I Introduction
Creating an environment for the pharmaceutical industry that promotes innovation of new and improved drugs that are accessible to the public is a challenge. In an attempt to create such an environment, governments have instituted regulations to balance the interests of Brand-name versus generic companies.
In order to promote innovation, Brand-name companies emphasize the need for a period of market exclusivity, primarily in the form of strong intellectual property protection . Due to the financial risk associated with new drug development, Brand-name companies require a certain guarantee that they can recoup the costs of their investment, cover any potential liability and finance further research and development. Absent this, fewer new drugs would be discovered for a smaller range of conditions (i.e. those with only a large potential market). This, in the end, would be detrimental to society.
To understand the risks associated with the development of new pharmaceuticals, in the United States only one out of every 250 drugs that enter pre-clinical testing are ever approved for marketing . This equates to about one out of 10,000 drugs isolated at the basic research stage. Therefore, companies must rely on a few successful products in order to finance their entire research and development programs. According to a U.S. study, it is estimated that a drug will cost $500-$600 million to develop. In comparison, the cost to put a generic drug on the market is only about $1 million. This is due to a number of factors. In addition to much reduced basic research costs, the studies required for market approval are less onerous for generic companies as they are permitted to rely on bioequivalence studies with the corresponding Brand-name drug. This enables generic drug companies to sell their drugs at a much lower price than their Brand-name counterparts while still allowing them to reap profits soon after entry into the market. Generic companies are often favoured by the public, as they provide market competition and drive drug prices down.
Another factor that Brand-name companies have to account for is the increased time required to get a drug to market. Although a patented invention obtains a 20-year patent term (i.e. market exclusivity), drug approval times, which are estimated at approximately 8 to 14 years, erode the effective market exclusivity for patented medicines to only 6-12 years. This is significantly less than the 18-year effective patent term of an invention in any other industry. According to a study done by the U.S. Congressional Budget Office, once generic drugs are approved, the innovator loses 65% or more of the market share of that drug.
Governments, faced with the significant public outcry for inexpensive drugs, recognize that this must be balanced with intellectual property rights in order to maintain a Brand-name pharmaceutical industry that is competitive worldwide and capable of attracting investors. In Canada, research funding by the Brand-name pharmaceutical industry was only 106 million dollars in 1987, a time when generics were free to enter the market during the innovative drug's patent life through compulsory licensing. In contrast, in 1999, several years after patent protection was strengthened, that figure reached 944 million dollars, an increase of more than 800%.
Canada, the United States and Europe have tied exclusivity of drug products with the regulatory approval process. As in the patent regime, with international treaties such as the Paris Convention and TRIPs , there is a trend towards uniformity of the regulatory approval process for drugs. A number of features have been proposed by each region to attempt to address the concerns of the respective constituents (For an overview, see Table 1). This article will compare the historical and current treatment of Brand-name and generics in each region, the corresponding drug approval regulations and patent legislation as well as the current strategies used by Brand-name and generics to improve their positions in the industry.
II Canada
Compulsory Licensing to Notice of Compliance, as compared to other jurisdictions, Canada has historically created a favourable environment for generic drug companies. In 1923, Canada introduced compulsory licensing, permitting the manufacture, use, or sale of a patented drug before the expiration of the patent. In exchange, the licensee had to pay a royalty to the patent holder. This was generally set at 4% of the sales of the generic product. No authorization from the patent holder was needed. However, there was a requirement that the active ingredients of the generic drug be produced in Canada. In 1969 that requirement was removed, resulting in numerous compulsory licenses and a significant growth in the generic drug industry.
However, in the late 1980’s to mid-1990’s the legislative framework changed. On October 1, 1989, the patent term was changed from the previous seventeen years from issuance to twenty years from filing of the application. Market exclusivity was granted to patent holders such that compulsory licenses could only be used after the patented drug had been on the market for 7 years (or 10 years if the active ingredients for the generic drug were imported).
In 1993, compulsory licensing was completely eliminated with the coming into force of the Patented Medicines (Notice of Compliance) Regulations. These regulations were further amended in 1998 to correct some of the loop holes of the original regulations. The regulations link patent rights with the drug approval process. Generic companies now have to wait until patent expiry before obtaining the necessary market approval (or a Notice of Compliance ("NOC")) for their drug .
