On 28 May 2018, the European Commission announced a legislative proposal to amend the supplementary protection certificate (SPC) Regulation by introducing an "export manufacturing waiver". This article provides an overview of the main provisions.

On 28 May 2018, the European Commission announced a legislative proposal to amend Regulation (EC) No. 469/2009 (the SPC Regulation) by introducing an “export manufacturing waiver” (the Proposal). With this amendment, the act of manufacture (and strictly necessary related acts) would no longer infringe the limits of protection conferred by an SPC provided that such manufacture (or act) is exclusively for export to a non-EU market.

Historical development

The export manufacturing waiver was originally announced in late 2015 as part of the European Commission’s “Single Market Strategy”. Since then, it has formed the subject matter of several studies and public consultations, including:

  1. an economic study conducted by the Charles River Associates (published in October 2017)
  2. an economic study funded by the European Federation of Pharmaceutical Industries and Associations (EFPIA), undertaken by QuintilesIMS (also published in October 2017)
  3. a Commission-sponsored study on legal aspects of the SPC system conducted by the Max Planck Institute (during 2017/2018)
  4. another Commission-sponsored study on the economic impact of SPC incentives, conducted by Copenhagen Economics (during 2017/2018), and
  5. the Commission’s own public consultation (during 2017/2018).

Links are included above to the final reports from each of these studies; the ones in points three to five being the most recent and in fact published on the same date as Proposal.

The Proposal

The full text of the proposed amendment to the SPC Regulation (without its recitals) is set out in the Annex hereto and the following summarise the main points:

Its application

The proposal is drafted to apply to all SPCs granted on or after the date three months after the amending Regulation is passed and published. This means that all SPCs that are granted before that date will not be subject to the extension but that all pending SPCs and future SPCs will be. Given the UK IPO’s current workload and backlog of SPC applications, it seems unlikely that that it will expedite applications simply because this waiver may come into force. However, companies with basis to seek expedition are likely making such requests with haste.

The waiver

The waiver is drafted as a limitation within a new Article 4, stating that protection is not conferred against a particular act, if with respect to the act either of two conditions are met:

(i) the act comprises making for the exclusive purposes of export to non-EU countries, or

(ii) any related and strictly necessary act for that making or for the actual export itself.

Notably, apparently in respect of point (ii), the recitals to the Proposal refer to allowing the necessary upstream or downstream acts by the maker or by third parties in a contractual relationship with the maker to take place and gives examples, including the supply and import of active ingredients for the purpose of making the medicinal product and temporary storage of the product or advertising for the exclusive purpose of export. This highlights that the waiver is not only for making, but in particular contexts, also importing, offering to sell and keeping.

The safeguards

These take the form of three main obligations on the maker as follows:

  1. To notify the relevant authorities in each Member State (ie the SPC granting body) about the intention to begin making in that Member State no later than 28 days before its intended start date. The relevant body then has a separate obligation to make that information publically available within 15 days of receipt. This appears to be a notice to the public which the SPC holder will therefore need to monitor, thereby giving them perhaps 13 days’ notice before the intended act.
  2. To ensure that a specific “EU export” logo is affixed to the product’s packaging.
  3. In relation to related acts (ie limb (ii) of the waiver above) makers must ensure that contracting parties are fully informed that the acts are being done under the scope of the waiver and that other acts may infringe the SPC (eg placing on the market, importing or re-importing).

According to the Explanatory Memorandum accompanying the Proposal, the “safeguards” were designed on the basis of input from industry gleaned from the various consultations and industry meetings. However, it remains to be seen whether these measures will prove effective in assuaging the concerns of SPC holders.

Evaluation

The amendment provides that within five years of coming into force and every five years thereafter, the Commission will evaluate the safeguards and report the findings. Given the level of dispute in the industry concerning the principles upon which the Proposal is founded, it seems likely that these evaluations will be subject to considerable scrutiny.

Industry reaction

The Commission stated in its press release accompanying the Proposal that these provisions would generate at least €1 billion per year in additional export sales, and could create up to 25,000 extra jobs over ten years. Unsurprisingly, the waiver has been well-received by biosimilar and generics organisations. For example, Medicines for Europe, which represents European generic and biosimilar industries, “commended” the Proposal, which it considered would have a positive impact on the export of generic and biosimilar medicines. However, it also argued that the Proposal should go further and allow production ahead of launch in the EU - ie stockpiling, which was one of the potentials considered in the 2017 Charles River study.

The response from innovator organisations has been the opposite. For example, in its press release EFPIA presented concerns that the Proposal “reduces IP rights and thereby jeopardizes patient access to innovative treatments. It also sends a global signal that Europe is weakening its commitment to IP, putting this investment, these jobs, this opportunity for economic growth and the advancement of patient care in Europe at serious risk."

Similarly, EuropaBio, an industry group whose members include both originator and biosimilar companies, pointed out that innovation is often driven by smaller biotechs who depend upon strong intellectual property portfolios to attract vital investment. In their view, the Proposal sends the wrong message to global investors.

