Impact of the current situation

Competitive disadvantages for EU generic and biosimilar manufacturers

Initial marketing authorisation for new medicinal products is often granted at different times for different markets. As a result, the protection periods expire at different times, for instance in the USA and Europe. In most of the cases, the total protection is longer in Europe than in any other region of the world (see list of molecule expiries in download section). The current European SPC regulation leaves the generic and biosimilar medicines industry in the EU at a competitive disadvantage. EU-based generic and biosimilar manufacturers are not permitted to produce medicines for export to regions where the protection periods have already expired or for immediate launch in Europe after SPCs expire for as long as the reference medicinal product is protected by a supplementary protection certificate in the EU. Generic and biosimilar medicines manufacturers based in third countries without SPC protection (e.g. Canada, Brazil, Russia, India, China, etc.) or with shorter protection periods are able to enter unprotected export or EU markets up to five years earlier than their EU-based competitors.

This severely compromises the competitiveness of EU companies, for instance in the US where patents and patent extensions generally expire earlier than in the EU, as new medicinal products tend to be introduced more rapidly. The current situation gives non-EU manufacturers a lead time advantage, i.e. allowing them to enter the generic and biosimilar market in the USA as soon as the SPC-like period expires there.


The Impact on Small and Medium Enterprises (SMEs)

The ban on producing generic and biosimilar medicines in Europe during the SPC period forces companies to delocalise production to non-EU countries. Larger multinational companies manage to supply export markets and EU markets after SPC expiries from their non-EU manufacturing plants, established abroad just to be able to remain competitive with international players.

However, SMEs very often do not have resources to establish manufacturing plants abroad. Therefore, either they renounce production during the SPC period (therefore losing competitiveness with other players in Europe and abroad) or they are obliged to outsource production to third party manufacturers in non-EU countries. Contracts with third parties bind EU SMEs for several years, often beyond the EU SPC expiry, therefore preventing them from bringing manufacturing back in Europe at a later stage.

The SPC manufacturing waiver would therefore have a huge positive impact on EU SMEs specifically, as recognised in the CRA study published by the Commission.


Production outside Europe

Being present in a market from the day IP protection expires is a vital prerequisite for manufacturers of generic medicines to successfully compete on the international stage. Immediate market presence upon expiration of the SPC is crucial for securing relevant market share. Prices tend to drop quite rapidly during the first few months following the end of the protection period. Being present in the market during those first few months is therefore economically significant and necessary in order to generate economies of scale in production to sustain cost competitiveness in the long term.

The ban on production during SPC terms does influence investment decisions of European generic manufacturers in favour of establishing production facilities outside the EU. The competitive disadvantages vis-à-vis non-EU competitors, who are able to enter unprotected markets sooner, act as an incentive to move production outside the EU. As investment in building up new production technology tends to be long-term, development of new generics and biosimilars follows production and also moves outside Europe. As a consequence, Europe loses investments not only in manufacturing of generic and biosimilar medicines, but also in the related R&D.


Growing dependence within the EU on medicines produced in third countries

As a consequence of the ban on production during SPC terms, a large proportion of European generic and biosimilar manufacturers’ production has been established in non-EU countries (e. g. India or China) despite the uncertainties due to the territorial distance. Due to the limitations imposed by intellectual property rights, development of new technologies is being made outside the EU and, especially for more complex medicinal products, is hardly relocated back at a later stage because of the excessive related costs and complicated regulatory approvals.

In view of supply shortages in many European countries, the EU’s increasing dependence on medicines manufactured in third countries as a result of production facilities migrating there is a significant disadvantage. Levelling the playing field with international competitors by stimulating investment in EU production brings higher security of supply, generates additional revenues and creates more jobs in the EU.


EU manufacturers’ share in the growth of generics and biosimilars is unsatisfactory

Generics and biosimilars ensure that providing the population with medicines will remain affordable well into the future. Based on estimates by the European Commission, generics and biosimilars could account for up to 80 percent of the volume of medicinal products by 2020. Lack of incentives to invest as a result of the current regulations however means that the European industry will be unable to realise their full potential in the EU Single Market in the long run (see also the EU Commission’s Impact Assessment in the download section). Lifting the ban on production by means of the SPC manufacturing waiver would enable European manufacturers to exploit not only net export opportunities amounting to billions of Euro, but also to supply the growing EU market from Europe rather than from abroad. This would lead to an increase of investment in production activities within the EU and create new high skill jobs.


No disadvantages for originators

Deliveries of generic medicines are already made to European pharmacies the day after expiration of the SPC protection period under the current system. These deliveries are made from international production facilities also to foreign markets where protection has expired. Whether the generic or biosimilar medicine is being produced in Europe or any other region is therefore not going to make any difference to the manufacturers of the original products. With an SPC manufacturing waiver, the market exclusivity enjoyed by the original products remains exactly the same as without the SPC manufacturing waiver.


Global competition

Introducing an SPC manufacturing waiver to lift the production ban of generics and biosimilars in the EU for both export and manufacturing to prepare for launch at SPC expiry in Europe during the SPC protection period is necessary to restore the ability of European generic and biosimilar producers to compete with their peers based outside the EU. The owners of the reference products will retain the exclusive marketing rights for their protected medicines.

Producers based in non-EU countries, such as for instance Canada, Brazil, Russia, India or China, are currently able to sell generics and biosimilars up to five years earlier than their EU-based competitors in markets where the protection rights have expired or do not exist. Current SPC regulations prevent EU-based generic and biosimilar manufacturers from making their medicines for unprotected markets for as long as the reference medicinal product is protected by an SPC. This compromises the competitiveness of EU companies.

The opportunity to prepare for expiration of a protection period in another market is essential for generic and biosimilar manufacturers. Therefore, it is not enough to permit production within the EU for export to other regions only. It is fundamental that stockpiling for day-1-launch in European markets is also allowed.