fragmentation Archives - European Industrial Pharmacists Group (EIPG)

A new member within EIPG

The European Industrial Pharmacists Group (EIPG) is pleased to announce the Romanian Association (AFFI) as its newest member following the annual General Assembly of EIPG in Rome (20th-21st April 2024). Commenting on the continued growth of EIPG’s membership, EIPG President Read more

The EU Parliament voted its position on the Unitary SPC

by Giuliana Miglierini The intersecting pathways of revision of the pharmaceutical and intellectual property legislations recently marked the adoption of the EU Parliament’s position on the new unitary Supplementary Protection Certificate (SPC) system, parallel to the recast of the current Read more

Reform of pharma legislation: the debate on regulatory data protection

by Giuliana Miglierini As the definition of the final contents of many new pieces of the overall revision of the pharmaceutical legislation is approaching, many voices commented the possible impact the new scheme for regulatory data protection (RDP) may have Read more

The proposals of the EU Commission for the revision of the IP legislation

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By Giuliana Miglierini

In parallel to the new pharmaceutical legislation, on 27 April 2023 the EU Commission issued the proposal for the new framework protecting intellectual property (IP). The reform package impacts on the pharmaceutical industry, as it contains proposals on Supplementary Protection Certificates(SPCs) and compulsory licensing (CL) in crisis situations. It also includes a new Regulation on Standard Essential Patents(SEPs).

The proposed reform, which is part of the EU Industrial Strategy, will now undergo the scrutiny of the European Parliament and Council. It aims to improve European competitiveness, innovation and technological sovereignity, with a special attention to the role played by SMEs. The proposal is based on comments received during the consultation on the Action Plan on Intellectual Property issued in November 2020. The IP legislative framework will complement the Unitary Patent system, that will fully entry into force on 1 June 2023.

Supplementary Protection Certificates

Central to the reform of the SPC system is the creation of a unitary SPC to complement the Unitary Patent. The aim is to reduce the current fragmentation in the issuing of SPCs at the national level, which often leads to complex interpretation of patents’ expiry dates, and consequent legal uncertainty. The new system would not replace the existing national SPC schemes.

Procedures should be simplified, with a single application to be submitted to the EU Intellectual Property Office (EUIPO), which would be responsible for its central examination in close cooperation with EU national IP offices. The process would lead to national SPCs granted for each of the designated member states (MS), plus a unitary SPC if required by the applicant (here the Q&As).

According to the Commission, approx. 25% of current SPC procedures have contradictory outcomes. The mean number of annual SPC applications is 81 per MS, with a total cost of €192,000 over the 5 years of duration (compared to roughly €3,000 in the US and €4,200 in Japan). Savings from the new procedures may amount to up €137,000 for the EU27 wide, five years long SPC protection. A central SPC database is also planned in order to increase transparency.

The proposed reform is comprehensive of a Regulation specific to medicinal products and a second one focusing on plant protection products, plus parallel recasting regulations to review the current legislative provisions (i.e. Regulation (EC) No 469/2009). Innovators would be incentivised to use unitary SPCs, since otherwise a unitary patent could be extended at higher costs only by means of national SPCs. Infringements of unitary SPCs would fall under the judgement of the UPC Court.

The Commission expects the development and access to generic medicines will be facilitated. In particular, SMEs will be able to submit observations during the examination of a centralised SPC application, and to file an opposition in order to centrally challenge the validity of the SPC protection, if justified. The new framework complements the proposed pharmaceutical legislation, for example on the Bolar exception. This should allow the generic industry to perform research and testing for preparing regulatory approval also while a patent/SPC is still in force.

Compulsory licensing

Compulsory licensing may be used during crisis in order to provide access to relevant products and technologies, should result in impossible (or not adequate) to close voluntary licensing agreements with owners of IP rights. The current fragmentation of procedures at the national level results in a wide legal uncertainty (see also the published Q&As). The new framework would complement other EU crisis tools, such as the Single Market Emergency Instrument, HERA regulations and the Chips Act.