To receive a NOC, an innovator must establish the safety and efficacy of the drug through experimentation and clinical trials. Rather than having to independently establish the safety and effectiveness of the drug, the NOC regulations permit a generic drug to rely on the safety and efficacy data submitted by the innovator if bioequivalence can be established. However, a NOC will not automatically be issued to a generic drug if the drug was marketed in Canada pursuant to NOC by a first person in respect to which a patent list was submitted.
A generic manufacturer seeking a NOC must indicate whether it accepts the patent list. If the generic agrees with the list, the NOC will issue upon the expiry of the last patent relevant to that product, as stated in the patent list. However, if the generic does not accept the patent list, it must serve the patent holder with a notice of allegation ("NOA") that states that the patent list is false, the patent is invalid or expired or that no patent claim of the first person to the medicine itself or use of the medicine would be infringed if they were issued a NOC. The patent holder then has 45 days to decide if it will initiate court proceedings to prevent the Minister of Health from issuing the NOC until the expiry of the listed patents. This does not initiate a patent infringement suit but instead a summary prohibition hearing. The parties can follow this type of proceeding with an infringement suit if desired.
Once court proceedings have been initiated, the Minister is not allowed to issue a NOC until the parties reach agreement, the listed patents subsequently expire, the court renders a decision, or a period of 24 months (amended from 30 months in 1998) elapses, whichever comes first. This gives patent holders an automatic injunction against any generic manufacturer who tries to obtain an NOC within the patent's lifetime.
The intent of this legislation is to prevent a NOC from being issued to a generic copier until the status of the relevant patents for the innovative drug has been determined.
In order to benefit from the NOC regulations, a patent holder must submit to Health Canada a patent list of all relevant patents to their product and their corresponding expiry dates. The patent list must be submitted at the time an application for the notice of compliance is submitted. Patents can be added to the patent list after filing of the application, if it is done within 30 days of issuance of the patent. This time limit is not extendable. The patent lists are published in the official Patent Register. There is no limit to the number of patents that can be submitted for a drug but only patents that have "a claim to the medicine itself" or "claim to use of medicine itself" can be listed. This has been interpreted by the courts to exclude process per se claims and claims for intermediates. In order to curb abuse of the patent list regulations, the Minister, under section 3 of the regulations can audit the patent list and refuse to add to the list or can delete from the list patents that do not meet the requirements of the regulations.
Old Act patents (prior to October 1989) were not allowed to claim drug compounds, parse and therefore claimed the product via a product-by-process claim. The court has been unable to come to a standard interpretation for product-by-process claims. In Novartis AG v. Apotex Inc. , Pfizer Canada Inc. v. Apotex Inc. (1998) and Eli Lilly and Co. v. Novopharm Ltd. , the court has found that the process element of the claim was an essential part of the claim and that the compound was protected only insofar as it was made by that process or an obvious chemical equivalent of that process. In contrast, in Janssen Pharmaceutica Inc. v. Apotex Inc. and Pfizer Canada Inc. v. Apotex Inc. (1997) , the court found that if the process was known at the time of the patent and was uninventive, then the process part of the claim was non-essential, basically suggesting that the claim was for the compound itself. Assuming that the court construes the process part of the claim as essential, the court must still answer the question: Is the NOC applicant's process the obvious chemical equivalent of the process(es) claimed in the patent? This uncertainty in the courts might suggest to a generic drug company that it is worth the risk to challenge a product that is protected by a patent under a product-by-process claim. However, the generic company must still contend with a reverse onus of proof since a drug will be presumed to have been made by the same process unless proven otherwise.