Aside from industry, some commentators are already posing the question of whether the waiver is compatible with the TRIPS agreement, in particular the three-step test set out in Article 30 for limited exceptions to the rights conferred under Article 28 of the TRIPS agreement. In contrast, this issue is considered expressly in the Max Planck Institute’s (MPI) legal study, which states that “manufacturing waivers in the form of export or stockpiling waivers are not precluded by TRIPS if they only apply to SPCs.” Furthermore, the MPI study concluded that, from a legal perspective, such a waiver would not be inconsistent with the principles of the SPC Regulation, being to provide an extended period of time to compensate for the delay in the commercial exploitation of the invention.

Next steps

The Commission’s Proposal takes the form of a draft Regulation which will amend the existing SPC Regulation. This is therefore at an early stage, and the Proposal still needs to be adopted by both the European Parliament and the Council before it is implemented. It is difficult to predict the legislative timeframe, but considering the European Parliament Resolution passed in 2016, which endorsed the need to introduce an SPC manufacturing waiver “before 2019”, it is possible that the process will be expedited. This may also be so given the European Parliament elections in May 2019 and the accompanying parliamentary dissolution, after which the legislative agenda and priorities may change.

The potential 2019 timing raises questions as to if and how it may bind the UK in light of Brexit. If the amended Regulation enters into force pre-29 March 2019, it would apply in the UK as part of “retained EU law” under the terms of the draft Withdrawal Bill. If it comes into force after March 2019, this will be subject to the terms of any agreed transition period between the UK and the EU. Based on the current draft of the Withdrawal Agreement, this would mean that the UK would still be bound by the Regulation, albeit that having left the EU the UK would have limited powers to scrutinise its passage through the European legislature.

At this stage, the UK IPO has published a call for views on the draft legislative proposal, including, for example, evidence on the possible impact of the legislation for the UK and views on the draft legal text. This is in order to “inform working group discussions on the proposal between EU member states which may take place midsummer”. Initial views are requested before the end of June 2018, though the UK IPO notes that more substantive detail can follow at a later date.

Lastly, looking to the potential future reform of the SPC Regulation, it remains to be seen whether the Commission will hold off on any further changes. In this respect, the Explanatory Memorandum to the Proposal suggests that this may be the case when it states that “any future guidance on the SPC system in general should await the outcome of currently pending SPC cases before the Court of Justice of the European Union.” This may therefore be some time away in light of the referrals currently pending. However, there are no guarantees that as the legislative process ensues, further points will not be taken that seek to amend the SPC Regulation in other respects.

Annex - The Proposal

Article 1 - Amendment of Regulation (EC) N 469/2009

Regulation (EC) No 469/2009 is amended as follows:

(1) Article 4 is replaced by the following:

"Article 4 - Subject matter of protection and exceptions to rights conferred

1. Within the limits of the protection conferred by the basic patent, the protection conferred by a certificate shall extend only to the product covered by the authorisation to place the corresponding medicinal product on the market and for any use of the product as a medicinal product that has been authorised before the expiry of the certificate.

2. The certificate referred to in paragraph 1 shall not confer protection against a particular act against which the basic patent conferred protection if, with respect to that particular act, the following conditions are met:

a. the act comprises:

i. making for the exclusive purpose of export to third countries, or

ii. any related act that is strictly necessary for that making or for the actual export itself,

b. the authority referred to in Article 9(1) of the Member State where that making is to take place (the relevant Member State) is notified by the person doing the making (the maker) of the information listed in paragraph three no later than 28 days before the intended start date of making in that Member State

c. the maker ensures that a logo, in the form set out in Annex -I, is affixed to the outer packaging of the product or, if there is no outer packaging, to its immediate packaging, and

d. the maker complies with the requirements of paragraph 4.

3. The information for the purposes of paragraph 2(b) shall be as follows:

a. the name and address of the maker

b. the address, or addresses, of the premises where the making is to take place in the relevant Member State

c. the number of the certificate granted in the relevant Member State, and identification of the product, by reference to the proprietary name used by the holder of that certificate

d. the number of the authorisation granted in accordance with Article40(1) of Directive 2001/83/EC or Article 44(1) of Directive 2001/82/EC for the manufacture of the corresponding medicinal product or, in the absence of such authorisation, a valid certificate of good manufacturing practice as referred to in Article 111(5) of Directive 2001/83/EC or Article 80(5) of Directive 2001/82/EC covering the premises where the making is to take place

e. the intended start date of making in the relevant Member State

f. an indicative list of the intended third country or third countries to which the product is to be exported.

4. The maker shall ensure, through appropriate means, that persons in a contractual relationship with the maker who perform acts falling within paragraph 2(a)(ii) are fully informed and aware of the following:

a. that those acts are subject to the provisions of paragraph 2, and

b. that the placing on the market, import or re-import of the product might infringe the certificate referred to in that paragraph where, and as long as, that certificate applies.

5. Paragraph 2 shall apply in the case only of certificates granted on or after [OP: please insert the date of the first day of the third month that follows the month in which this amending Regulation is published in the Official Journal)].’;

(2) in Article 11, the following paragraph is added:

" The notification sent to an authority as referred to in Article 4(2)(b) shall be published by that authority within 15 days of receipt of the notification.";

(3) the following Article is inserted:

"Article 21a - Evaluation

No later than five years after the date referred to in Article 4(5), and every five years thereafter, the Commission shall carry out an evaluation of Articles 4(2) to (4) and 11 and present a report on the main findings to the European Parliament, the Council and the European Economic and Social Committee.";

(4) the Annex to this Regulation is inserted as Annex -I.

Article 2 - Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels.

Annex

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