According to the proposal, a Union compulsory licence can only be granted after activation of an emergency or crisis mode at EU level. Instruments to trigger this fundamental passage are listed in an Annex, so to improve legal certainty. A remuneration scheme for IPR holders is also included, on the basis of successive steps in the activation and termination of compulsory licensing.

The existing national frameworks on compulsory licensing will continue to operate, and they may be used to manage local crisis. Compulsory licensing of exported products would not be allowed.

Standard Essential Patents

SEPs refer to technologies essential for the implementation of a technical standard adopted by a standard developing organisation. They are typical of the ITC industrial sector, and central to building the Internet of Things.

To improve the transparency and legal certainty of SEPs, the proposal aims to ensure innovation would be run in the EU by both EU SEP owners and implementers. End users would benefit from products based on the latest standardised technologies at fair and reasonable prices. SEPs licensing is based on the FRAND scheme (fair, reasonable and non-discriminatory) for the remuneration of patent holders.

Comments from the stakeholders

EFPIA granted positive feedback on the simplification and harmonisation of the SPC system and to the opportunities offered by the unitary SPC. On the other hand, the proposals on compulsory licensing didn’t find the agreement of the research-based pharmaceutical industry.

According to a note, voluntary licensing would be the preferred instrument for innovators, as it allows for the choice of the best-positioned and trusted partners to speed up production and distribution of medicinal products during health crisis. On the contrary, compulsory licensing is seen as a threat to investment stability of the EU’s IP system and to the overall innovation pipeline.

Protecting the EU’s intellectual property framework could not be more important if we are to close the investment gap between Europe, the US and increasingly China and continue to offer patients the best possible treatments. Yet we are seeing multiple proposals emerging from the European Commission in the pharmaceutical legislation and patent package which tend towards the opposite”, said EFPIA Director General Nathalie Moll.

Medicines for Europe (MfE), on behalf of the generic and biosimilar industry, said that while “voluntary licensing agreements are relevant for health crises, we will contribute constructively to the EU-wide compulsory licensing system”. The request to the Commission is to make it a remedy also for anti-competitive abuses of the patent system, according to art. 31(k) of the TRIPS Agreement.

As for new SPCs, MfE highlights the new regime would extend their geographical scope from the current 20 out of 27 MS covered on average. “The proposal for a reform in the SPC system has the potential to reduce fragmentation in Europe but the legislation must ensure improved quality and transparency of granting procedures to prevent misuse by right holders to delay competition”, said MfE Director General Adrian van den Hoven.

Critics of the proposed scheme for compulsory licensing also came from EUCOPE, representing pharmaceutical entrepreneurs. According to the Confederation, the Commission’s proposal would further weakening the value of intellectual property rights within the EU. “Together with the proposal on the revision of the general pharmaceutical legislation, it is another indicator that the development of an innovation-friendly environment is not a priority, contrary to statements in the Intellectual Property Action Plan”, it states in a note.

For EUCOPE, the proposed SPC regime would not amend the substantive elements of the current system. Furthermore, a centralised SPC application would only be possible on the basis of a European patent, including a unitary patent, and for products with a centralised marketing authorisation. EUCOPE position goes for an optional EU-wide SPC, so to allow flexibility for IP owners in deciding their strategy for the protection of IP rights.

EFPIA’s Annual Report on the Pharmaceutical industry 2022

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by Giuliana Miglierini

In the 21 years from 2000 to 2021 – in which time we’ve come through the Global Financial Crisis and a pandemic – EFPIA companies have more than doubled production, increased exports by a factor of six, and recorded a trade balance that puts it far ahead of other high-tech sectors in Europe”, writes EFPIA’s Director General Nathalie Moll commenting the Annual Report2022.

Despite this marked growth, many challenges are still to be faced to allow the European pharmaceutical industry to maintain and even strengthen its role as primary hub of innovation, thus contributing to the overall success of the EU’s economy. It can be expected, for example, that the energy crisis will be highly impacting pharmaceutical productions, also in the form of increased difficulties to guarantee a constant supply of raw materials. This would represent just the last drop adding to existing regulatory barriers slowing down R&D and to the impact of fiscal austerity policies that may discourage investors.