2.1 Patented Medicines Prices Control Board
In conjunction with the phasing out of compulsory licensing, Canada established the Patented Medicine Prices Review Board (PMPRB). The PMPRB was established to protect consumer interests by ensuring that patented medicines are not priced excessively during the patent protection term, a time when there is little competition to drive prices down. The provisions have very broad scope and apply to any person having the benefit of a patent pertaining to the medicine. This would include any patent having claims to the medicine, use of the medicine or process for making the medicine. It may also include intermediates. The PMPRB has asserted its jurisdiction over patents that have been dedicated to the public. Patent benefit holders are required to report information on the introductory prices and sales of patented medicines prior to first offer of sale of the product and to continue to file information every six months for as long as the drug remains under patent protection. The PMPRB reviews this pricing information to ensure that the prices charged comply with the Guidelines established by the board. The Guidelines are based on the price determination factors in s. 85 of the Patent Act , including comparison to prices charged for the same drug in other industrialized countries and increases limited to the changes in the Consumer Price Index. Prior to the PMPRB being established, Canadian drug prices increased on average by 9% per year from 1982-1988. However, between 1988 and 2000, the increase was only 1.8% (0.8% for patented drugs only). This corresponds to prices that were 23% higher than the median international prices in 1987 and 10% below the international median in 2000. Furthermore, in 2000, consumer prices increased by 2.7% whereas the prices of patented medicines only rose by 0.4% on average. Despite the actions of the PMPRB, patented drugs, which only represent 6.6% of the total number of drugs in Canada, accounted for 63.0% of the total value of sales or $6.3 billion in sales in 2000.
2.2 The Bolar Provision
Although Canada signed the TRIPS agreement on January 1, 1995, it still attempted to find ways to ease the way for generics onto the market to provide consumers with easy and inexpensive access to drugs. Canada interpreted the exception to the exclusive manufacture, use, and sale of the patented drug found in Article 28 of the agreement to include not only preparation for regulatory approval (often called the Bolar provision) but also for stockpiling of the drug six months prior to patent expiry. The European Community disagreed and brought a complaint to the World Trade Organization (WTO), stating that Canada was in violation of the TRIPS agreement. The WTO gave a split decision. Preparation of a patented drug is acceptable for regulatory approval but not for stockpiling. Canada passed the Repeal of the Manufacturing and Storage of Patent Medicines Regulations, which came into force on October 7, 2000, in order to comply with this ruling. This effectively gives patent holders a longer patent protection period since the generic company will not be able to sell the drug on the day the patent expires but can only just begin its production.
In another WTO decision, the complaint being brought against Canada by the United States, the WTO ruled that Canada's seventeen year patent protection period which began on the date of issue does not comply with the twenty year patent protection from the filing date in patents that took less than 3 years to be issued. Therefore, the government recently passed Bill S-17, An act to amend the Patent Act , which implements this ruling by extending the life of the then pending patents, to the longer of 17 years from the date of issue or 20 years from the date of filing.
2.3 Summary
Since patent status is linked to the NOC, patent holders have the opportunity to prevent generics from entering the market at an early stage, prior to their entry into the commercial market. Although the patent holder is limited to a 24-month injunction, there is nothing to prevent the patentee from beginning a new court challenge for each individual patent listed for a particular drug, thus encouraging excessive patent litigation, which keeps the generic equivalents off the market for many years. Norfloxacin and Nizatidine are examples of such drugs that were blocked for approximately 4 years by patent litigation.
Furthermore, innovators can try to add more patents to the patent list for a specific drug such as changes in coatings or other advances, in an attempt to extend the term of market monopoly. This process is called "evergreening". For example, enalapril will not be off-patent in Canada for 28 years after the initial patent was granted. However, the legislation limits the innovators right to add patents. Only patents which were filed on a date prior to the NOC submission can be added. They must be added within 30 days of the patent being issued. If the patent holder has included patents which should not be included or tries to extend the exclusivity by delaying the proceedings, costs can be awarded to the generic drug company as well as damages for loss of revenue during that time.
The lack of any data exclusivity period in Canada allows the generic drug company to access the new drug submission data of an innovative drug immediately. In Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare), the Supreme Court of Canada described the NOC provisions as "manifestly unjust to subject generic producers to such a draconian regime". Given the pro-generic sentiment in Canada's highest court, a generic company may be encouraged to challenge existing patent lists of innovative drugs, in hopes that the court will construe the innovator's patent narrowly and side with the generic interest. In situations where a generic drug company wants to develop a product that is protected by a product-by-process claim, the generic drug copier can assert a new and distinct NOA to an innovator for each process that they plan to use in the drug development, thereby forcing an innovator to launch a prohibition proceeding to counter each one.
