SUI GENERIS PROTECTION FOR PHARMACEUTICALS AND ITS IMPACT ON GENERIC COMPANIES

The pharmaceutical industry is composed of two main groups: the research-based pharmaceutical industries (innovators) and the generic industries.  The former discovers and develops new medicines while the later replicates, manufactures and distributes the bioequivalent or biosimilar “copies” of the innovative product. ^[1]

These research-based pharma industries, undoubtedly invest billions of dollars and many years of research to finally produce a drug.[2] Moreover, these drugs are further tested through the preclinical and three phases of clinical trials.^[3] These trials normally take 10-15 years before the final result is approved by the respective drug regulatory authority.^[4] The trials are conducted by the pharma industries after the particular drug has been granted a patent license. Hence, such trials eat up into the 20 years of patent term protection given to the pharmaceuticals. So usually, the pharma industries are left with just 5-10 years of patent protection, and more importantly to cover up the costs and make profits out of it.  Such a procedure is unique and applies just too pharmaceutical and other related innovations.[5]

Due to the strict and exhaustive procedure, the pharma industries are a granted patent extension and other forms of protection. Data exclusivity is a form of product exclusivity right for medicinal products and a market exclusivity is a related form of additional protection.^[6] The rising economic significance of data exclusivity is a combination of three factors:^[7]

(i) The lengthy and costly process of clinical trials;

(ii) The ongoing innovative productivity challenges faced by the pharmaceutical industry and

(iii) The legal disputes between research-based and generics-based pharmaceutical companies.

This essay will deal with the implementation of data and market exclusivity in the European Union and the United States of America and its effect on the generic pharma industries. 

DATA AND MARKET EXCLUSIVITY:

“Investments in discovering and developing a single new biologic (including the cost of failures and cost of capital) are now estimated at over a billion dollars with an increasingly focused Food and Drug Administration (FDA) requiring more, not less, investment prior to approval. Given these high upfront costs, data exclusivity is designed to provide a sufficient period of in-market exclusivity to encourage innovation when patent protection is limited or uncertain in value”^[8]. The United States and the European Union systems go a step beyond the minimum obligations as set out under the TRIPS.^[9]

Data Exclusivity is a period of time during which a company cannot cross- refer to the data in support of another marketing authorization.^[10] Data exclusivity is designed to preserve innovation, incentives and recognizes the long, costly and risky process necessary for the innovator company to gain regulatory appeal.^[11] The protection of this test data is a legally required and economically necessary component of the intellectual property that provide incentives for the development of innovative pharmaceutical products.^[12] Further, this data is important for the innovator company so as to get a market authorization from appropriate drug authority. Some experts consider data exclusivity as an independent intellectual property right and not part of patent protection. ^[13] Hence, data protection is available even if the drug is not protected by a patent. 

The Trade Related Intellectual Property Rights (TRIPS) agreement also recognises the need to protect such an undisclosed data under Article 39.3. TRIPS Article 39.3 states that “Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use” ^[14]

The phrase “a considerable effort” in the TRIPS article 39.3 (in the case of pharma industries) means the pre-clinical testing and the three phases of the clinical trials, which have to be conducted before the market approval is granted. Article 39(3) essentially imposes three obligations on governments^[15]:

1.     To protect data on new chemical entities, the collection of which involved considerable effort, against unfair commercial use.

2.     To protect such data against disclosure, except where necessary to protect the public.

3.     To protect such data against disclosure, unless steps are taken to ensure that the data is protected against unfair commercial use.

EUROPE:

Data exclusivity was first introduced in the European Union in 1987 with the 87/21/EEC Directive, which amended the 65/65/EEC Directive.^[16] In July 2001 the E.U. revised key aspects of the pharmaceutical legislation; data exclusivity being one of the key topics.^[17] Subsequently, the changes were brought into the 2004/27/EC Directive that amended the 1987 Directive.^[18] It is not retroactive directive; it does not affect exclusivity periods for products for which applications were submitted before the effective date, ie, late 2005. Hence, if an application is made before November 2005, then the data exclusivity will depend on the earlier laws of the member state, where data exclusivity varied from 6 -10 years.^[19]

The EU Pharmaceutical Legislation, Directive 2004/27/EC adopted in 2004 created a harmonised eight year data exclusivity provision with an additional two years market exclusivity provision.^[20] This effective ten year market exclusivity can be extended by an additional one year for new therapeutic indications.^[21] This is also referred to as the “8+2+1 formula”. This formula applies to all new chemical entities (NCEs) from 1^st November 2005 onwards.^[22] This formula allows the generic company to file a patent application after the first 8 years of the data exclusivity but would be restrained to market the drug due to the extended market authorization with the innovator company. Therefore, if a generic company wants to apply for a generic product within the stipulated 8 years of the data exclusivity time period, then it will have to perform its own clinical trials and other safety and toxicology work.^[23]

The E.U. data exclusivity does not grant additional periods of protection for subsequent improvements (like the concept of “ever greening” in the U.S.A) brought to a drug, for example new therapeutic indications, dosage forms, doses and dosage schedule.^[24]Any new strengths, pharmaceutical forms, routes of administration, and presentations, as well as any extensions or variations, are to be considered as belonging to the same “global authorization” for purposes of the abridged application rules ^[25]and therefore there is no data protection for these changes.^[26]

Comprehensive Economic and Trade Agreement between Canada and the European Union (CETA):

Article 10 of the intellectual property chapter in CETA provides protection of undisclosed data in relation to pharmaceutical products.^[27]  Clause 2(b) of the said article states that no person other than the person that submitted the undisclosed information may, without the latter's permission, rely on such data in support of an application for  marketing authorisation during a period of not less than six years from the date on which the Party granted approval to the person that produced the data for approval to market its product, and no Party shall grant to any person who relies on such data during a period of not less than eight years from the date on which the Party granted authorisation to the person that produced the data for authorisation to market its product, unless the person or entity who produced this data provides its permission.^[28]

In CETA, there are two levels of protection, firstly, the data authorization; which is valid for 8 years after it is submitted to the respective drug authority. Secondly, the market authorization; which is valid for 6 years from the date the innovator pharma company was granted the permission to market the drug.

EXAMPLE:

A pharma company ‘X’ is granted a patent in 2010. After its preclinical and clinical trials, it submits the data in 2020, ie 10 years after the grant of the patent. After the data is submitted, this undisclosed information gets data protection through 8 years of data exclusivity in accordance with the clause (b) of Article 10 in CETA, as mentioned above. Hence, the generic pharma companies cannot rely on the data till 2028. The other incentive provided to the company ‘X’ is the marketing exclusivity for 6 years. If the said company gets authorization to market the drug in the year 2024, it will last till 2030.

While reading the above example, it must be kept in mind that the patent term protection will last till 2030 (as the patent term is 20 years). Hence, as the data and market exclusivity are treated separately from patents, such exclusive rights may terminate or exist after the patent term is over, depending on the factual circumstances. In this case, all the protections terminate in 2030.