European Union: SPC Reform: Commission Proposes Export Manufacturing Waiver

Following its consultation (discussed in our November 2017 edition), the EU Commission has published a proposal for a 'targeted amendment' to the rules relating to supplementary protection certificates (SPCs) in the form of a 'manufacturing export waiver'. Once introduced, this will allow EU-based manufacturers of generic and biosimilar products to manufacture those versions of an SPC-protected product during the term of the relevant SPC, provided it is done exclusively for the purpose of exporting to a non-EU market where protection has expired or has never existed. The proposed Regulation will only apply to SPCs granted after the Regulation takes effect.

The Commission considers that its proposal will address a competitive disadvantage for such companies, as compared to non-EU companies, and generate new opportunities, particularly as we approach the 'patent cliff' of 2020 when many blockbuster drugs will lose protection. Indeed, in its press release, the Commission states that the waiver is expected to generate extra growth of at least €1 billion per year in net additional export sales in the EU pharmaceutical sector and create up to 25,000 extra highly skilled jobs over the next ten years.

The Commission recognises that there may be concerns for SPC-holders as to transparency and possible illicit diversion on to the EU market, but stresses that the core protection and enforcement of SPC rights will remain unaffected, in particular due to a number of safeguards in the proposed Regulation:

• Businesses that intend to start manufacturing for export will be required to notify certain information (which will be made public) to the competent authorities no later than 28 days before the intended start date of making in the EU, including an indicative list of the intended third countries to which the product is to be exported.
• Businesses must comply with due diligence in respect of their contractual partners, in particular, to prevent goods manufactured for export being diverted onto the EU market.
• Any export of SPC-protected products outside of the EU will be subject to compliance with specific labelling requirements, including affixing a logo (see below) to the outer packaging or, if there is no outer packaging, the immediate packaging.

Whilst Medicines for Europe has welcomed the proposed Regulation, it argues that it does not go far enough as it does not deal with the issue of 'day 1 launch' – namely, allowing generic and biosimilar manufacturers to be in a position to launch in the EU immediately after expiry of the SPC (at present, they are unable to do so as they cannot begin manufacturing in the EU until day 1 after SPC expiry). Medicines for Europe points out that the Explanatory Memorandum in relation to the proposed Regulation highlights the issue of 'day 1 launch' but that the Regulation itself does not specifically deal with the issue. Indeed, the Memorandum says: "As the manufacturing capacity established for export purposes can, prior to the expiry of the [SPC], be used with a view to supplying the EU market from day-1, it is also expected to boost, to some extent, access to medicines in the Union by enabling generic and biosimilar medicines to enter the market more quickly after the lapse of certificates..."

This issue is one that will no doubt be considered further, alongside the safeguards for continued protection of SPC rights, as the proposed Regulation makes its way through the EU legislative process. To keep track of developments, Medicines for Europe has launched an SPC Waiver website (www.spcwaiver.com).

Meanwhile, the Commission has confirmed that consideration of other possible reforms of the EU SPC regime, including a possible unitary SPC, alongside a potential re-calibration of patent research exemptions, will await finalisation of its ongoing analysis of pharmaceutical incentives. It has also indicated that any future guidance on the SPC system in general should await the outcome of various references to the CJEU.

Brexit

It remains to be seen how the UK will deal with SPCs post-Brexit, including any proposed manufacturing export waiver, albeit it is widely assumed that the Government will seek to align a UK SPC system with the EU one as much as possible.

The Commission however continues to issue its 'doomsday' notices to stakeholders reminding them of the implications of the UK's withdrawal from the EU, on the basis that the UK will be a third country (subject to an agreement being reached). The latest such notice, from April 2018, focuses on SPCs.

It confirms that, subject to any such agreement, the EU regime will no longer apply to the UK once it leaves the EU, with the following consequences:

• An authorisation to place the product on the market granted by a UK competent authority on or after the withdrawal date will not be considered a first authorisation to place the product on the market in the EU for the purposes of calculating the term of an SPC.
• However, an authorisation to place the product on the market granted by a UK competent authority before the withdrawal date will be treated as the first authorisation to place the product on the market in the EU.

Meanwhile, the draft withdrawal agreement, in a provision that has recently been agreed by the EU27 and UK negotiators, provides that the EU SPC Regulation will continue to apply to pending applications for SPCs submitted to the UK authority as at the end of the transition period and that those applications will have the same level of protection.

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