Innovators defend their right to longer patent terms because of the length of time wasted in drug approval when they are not actually able to enjoy their patent monopoly. Canada does not have any patent term extension to compensate for the 8-12 year delay. Innovators complain that this does not make it worthwhile to invest in the production of new drugs. To address this complaint, Canada has recently introduced Bill C-338, An act to amend the Food and Drugs Act, which is designed to speed up the approval process for new drugs. Although this will improve the time wasted on regulatory approval, it will not be able to fully compensate for lost patent protection time.
III United States
At no time in history has the United States allowed a compulsory licensing regime to govern the pharmaceutical industry. In fact, they strongly opposed such a scheme during the TRIPs talks. Prior to 1984, generic drugs were prevented from marketing approval until after patent expiration. To gain drug approval, generic drugs were required to submit the full experimental and clinical data that is required for a new drug.
After pre-clinical experimentation, the applicant submits an Investigational New Drug ("IND") application. The Food and Drug Administration ("FDA") reviews the information and if it decides that it is safe to study in humans, then an IND is issued. The innovator then begins clinical trials to determine the safety and efficacy of the drug. The results of clinical trials are submitted to the FDA in a New Drug Application ("NDA"). The FDA will review the information to decide if the drug should be approved for marketing. FDA approval is similar to the issuance of a notice of compliance.
In 1962, generic drug companies were permitted to use a paper new drug application for a faster and more economical approval, based on published scientific or medical literature that demonstrated the safety of the chemical. However, paper NDAs were minimal and generic drug companies did not want to spend time and money on clinical trials necessary for marketing. The United States Court of Appeals in Roche v. Bolar further paralyzed the generic industry by finding infringement where the patented product was used to obtain data necessary for a NDA prior to patent expiry. This decision essentially extended the patent term of an innovative drug by at least two years, the length of time that it would take for an equivalent of an established drug to be approved.
In Bolar, the court refused to provide for a regulatory approval exception stating that "[(i)]t is the role of Congress to maximize public welfare through legislation". Therefore, in 1984, the Drug Price Competition And Patent Term Restoration Act was passed (also referred to as the Hatch-Waxman Act) (summarized in Bristol-Myers v. Royce, infra). This Act introduced the possibility of an abbreviated new drug application ("ANDA"). The purpose of these provisions was to facilitate the approval of generic drugs to speed up public access to cheaper products. Under this scheme, a generic drug company could avoid the repetition of extensive research needed to prove safety and efficacy, by relying on the information that was submitted in the original innovator's NDA. Furthermore, in response to Bolar, an exception to patent infringement for the manufacture, use or sale of a patented drug was allowed if the purposes of such infringement were for preparation and submission of an ANDA.
The Hatch-Waxman Act attempted to strike a balance between the interests of the generic industry and the innovators' intellectual property rights. In exchange for allowing the Bolar-type infringement, patent holders could apply for an extension of the patent term to compensate for the length of time it took for NDA to receive FDA approval. Extensions are available for active ingredients, formulations and compositions, methods of use and methods of manufacturing. The length of the patent term extension can be calculated as one-half of the time of the Investigational New Drug Period (IND approval to FDA acceptance) with a maximum extension of 5 years and a total market exclusivity that cannot exceed 14 years.
Similar to Canada's NOC provisions, the Hatch-Waxman Act provides for the linkage between the drug approval process and patent status. Upon a NDA submission, the innovator is required to submit a list of patents pertaining to the drug, which is published in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the Orange Book, the United States' equivalent to the Patent Register in Canada. The list is comprised of only drug patents, which includes drug substances (active ingredients), drug products (formulations and compositions), and methods of use. Process patents are ineligible and only intermediates that can satisfy the definition of an active ingredient can be included.
When an applicant submits an ANDA for a generic drug and wishes to compare it to an innovator drug, the applicant must make a certification based on one of four categories:
(i) the drug has not been patented,
(ii) any patents pertaining to the drug have expired,
(iii) the generic accepts the patent list and will wait until the patent expires,
(iv) the patent on the drug is invalid or not infringed.
