New Commission study fuels generic drugs industry ‘manufacturing dispute’

EFPIA: "An SPC manufacturing waiver would be detrimental to innovation, to research and development in Europe." [Tom Small/Flickr]

This article is part of our special report Pharma innovation.

The European Commission launched on Thursday (12 October) a public consultation on supplementary protection certificates for pharmaceutical products and the so-called Bolar patent research exemption.

Global medicines spending is expected to shift toward generic drugs, with an expected rise from 27% in 2012 to 36% of total sales by 2017, according to a Commission staff working document that accompanied the EU executive’s 2015 Single Market Strategy Communication,.

“Generics and biosimilars could represent 80% of the volume of medicines by 2020,” the document reads.

The Commission announced its intention to add a manufacturing waiver to supplementary protection certificates (SPC) as part of its upgraded Single Market Strategy in 2015.

An SPC is an intellectual property right that serves as an extension of a patent right in the EU. With a manufacturing waiver, generic drugs makers can manufacture SPC-protected drugs in the EU to sell in other markets, and to prepare stocks for when the SPC expires.

The Commission document continues, saying that an SPC manufacturing waiver for exports to countries outside the EU could allow the EU generics and biosimilars industries both to create thousands of high-tech jobs in the EU and start many new companies. The industry is currently import-dominated.

“Between 54% and 70% of the active pharmaceutical ingredients market in Europe (depending on the member states) is supplied by India, China and Israel. Active pharmaceutical ingredients manufactured in Poland, for example, have significant penetration in some of its neighbouring markets, but a negligible one in the EU-15 market.”

The regular patent for a pharmaceutical product in the EU is 20 years but an SPC can extend this patent right for a maximum of five years. Specifically, SPCs aim to offset the loss of patent protection for pharmaceutical products that occurs due to the compulsory lengthy testing and clinical trials these products require prior to obtaining regulatory marketing approval. This period can last 12 years.

The generic industry is keen to obtain this SPC manufacturing waiver so it can start manufacturing drugs even while an SPC is in place.

Its main argument is that this will ensure better access to generics, as the drugs will be available from day one of the SPC expiry in the EU.

In addition, EU-based generics and biosimilars manufacturers claim that this waiver will boost their competitiveness on a global scale.

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Boosting employment

The study on “Assessing the economic impacts of changing exemption provisions during patent and SPC protection in Europe”, which was commissioned by the EU executive, was completed in late 2016 and published late last week.

This study, together with another titled “Economic Analysis of Supplementary Protection Certificates”, will be the main basis for a public consultation on SPCs.

The study claims that an SPC export waiver to third countries could result in net additional sales to European generic producers of up to €7.4bn by 2025, taking into account the potential negative impact on the EU-based branded export sales.

Referring to data from Medicines for Europe, which represents the European generic, biosimilar and valued added pharmaceutical industries, the study noted that the EU generic and biosimilar industry directly employs 160,000 people.

Such an export waiver could bring an additional 20,000-25,000 jobs, representing a 13-16% increase in employment.

“We estimate the net additional sales to EU-based generic producers that could result from an SPC export waiver within Europe to range between €207.9m and €416m by 2025, depending on assumptions regarding the diversion from other European generic and branded producers,” the study emphasises.

Adrian van den Hoven, Director-General at Medicines for Europe, told EURACTIV.com that the public consultation on the SPC manufacturing waiver is perfectly in line with the renewed EU Industrial Policy Strategy recently launched by the executive.

“The SPC manufacturing waiver is the engine for a smart and sustainable European industry,” he said, adding that this is the “perfect mix” to guarantee patients’ access to medicines by increasing jobs and growth while boosting the competitiveness of European SMEs across and outside the EU.

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It will ‘kill’ innovation and investments

On the other hand, the pharma industry does not share this view and warns of possible severe implications on innovation and investment in the EU.

“An SPC manufacturing waiver would be detrimental to innovation, to research and development in Europe and to the economy as a whole,” Nathalie Moll, the Director General of the European Federation of Pharmaceutical Industries and Associations (EFPIA), told EURACTIV.

The pharma boss claimed that for European SMEs in the life sciences sector, which are considered critical for innovation and growth, such a waiver would make attracting investment more difficult as investors look for the most favourable intellectual property (IP) environment to decide on their investments and can find such environments elsewhere.

“Europe is no longer alone in terms of attracting investment in R&D for innovative start-up to SMEs and larger innovative industries. Many regions of the world are equipping themselves with extremely attractive incentives which compete against European investment attractiveness.”

Minimal benefits

For the pharmaceutical industry, such a waiver would send a worrying signal about the EU’s respect for, and seriousness about, building a knowledge-based economy.

“This would also be at odds with the block’s trade policy, in which the EU has consistently argued against localisation policies and in particular against using IP tools to favour domestic production. There are also potential export losses to European originator companies resulting in a drop in export value for the EU,” Moll emphasised.

As far as long-term benefits for EU-based generic manufacturers go, EFPIA pointed out they would be “minimal”.

“The window of opportunity for exporting European generics to non-European markets prior to European SPC/patent expiry is often quite limited, as loss of exclusivity would either be earlier or not significantly later than SPC expiry in European markets.”

Moll went further, claiming that any potential benefits are also likely to be short-lived, as an SPC waiver would certainly encourage other third potentially importing countries, which are more competitive from a manufacturing perspective, to take similar measures, negating any benefit for generic manufacturers and the economy in Europe.

Some suggest that the generics companies will stockpile in Europe and flood the market with generic drugs when the SPC expires. Asked whether this was already happening with generics manufactured outside of the EU, Moll replied, “Currently generic medicines are often launched in Europe immediately upon SPC expiry, especially in the case of products with large market shares.”

“In fact, in some cases products are launched ‘at risk’ by generic companies, before the SPC expiry. This practice would be facilitated by such an exemption and one could assume that stockpiling for launch in Europe when the SPC expires, rather than for export, could also occur as a consequence of introducing an SPC manufacturing waiver.”

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A new study

In addition, a new study, which was commissioned by the pharma industry and the US Chamber of Commerce, was released on Thursday (12 October) and is in direct opposition to the Commission’s findings.

It says the implementation of an EU-wide SPC manufacturing and export exemption would potentially result in annual losses ranging from €2.26bn up to €4.52bn to the global innovative biopharmaceutical industry.

Of these losses, up to €1.92bn concern the European innovative biopharmaceutical industry.

As far as the impact on employment and R&D investment in the biopharmaceutical sector is concerned, the study claims that a manufacturing waiver would cause between 4,500 and 7,700 direct job losses (with an additional 19,000-32,000 indirect job losses) and a decrease in R&D investment of between €215m and €364m.

Background

Pharma innovation

Hit hard by austerity, the health systems of EU member states are under huge pressure. Combined with an aging population and the alarming burden of chronic illnesses, EU member states have targeted specific aspects of the incentives granted to the pharma industry in order to decrease drug prices.