At the same time, we have seen the growth of Brazilian, Chinese and Indian markets outstrip growth in the top 5 European markets. Our global competitors have prioritised life sciences and we must respond with similar ambition”, adds Nathalie Moll.

The 2021 of the pharmaceutical industry

According to EFPIA’s Annual Report 2022, the value of production for the research-based European pharmaceutical industry has grown from 127.5 billion euro in year 2000 to 300 billion in2021. Even more relevant is the growth of export, increased from €90.9 bln to €565 bln over the same period. In 2021 imports counted for €390 bln, with a positive trade balance of €175 bln.

The research-based pharma industry employed last year 840,000 units (125,000 of which in R&D) and invested €41.5 bln in research and development activities.

The total European pharmaceutical market value at ex-factory prices increased from €89.4 bln in 2000 to €255 bln in 2021. The pharmaceutical expenditure supported by statutory health insurance systems (and referred to ambulatory care only) grown from €76.9 bln to €157.5 bln over the same time.

Despite these positive figures, EFPIA warns about the danger of migration of many R&D activities from Europe towards fast-growing markets such as Brazil, India and China, thanks to the more favourable conditions. The pharmaceutical market in these countries grown, respectively,11.7%, 6.7% and 11.8% in the period 2016-2021, compared to 5.8% of top EU countries (France, Germany, Italy, Spain and United Kingdom) and 5.6% of the US.

North America still represents the wider market area for pharmaceuticals (49.1%, vs 23.4% for Europe), and accounts for the higher proportion of new launches (64.4%, vs 16.8% of top five EU countries). In 2020 China marked the higher pharmaceutical R&D expenditure (78,5 billion Yuan, from 1.9 bln Yuan in 2000), overcoming for the first time the US ($72.4 bln), while Europe is positioned far behind (€39,7 bln). Not less interesting is the 3.2% market share assigned to emerging, high-growth pharmaceutical markets including many African, South American and Asiatic countries (Algeria, Argentina, Bangladesh, Brazil, Colombia, Chile, China, Egypt, India, Indonesia, Kazakhstan, Mexico, Nigeria, Pakistan, Philippines, Poland, Russia, Saudi Arabia, South Africa, Turkey and Vietnam).

Parallel trade is a characteristic of the European pharmaceutical market, due to the persistent fragmentation of many policies in different countries. Denmark saw in 2020 the higher share of parallel imports in pharmacy market sales (26.9%), well above other countries (e.g. 10.9% Sweden,9.1% UK, 8.3% Germany).

 Issues slowing down R&D

According to EFPIA, the length of time needed to bring a new medicine to the market (up to 12-13 years) is still a major issue impacting the attractiveness of European R&D. An average of one-two new synthetic substances out of every 10 thousand exiting the labs passes all the scrutiny steps needed to reach approval. The total costs of R&D was estimated in 2014 to reach €1.97 billion, indicates the report.

Germany, Switzerland and the UK are the European countries more active in research and development (€7.8 bln, €7.4 bln and € 5.6 bln expenditure in 2020, respectively). Clinical research accounts for the higher percentage of investment (44.1%, mainly in phase III studies), far above pre-human and pre-clinical research (14.9%) and phase IV studies aimed to post-marketing surveillance (11.5%). Approval studies account for 4.3% of the total R&D expenditure.

The US generated 159 new chemical entities (both chemical and biological) in years 2017-2021, almost doubling Europe (72) and a group of other countries (71), excluding Japan (41). Even more worrying, in 2021 China lagged just behind Europe as originator of new active substances launched for the first time on the world market (18 vs 19, respectively), while the US confirmed its leading position (35). According to EFPIA, this trend is associated with a marked lower annual growth rate of pharmaceutical R&D expenditure in Europe (4.0% for years 2017-2021), compared to that in the US (8.5%) and China (12.9%). Despite this, health industries still position at the first place of the ranking of industrial sectors by overall R&D intensity (12.4%, vs 8.7% of ITC services and 7.4% of ITC products).