In situations where a paragraph iv certification is asserted, the patent owner must be notified of the possible generic infringer and will have 45 days to seek to prevent the ANDA approval by filing a patent infringement suit. As soon as the innovator files suit, the ANDA approval is automatically barred for 30 months. This process resembles Canada's NOC regulations, however, in the U.S., this process will lead to a patent infringement proceeding rather than a summary proceeding to prevent approval from taking place, since the act of asserting a paragraph iv certification is considered an artificial act of patent infringement.
In keeping with the TRIPS agreement, the United States changed the patent term to 20 years from the filing date rather than 17 years from the issue date. However, in contrast to Canada, the United States immediately provided for a longer term for any old patents that had been issued within three years. The Uruguay Round Agreements Act provided for what was called the "Delta Period". Any drug with a patent in effect on June 8, 1995, or any patent application pending at that time would get the term of twenty years from the time of filing or seventeen years from the time of grant, whichever was longer. In fairness to generic companies that had been expecting to enter the market as soon as a drug went off-patent, the Act created a very limited compulsory licensing provision, effective during the time between the two dates. The owner of the patent was not permitted to obtain an injunction against a generic party who had invested money in preparation of entering the market, but would be entitled to receive "equitable remuneration". However, the Bristol Myers Squibb v. Royce decision held that a generic drug company could not bring a drug to market under the ANDA route during the delta period, thereby still exhibiting pro-Brand-name mentality.
It is estimated that each day some drugs bring in revenue of over $4 million. Given the financial importance of each additional day of market exclusivity, brand-name companies have developed various strategies to stave off generic competitors. However, the innovator must deal with the limitations of the Hatch-Waxman Act. An extension can only be granted once for a patent; only one patent for each given regulatory review period is eligible; extensions are limited to FDA authorization of the drug, which must be for the first commercial marketing or use of the drug's active ingredient i.e. new chemical entity. In order to capitalize on this extension, certain patents drafting strategies have been suggested . Such strategies include filing a separate patent application for each new chemical entity. Isoforms should be placed in separate patent applications to ensure that separate patent extensions can be granted. Obviously, when considering such strategies one also needs to be careful to avoid a double patenting rejection. In contrast, if a single product is the subject of a patent, both the new chemical entity and the method of use should be patented in one application to ensure that they both get an extension since they share the common FDA regulatory review period. Patent holders have a difficult decision to make when two or more patents cover the approved drug product, and only one can be extended. When a formulation has a longer remaining term and is key to the drug's success, it might be better than the composition itself. Also, when considering the use of the Orphan Drug Provisions or Fast-Track approval one should weigh the benefits of approval versus the fact that the ability to extend patent rights for other indications for the same active ingredient will be lost once those applications are approved.
In addition to patent protection, the FDA approval process offers data exclusivity periods, a brand-name benefit that is not offered in Canada. This period is distinct from the patent term; it is a time when generic companies are prohibited from relying on an innovator’s safety and efficacy data for use in an ANDA, thereby delaying market approval for a generic drug. The rationale for data exclusivity periods is that the extensive data generated for a new drug submission or for a supplemental submission that requires clinical trials (often for new uses of a known product), deserves its own intellectual property rights. Innovators should have the right to exclude others from profiting from their data. The Hatch-Waxman Act provides for a 5-year period for new molecular entities and a 3-year period for supplements. The data exclusivity benefit can exist with or without a corresponding patent. Since approval takes so long, the exclusivity period usually occurs toward the end of a patent term and can be used to effectively delay generic drug testing needed for an ANDA application.
