kom (2018) 0317 (forslag) - COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 469/2009 concerning the supplementary protection certificate for medicinal products

Europaudvalget 2018
KOM (2018) 0317
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EUROPEAN

COMMISSION

Brussels, 28.5.2018

SWD(2018) 240 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a Regulation of the European Parliament and of the Council amending

Regulation (EC) No 469/2009 concerning the supplementary protection certificate for

medicinal products

{COM(2018) 317 final} - {SEC(2018) 246 final} - {SWD(2018) 241 final} -

{SWD(2018) 242 final}

kom (2018) 0317 (forslag) - COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 469/2009 concerning the supplementary protection certificate for medicinal products

Table of contents

INTRODUCTION: POLITICAL AND LEGAL CONTEXT ............................................................... 5

1.1.

1.2.

1.3.

1.4.

Political context ................................................................................................. 5

Scope of the impact assessment ........................................................................ 6

The EU Supplementary Protection Certificate regime ...................................... 7

Strong evolution of pharmaceutical markets in the EU and globally ................ 9

PROBLEM DEFINITION .................................................................................................................. 13

2.1. Decreasing competitiveness of EU-based generics/biosimilars

manufacturers .................................................................................................. 13

2.1.1. Two specific problems ............................................................................... 14

2.1.2.

2.1.3.

Unintended side-effects of the EU SPC framework ................................... 15

Magnitude of the problem and urgency to act ............................................ 16

2.2. Two problem drivers ....................................................................................... 17

2.2.1. Asymmetry in SPC protection globally ...................................................... 17

2.2.2.

The ‘first mover’ advantage

....................................................................... 18

2.3. Consequences: relocation and decreasing attractiveness of the EU as a

pharmaceutical hub .......................................................................................... 19

WHY SHOULD THE EU ACT? ........................................................................................................ 23

3.1. Legal basis ....................................................................................................... 23

3.2. Necessity for action at EU level ...................................................................... 24

3.3. Added value of EU action ............................................................................... 24

OBJECTIVES: WHAT IS TO BE ACHIEVED? ............................................................................... 24

4.1. General objectives ........................................................................................... 24

4.2. Specific objectives ........................................................................................... 25

WHAT ARE THE AVAILABLE POLICY OPTIONS? .................................................................... 26

5.1. What is the baseline from which the options are assessed? ............................ 26

5.2. Options discarded at an early stage ................................................................. 26

5.2.1. Trying to persuade third countries to adopt SPC protection in line with that

of the EU (i.e., reducing the existing global SPC protection asymmetry) ............... 26

5.2.2.

Expanding the scope of the EU ‘Bolar patent/SPC exemption’ to allow for

advance manufacturing for export purposes............................................................. 27

5.2.3.

5.2.4.

New ad-hoc licensing measures ................................................................. 27

Cutting down the duration of the SPC ........................................................ 28

5.3. Description of the policy options .................................................................... 28

5.3.1. Option 0: status quo .................................................................................... 29

5.3.2.

Option 1: voluntary industry-led

agreements/‘soft-law’ approaches

......... 30

5.3.3. Option 2: introducing a manufacturing waiver for export purposes in

Regulation 469/2009 ................................................................................................ 30

5.3.4.

Option 2-bis: implementing Option 2 with anti-diversion measures ......... 30

5.3.5. Option 3: introducing a manufacturing waiver for stockpiling purposes in

Regulation 469/2009 ................................................................................................ 31

5.3.6. Option 3-bis: similarly to option 2-bis above, option 3 could be

implemented with anti-diversion measures .............................................................. 31

5.3.7. Option 4: introducing a manufacturing waiver for export and stockpiling

purposes under Regulation 469/2009 ....................................................................... 31

5.3.8. Option 4-bis: similar to options 2-bis and 3-bis, option 4 could be

implemented with anti-diversion measures .............................................................. 31

5.4. Timing scenarios for applicability of options 2 to 4bis ................................... 31

WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? ........................................................... 32

6.1. Impact of option 0 ........................................................................................... 32

6.2. Impact of option 1: voluntary industry-led agreements .................................. 32

6.3. Impact of option 2: SPC manufacturing waiver for export-only

purpose ............................................................................................................ 33

6.3.1. Findings of studies...................................................................................... 33

6.3.2.

Feedback from public consultation ............................................................ 34

6.4. Impact of option 2-bis: SPC manufacturing waiver for export purpose

with anti-diversion measures ........................................................................... 37

6.4.1. The risk of diversion................................................................................... 37

6.4.2.

6.4.3.

Possible anti-diversion measures................................................................ 38

Retained anti-diversion measure for option 2-bis ...................................... 40

6.5. Impact of Option 3: SPC manufacturing waiver for stockpiling

purposes ........................................................................................................... 40

6.6. Impact of Option 3-bis: SPC manufacturing waiver stockpiling

purposes with anti-diversion measures ............................................................ 41

6.7. Impact of Options 4 and 4-bis: SPC manufacturing waiver for export

and stockpiling purposes (with anti-diversion measures) ............................... 42

6.8. Impact of the options for the timing of the introduction of the

manufacturing waiver ...................................................................................... 42

HOW DO THE OPTIONS COMPARE? ............................................................................................ 43

PREFERRED OPTION ...................................................................................................................... 47

8.1. Preferred option ............................................................................................... 47

8.2. REFIT (simplification and improved efficiency) ............................................ 50

HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED?.................................. 50

ANNEX 1: PROCEDURAL INFORMATION ............................................................................................ 52

ANNEX 2: STAKEHOLDERS’

VIEWS

..................................................................................................... 56

ANNEX 3: WHO IS AFFECTED AND HOW? .......................................................................................... 59

ANNEX 4: DIFFERENCES BETWEEN GENERIC AND BIOSIMILAR MEDICINAL

PRODUCTS ........................................................................................................................................ 62

ANNEX 5: BIOSIMILARS APPROVED IN THE EU AS OF DECEMBER 2017 .................................... 63

ANNEX 6: ANALYTICAL METHODS ..................................................................................................... 66

ANNEX 7: GENERIC AND BIOSIMILAR MARKET IS EXPANDING .................................................. 67

ANNEX 8: IMPACTS OF THE CURRENT SPC REGIME (BASELINE SCENARIO) ............................ 71

ANNEX 9: COMPARISON OF SPC PROTECTION EXPIRY DATES .................................................... 72

ANNEX 10: ASSESSMENT OF WAIVER TIMING SCENARIOS .......................................................... 76

ANNEX 11: BIOPHARMACEUTICALS R&D AND MANUFACTURING ACTIVITIES...................... 78

ANNEX 12: STUDIES ON THE MANUFACTURING WAIVER............................................................. 87

ANNEX 13: NUMBER OF MARKETING AUTHORIZATION REFERRED TO IN SPC

APPLICATIONS ................................................................................................................................ 96

ANNEX 14: PATENT CLIFF AND GEOGRAPHICAL SCOPE OF SPC PROTECTION ....................... 97

ANNEX 15: IMPACT OF A POSSIBLE SPC MANUFACTURING WAIVER ON R&D IN THE

EU ....................................................................................................................................................... 98

ANNEX 16: SME TEST .............................................................................................................................. 99

Glossary

Term/Acronym

API

Biosimilar medicines

or biosimilars

(also known as

‘follow-on

biologics’

‘subsequent

entry

biologics’)

Bolar exception

Meaning/Definition

Active pharmaceutical ingredient (the part of any medicine that produces its

effects)

A biosimilar is a biological medicine highly similar to another already

approved biological medicine

(the ‘reference medicine’).