The pharmaceutical production

Switzerland, Germany and Italy are the leading European hubs for pharmaceutical production (€53.2 bln, €32.3 bln and €34.3 bln of value, respectively). This corresponds in Germany to a significant higher number of people employed in the sector (115,519, vs 66,400 in Italy and 47,000 in Switzerland). EFPIA also mentions that the research-based pharmaceutical industry generates about three times more indirect employment along its value chain (both upstream and downstream) than it does directly, thus significantly contributing to the overall European job market. This is even more true for highly skilled jobs, thus preventing the phenomenon of brain-draining towards more attractive countries for scientific talents.

The US remains the favoured trading partner for the EU pharmaceutical industry, accounting for 32.2% EU exports and 30.2% imports. Switzerland is at the first place for EU imports (36.4%, and 11.8% EU exports); more distanced are the UK, China and Japan.

Fragmentation still impacts the European market

Fragmentation of policies on price and reimbursement and different VAT rates for medicinal product sis a very typical phenomenon still limiting the potentiality of the European pharmaceutical market.

According to EFPIA, in 2020 the retail price of a medicine corresponded on average to 66.8% rewarding for the manufacturer, 17.4% for the pharmacist, 10.6% for the State and 5.2% for the wholesaler. The top 5 countries for market value at ex-factory prices were Germany (€42.9 bln), Italy (€23.4 bln), France (€29, 5 bln), the UK (€24.6 bln) and Spain (€17.6 bln); Russia also represented a relevant market (€18,4 bln). Italy sees the higher market share for generics (67.6%), well above Poland (58%) and Austria (49%). EFPIA also monitored the VAT rates applied to prescription and OTC medicines in different European countries, compared to the standard VAT rates. Malta (0%), Sweden (0%), France (2.1%), Switzerland (2.5%), Luxembourg (3%), Spain (4%), Lithuania, Croatia, Cyprus, Hungary (5%) marked the lower VAT rates on prescription medicines. In some case, these same rates applies also to OTC products (Croatia, Cyprus, Hungary, Luxembourg, Malta, Spain, Switzerland), while in other countries the rates for this category of medicines is higher (France 10%, Lithuania 21%, Sweden 25%).

Steps towards the final approval of the IP action plan

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By Giuliana Miglierini

The end of 2021 may see the final approval of many pieces of the new legislative framework announced in November 2020 by the European Commission. An important piece of this puzzle is represented by the IP Action Plan, governing the protection of intellectual property (IP); a step forward in this direction is represented by the resolution of 11 November 2021 on the Own-initiative report of the European Parliament.

The final text licensed in single reading is the result of the examination of the initial draft report – issued in May 2020 by the Committee for Legal Affairs, rapporteur Marion Walsmann – by several other Committees (IMCO, DEVE, CULT, AGRI).

The main points of the resolution

The resolution recognises the importance for the European economy of a balanced protection and enforcement of intellectual property rights (IPR). In years 2012-2016, the knowledge-intensive industries generated almost 30% of all jobs and almost 45% of total economic activity (in terms of Gross Domestic Product, GDP) in the EU; the IPR-intensive industries account for 93% of total EU exports of goods.

Europe’s recovery and resilience capacity is also highly impacted, as demonstrated by the pandemic when shortages of certain medicinal products and vaccines occurred. The EU Parliament acknowledges the role played by intellectual property in increasing the overall value of companies,especially the small-and-medium size ones (SMEs).

A current limitation to IP protection in Europe is represented by the still fragmented situation across different member states, which often leads to parallel national validation procedures and litigation for European patents. To this instance, the Parliament suggests the establishment of an IP coordinator at European level, to harmonise the approach to EU IP policy and enhance cooperation between the different bodies involved in the process (i.e. national IP authorities, Commission Directorates-General, EPO, EUIPO, WIPO, etc).

The Parliament also recognised the role IP plays in the pharmaceutical sector, where the availability of incentives greatly favours the development of new and innovative treatments. The resolution asks the Commission to support the innovative potential of European companies “on the basis of a comprehensive IP regime”, so to guarantee effective protection for R&D investments and favour fair returns through licensing. The availability of open technology standards has been valued as an important competitive element on the wider, global scenario.

