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Out-Law Analysis 4 min. read

Review of EU SPC regime makes case for manufacturing waiver reform

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A review of the business impact of the supplementary protection certificate (SPC) manufacturing waiver sets out a coherent case for reforming the regime.

The study (11-page / 293KB PDF) was published by Medicines for Europe (MfE), which represents the European generic, biosimilar and valued added pharmaceutical industries, based on eight months of available data.

The SPC manufacturing waiver

The waiver was introduced to reduce the chilling effect that SPCs have on the EU manufacture of generic medicines. SPCs extend patent protection in EU member states in which they are granted for specific medicinal products. Such SPC protection prevents manufacture and storing of generic versions of that product in the protected country. This in turn, prohibits EU manufacturing, encourages non-EU manufacturing, and places non-EU manufacturers in a better position to launch in the EU immediately after expiry of the SPC – a practice known as a ‘day 1 launch’.

The waiver regime, which has been operating since July 2022, allows EU manufacturers an absolute exemption for manufacture for export beyond the EU during the SPC period, and a six-month exemption for products destined for the EU. A manufacturer must send a notification of its intention to use the waiver in respect of an SPC to the SPC owner and to the relevant local patent office for publication. 

The impact of the SPC manufacturing waiver

Of 13 respondents to the MfE’s survey, more than half had submitted a notification in one or more member states, and use of the waiver appears to be growing. The percentage of respondents who have relocated some manufacturing to or within Europe as a result of the waiver varies between 10% and 45%, depending on the precise activity in question. 

Despite uptake increasing, feedback on the process was mixed. Several respondents also increased manufacturing of less complex small molecule products and active pharmaceutical ingredients (API) in Europe. One had invested €600 million, creating 300 new jobs, and seven others estimated the had been able to create more than 100 new jobs each. However, a number of respondents opted not to increase EU investment based on the waiver in its current form.

For example, almost 50% of the products in question had not been manufactured by any company using the SPC manufacturing waiver, because of:

  • legal uncertainty;
  • concerns about disclosure of confidential information in the notification letter;
  • litigation risks; and
  • impracticalities and timing issues, specifically in relation to biosimilars and complex products.

Notification process

Unsurprisingly, a number of respondents expressed deep concerns about the publication of notification letters by national patent offices. In particular, some respondents were so concerned about the disclosure of the manufacturer’s identity, supply chain and third country information that they opted not to use the waiver at all. These concerns do not appear to have been misplaced, as some respondents reported pressure, warning letter and lawsuits from SPC holders that appear to have been prompted by SPC notification letters.

A particular point of contention is manufacture for export into a country in which intellectual property (IP) protection is in place at the time of manufacture – even when export would only occur after that protection expired. Various threats and legal proceedings have been reported in these circumstances, including one in Ireland on the basis of US patent protection, which settled.

Another concern is whether notices are likely to be challenged by SPC holders on technicalities.  In respect of the terminology used in the underlying regulation, there is considerable concern about the uncertainty of the term ‘maker’, particularly where the manufacturer and the marketer are different entities. There is additional concern about what related acts should be considered ‘strictly necessary’ under the regime.

‘Day 1’ launches

As the aims of the waiver are to facilitate day 1 launches and to encourage manufacturers to conduct their operations in the EU, it is disappointing to see feedback which suggests it falls short on each of these aims. 

Respondents to the MfE report made clear that a six-month grace period for biosimilars and complex products is insufficient, particularly when considering reimbursement procedures that need to take place ahead of a launch, and which are not permitted under either the waiver or the ‘Bolar exemption’ for regulatory review. It has been estimated that 9-12 months would be a more realistic period. In addition, the waiver does not extend to intra-EU transportation, which delays distribution ahead of or in time for a Day 1 launch.

Prejudice against European manufacturers

In contrast to parties using the waiver, non-EU manufacturers are able to commence manufacturing long ahead of the six-month period afforded to those inside the EU. This point, combined with those above, means that some respondents had opted to license out manufacturing to non-EU third parties – something that is completely contrary to the aim of the legislation. 

A further quirk to the waiver regime means companies that manufacture in the EU using the waiver are not permitted to export products to EU territories in which there is no patent or SPC protection in place. This is perverse, as it means that non-EU manufacturers are in a better position to serve patent and SPC free EU markets than EU ones. This is, once again, wholly contrary to the aim of the legislation.

Case for reforming the SPC manufacturing waiver

In light of these issues, MfE has set out a series of proposals to reform the SPC waiver regime during its upcoming 2024 review period. MfE recommended that the Commission:

  • remove the six-month limitation in the waiver for manufacture and export into the EU;
  • soften the requirement to share highly sensitive commercial information in notifications;
  • clarify that third country IP rights are irrelevant to whether or not the waiver is granted; and
  • allow the export of products produced under the waiver to patent- and SPC-free EU countries.

Of course, these measures are likely to be highly contentious, and could face stiff opposition from EU rights holders. It remains to be seen what action the EU takes, but it is clear that, in its current form, the waiver regime is not working as intended.

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