Unlike the small

molecules of classical medicines, which are ‘chemically’ synthesised, the

much more complex biosimilars are extracted or synthesised from biological

sources such as blood or tissues, and for this reason cannot be fully identical

to their reference products. EMA evaluates biosimilars in the EU

The Bolar exception, which allows small-scale manufacturing of

generic/biosimilars medicines to take place during the patent/SPC protection

period of the reference medicine in order to conduct the testing required to

obtain regulatory approval for the generic/biosimilar

A medicine with annual global sales of over USD 1 billion

First day following expiry of intellectual property (IP) protection for a given

medicine. For practical reasons (such as national-level pricing and

reimbursement negotiations), generics/biosimilars rarely enter on the market

on the very first day following SPC expiry. Therefore throughout this

document

‘day-1’

entry shall be understood as referring to entry on the first

practically possible day, or more generally to a ‘rapid’ or ‘timely’ entry

European Medicines Agency

U.S. Food and Drug Administration

Generics and

biosimilars are also called ‘follow-on’ products

A generic medicinal product is a copy of an original non-biologic

‘reference

medicine’ whose IPR and market protection has lapsed or expired. The

generic medicine is usually manufactured by a different company. Generics

have the same qualitative and quantitative composition in active substances

and the same pharmaceutical form as reference medicinal products

This term includes manufacturers of generics and/or biosimilars as well as

manufacturers of APIs corresponding to those generics/biosimilars

They are typically the SPC holders, but are increasingly becoming leaders in

the production and commercialisation of biosimilars

A supplementary protection certificate is a sui generis IP right that extends

by up to 5 years the effect of a patent in Member States (with an extra 6

months added if a paediatric investigation plan is conducted).

SPCs

apply to

human medicinal (or plant protection) products subject to regulatory

authorisation

Agreement of the World Trade Organization (WTO) on Trade-Related

Aspects of Intellectual Property Rights

Blockbuster

Day-1

EMA

FDA

Follow-on product

Generic medicines

(‘generics’)

Manufacturer of

generics and

biosimilars

Originators or

innovators

SPC

TRIPS

1. I

NTRODUCTION

: P

OLITICAL AND LEGAL CONTEXT

1.1. Political context

The

Single Market Strategy

announced a targeted recalibration of certain aspects of

patent and Supplementary Protection Certificate (SPC) protection, aiming to tackle the

following problems:

(1) Loss of export markets (in unprotected third countries), and of timely

day-1

entry

onto Member State markets, for EU-based manufacturers of generics and

biosimilars, due to the unintended effects of the current EU SPC regime; in this

regard, it was suggested to introduce in the EU SPC legislation an ‘SPC

manufacturing

waiver’ allowing manufacturing of generics and biosimilars,

within the EU, during the SPC term.

(2) Fragmentation resulting from the uneven implementation of the current SPC

regime in the Member States that could be solved in connection with the

upcoming unitary patent, and the possible creation thereafter of a unitary SPC

title.

(3) Fragmented implementation of the Bolar research exemption

The European Parliament resolution on the Single Market Strategy

endorsed the

Commission’s intentions and notably ‘urge[d]

the Commission to introduce and

implement before 2019 an SPC manufacturing waiver’,

so as to boost the

competitiveness of the generics and biosimilars sector, ‘while

not undermining the

market exclusivity granted under the SPC regime in protected markets’.

In June 2016, the Council of the European Union called upon the Commission to engage

in a wider review of IP incentives in the pharmaceutical sector

. In particular, the Council

invited the Commission to conduct, before 2019, an evidence-based analysis of the

impact of EU pharmaceutical incentives on innovation, availability and accessibility of

medicinal products, including on pricing strategies. Among those incentives, the Council

considered that particular attention should be given to SPCs, the ‘Bolar’

patent

exemption, data and market protection, market exclusivity for orphan medicinal products,

and incentives and rewards for paediatrics

Document COM(2015)550. See also the subsequent inception impact assessment on patents and SPCs.

The exception is defined by Article 10(6) of Directive 2001/83 on the Community code relating to

medicinal products for human use, stating that ‘Conducting

the necessary studies and trials with a view to

the application of paragraphs 1, 2, 3 and 4 and the consequential practical requirements shall not be

regarded as contrary to patent rights or to supplementary protection certificates for medicinal products’.

A similar provision can be found in Article 13(6) of Directive 2001/82/EC on the Community code relating

to medicinal products for veterinary use.

2015/2354(INI).

Council Conclusions on strengthening the balance in the pharmaceutical systems in the EU and its

Member States (17.6.2016).

Medicinal products enjoy data and market protection, or market exclusivity for orphan medicines,

following their authorisation, which run in parallel to patent and SPC protection, and may in some cases

last longer than the SPC protection (the impact of these two types of protection on innovation, availability

and accessibility of medicinal products is being analysed by the Copenhagen Economics study).

As regards the review of the SPC Regulation and following a series of studies (see

Annex 1 and section 4), an inception impact assessment

was published in February 2017

announcing possible legislative and non-legislative proposals. In October 2017, a 12-

week online public consultation was launched; its results are summarised in Annex 2.

As regards the wider pharmaceutical review, the Commission contracted an economic

study

. The Commission also intends to conduct an evaluation of the orphan and

paediatric legislation, with further analysis in 2018-2019

1.2. Scope of the impact assessment

This impact assessment focuses on two specific problems, (a) the

loss of export markets

due to delayed entry

and (b) delayed entry onto EU markets, that

decrease the

competitiveness of EU-based manufacturers of generics and biosimilars.

It considers

a targeted initiative in this area. Other aspects related to the review of the SPC regime,

and a wider pharmaceutical incentives review, will be dealt with via separate initiatives

at a later stage. The reasons for this approach are the following:

(1) Even though the public consultation showed wide support for the introduction of a

unitary SPC,

it would be premature at this stage to table a proposal for the creation

of a unitary SPC, as the unitary patent package is not yet in force.

Secondly, whilst the public consultation and ongoing analysis show a

need for more

clarity as regards the way the SPC Regulation is applied in practice,

it would be

preferable to await the outcome of certain pending cases before the Court of Justice

of the European Union (CJEU) before proceeding to offer practical guidance.

