An extract from The Pharmaceutical Intellectual Property and Competition Law Review, 1st Edition
The pharmaceutical industry is and has been for many years an important sector in the UK. It has a vibrant research and development community within universities, hospitals and companies, from the largest multinationals to start-ups, and it continues to have significant manufacturing activity (although there is a move to bring more drug manufacturing within the UK to reduce the risk of shortages that have been experienced during the covid-19 pandemic and in anticipation of a 'no-deal' Brexit).
As well as the innovator manufacturers in the UK, there are a significant number of generic manufacturers. Many commentators would say that the there is a healthy balance (or even a virtuous circle) between the incentives and stimulus to the originators to maintain their research based activities and the activities of the generic manufacturers to secure access to reasonably priced medicines.
The UK government has expressed its support for the sector in 'The Life Sciences Sector Deals', which were designed to help ensure that new pioneering treatments and medical technologies are produced in the UK and to drive economic growth. The deals involve substantial investment from private and charitable sectors, and significant commitments in research and development from the government.
Notwithstanding the current buoyancy of the sector, to some extent its future is a little uncertain in the light of Brexit; the UK exited the EU on 31 January 2020 but EU law will continue to apply in the UK until the 31 December 2020. Thereafter, the EU treaties, EU free movement rights (including the access to the single market) and the general principles of EU law will cease to apply in relation to the UK, and prior EU regulations will only continue to apply in domestic law if not already revoked or amended by the UK. The effects of Brexit on the life sciences sector are likely to be substantial. This is because, as a third party to the EU, the UK will no longer have access to the benefits of the EU Single Market, such as the centralised procedure for marketing authorisations, the EU portal for clinical trials and the pharmacovigilance database. The loss of the free movement of goods, in the absence of a 'deal' is likely to affect trade between the EU and UK, which may cause delays (because of enhanced quality and safety, and import and export checks) and in a worst case scenario may result in shortages of medicines not only in the UK but throughout Europe as so many medicines are manufactured at least in part in the UK.
Competition (antitrust) law is implemented by the UK Competition and Markets Authority (CMA) – its activities are considered in more detail below. Recent cases have dealt with unlawful market and information sharing activity, excessive pricing and investigations in to 'pay-for-delay' cases where the innovator company pays a generic competitor to delay or give up completely its plans to enter the market.
In this chapter, we set out the pharmaceutical legislative and regulatory framework – which is in some state of flux awaiting the outcome of Brexit negotiations – how to bring a product to market, the use and challenge in using patent litigation for product launch and then an overview of the competition law environment in the UK, including a review of unlawful activities, merger control and an assessment of case law.
Legislative and regulatory framework
In the UK, pharmaceutical products and medicines are regulated in accordance with the Human Medicines Regulations 2012 (UK HMR), which implement Directive 2001/83/EC and other key EU legislation, and consolidate relevant UK laws.i Patent duration
Patent protection is governed by the Patents Act 1977. Patents have a maximum duration of 20 years from their filing date, subject to payment of renewal fees and remaining valid. Under Regulation (EC) No. 469/2009, a supplementary protection certificate (SPC) may be granted in certain circumstances to extend the duration of a patent relating to a medicinal product.ii Marketing authorisation
The UK Medicines and Healthcare products Regulatory Agency (MHRA) is the competent enforcement authority for the regulation of pharmaceutical products. As an executive agency of the Department of Health and Social Care (DHSC), the MHRA is responsible for managing licences and marketing authorisations (MAs) under the UK HMR.
The European Medicines Agency (EMA) regulates pharmaceutical products on a pan-European level. This includes evaluating applications and providing recommendations to the European Commission for the grant of an MA through a centralised European procedure. Applications are assessed on the principles of safety, quality and efficacy set out in the Medicines Regulations, Community Code and Regulation (EC) No. 726/2004.iii Pricing
The DHSC manages the pricing and reimbursement of medicines in the National Health Service (NHS), on the guidance and advice of the National Institute for Health and Care Excellence (NICE). Companies typically consult the DHSC before setting a reimbursement price, which is published in the Drug Tariff. NICE analyses the cost and potential benefit of a new drug to decide whether it should be recommended for use in the NHS.
The Voluntary Pricing and Access Scheme (VPAS) is a non-contractual agreement between the DHSC and the Association of the British Pharmaceutical Industry. Under VPAS, NHS spending on branded medicines is capped at 2 per cent growth of the total annual bill, with spending above this cap being paid back by members as a percentage of product sales. To encourage innovation, exemptions are available for products containing new active substances and for small- and medium-sized companies.
Companies not participating in VPAS are subject to the statutory scheme, governed by the National Health Service Act 2006 and the Branded Health Service Medicines (Costs) Regulations 2018. Under this scheme, companies pay rebates based on a percentage of their UK revenues.iv Public purchasing
Medicines are procured using collective purchasing and framework agreements, governed by the Public Contracts Regulations 2015. The Commercial Medicines Unit of NHS England is responsible for awarding and managing frameworks across regional pharmacy purchasing groups, while hospital trusts are responsible for implementing the contracts awarded. In Wales, the contract process is managed by the NHS Wales Shared Services Partnership, while the All Wales Drug Contracting Committee acts as the awarding body and ensures compliance with legal and governance requirements.v Competition laws
For the time being, two sets of competition rules apply in parallel in the UK. UK-specific legislation comprises the Competition Act 1998 (Chapters I and II), which prohibits anticompetitive agreements and abuse of dominance that may affect trade within the UK, and the Enterprise Act 2002. Anticompetitive agreements that extend beyond the UK to other EU Member States are prohibited by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).
Each law essentially prohibits two main types of anticompetitive activities:
- anticompetitive agreements (the Chapter I and Article 101 prohibitions); and
- abuse of a dominant market position (the Chapter II and Article 102 prohibitions).
Even after the Brexit transition period, UK companies whose activities may affect trade within the EU, will still remain subject to EU competition law. The government has stated that it has no plans significantly to amend the UK competition laws.