Eli Lilly has taken advantage of various strategies to keep generics from entering the market for their best selling drug Prozac, whose active ingredient is fluoxetine hydrochloride. Twelve hours prior to the patent expiring, an additional patent was listed in the Orange book. This allowed the possibility of extending the period of market exclusivity beyond the expiration of the patent through litigation. This late-hour patent claimed the use of fluoxetine hydrochloride to inhibit serotonin uptake, which is the cause of depression. Barr laboratories, who had anticipated the drug to go off-patent, filed an ANDA application with a paragraph (iv) certification. When Eli Lilly was notified of this application, they commenced an infringement suit, which triggered the automatic 30-month injunction preventing the FDA from approving generic fluoxetine hydrochloride tablets. The Court of Appeal upheld the decision finding invalidity of the patent, that this was an example of double-patenting or evergreening in order to gain further market exclusivity. Although this patent was not legitimate, it effectively gave Eli Lilly the extension it was looking for. Innovators list as many patents that are within justification since each patent that is listed must be challenged by an ANDA applicant, and will trigger a 30-month injunction. There are no limits on the number of patents that can be listed in the Orange Book. The United States does not monitor what patents are listed, a practice that Canada implemented in 1998, in order to reduce the extensive patent litigation. According to an article form American Health Line, during the past 10 years, 50% of the NDAs approved are for new versions of existing drugs and only 36% are actually for new products. SmithKline has also used this strategy to extend the time that they hold the market share on Augmentin, whose active ingredient is amoxicillin. Prior to the original patent expiring, they filed an additional patent covering other elements of the drug, including an acid that stops the amoxycillin from degrading. This patent does not expire until 2017, however, the work that it is based on was done in the 1970's.
Patent holders can also attempt to delay generic drug approval at the administrative level. Innovators can submit citizen petitions requesting increased testing for greater assurance of bioequivalence, safety and a drug product's performance. The strategy behind this practice is to create more difficult scientific and economic hurdles for generic firms to overcome. On the other hand, generic companies can counter this action by submitting their own citizen petitions objecting to the rigorous requirements proposed by the innovator.
In addition to the litigation strategy, innovators can take advantage of the pediatric exclusivity provisions in the United States. Many drugs are prescribed to children even if it does not contain a pediatric indication. To answer the need for pediatric labeling and to encourage drug companies to fund pediatric clinical trials, pediatric exclusivity provisions were introduced in 1997, which awarded an extra 6 months of data exclusivity to companies conducting pediatric trials. According to the Wall Street Journal, estimates of how much extra revenue the extension could produce were calculated for six of the drugs that have been granted pediatric exclusivity. Eli Lilly obtained a further 6-month exclusivity period by conducting trials of Prozac for pediatric indications, resulting in an estimated $831 million in additional revenue. This extended the exclusivity long enough to gain public support for a new version of Prozac. Merck & Co. gained a half-year of extra protection from generics when it tested Pepcid on infants, gaining an estimated $975 million and for Vasotec, their anti-hypertensive drug, for $318 million. Schering-Plough extended Claritin for an estimated $975 million, Bristol-Myers Squibb extended Glucophage for an estimated $648 milliion, and BuSpar, an antianxiety drug for $284 million. The FDA estimates that over 20 years, generic drug companies could lose $10.7 billion in sales due to the 6-month delay in entering the market. Despite this criticism, the pediatric exclusivity law has provided some important and beneficial data, permitting drugs for HIV, arthritis and obsessive-compulsive disorder to be given to children using accurate dosing for their age level, pediatric labeling that would likely not have occurred without the pediatric exclusivity incentive.
Manufacturers of innovative drugs attempt to develop new medications with improved efficacy or reduced side effects for the same indications prior to going off-patent. Although the development of new and improved drugs is beneficial, it also provides mechanism for the innovative company to retain its market share. The switching of patients to the newer medications can ensure reduced market competition upon patent expiration of the older product. Eli Lilly began marketing Prozac Weekly, a tablet that only needed to be taken once a week. Therefore, although generics can enter the market with the daily dose Prozac, they will not be able to market the improved version, which is likely to be preferred by patients. This type of marketing strategy was also used by Bristol-Myers Squibb for their product Glucophage, which was not under patent protection but only a five-year data exclusivity period of protection. They introduced a once-per-day version of the drug. The old version usually had to be taken three times daily. They also began to push a new drug Glucovance which combines Glucophage and another medicine to make it more potent, and to discourage the use of generic glucophage. Similarly, AstraZeneca PLC have also begun marketing a successor to their blockbuster drug Prilosec, which will be off-patent soon. They are hoping that marketing of Nexium will entice patients to switch from Prilosec to Nexium and avoid the switch to generics.