Thirdly, as regards the

Bolar exemption

(which is enshrined in the pharmaceutical

acquis), the public consultation and ongoing studies point to the need for more

clarity, which could be offered through guidance.

(2) There is an

urgent need to tackle the specific problems faced by EU-based

generics and biosimilars manufacturers.

As discussed below, the markets for

generics and biosimilars are highly competitive and steadily growing. Under the

current SPC rules however, EU-based manufacturers of generics and biosimilars are

put at a competitive disadvantage vis-à-vis manufacturers capable of producing

generics and biosimilars outside the EU. As of 2020, a significant number of

medicinal products will go off-patent and off-SPC

, opening a significant market for

generics

–

and biosimilars in particular (expected to amount to EUR 95bn)

–

competition. For example, in 2015, the originator firm Pfizer spent USD 17bn to

purchase Hospira (a leading developer of biosimilars) in view of the USD 100bn

patent cliff faced by biologics up to 2025 (a USD 20bn biosimilars market is

expected by 2020)

. This upcoming ‘patent cliff’ will come in a context of SPC

protection now mainstreamed across the Union, thus forcing companies who are

http://ec.europa.eu/smart-

regulation/roadmaps/docs/2017_grow_051_supplementary_protection_certificates_en.pdf

Copenhagen Economics study.

See inception impact assessment.

See Annex 14 for details. See also:

World Preview 2017, Outlook to 2022,

EvaluatePharma, 2017.

https://www.sec.gov/Archives/edgar/data/78003/000007800315000038/x999315.htm

willing to invest in the new opportunities to start

–

or relocate

–

their manufacturing

outside the EU.

The EU was a pioneer in the development of regulatory procedures to approve

biosimilars: the EMA authorised the first biosimilar in 2006 (to Sanofi), while the

FDA did so only in 2015. However, there are clear signs that Europe is now losing

its competitive edge as a hub for manufacturing of generics and biosimilars, with

trade partners now quickly catching up

. For example, South Korea invested 35% of

its national medical R&D budget in

biosimilars development in 2012 (see Deloitte’s

Winning with biosimilars-Opportunities in global markets

), and Canada, while

accepting to introduce SPC protection as a result of the negotiations with the Union

on the Comprehensive Economic and Trade Agreement (CETA), nevertheless

insisted on including an SPC manufacturing waiver in the Agreement, so as to allow

its own firms to reap the benefits of the new generics and biosimilar markets.

Therefore, and as testified both by the respondents to the public consultation and in

various studies, there is an urgent need for the EU to restore the competitiveness of

EU-based manufacturers of generics and biosimilars. Doing nothing or postponing

an initiative would further weaken European industry and unravel the EU’s

pioneering-effect competitive advantage in the biosimilar sector in particular.

(3) The

competitiveness issues addressed in this impact assessment can be

addressed in a stand-alone manner.

In fact, the issues under discussion here, and

the measures taken to address them, are not related to the wider debate on the

optimal scope and duration of IP protection in the pharmaceutical sector in the EU. It

should, moreover, be noted that the public consultation and study results have not

pointed to the need for a broader re-opening of the SPC regime.

1.3. The EU Supplementary Protection Certificate regime

An SPC can extend by up to five years the protection conferred by the basic patent, but

only with respect to the medicine(s) covered by the related marketing authorisation(s) to

place the protected reference medicine(s) on the market

. An SPC is therefore

considered a

sui generis

intellectual property right. SPC protection was first introduced

in the EU in 1992 and is currently governed by Regulation (EC) No 469/2009 concerning

the supplementary protection certificate for medicinal products

The Asia-Pacific region has more biosimilars in development, led by China (269) and India (257), than

anywhere else in the world (The USA counts with 187 under development). See annex 7 and Deloitte

Report 2018 Global life sciences outlook Innovating life sciences in the fourth industrial revolution:

Embrace,

build,

grow.

Available

at:

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/gx-lshc-ls-

outlook-2018.pdf

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-lshc-

biosimilars-whitepaper-final.pdf

Therefore, the SPC is not formally an extension of the patent. The subject matter of protection of the

SPC needs to be seen in the context of the protection conferred by the reference patent (the latter is

generally broader), and the marketing authorisation granted (which is purpose-bound, and thus more

limited).

It should be recalled that two kinds of SPCs are available in the EU: the SPC for medicinal products,

governed by Regulation (EC) No 469/2009, and the SPC for plant protection products, governed by

Regulation (EC) No 1610/96. Only the former is addressed by the current initiative, since the specific

SPC protection aims to offsetting the loss of effective patent protection due to the length

of necessary testing, clinical trials and marketing authorisation procedures, thereby

providing the pharmaceutical industry with appropriate incentives to innovate.

An SPC takes effect at the end of the term of the basic patent, and can be granted for a

period equal to the period which elapsed between the date on which the application for a

basic patent was filed and the date of the grant of the first authorisation to place the

product on the market in the EU, reduced by five years. This means that not all patented

and authorised medicines benefit from 5 years of SPC protection. Some may not be

eligible for SPC protection at all (if the marketing authorisation was granted relatively

quickly

); some may enjoy SPC protection having the full duration

; while others enjoy

SPC protection but on the basis of a shorter duration. According to the

Copenhagen

Economics

study

, the average duration of SPCs granted in the EU amounts to 3.5 years.

The benefits of an SPC for its holder

are significant. Since an SPC ‘confer[s]

the same

rights as conferred by the basic patent’

, the monopoly resulting from the basic

(reference) patent is extended and enables its holder to prevent competitors from

practicing the invention (manufacturing the medicine, offering it for sale, storing

it,

etc.) in those Member States in which an SPC has been granted

problems described below in connection with medicinal products are not necessarily faced in connection

with plant protection products, whose legal framework and market dynamics are different (just to take one

example, no patent exemption similar to the ‘Bolar’ one is available for plant protection products

in most

of the Member States as confirmed by submissions to the Commission’s public consultation).

No later than 5 years after the filing of the patent application (Art. 13(1) of Regulation 469/2009).

In certain specific cases, as set out in Regulation (EC) No 1901/2006 on medicinal products for

paediatric use, the term can be extended by a further six months if a Paediatric Investigation Plan has been

submitted to the EMA.

See Annex I, overview of studies conducted.

The SPC holder usually also holds the reference patent, although other situations are possible

–

for

instance that the patentee licenses the patent and that the licensee invests in the clinical trials and obtains

the marketing authorisation and the SPC.

Article 5 of Regulation 469/2009. Although the subject matter of protection is more limited (Article 4).

Stockpiling waivers for patent rights (not for SPCs, which are out of the scope of TRIPS and are not

global-harmonised rights) have been subject to dispute in the context of the TRIPS Agreement. In 1999, a

Dispute Settlement Body (DS114) of the WTO was established to rule on the European Communities and

their Member States’ complaint against Canada arguing, among other things, that the stock-piling

provision

stipulated in the Canadian Patent Act curtailed the rights conferred on a patent owner provided in Article

Annex 8 includes a detailed table summarising the main impacts of the current EU SPC

regime for medicines, as governed by Regulation (EC) No 469/2009, on various

stakeholders during the SPC protection period.

