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Out-Law Analysis 5 min. read

EU unlikely to follow US with 'patent linkage' system, says expert

ANALYSIS: An interesting approach to encouraging competition and controlling prices of pharmaceuticals was recently unveiled in the US. Whilst there may be similar political will to control the cost of pharmaceuticals in Europe, practicalities suggest that at present such an approach is unlikely here in Europe.

Recently, the US Food and Drugs Administration (FDA) published a new list of off-patent, off-exclusivity branded drugs for which no generic equivalents have been approved (10-page / 185KB PDF).

The move is aimed at allowing manufacturers to see at-a-glance where there might be opportunities to launch new products onto the market where there is limited competition and where the FDA could immediately accept an Abbreviated New Drug Application (ANDA). The FDA has separately outlined a new policy designed to expedite the process of approving applications for certain generic products such as those for which there is limited competition  (7-page / 109KB PDF).

Such programs are possible due to the patent linkage system which operates in the US.

Under the so-called 'Orange Book' system, branded pharmaceuticals which benefit from patent protections are indexed, with the purportedly relevant patents listed. In accordance with the provisions of the Hatch-Waxman Act, when submitting an ANDA or generic application, the applicant must certify against all the purportedly relevant patents. If the applicant certifies that his product will not infringe the patent, or that the patent is invalid, there follows a process by which the courts will consider these questions, meanwhile there is a 30-month stay to approval of the ANDA by the FDA. 

In essence, the regulatory process is linked to the question of patent validity and infringement.  In contrast, historically, Europe has firmly maintained an approach contrary to patent linkage. This is enshrined in legislation and the European Commission has taken action in the past against countries seen to be transgressing the status quo, However, with ever increasing pressure on healthcare budgets and costs of pharmaceuticals, could the landscape shift so that we see a similar scheme to the FDA's proposal in Europe?

Drug pricing remains a controversial issue in both Europe and the US

The publication of the FDA's new off-patent list and generics approval scheme comes at a time when there has been a high-profile debate taking place in the US over the price of medication. By helping to support the emergence of rival generic products into markets dominated by the giants of the pharmaceutical industry, the FDA seeks to boost competition and in turn drive down prices.

The move by the FDA must be considered in the context of the policy direction being taken by US president Donald Trump.

Not long after his election, Trump announced his intention to tackle what he called the "astronomical" pricing of drugs in the country. A new executive order has been mooted to address the issue and is reportedly imminent, with the president previously expressing his desire to simultaneously reduce regulation and promote innovation.

Pricing pressures on pharmaceuticals is not new, nor an issue peculiar to the US market – this is also a current hot topic in Europe.

In June 2016, the EU's Council of Ministers expressed its concern about the "very high and unsustainable price levels" of some drugs. It said at the time that the cost of those drugs, together with the fact that some out-of-patent products are pulled from sale, puts patients' access to "effective and affordable essential medicines" at risk.

The Council called for greater collaboration and coordination on drugs pricing between each EU country, including advocating potential joint negotiations with pharmaceutical companies over the pricing of their products.

In the UK, the pricing of drugs has been a particularly acute issue as the NHS battles with its own budgetary constraints. A number of policies on reimbursement have been implemented in an effort to curb the amount the NHS must pay pharmaceutical companies to provide their products free of charge to patients.

The measures have, unsurprisingly, not proved popular with pharmaceutical companies that may invest significant sums in developing innovative new treatments.

Indeed, it has now been reported that the Association of the British Pharmaceutical Industry is seeking judicial review of the decision of NHS England and NICE to limit funding for medicines which cost the NHS more than £20 million per year in the first three years.

NICE is the UK health technology assessment body, making difficult decisions as to what therapies will be funded and available on the NHS. In an example of the challenging cases it handles, last month NICE announced that it would recommend Roche’s breast cancer drug Kadcyla receive NHS funding after agreeing a new deal with the manufacturer regarding costs. NICE had previously announced it intended not to recommend Kadcyla's availability on the NHS.

Why patent linkage is unlikely to materialise in Europe

With this background one might expect that an FDA-style scheme would be effective here in Europe. In fact, a proposal of the same was advocated by the European Federation of Pharmaceutical Industries and Associations (EFPIA) in 2014. The proposal contained a three-step system to assist in flagging patent rights and addressing potential infringement. In particular, patent holders would be required to disclose the patents that protect their products "at least one year before the loss of exclusivity". 

Competent authorities would be obliged to disclose when generic manufacturers applied for marketing authorisations in a way which would allow the patent holder to determine whether the generic manufacturer might have infringed its patent rights.

Finally, the patent holder would be able to lodge infringement proceedings on the basis of a generic rivals' application for marketing authorisation. This step would "allow sufficient time in the majority of cases for the dispute to be resolved before the planned generic launch", according to EFPIA. However, there have been no indications that the proposals have the support of the European Commission or wider industry.

Practically speaking, a proposal like the FDA's would be difficult to implement in Europe. For example, whilst marketing authorisations for pharmaceuticals can be granted on a Europe-wide basis by the European Medicines Agency, they may also be obtained via the decentralised or mutual recognition procedures, resulting in marketing granted country by country. It would therefore prove challenging to produce a definitive list of products for which there is no authorised generic available on the European market.

In addition, at present it is not possible to obtain EU-wide patent protection for pharmaceuticals with a single patent. Instead, an application is made to the European Patent Office (EPO) for a European patent which is essentially a bundle of national patent rights across each individual contracting state. Patent term extensions granted in the form of supplementary protection certificates (SPCs) are also granted on a national basis. A lack of centralised register would present difficulties for an FDA-style list of products available for development. 

It remains to be seen whether the introduction of the planned new unitary patent and Unified Patent Court system in Europe will facilitate patent linkage.

In summary, whilst the drivers behind the development of a list such as that just published by the FDA for Europe are clear and important; the logistical challenges presented by the current patent and regulatory system in Europe suggests for the time being this is an unlikely occurrence.   

Catherine Drew is an expert in life sciences at Pinsent Masons, the law firm behind Out-Law.com.

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