-tech or biotech products, orphan medicinal products, cell and gene therapy products and imminently, for products for the treatment of certain types of diseases, e.g. cancer, autoimmune diseases and HIV. The centralised procedure is optional for new active substances, those which constitute significant therapeutic scientific or technical innovation, or for generic versions of products which have been authorised at the community level. Most generics companies use either the MRP or DCP procedures, as they are generally chemical (as opposed to biosimilar) products for which the originator was not originally authorised via the centralised procedure.
For most chemical pharmaceutical products, once data exclusivity has been exhausted, the sponsor of a generic product need only demonstrate bioequivalence to the originator product in order to obtain a marketing authorisation.
The European Union has a now well-established framework for data exclusivity, commonly referred to as 8+2+1 (2001/83/EC, Article 10) for marketing authorisation applications submitted after November 2005, under which an applicant for marketing authorisation for a generic product may rely on data generated by the originator after the originator's product has been on the market for eight years. A marketing authorisation for the generic may not be actually granted until the originator's product has been on the market for 10 years. Finally, if the originator has licensed a new indication during the initial eight-year period, then he can also obtain an additional one-year period of data exclusivity. This last year of data exclusivity was included to create an incentive to innovation for originators; however some of the originator companies surveyed by the report felt it was inadequate for this purpose. However as the preliminary report covers the period 2000-2007, the generic applications will relate to originator applications for marketing authorisation submitted before November 2005. Under the rules relating to such applications the generic applicant has to wait for expiry of the protection period of either six or ten years (depending on the laws of the Member State) which has been granted to the original MA holder before it can file its abridged application.
The report presents the comments of the generic and the originator companies surveyed. It provides an extensive critique of the complexities inherent within the existing regulatory system in Europe, particularly with regard to the MRP and DCP regulatory pathways. To summarise, these complaints referred to inconsistent application of EC Directives; lack of compliance with timelines by regulatory authorities; lack of sufficient regulatory resources to conduct reviews at the national level, particularly due to a tendency for most applications to be made to only four member states as the Reference Member State; discrepancies in assessment criteria; alleged violations of generics companies confidentiality and "patent linkage" reportedly used by some national regulatory authorities. Patent linkage will be discussed below.
The regulatory framework in Europe was described by both originator and generics companies as unduly complex and overburdened. It seems, however, that this is a criticism of the legal and regulatory structure put into place by the European Parliament, rather than a specific abuse of a dominant market position or collusive activity by any particular business.
Practices affecting generic entry
The Preliminary Report focuses on practices that may affect generic entry relating to the regulatory system. A significant section is dedicated to intervention by originators with national regulatory authorities reviewing generic applications, alleging either that the generic product will infringe their patent rights ("patent linkage"), that the data exclusivity period has not expired, that the generic is not bioequivalent or that it is not safe. These pre-litigation "contacts" were often of an informal nature, and as such, reliable data could not be obtained by the EC from the national regulatory authorities, as there are no systematic records kept of informal contacts (Footnote 315, page 260). However, the report does not specify in what way, if any, contacts by the originators with the regulatory authorities regarding potential generic competition is abusive of a dominant position or unlawful.
The report discusses the various types of intervention by originator companies, and asserts that there is a correlation between the intervention and the perceived delay. However, any causal link between the intervention and the delay is speculative, as is admitted by the report (see paragraph 743, page 271).
In Europe, the brief of regulatory authorities is to evaluate medicinal products on the basis of quality, safety and efficacy. These are to be the only bases upon which marketing authorisations are granted or refused (Regulation (EC) 726/2004, Article 81 and Directive (EC) 2001/83, Article 126). However, the Preliminary Report states that in some Member States, the regulatory authorities request that generics companies declare or certify that no patent has been infringed by the marketing authorisation application. The Member States alleged to have some form of patent linkage in their legislation are Hungary, Italy and the Slovak Republic (Table 22, page 262).
In addition, another form of patent linkage is where originator companies allege that by granting the marketing authorisation, the authorities are liable for patent infringement as a contributory infringer and therefore the grant of the marketing authorisation should be stayed until the patent issues are resolved. When such allegations proceeded as far as litigation, the originator only won in one case out of 24 (with 37 cases withdrawn and 75 still pending) and the litigation took place in a very few countries (58 of the 75 cases still pending, for example, were in Portugal).