Reliance on SPC protection is significant and increasing. The number of SPC

applications filed in Member States has tripled from about 500 applications in 1993 (in

then EU-12) to 1,518 in 2013 (in EU-28). A recent study (Kyle) shows that the share of

new medicine introductions having an SPC in at least one Member State increased from

75% in the early 1990s to 86% today

. Biologics account for about 16% of medicinal

products subject to an SPC

In addition to more medicines benefitting from SPC protection, SPCs are also protected

in an increasing number of Member States. States that acceded to the EU from 1986

onwards were given transition periods during which they were not yet required to put in

place SPC protection systems. The lapse of these transition periods has led to the gradual

roll-out of SPC protection system across the whole EU. The effects of this roll-out are

now being felt in particular in those Member States that joined the Union as and from

2004.

1.4. Strong evolution of pharmaceutical markets in the EU and globally

Since the introduction and codification of the SPC regime in 1992 and 2009 respectively,

the European and global markets for pharmaceuticals have undergone very profound

changes:

(i) Global demand for medicines is increasing, with a significant switch towards generics

and biosimilars

The global pharmaceutical market has dramatically changed in the past 25 years. The fast

growing economies of Asia, Central and South America

–

the so-called

‘pharmerging’

regions

–

combined with ageing populations in the traditional industrialised regions, have

driven

massive global demand for medicines

over these decades. This is confirmed by

industry data, which shows that total global spending on medicines increased from

EUR 950 billion in 2012 to EUR 1.1 trillion in 2017. The USA represents 40% of this

global market, while China (20%) has now displaced the EU into third place (with less

than 15%). Biologics will represent 25% of the pharmaceutical market value by 2022

(Deloitte, 2017

Meanwhile, this growing global demand for pharmaceuticals is being accompanied by a

shift towards ever-greater market share by generics and biosimilars,

which could

represent 80% of medicines by volume by 2020 and about 28% of global sales (Deloitte,

28.1 of TRIPS, and were not within the limited exceptions provided by Article 30 TRIPS. The Panel ruled

that stockpiling is indeed not justified under Article 30 for patent rights. The decision of the Panel was not

appealed.

According to the Mejer study, SPC protection for a single medicinal product is filed, on average, in 20

Member States today.

According to Kyle, there were the change in drug development (e.g. introduction of secondary clinical

endpoints) has increased the relevance of SPCs over time.

DG GROW calculations based on AdP database.

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-lshc-

biosimilars-whitepaper-final.pdf

2018), with a future compound annual growth rate estimated at 6.9% (partly due to

efforts by governments to contain overall healthcare costs). According to Medicines for

Europe, 56% of medicines by volume currently supplied in the EU are generics or

biosimilars

. That being said, penetration rates vary considerably from one Member

State to another

(ii) Pharmaceutical R&D and manufacturing in the EU is significant but patterns are

changing

The pharmaceutical sector in the EU is significant. According to Eurostat, there are about

4 000 enterprises active in this sector and together they provide about 570 000 jobs

(figures from 2015). R&D expenditure in the EU amounted to EUR 27bn in 2015.

Calculations by EFPIA show the following (these figures include Switzerland):

The leading Member States in pharmaceutical R&D investment are Germany, UK and

France. Belgium, Denmark and Sweden are intensive in R&D and manufacturing.

Germany and Italy are the leading manufacturers of pharmaceuticals in absolute terms;

however, while the trade balance in Germany is very high, Italy has a negative trade

balance. The leading Member States in employment in this sector (in absolute terms) are

Germany and France. Ireland, Denmark, Belgium and Sweden are highly intensive in

manufacturing and have large trade balance. Member States that acceded to the EU as of

According to IMS Health, there have been a number of successful launches of non-biologics

blockbusters medicines in the EU (e.g. fingolimod, rivaroxaban, palperidone, and abiraterone) that will be

the subject of generics development programmes and market launches over the longer term. In the

biosimilars sector, IMS Health also signals that the dominance of biological therapies in the top 10

products in Europe anticipates the future importance of the biosimilar industry.

Greece and Italy only have 18% penetration by volume, while the UK and Germany have over 80%

penetration by volume representing over 35% in terms of value. (Source: OECD Health Statistics 2016).

2004 (in particular Poland and Hungary) account for over 50 000 jobs combined, notably

in the generics sector

. However, investment in R&D is low in these Member States.

The pharmaceuticals manufacturing sector in the EU is composed of a relatively small

number of large capital-intensive enterprises, although small and medium-sized

enterprises (SMEs) are active in manufacturing as well, in particular as regards generics

(details in annex 16)

. 60% of European production is generated by global firms who are

active in several Member States

. Manufacturing includes innovative drugs,

biological/biosimilars, as well as high-end APIs

and value-added generic medicines.

Whilst the largest share of EU manufacturing is controlled by patent- and SPC-holding

companies, the generics and biosimilar sector in the EU comprises 350 manufacturing

sites, accounts for over 160 000 jobs and exports to over 100 countries. According to

IMS Health, the company that provides information, services and technology for the

healthcare industry, the generics and biosimilar sector accounts in volume for 56 % of

prescribed medicines in 2016 and accounted for 22% of the total sales of medicines in

2014. As illustrated in the map provided by Medicines for Europe, its companies are

established in most Member States as indicated in the map below (originator firms also

have biosimilars plants in other Member States, but these are not indicated):

According to the Eudra Good Manufacturing Practice (GMP) database which is

maintained and operated by the EMA, 234 sites in 19 Member States are authorised to

produce biologics and biosimilars (see annex 11 for details).

Biosimilar production requires costly and complex development and manufacturing

processes

, but is also highly lucrative. Given that approval of biosimilars started in the

EU much earlier than elsewhere (already from 2006), and given Europe’s excellent

ecosystem (including universities) and infrastructure (including clinical and contract

See annex 11 for detailed Member State statistics on industry structure, R&D, trade, FDI and EMA-

compliance manufacturing sites.

According to Eurostat, since 2010, the number of enterprises in the EU-28 for which pharmaceuticals

manufacturing is their principal activity has remained stable and amounts to around 4 000.

That is, with the controlling company located outside the reporting country.

Chemicals Producers Association

(CPA) report (2015), Competition in the world APIs market.