The United States legislation has a unique provision to encourage generic companies to challenge weak patents. In exchange for submitting themselves to the possibility of expensive litigation, the Act provides for a benefit to the first ANDA filer for a patented drug. The Act grants a 180-day exclusivity period to the first generic applicant to come to market or win the right to do so in court. Despite the intentions of this provision, a large amount of litigation has spurred between ANDA filers in order to gain the elusive opportunity to be the first generic supplier.
IV Europe
In 1965, Council Directive 65/65/EEC was adopted by the European Community requiring each member state to establish a drug approval system. In order to market a drug, the innovator has to obtain a marketing authorization by submitting reports of pharmacological and toxicological tests and clinical studies, similar to NOC or FDA approval. Council Directive 87/21/EEC, which was adopted in 1986, allowed for acceptance of abridged applications in which generic products could rely on original marketing authorization data.
In 1995, Europe adopted a new system for the authorization of drug products in order to make available a medicine marketed in one EC country to all other EC countries. The new system is based on two procedures, the centralized procedure and the mutual recognition procedure. Under the centralized procedure, applications are submitted to the European Agency for the Evaluation of Medicinal Products ("EMEA") to be evaluated by the Committee for Proprietary Medicinal Products ("CPMP"), which pools the scientific expertise of the Member States. The EMEA then forwards the opinion to the EC, where a final decision on marketing authorization is made. The advantage of this procedure is that an EC authorization is valid throughout the entire European Union. The mutual recognition procedure works on the idea that each Member state will recognize the respective national marketing authorizations of other Member States. If the original national marketing authorization is not mutually recognized by another Member State, the dispute is referred to the CPMP for arbitration. Once the CPMP decision is recognized by the EC, the decision is binding on all Member States. Biotechnology products must seek approval through the centralized procedure. For other innovative new products, the choice of procedure depends on a number of factors. If the product is an orphan drug or the company is small and has limited resources, the centralized procedure may be more appropriate. If the targeted market does not include all the Member States, the mutual recognition procedure may be more appropriate. In the future, the centralized procedure will be recommended for all pharmaceuticals seeking marketing authorization in Europe.
Similar to the United States, Europe recognizes the independent intellectual property right associated with the data submitted for drug approval. However, the length of the term of protection varies within Europe. The basic data exclusivity period given to an innovator was six years, but member states had the option of creating a ten-year period or recognizing no data protection after a patent had expired. Biotechnology and high-technology medicines were entitled to a uniform ten-year period as established by Council Directive 87/22/EEC. Any products that are submitted through the Centralized Procedure of the European Union are automatically entitled to ten years of data exclusivity.
Data exclusivity is limited in its protection. It only protects the patentee/innovator for the first marketing authorization of the substance against a second person/generic relying on the tests and trials. Data exclusivity is not given for new therapeutic indications, dosages or dosage forms of a substance that have already had a first marketing authorization. This leads to the conclusion that if a generic product meets the criteria for an abridged application, i.e. essentially similar to the innovator's medicinal product, it is entitled to all the approved indications for the original product if the original data exclusivity period has expired.
As part of an abridged application, "evidence of the date of authorization for more than 6/10 years and the confirmation that the medicinal product is marketed in the Member States concerned should be provided." This rule has led to some Brand-name companies withdrawing their product immediately prior to the end of the data exclusivity period such that no reference marketed product exists. The company then markets a new improved version of the product. When the generic company seeks to rely on an abridged application, there is no longer a marketed reference product with which to compare its medicine, forcing the generic companies to perform their own tests and trials to enter the market and effectively extend the exclusivity term.
The European system does not have an effective linkage with the European Patent Convention. There is some linkage in countries that have opted to limit the data exclusivity period for six years to products that have unexpired patents. In the centralized procedure, abridged applications can be approved for products with unexpired patents once any data exclusivity period has lapsed. An innovator is not notified of this activity and has as its only possible recourse, the ability to file a patent infringement suit against the generic producer.
