Europe is attempting to play mediator in a politically charged, high-stakes dispute involving one of its most powerful industries — the drugs lobby.
The pharmaceutical industry has a host of intellectual property rights to choose from to protect its novel medicines from competitors once they are approved for sale. These include patents, additional protections once patents have expired, and European laws that reward companies for developing drugs for rare diseases or for children by preventing competition.
Health care campaigners, the generic drugs industry and some EU countries argue these protections have gone too far, causing drug prices to skyrocket while patients struggle to access the latest treatments and cures.
In addition to the 20-year patent, “several top-ups have been introduced: supplementary protection certificates, data protection and market exclusivity,” said Dutch Health Minister Edith Schippers last year ahead of calling for a review of the system. “Are they still necessary given the rapid change in the production of medicines?” she asked.
Health campaigners point to examples like Novartis’s cancer drug Glivec as overprotection of the pharma industry. Glivec was licensed incrementally for six rare diseases and each time protected by 10 years of market exclusivity. The company also benefited from a protection designed to reap back lost market exclusivity while the drug was still in development. Global sales for the medicine peaked at $4.75 billion in 2014. Since it was launched in 2001, Novartis has earned $50.42 billion from the drug.
Any changes to Europe’s laws on protections and rewards could have a big impact.
The pharmaceutical industry argues each of the protections is needed to reap back the high costs of developing much-needed new medicines. It’s a “carefully balanced ecosystem” that has been “ﬁne-tuned over time,” said Nathalie Moll, head of the European Federation of Pharmaceutical Industries and Associations, Europe’s biggest drugs lobby. “Changing any part of this framework risks undermining the innovation process that patients, health care systems and society are relying on to address the challenges they face,” she added.
But after broad support in the European Council last summer, led by Schippers’ determined Dutch presidency, to investigate how these protections are increasingly being used — and potentially abused — the industry may have an uphill struggle on its hands. The European Commission is now assessing whether the pendulum has swung too far in favor of the pharma industry while potentially penalizing the generics sector, governments and other payers and patients.
The stakes are high. Any changes to Europe’s laws on protections and rewards could have a big impact on the pharmaceutical industry’s presence in the region. Let the pendulum swing too far in favor of the generics industry and governments, and the sector could vote with its feet and carry out more of its research, development and manufacturing of medicines in more attractive countries such as the U.S. It’s a fine line the Commission will be attempting to balance in its review, due to be completed by the end of the year.
The Commission first began investigating certain incentives for the pharmaceutical industry in 2015. It is now carrying out five studies into the various protections and their impact on competition, health care budgets and how they encourage development of innovative products.
This includes supplementary protection certificates, additional five-year protections awarded to approved medicines whose patents began before the date of approval for sale. They are designed to claw back lost market exclusivity while the product was still in development. These certificates also prevent generics firms from manufacturing copycat drugs during this period.
The Commission is analyzing the use of an existing exemption for generic drugmakers to manufacture products for research purposes | George Frey/Getty Images
The generics lobby is calling for a “manufacturing waiver” since this certificate prevents companies from exporting or stockpiling generic drugs, ready to hit the EU market as soon as the protection expires. A waiver would lift the restrictions and make the European generics sector more competitive globally, the sector argues.
The review is also looking at how these certificates are being granted across Europe. They were initially intended to award up to five years of extra market exclusivity per product, but a European court ruling in 2012 opened the door to numerous additional protections per drug, for example for new doses or slow-release versions of a medicine.
“That was a big surprise for everyone because that’s not how the regulation was drafted,” said IP lawyer Paul England of the Taylor Wessing law firm in London. “It left an awful lot of questions open about what an SPC can cover. Where do you stop with SPC protection? Companies have lots of old products that could therefore have SPCs.”
Approximately 20,000 of these protections were filed in Europe between 1991 and 2015, according to the Commission. In 2014, there were about 1,650 applications in member countries.
The Commission is also analyzing the use of an existing exemption for generic drugmakers to manufacture products for research purposes, when the drug they are copying remains protected by a patent or other certificate. It’s called the Bolar exemption.