See annex 4.

research organisations), the EU quickly became the world leader for the development and

manufacturing of biosimilars (with 31% of global FDI in manufacturing and R&D for

biosimilars currently taking place in the EU)

Today, the classical boundaries between originators and generics/biosimilars

manufacturers are more blurred. Some originators have branches devoted to generics

(e.g. Novartis/Sandoz, Pfizer and Merck KGaA are the top sellers of unbranded products

in the EU

) and some traditional generic manufacturers are developing innovative or

high value-

added generics and biosimilars (e.g. Mylan, Dr. Reddy’s or Teva

). This

does not, however, necessarily translate into jobs in the EU, as originators tend to

increasingly manufacture biosimilars and generics outside the Union, and notably in

Canada, the USA and Asia

(e.g. Samsung Bioepis manufactures in Asia and registers

biosimilars at the EMA and FDA, that are then commercialised by the originator firms

Merck and Biogen

; Pfizer bought Hospira, a leading manufacturer of biosimilars with

manufacturing capacity in Asia and North America; and Celltrion manufactures

biosimilars in Asia for Pfizer

It should be noted that in the field of pharmaceutical innovation, start-ups and SMEs play

an increasingly important role, in particular as regards the initial steps of innovation. In

fact, pharmaceutical companies are increasingly outsourcing their R&D. Today,

significant innovation comes from specialised SMEs focused on the initial steps of R&D

and development, with less than 25% of the new medicines being developed by

originators (Deloitte, 2018). According to a report by Accenture (2016)

, over the past

decade, 60% of innovator small molecules and 82% of innovator biologics have their

roots outside big pharmaceutical companies (see for more details, Annex 16 on SME

Test).

(iii) Global developments of pharmaceutical R&D and manufacturing

25 years ago, pharmaceutical R&D and manufacturing was essentially situated in the

USA, the EU and Japan

; today pharmaceutical R&D and manufacturing

is a global

phenomenon. The EU has traditionally been the biggest exporter of pharmaceuticals,

representing over 25% of the Union’s total high-tech

exports. In recent years however,

Commission services calculations based on FT fDi database.

Cf. Table 5 in Kyle (2017). The ranking is based on the number of product launches (of a unique

chemical combination) per firm observed in 2016 in a set of Member States, not on revenues or market

share.

http://www.tevapharm.com/research_development/rd_focus/pipeline/

Manufacturing biotechnology sites in China, Singapore and India are already complying with

Good

Manufacturing Practice

which is a standard required to produce medicines for the EU market. See Annex

11 for details.

www.samsungbioepis.com/en/pipeline/

https://dcatvci.org/5058-biosimilars-opportunities-and-challenges-in-the-us-and-eu

https://www.accenture.com/t20150527T203922__w__/us-en/_acnmedia/Accenture/Conversion-

Assets/Microsites/Documents/Accenture-The-Future-of-Pharmaceutical-Innovation-Tackling-the-RD-

Productivity-Gap-Online.pdf

Gambardella, A., Orsenigo L., & Pammolli, F. (2000),

Global competitiveness in pharmaceuticals: a

European perspective,

available at

https://mpra.ub.uni-muenchen.de/15965/1/MPRA_paper_15965.pdf

See table in page 42 at:

https://www.ifpma.org/wp-content/uploads/2017/02/IFPMA-Facts-And-

Figures-2017.pdf

India, Singapore and Israel have also managed to position themselves as major

pharmaceutical exporters (IFPMA 2017), while China is now the world leader for the

production of APIs (by volume), according to the World Health Organisation.

Regarding biosimilars development, according to Deloitte’s 2018 Global Life Sciences

Outlook:

‘Led by China, the Asia-Pacific

region has more biosimilars in development than

anywhere else in the world. China has the potential to become the frontier market

for biosimilar drugs (269 biosimilars under development). The growth of

biosimilars could push

the industry into an innovative phase’.

Indeed, all four BRIC countries (Brazil, Russia, India and China) have updated their

regulatory rules and are becoming increasingly attractive for investments in biosimilars

(see Annex 7 for more detailed information). Global competition is therefore fierce,

requiring the EU to take the steps needed to remain competitive.

2. P

ROBLEM DEFINITION

A problem tree is included at the end of this section.

2.1. Decreasing

competitiveness

manufacturers

EU-based

generics/biosimilars

In the current international context, and given the evolution and dynamics of the

pharmaceutical market, the EU SPC protection, established back in 1992, is

unintentionally acting to the disadvantage of EU-based

manufacturers of generics and

biosimilars vis-à-vis non-EU-based manufacturers, and this detrimentally affects the

whole EU pharmaceutical ecosystem. Responses to the public consultation confirm that

EU-based manufacturers of generics and/or biosimilars are losing competitiveness with

respect to non-EU based ones.

As identified in the Single Market Strategy, it is urgent (see section 1.2 and 2.1.3) to

tackle the difficulties faced by such manufacturers regarding export during the SPC term

and entry onto the EU market immediately after SPC expiry.

IMS Health

identified in 2011 South Korea, India and Brazil as key macroeconomic drivers of growth,

attracting foreign capital by creating manufacturing and R&D centres of excellence for biosimilars.

According to the

Financial Times

fDi database, India and China are among six top countries in terms of the

number of FDI announcements in biotechnology (life science) R&D and manufacturing. According to the

EudraGMP database, sites in Brazil, India and China are already complying with EU standards for the

production of medicinal products. See Annex 7 for details.

Evidently, no problem arises, for a given medicine, in respect of those Member States where no SPC

has been granted, and where manufacturing may freely take place after patent expiry. However, as

explained below, this situation has a minor impact, as the geographical coverage of SPC protection across

the EU is usually very large.

2.1.1. Two specific problems

Manufacturers

of generics and/or biosimilars (based in Member States where an SPC

has been granted for the reference medicine), face two problems:



Problem 1:

during the period of protection covered by the certificate of the reference

medicine in the EU,

they cannot manufacture for any purpose, including export

outside the EU to countries where SPC protection for the reference medicine has

expired or never existed, while manufacturers based in those third countries can do

;



Problem 2:

immediately upon the expiry of the certificate:

they are not ready to enter

the EU market on

day-1

, since the EU SPC system does not allow manufacturing in

the EU until then. By contrast, manufacturers based in third countries where SPC

protection for the reference medicine has expired earlier or never existed

can be

ready from

day-1

to enter, via exports, the EU market, and thus gain a considerable

competitive advantage.

These problems put EU-based manufacturers at a competitive disadvantage vis-à-vis

manufacturers located outside the EU in both global market and in the (day-1) EU

market. This is aggravated by the dynamics of generics/biosimilars markets whereby,

after expiry of patent/SPC protection of the reference medicine, only the first

generics/biosimilars to enter the market capture a significant market share and are

financially viable (see section 2.2.2 below).

In the public consultation on SPCs, these two problems were confirmed in submissions

by the group of generics/biosimilars, as well as by the group of patients/doctors/insurers’,

as follows:

Table 2.1.1.

Generics/biosimilars’ opinion

Yes

(The problem exists)

Problem 1

Problem 2

Patients/doctors/insurers’ opinion

Don’t

know

answer

Don’t

Yes

know answer (The problem exists)

Whether they have their headquarters in the EU or in a third country (this includes generics/biosimilars

divisions of innovative pharma companies).