Clinical trials, tests and experiments conducted by a generic manufacturer for the purposes of filing market authorization applications during the time the original product is under patent protection amount to patent infringement. No Bolar provision exists in EC law. As stated previously, Europe challenged Canada's Bolar provision via the WTO dispute settlement body, which ruled in favour of Canada. Europe did not appeal this decision but has yet to implement any changes. Because of the lack of Bolar provisions in Europe, generic companies that want to access the European market develop their products outside of Europe and then import them the day that the patent or market exclusivity has expired. If a generic company chooses not to manufacture the product elsewhere, they will enter the market 18 months to two years after their competitors, which would make it very difficult to establish a market for their product. Furthermore, if companies are prevented from importing generics the day after the patent expires, then drug costs will continue to be high for the additional two years prior to generic competition.
On July 18, 2001 it was reported that changes would be proposed to the European rules. These changes include the requirement that all high technology products and all medicines based on new chemical entities go through the centralized procedure, the option to use the centralized system whenever the medicinal product is a significant innovation from a therapeutic, scientific or technical point of view or of interest at the European Union level to patients. A trade-off between generic and Brand-name industries is also proposed. Generics would be allowed to get their products ready for approval during the patent period in return for a consistent ten-year data exclusivity period for the innovator. This exclusivity would be 11 years if a new innovative indication is added after the brand has been on the market.
Under Article 63 of the European Patent Convention, the term of a European patent will be 20 years from the filing of the application. Europe acknowledges the unfair treatment that the pharmaceutical industry receives in comparison to most other industries due to the lengthy drug approval processes. Therefore, a Supplementary Protection Certificate ("SPC") will be issued in circumstances where a patent has had a significant amount of its lifetime eroded because of the time to approval. This is Europe's equivalent to the patent term extension provided by the Hatch-Waxman Act. A SPC will be granted if (1) the product is protected by a basic patent at the time of the application; (2) a valid authorization to place the product on the market has been granted in the country where the SPC is being sought; (3) the product has not already been the subject of an SPC in that country; (4) the authorization is the first authorization granted for the product; and (5) the application for the SPC is made within six months of the grant of the authorization. The maximum duration of the extension is five years, calculated as the time equal to the period which has elapsed between the filing of the patent application and first market authorization obtained for the product anywhere in the European Community ("EC"), less five years. Therefore, if the product has received authorization anywhere in the EC within five years, then it is not eligible for the extension. The SPC can only be granted such that the product enjoys a maximum of 15 years of market exclusivity, one year longer than that provided by the Hatch-Waxman Act.
V CONCLUSION
Establishing a regulatory framework that promotes the interests of society; the development of new drugs for an increased variety of medical conditions and making them available to the public, is difficult.
Canada, the United States and Europe have each adopted their unique regulatory framework.
For instance, Canada and the United States have provided patentees with a mechanism for obtaining an initial injunction against a second company wanting to market the same drug. The United States additionally has provisions for data exclusivity, while Europe relies solely on data exclusivity. Both the US and Europe have provisions for patent term extensions, while Canada has no provisions for data exclusivity or for patent term extensions.
Harmonization of this framework would benefit the pharmaceutical industry. Currently, time and money are spent to optimize a company's marketing strategy for each jurisdiction: from drafting of the initial patents to drug approval and pricing.
CANADA UNITED STATES EUROPE
Compulsory Licensing
Prior to 1993 No No
Exclusivity Provisions tied into the Drug Approval Process
Yes- Drug approval is linked to patent status Yes- Drug approval is linked to patent status.
- Data exclusivity provisions: 5 yrs for new molecular entities and 3 yrs fir supplemental indications Yes-10 year data exclusivity, if centralized procedure is used.
Patent Term Extension
No Yes
- up to 5 yrs and maximum market exclusivity of 14 years. Yes- up to 5 years and maximum of 15 years market exclusivity
Price Control
Yes No
Bolar Provisions
Yes Yes No
Generic Exclusivity
No Yes No
Orphan Drug
Provisions
No Yes Yes
Pediatric Drug Provisions
No Yes
Patent List
Yes
- Patent Register
Yes
- Orange Book
No
Automatic Injunction against generic applicants during patent term Yes Yes No
