Q&A

SPC MANUFACTURING WAIVER
Q&A about SPC Manufacturing waiver

 

Is the SPC Manufacturing Waiver (MW) inconsistent with the EU objective to maintain its global leadership in the pharmaceutical sector?

The pharmaceutical sector as a strategic sector which includes the EU generic, biosimilar and value added medicine industries, tries to compete to be one of the strongest globally. Any stimulus to strengthen the EU sector can only increase EU global leadership, especially if it has no impact on the originator industry, as the SPC MW evidence shows. As the study published by the Commission shows, the waiver would be beneficial to the whole EU pharmaceutical sector, also including the Active Pharmaceutical Ingredients (API) industry.

An SPC MW will particularly benefit European SMEs as contractors & sub-contractors, instead of forcing EU companies to rely on non-EU SMEs.

Does the SPC MW change the European Intellectual Property Right (IPR) system? With an SPC MW, would the SPC compensation be reduced or limited?  

The SPC MW does not erode or change IP protection in any way. The study published by the Commission strongly confirms this point. The monopoly on the market that the originators enjoy in the EU or abroad during the SPC period will remain as it is now, until the very end of the SPC protection.

The only difference is that instead of manufacturing from abroad (as it happens today), it would be done from EU. Hence it will benefit European Jobs and Growth instead of subsidizing jobs in 3rd countries. The SPC MW would only allow the EU generic and biosimilar medicines industries to be ready for marketing once protections expire in Europe and elsewhere.

Could the introduction of Day 1 Launch in the legislation be considered as expropriation of IP rights of the SPC Holder?

No, the introduction of Day 1 Launch should not be considered as expropriation of IP rights of the SPC Holder. From the inception of the SPC Regulation to the latest EU pronouncements in international fora on the issue (ex. EU 2017 Trade Policy Review at the WTO, Court of Justice decisions on specific case law and the SPC regulation itself in its Article 4), the European Union has maintained the position that the main aim of a SPC is to allow originators to recoup their investments through extended marketing protection. In this context, a SPC manufacturing waiver that allows generics companies to manufacture and stockpile, but not to commercialize, their products in markets protected by SPCs, respects the rights strictly conferred to originator companies by SPCs with no danger of expropriation.

It is precisely this strong link between a SPC and marketing exclusivity that has led the Commission to acknowledge consistently the sui generis nature of SPCs as distinct intellectual property (“IP”) rights from patents.  Additionally the EU is already equipped with strong enforcement tools (IP Enforcement Directive) protecting the IP holder from any potential and unlikely abuse.

Would the notification requirement as currently proposed in the legislation help protect a potential abuse of the system?

Not at all, quite the contrary, the system would become unworkable and the waiver would hardly be used by EU manufacturers. Within the notification requirement as proposed by the Commission, some of the information required to be disclosed is commercial sensitive and confidential (CCI), or part of business plans and commercial strategies of companies considered as trade secrets (name and address of manufacturers, list of manufacturing sites, list of countries of destination, start of manufacturing date and the GMP certifications). This is further highlighted and confirmed by the EMA Guidance on transparency(1). The disclosure and publication of such information would have an extremely anti-competitive effect for the user of the waiver vis-à-vis direct competitors (both generics and originators), playing against the real goals for the introduction of the waiver, hence more jobs and growth to be kept in Europe.  No business sector is currently required to disclose its commercial plans pre-launch in Europe and this would create a worrying precedent, whatever side of the industry we refer to (generics or originators).

Is the SPC MW detrimental for R&D activities in the pharmaceutical sector?

Not at all, quite the contrary. The SPC MW would have no negative impact on R&D, it would actually attract more R&D in Europe. The EU is still a leader on R&D for complex generic, biosimilar and value added medicines. Pharma companies prefer to keep R&D and manufacturing in the same location. In fact, despite the objective of the SPC Regulation being to attract manufacturing and R&D to Europe, the SPC unintendedly forces delocalisation of both manufacturing and R&D. Another study published by the Commission with the Public Consultation shows that of the SPCs filed in Europe, 44% come from US-based companies, and only 30% from EU-based companies.(2)

Is the SPC MW applied in any major developed country?

Yes, Canada has just introduced the SPC MW in its legislation, which of course represents a huge competitiveness advantage for the Canadians if the EU does not follow within a very short-term period.

Would the SPC MW increase the risks of generic and biosimilar medicines entering EU markets before SPCs expire? And in non-EU markets?

No. The rules in place today to avoid that this happens will not change at all with an SPC MW. The study published by the Commission strongly confirms this point. All EU countries have all the necessary legal tools to block and seize infringing pharmaceuticals before they reach the market (e.g. preliminary injunctions), and this will not change. The same applies in non-EU markets.

The SPC MW is only about entering the market and creating competition immediately after SPCs expire. European companies today cannot do it. Either they produce abroad, or they enter the EU market over 6-9 months after SPCs expire.

Would the SPC MW have any implications for other sectors as well?

Yes, positive implications for other sectors: as confirmed in the study published by the Commission, the Active Pharmaceutical Ingredient sector has also been forced to delocalise outside Europe in the past years. The SPC MW would benefit them significantly, especially in countries where production of API has always been important.

It will also benefit EU contractors & sub-contractors that manufacture for both originator and generic companies, instead of forcing them to rely on non-EU third party manufacturers.

Would an SPC MW be negative if it creates more competition for originators on EU and non-EU markets, and especially in pharma-emerging markets?

Commercially speaking there is absolutely no difference for originator companies. They face competition immediately after protection expiry in any case: if not from Europe, competition comes from non-EU developers. The SPC MW intends to allow European producers to compete on a level-playing-field with non-EU competitors.

Any legislation or argumentation preventing exports of high quality generic and biosimilar medicines to developed or pharma-emerging countries is against access to medicines and to the detriment of patients.

Legally speaking, once SPCs expire, markets are legally open to competition and no obstacle for companies to compete should exist or be created. Any delay, whatever the cause, is anti-competitive.

Will the SPC Waiver benefit Small and Medium Size Enterprises?

Yes unlike Global Pharma Companies, it is sometimes difficult for European SMEs to have the resources to produce elsewhere than in Europe if they want to reach other markets. If Global Pharma Companies can benefit from a global manufacturing network which provides them sufficient production flexibility to compete worldwide, SMEs manufacturing footprint is often extremely limited. The Manufacturing Waiver would therefore give them more opportunity to produce in Europe and unlock new perspective for developments and growth. 

A workable SPC waiver will also provide SMEs a level playing field with companies located outside of Europe, in countries offering this flexibility (e.g. Canada) giving them the ability to compete out of Europe for the global market.

Are there other barriers that prevent generic companies from entering the market after protection expiries?

In general, at midnight on the day of protection expiry, generic medicines (necessarily produced abroad) are ready at borders to enter the market. If in some countries there are national rules delaying generic entry even when competition should be open for generic competitors, these barriers are anti-competitive and should be removed.

The SPC MW would remove the unintended barrier that prevents European companies from producing in Europe while competing on a level-playing-field with non-EU competitors.

(1) https://www.ema.europa.eu/documents/other/heads-medicines-agencies/european-medicines-agency-guidance-document-identification-commercially-confidential-information_en.pdf

(2) https://ec.europa.eu/info/consultations/public-consultation-supplementary-protection-certificates-spcs-and-patent-research-exemptions_en