At least if they are based in a country having no SPC protection (e.g. China, India, Brazil, Mexico,

Russia), or having SPC

with a manufacturing waiver for export purposes

(e.g. Canada– which is very

relevant in relation with the highly lucrative US market), or countries such as Israel with shorter SPC

protection than the EU.

Although SPCs are granted nationally, Article 13 of Regulation 469/2009 is designed to ensure that all

SPCs granted by Member States for the same medicine expiry simultaneously (in a few cases there may be

temporary distortion).

While TRIPS provides for minimum standards of patent protection in WTO countries, it does not cover

SPCs.

2.1.2. Unintended side-effects of the EU SPC framework

Taking a step back, the Bolar exemption (governed by Directive 2001/83/EC and

Directive 2001/82/EC which in practice can be considered a manufacturing waiver for

testing and clinical trials

purposes) was intended to ensure that a generic could enter the

market as soon as possible after the expiry of patent/SPC protection. Without this

exemption, necessary testing and clinical trials prior to the authorisation of a generic or

biosimilar medicine could only start after such expiry, which practically speaking, would

extend the patent/SPC protection period of the reference medicine by several months, if

not years in some cases, beyond its legal duration (considering the time needed to

develop a generic or biosimilar and get it approved). The Bolar exemption has eliminated

this untended side-effect of the strong patent/SPC protection, based on the basic rationale

that free competition should be allowed as soon as protection expires.

Regarding the SPC manufacturing waiver, firms are facing a situation similar to the pre-

Bolar one. While the legitimate purpose of an SPC is to prevent the manufacturing for

the purpose of marketing of competing products on the EU market when it is in effect, it

has two unintended consequences that were not foreseen, namely preventing

generics/biosimilars (1) from being manufactured in the EU and exported to third

countries (where no legal protection applies) during the EU SPC term, and (2) from being

manufactured in the EU (and then stored) early enough to be placed on the EU market

immediately from

day-1.

The absence of an SPC manufacturing waiver, in practical terms, results in unduly

extending SPC protection beyond its legal term. This is detrimental to the

day-1

entry of

generics/biosimilars onto the EU market (as they can be supplied from

day-1

by firms

based in ‘non-SPC’ third countries), but also, much more so, to the

competitiveness of

EU-based generics/biosimilars manufacturers, which are not able to compete with those

based in ‘non-SPC’ third countries, neither in terms of export during the SPC term, nor

day-1

entry onto the EU market.

The following charts underline the difference between the theoretical (intended) and

practical (i.e. unintended and

de facto)

consequences of the scope of the exclusivity

conferred by SPCs.

Development of biosimilars involves some clinical trials.

2.1.3. Magnitude of the problem and urgency to act

The problems described above preclude major export opportunities for EU-based

manufacturers of generics and biosimilars (about EUR 1bn yearly for a sample

representing 32% of relevant medicines (see detailed quantification in section 6.3, and

tables 7.1 and 7.2)). They also imply a loss of ‘lead time’ for EU-based

manufacturers

wanting to enter into the EU market after expiry of SPC protection, thus making these

manufacturers forego significant opportunities in a fast-growing global pharmaceutical

market, which is undergoing a significant shift toward generics and biosimilars.

As indicated in section 1.2, as of 2020, a growing number of medicinal products will go

off-patent/off-SPC

, opening a significant market for generics

–

and biosimilars in

particular (expected to amount to EUR 95bn)

–

to competition. Indeed, the global market

for generic medicines is expected to increase by 50% over the 5 year period up to 2021,

reaching EUR 500bn. In this context, the biologics market is booming, with annual sales

of over EUR 150bn (biologics currently top the list of blockbusters), and originators

increasingly entering the market of biosimilars. The Pugatch study (2017)

estimates

that every year a global market of between USD 2.7bn and USD 5.4bn is opened to

generics and biosimilars competition.

EU-based manufacturers of generics and biosimilars are therefore at risk of foregoing

significant sales opportunities, both within EU and in global markets. This will act to the

detriment of existing companies, but will also deprive new companies from the

possibility of starting- and scaling up in high-growth markets. Companies will be faced

with a stark choice: either to manufacture in Europe, where they are confronted with a

legal barrier; or to manufacture abroad.

There is an

urgent need to tackle the specific problems faced by EU-based generics

and biosimilars manufacturers.

Markets for generics and biosimilars are becoming

highly competitive, and these markets are steadily growing driven by a major patent/SPC

cliff of blockbusters, especially in the biologics sector, and by increasing global demand

for medicines (see further section 1.2).

See Annex 14 for details. See also: World Preview 2017, Outlook to 2022, EvaluatePharma, 2017.

http://www.pugatch-consilium.com/?p=2518

This has been understood by EU’s trade partners that recently have been investing in

pharmaceutical manufacturing and biosimilars development

Doing nothing, or postponing an initiative would, firstly, further weaken the EU

pharmaceutical industry (by not allowing it to seize the new emerging opportunities), and

secondly, unravel the EU’s pioneering-effect

competitive advantage in the biosimilar

sector in particular.

2.2. Two problem drivers

The two identified problems share the following drivers:

Many of the EU’s trading partners grant weaker or no SPC protection, which is

in stark contrast to the EU’s own SPC protection, thus leading to asymmetry in

SPC protection globally;

- The market for

generics and biosimilars is highly competitive with a strong ‘first

mover’

effect (i.e. a clear advantage for the first mover) both in the export and

EU markets.

2.2.1. Asymmetry in SPC protection globally

While the TRIPS agreement obliges all EU trade partners to provide at least 20-year

patent protection, it does not impose SPC protection

–

which is a

sui generis

right. Many

trade partners of the EU do not provide for SPC or SPC-like protection at all (such as the

BRIC states)

, some offer SPC protection with a manufacturing waiver for export

purposes (e.g. Canada), while others offer SPC or SPC-like protection that is in general

shorter than the EU SPC protection (e.g. USA and Israel

The following table shows that, in most cases, SPC protection is the longest in the EU.

Country

Korea

China

India

Canada

Molecules with

known SPC expiry

date

109

Molecules with SPC

expiry date earlier than

in the EU

Average difference in SPC

expiry dates between EU and

third country

(years)

2.06

2.86

3.31

3.07

3.53

Note: See Annex 9 for details.

The Asia-Pacific region has more biosimilar in development (led by China (269) and India (257)) than

the rest of the world (the USA has 187 under development): See annex 7 and Deloitte Report 2018 Global

life sciences outlook Innovating life sciences in the fourth industrial revolution: Embrace, build, grow.

Available at:

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-

Care/gx-lshc-ls-outlook-2018.pdf

As of 2016, 56 out of the 164 states who are members of the WTO have a form of SPC-like protection

for medicinal products. Conversely, this means that 108 of these state have no such protection.