The exemption is an EU law but was issued as a directive (so only the goal was prescribed, not the means to achieve it), leading to different interpretations across EU countries. For example, the Dutch and the U.K. allowed generics to be manufactured for testing only to obtain an EU license, while Germany applied the exemption to manufacture generics and originator products to obtain a license anywhere in the world. The U.K. has since increased the breadth of the exemption, more in line with Germany.
Finally, the Commission is also looking at whether protections for rare disease drugs, known as orphan drugs, such as Glivec, plus rewards for testing medicines in children, are fair and balanced.
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Medicines are increasingly targeted at small patient populations and win orphan drug market protections; a trend labeled the “orphanization” of drugs.
The pharmaceutical industry says scientific developments have led to more targeted medicines, for example those that hone in on a genetic mutation. This mutation might apply to several rare cancers, meaning they can test it and license it across several rare diseases, as Novartis did.
But health care advocates and EU governments worry the system has gotten out of hand. Out of the top 20 biggest-selling drugs in the world, 19 are orphan drugs, demonstrating the pricing pressures these medicines are having on health systems.
Schippers, the Dutch health minister, told MEPs at the start of her country’s Council presidency, that, “current prices have no clear relationship anymore with the research and development costs or even with the added value [of the drug].”
The issue will get more critical. “We forecast that — in the EU — approximately 120 new orphan drugs will receive market authorization by 2025, with an estimated budget impact of €22 billion,” market analysis group IMS Health reported in its Pricing & Market Access Outlook 2017.
“The Commission’s impact is potentially huge. However, this would only occur if the Commission legislates” — Adrian van den Hoven, head of Medicines for Europe
There are additional protections for testing medicines in children. If a company studied a drug in children and shared that data in its product information, even if the study results were negative, the company will receive an extra six months of market exclusivity.
If a product is an approved orphan medicine and it was studied in children, the company earns an extra two years of market exclusivity. And if a medicine is developed specifically for children, the company is eligible to apply for a license specifically to treat children, which guarantees 10 years of market protection as an incentive.
Though the Commission’s overarching assessment is at the early stages of Europe’s zigzag bureaucratic processes, it could ultimately result in significant change to the landscape of incentives for the sector.
“The Commission’s impact is potentially huge. However, this would only occur if the Commission legislates,” said Adrian van den Hoven, head of Medicines for Europe, which represents the generics and biosimilars industries.
While the Commission holds the power to investigate, the impact of the final reports rests on the shoulders of EU leaders and lawmakers. Van den Hoven thinks the reports will be “rather wishy-washy with recommendations hidden between the lines.” He said the “main issue” will be how the Council and European Parliament react.
Some countries such as Germany have already voiced their opposition to the anti-pharma stance taken by countries like the Netherlands.
“The criticism of the pharma industry is not something Germany can support,” said Ingrid Fischbach, German health secretary of state. She said Germany would sign up to the conclusions, but noted its reservation, saying the text should have been “more balanced,” and calling for “an open analysis of the legal framework.”
Lawyers also think any changes are likely to be minimal.
Some countries, such as Germany, have voiced their opposition to the anti-pharma stance taken by countries like the Netherlands | Thomas Lohnes/Getty Images
“I don’t think the Commission will do anything radical. I think they will be looking at ways of tweaking the system,” IP lawyer England said.
And any changes are likely to be years down the line.
“The June 2016 Council conclusions started a discussion, which will not end when this study is completed,” said Yannis Natsis, policy manager for universal access and affordable medicines at the European Public Health Alliance. “A follow-up study might be envisaged to examine in depth the cost of these exclusivities,” he added.
The studies will all need to be taken back to the Council next year and debated. This could result in further studies being requested. Then, in 2019 will be the European election, which means everything will stop and a new Commission put in place. Therefore few people expect anything to happen before 2020.
Meanwhile, the pharmaceutical industry believes this is entirely the wrong discussion to have with regard to the affordability and sustainability of health care systems.
“IP is not the right tool to address such issues. IP drives the medical innovation that we need to address societal health-related challenges such as dementia and diabetes,” said Moll, head of the drugs lobby EFPIA.
She said the discussion needs to focus on how health systems prepare for the introduction of “disruptive” and “high-value” medicines such as Gilead’s hepatitis C cures.
“We need to get better at working together to manage their introduction into the system,” she said.
This is part of a special report on the future of pharma incentives.