The European system is designed to keep regulatory authorities away from patent disputes. However other systems have taken a different approach. For example in the US, a mandatory patent linkage system operates. Briefly stated, all New Drug Applications (NDA) must include patent information (21 CFR 314.53). The applicant must submit a signed declaration of the composition and method of use patents relevant to the drug and the Food and Drug Administration (FDA) relies on the innovator drug company's assertions. This information is published in the "Orange Book". The Orange Book (an online searchable database) is a list of approved drug products with Therapeutic Equivalence Evaluations. It lists the patent numbers, expiry date and also exclusivity expiration information asserted by the originator company. If a valid patent is listed in the Orange Book for the originator product used as a reference, marketing approval will not be granted to a generic until the patent has expired or is found to be invalid.
When filing an abbreviated new drug application (ANDA) a generic drug company must certify one of four things:
- That the drug has not been patented
- That the listed patent has already expired
- The date on which the listed patent will expire (the generic drug will not go on the market until that date passes); or
- That the listed patent is not infringed or is invalid
If the ANDA certifies that the patent is not infringed or is invalid, then the applicant must notify the originator company of its application and its reasons for thinking that the patent will not be infringed or is invalid.
The originator has only 45 days after receipt of this notice to file a patent infringement suit. If a lawsuit is filed, FDA approval of the generic product is stayed for 30 months. The delay that dealing with such patent issues in this way can cause is therefore predictable and the system is transparent.
The benefit of this system of patent linkage is that it allows generic drug companies to easily determine all of the patents that are "linked" to the generic medicine they wish to market, when those patents expire and whether or not they are infringed. Furthermore if a pharmaceutical patent is not listed in the Orange Book an originator company cannot sue a generic company for infringement merely for having filed the ANDA certifying that the patent is not infringed or is invalid, but must wait until the product actually reaches the market to sue for infringement. The originator will also not benefit from the 30-month stay of FDA approval. Whereas if patent information submitted in a NDA is wilfully and knowingly false this amounts to a serious federal criminal offence under 18 U.S. C. 1001.
The Orange Book system of patent linkage is facilitated because there is one federal regulatory authority and one federal patent office. A comparable system would be difficult to incorporate into the existing regulatory system in the EU because of its complexity and disparate nature. Furthermore as there is still no Community Patent system placing a drug on the market might infringe patents in some Members States but not in others.
The existing regulatory system in Europe is complex and this complexity renders genuine pan-European availability of pharmaceutical products very difficult to obtain. This difficulty is compounded by a corresponding complexity in the patent system in Europe. The preliminary report focuses on the inconsistent manner in which EU Directives have been implemented and are interpreted by the Member States. Patent linkage is just one example of this. It is possible that if Member States have failed to implement the Directives properly by allowing their regulatory authorities to consider patent issues or their courts to entertain patent infringement actions against regulatory authorities then enforcement action could be taken against such Member States. The report does not clarify whether, by using the existing system, originator companies are acting abusively. Although of course one of the abuses by AstraZeneca in the AstraZeneca decision was its use of the regulatory system to prevent generic companies accessing the market, a decision which is under appeal.
In real terms perhaps a more significant problem is a shortage of resources in many regulatory agencies and the fact that MRP and DCP applications are not allocated evenly to Member States, but are made disproportionately to a few, creating regulatory bottlenecks. Comments by those surveyed by the report included that the regulatory authorities in Germany, Denmark, the UK and the Netherlands were the "most efficient" and that "Not all National Competent Authorities are currently willing to act as Reference Member State in MRP/DCP – therefore those agencies which are actively participating are fully booked one or two years in advance" (Page 380 paragraphs 1124 to 1126). The Preliminary Report also mentions misuse of the system by "some (generic) applicants, who use various ways of making "unnecessary" bookings in order to delay access for other applicants" but the preliminary report does not focus at all on the effect of generic/generic interactions (as opposed to innovator/generic and innovator/innovator interactions).
A single centralised regulatory system for the entire EU would address many of the problems raised in the preliminary report. It would not address them all due to the corresponding complexity inherent in the patent system where patents may be infringed in some Member States but not others. In the absence of a simplified system in the EU both for the regulation of drugs and of the patent system, smaller companies will always operate at something of a disadvantage.