Based on the data available on the differences in the expiry dates between EU and the USA: 1) the

overview provided by Medicines for Europe shows that in 80% of cases, protection expires later in the EU

than in the USA, 2) the Deloitte study reports that SPC protection of only 4 out of the 11 most important

biologics expires earlier in the EU, 3) QuintilesIMS selected a sample of 25 molecules and concludes that

in many instances, the SPC in a Member State expires earlier than in the USA. However, it includes Poland

and Slovenia, where SPC has been introduced only recently.

Even if the EU were able to convince third countries to accept SPC- or SPC-like

protection via its FTAs, CETA is likely to have a precedent effect in future FTA

negotiations negotiated. Third countries accepting to introduce, or increase, SPC

protection might well, at the same time, ask for a manufacturing waiver.

On this basis, it can be observed that:



there is a reasonably level playing field between most countries of the world

insofar as

patent

protection is concerned (with a duration of 20 years), as

provided for under TRIPS;



there is a lack of a level playing field between the EU and other countries

regarding

SPC

(or SPC-like) protection, which is simply not available in many

third countries; more specifically, there is a lack of a level playing field between

EU-based manufacturers of generics/biosimilars and those based in most third

countries (56 submissions from generics/biosimilars to the public consultation

claim that the longer the difference in the duration of protection, the less attractive

the EU is for their manufacturing activities).

Therefore, generics and biosimilars manufacturers established in third countries with no

(or shorter) SPC or SPC-like protection are able to start manufacturing earlier than their

EU-based competitors (this is a driver to the first problem). This timing advance in

manufacturing also puts them in a much better position for

day-1

entry onto the EU

market (the driver of the second problem).

Thus, the strong SPC protection in the EU introduced in the early 1990s is now creating

unintended consequences not foreseen by the legislator at that time. In the early 1990s,

developing countries did not constitute major competitors regarding the development of

generics (whose market share was in any event limited). In addition, biosimilars did not

even exist at that time. As a consequence, the two main problems described above had a

low impact (causing little distortion). They were therefore not addressed in the

travaux

préparatoires

of the 1992 Regulation (COM(90)101 final). However, today, modern

infrastructure for the manufacturing of generics and biosimilars can be found in many

developing countries that have no SPC protection (and notably in the BRIC states).

2.2.2.

The ‘first mover’ advantage

These problems faced by EU-based generics and biosimilars manufacturers are

aggravated by the dynamics of the generics/biosimilars markets where frequently only

the first products to enter markets in a timely way after protection expires capture a

significant market share and are financially viable. In the EU, generic firms entering one

year after the first generic entrant only capture 11% of

the first entrant’s market share

Even though the decline in prices for biosimilars is not as steep as in the case of generics,

there is a race in this market to launch first

, since later entrants have difficulty in

gaining market share without a further reduction in prices. For biosimilars, studies show

that in 2016, the first biosimilars to reach the market captured over 70% market share

CRA study (2017). A number of studies support the existence of a first mover advantage effect for

generic products. See Sharjarizadeh

et al

(2015), Yu and Gupta (2008), Hollis

et al

(1991).

The degree of first mover advantage depends, in part, on the switching costs between reference product

and the generic or biosimilar. Switching costs for biosimilars tend to be higher than for generics, including

switching studies, longer-treatment periods, physician-acceptance and other entry barriers. This suggests

that the effects of a ‘first-mover’ advantage might be stronger for biosimilars.

(biosimilar volume)

. Second and third biosimilar entrants captured respectively 30-40%

and 5-22% market share.

In order to capture those potential sales, companies must supply the EU market either

from their own plants or by subcontracting to third parties based in countries where

protection of the reference medicine has already expired.

2.3. Consequences: relocation and decreasing attractiveness of the EU as a

pharmaceutical hub

The problems above result in a lack of a level playing field between EU and non-EU

based generic and biosimilar producers, when it comes to competing in both global

markets and

day-1

entry in the EU. As it will be shown below, this affects not only EU-

based manufacturers of generics and biosimilars, but also EU-based originators, and even

EU patients (e.g. in terms of diversified supply). Thus, the whole EU pharmaceutical

ecosystem is affected.

This situation is particularly detrimental for small and medium-sized EU pharmaceutical

companies (see Annex 16 on SME Test), since they rarely possess manufacturing

facilities in ‘non-SPC’ third countries. The creation and growth of EU-based

start-ups is

also affected, as they require a proper ecosystem on top of a regulatory environment free

of unintended legal barriers. This situation gives way to a number of negative

consequences that will be exacerbated over time.

The main consequence of the above-mentioned problems is increased relocation and/or

outsourcing of the manufacturing of generics/biosimilars outside the EU, and loss of

business opportunities inside the Union more generally, as companies will have a

tendency to circumvent the current legal barriers they face, and will increasingly

manufacture in third countries with weaker or no SPC protection, so as to be able to

compete in global markets or be ready for

day-1

entry onto the EU market.

Three examples of relocation:

‘Levofloxacin’ (an antibiotic

that reached the sales-status of blockbuster before the SPC expiry)

went out of SPC protection in 2011 in Member States. Previously, a generic manufacturer

decided to set up production in Poland because SPC protection was not available in that country.

From 2010 to 2016 (i.e. following SPC expiry in the USA and later in most EU Member States)

the compounded market value creation (sales according to IQVIA) was more than EUR 120m.

The generic manufacturer claims that the production would have been moved outside of the EU if

the SPC had been applicable in the recently-joined Member States at that time.

An EU-based generic manufacturer reported that it decided to set up the production of

‘remifentanil’ in Serbia, so as not to face the legal barriers to manufacturing

in the EU. This

product was SPC-protected in all Member States at the time. The value creation of the generic

medicine is over EUR 10m from 2011 to 2016 (according to IQVIA).

A developer of generics and biosimilars, headquartered in Spain, has reported the successful

launch of a monoclonal antibody (a complex biosimilar) in several countries in the American

continent, though the firm has had to expand production to Argentina due to EU SPC protection.

Source: provided by generic manufacturers.

The Impact of Biosimilar Competition in Europe

(2017). The report analyses the impact on volume on

two biosimilar therapy classes, Anti-TNF and EPO.

Delocalisation/outsourcing of pharmaceutical production will come with

additional

consequences,

as follows:



Detrimental impact on manufacturing capacity, employment and skills

in the

EU generics and biosimilars sector:

Loss of jobs

in the EU pharmaceutical industry, in particular the generics and

biosimilars sector, which accounts for 160 000 jobs in the EU, according to

Medicines for Europe.

Loss of know-how

and

a brain drain

of highly-skilled jobs, especially in the

biosimilars sector, where R&D is increasingly shifting to other countries,

notably in Asia.

Relocation of R&D,

in particular for biosimilars

: the biosimilars sector is R&D

intensive, and R&D for biosimilars tends to be located where manufacturing

takes place. If manufacturing of biosimilars is rendered less attractive in Europe,

then there is a risk that R&D for biosimilars will also leave the Union, causing

Europe to lose its related expertise and competitive advantage. In the generics

sector, co-location of R&D and manufacturing is less frequent, and the risk of

delocalisation of R&D is thus lower.