Many different types of incentives are suggested by the Parliament’s resolution as useful to support micro-enterprises and SMEs in filing and managing their intellectual property, including IP vouchers, IP Scan and other Commission and EUIPO initiatives to support simple registration procedures and low administrative fees. The newly created European IP Information Centre may represents a fundamental reference point to increase knowledge in the field. The Parliament also suggests to introducing an EU-level utility model protection, not yet available, as a possible fast and low-cost protection tool to protect technical inventions.

Unitary patents and improved market competition

Still missing members states are urged to adhere to the enhanced cooperation scheme for the creation of a Unitary Patent Protection (UPP) and to ratify the Protocol to the Agreement on a Unified Patent Court on provisional application (PPA). The activation of this unique Court in charge of the examination of litigations would allow for a more efficient process and for lowering legal costs and improving legal certainty.

Fragmentation remains an issue also with respect to Supplementary Protection Certificates (SPCs): to this instance, the resolution asks the Commission to issue guidelines for member states and to provide a legislative proposal based on an exhaustive impact assessment. A major criticality to be solved is represented by the unitary patent not providing a unique SPC title valid across the EU; the own-initiative report also suggests the extension of the EPO’s mandate, so that examination of SPC applications could be carried out on the basis of unified rules.

Other important points needing attention to improve the presence of generic and biosimilar medicines in the EU are the abuse of divisional patent applications and patent linkage, which should also see an intervention by the Commission. The Parliament also opened the possibility of a revision of the Bolar exemption, which allows clinical trials on patented products needed to reach marketing authorisation of a generic or biosimilar version not to be regarded as infringements of patent rights or SPCs. This may also support the immediate market entry after the expiration of patent rights and SPCs. The Commission is called also to ensure the effectiveness and better coordination of compulsory licensing in order to provide access to medicines needed in case of health emergencies.

The resolution also addresses the theme of standard essential patents, which currently often leads to litigations, and it calls for the revision of the 20-years old system for design protection. Transparency on results obtained from publicly funded R&D is also recommended. The Parliament suggests artificial intelligence (AI) and blockchain technologies may play an important role in tackling counterfeiting practices and guarantee traceability of goods, as they may contribute to a better enforcement of intellectual property rights along the whole supply chain. The Commission should also work to establish clearer criteria for the protection of inventions created by the AI, without human intervention.

Comments from the industry

The European Parliament has clearly voted for a strong and fair IP system by underlining the importance of timely generic and biosimilar medicine competition. The misuse of divisional patents, the need to enlarge the scope of bolar to include API and all regulatory and administrative steps, and the long overdue ban anti-competitive patent linkage are well known problems that the Commission should address in the IP Action Plan. The Parliament has voted; the Commission must act.”, said Adrian van den Hoven, Director General at Medicines for Europe.

A major point in the implementation of the new European policies is represented by the review the Commission is going to conduct in 2024 to assess the effective achievement of goals of the SPC manufacturing waiver, which entered into force in July 2019 and is expected to start producing effects in the second half of 2022.

Many of the themes discussed in the Parliament’s resolution were debated during a webinar organized by Medicines for Europe, with the participation of representatives from the European Commission and the European Patent Office.

EFPIA, representing the innovator pharmaceutical industry, focused its attention on the impact of past EU Free Trade Agreements (FTAs) on drug spending, timing of countries’ access to new medicines after global launch, investments overall and in pharmaceuticals, and clinical trial participation. A report by IQVIA published in the Federation’s website addresses the impact of IP protection on these elements. Results confirm the central role of the pharmaceutical sector as the most R&D intensive industry in the world, with R&D spending averaging over 15% of revenue. A strong IP protection framework available at the level of EU FTAs favours the attractiveness for investments in the EU and its FTA partner countries. According to the report, an expanded IP protection appears not to be linked to the generation of a higher pharmaceutical spending; drugs’ share of healthcare spending is claimed to stay flat or fall after an FTA, and prices for medicines to rise more slowly than the level of inflation. A stronger IP index, adds IQVIA, is also correlated with increased clinical trial activity in a country, bringing both clinical and economic benefits.