Loss of manufacturing capacity:

once production is delocalised, it might well

never return to the EU. This risk affects EU-based SPC-holders (that also use the

manufacturing capacity of generic manufacturers) as well as generics and

biosimilars manufacturers. According to

Medicines for Europe,

the minimum

cost of relocating the production of a single biological product is EUR 10m and

it takes a minimum of 1.5-2 years. If the relocation requires additional

regulatory approvals to ensure that the safety, quality and efficacy of the product

are not affected, costs easily multiply. Switching API suppliers has a high cost

due to the requirement of new stability batches and new analytical studies on

impurities, among others. It is estimated that for the more complex APIs, the

cost associated to a change of API supplier could be around EUR 4m. Therefore,

once an API supplier is chosen, the decision tends to be irreversible.



Detrimental impact on the EU pharmaceutical industry as a whole,

including the

innovative pharmaceutical industry in the longer term:

Delocalisation of manufacturing capacity of medicines outside the EU might

negatively affect originators investments and manufacturing in the Union, as

originators often outsource production and are investing in biosimilars. As

already mentioned, originators are heavily investing in developing and

commercialising biosimilars in the EU and other markets to compete with the

highly-lucrative innovative biologics (patent/SPC protected) of other originators.

EMA databases (details in annex 5) show that 15 out of 33 biosimilars with

current valid authorisations in the EU issued to major originator firms (e.g.

Amgen, Boehringer, Eli Lilly, Merck and Sanofi) or their biosimilar divisions

(e.g. Pfizer-Hospira, Novartis-Sandoz and Novartis-Hexal). Samsung Bioepis

Alcacer, J. and Delgado M. (2016).

Spatial organization of firms and location choices through the

value chain.

Management Science, 62(11), 3213-3234. Analysing locations of new establishments of

biopharmaceutical firms in the USA from 1993 to 2005, authors show that collocation of activities varies in

the value chain. Although present in all activities, it is larger for R&D and manufacturing than for sales.

and Celltrion, which have 6 biosimilars authorisations at EMA, often

manufacture and license to originators

. Approximately 30% of commercial

biologics (reference products) are manufactured by contract manufacturing

organisations

, some of which are located in Asia (e.g. Samsung Bioepis).

Loss of administrative regulatory-related skills in the EU: it is preferable that

regulators be located near an advanced R&D and production ecosystem. If it is

delocalised, there will be lessened impact of EU rules on the global regulatory

environment, or other trade partners could even set the future regulatory rules

for global markets. This would impact adversely on EU-based originators as

well.

https://www.dcatvci.org/5058-biosimilars-opportunities-and-challenges-in-the-us-and-eu

http://www.pharmtech.com/biosimilars-supporting-contract-manufacturers-growth



Detrimental impact on EU patients and national public health budgets/systems:

Less diversity of (quality) generics and biosimilars to EU patients, and reduced

security of supply,

if the production is concentrated in particular geographical

regions outside the EU.

An increasing dependence on imports of generics has been a trend in the EU. As

reported by Member States to the Commission public consultation, the share of

EU-manufactured generics decreased from 60% in 2010 to 55% in 2013 in the

EU. A Commission Staff Working Document from 2014

revealed that while in

the 1980s more than 80% of APIs destined for the EU market were of European

origin, the proportion had decreased to 20% in 2008. The increased dependency

on non-EU sources

has already led to concerns with regard to maintaining

security and quality of supply in the EU

These concerns have materialised in recent years also in the form of some

episodes of shortages, in the EU, of medicines mostly supplied from outside the

EU following accidents or unexpected events

. The website of the EMA

provides a catalogue of shortages of supply of medicines in the EU. It should be

noted that some shortages are due to disruptions to production which takes place

exclusively outside the EU.

An increasing risk of imported counterfeit and falsified medicines has also been

detected by EU customs authorities, which in 2016 seized almost 400 000

pharmaceutical articles.

A significant majority of citizens in the public consultation ˗˗ 32 out of 43

submissions ˗˗ indicated that they care about the origin of production

of the

medicines they consume (only 3 respondents suggested that they do not care).

Some of the submissions express supply and quality concerns.

The relocation of clinical trials may also be detrimental to certain groups of

patients, as participants in such tests may benefit from experimental medicines.

In the medium term, competition in the EU will be reduced, especially for

medicines that are not so profitable (Kyle 2017), but still have important

therapeutic value. Reduced competition affects access to medicines for EU

patients and health expenditure for EU public health budgets. As often happens,

reduced competition may lead to price increases.

SWD(2014)216.

China is the world’s leading producer and exporter of active pharmaceutical ingredients

(APIs) by

volume, accounting for 20% of total global API output, and having displaced India. (Source:

http://www.who.int/phi/publications/2081China020517.pdf)

In the past, a strong delocalisation of API

manufacturing to Asia led to a significant dependency on commodity-APIs from Asia. According to the

CRA report, currently Asia accounts for 63% of the world’s API production. European API production,

mainly in Spain and Italy, accounts for 21% of the world market.

https://www.reuters.com/article/us-pharmaceuticals-europe-india/eu-recommends-suspending-

hundreds-of-drugs-tested-by-indian-firm-idUSKBN16W0A4

The Tianjinin explosion in 2015 in China damaged storehouses and production lines of medicines that

led to shortages of supplies in the EU.

ttp://www.ema.europa.eu/ema/index.jsp?curl=pages/regulation/document_listing/document_listing_000

376.jsp&mid=WC0b01ac05807477a6

Patients in a few Member States were not able to access to certain treatments

until a biosimilar was available. Therefore, limiting the

day-1

entry capacity for

EU biosimilars in those Member States could make a difference for some EU

patients.

It is thus apparent that the current situation vis-à-vis delocalisation and outsourcing is not

only detrimental for EU-based manufacturers of generics and biosimilars, but also for

other categories of stakeholders.

Problem tree: context

–

drivers

–

problems - consequences

3. W

HY SHOULD THE

ACT

3.1. Legal basis

Regulation (EC) No 469/2009 concerning the SPC for medicinal products is based on

Article 114 of the Treaty. An EU legislative initiative would prevent the heterogeneous

development of national rules and practices which directly affect the functioning of the

internal market. Thus, EU action to tackle the asymmetry in SPC protection and the ‘first

mover’ effect should be grounded on this legal base.

While the envisaged action does have an effect on the trade relations between the EU and

third countries, its centre of gravity is the competitiveness of manufacturers of medicines

within the internal market.

3.2. Necessity for action at EU level

At national level, agreements between generics/biosimilar manufacturers and originators

have been concluded (see section 6.2), however without properly addressing the

objective to create a level playing field for generics/biosimilar manufacturers within the

whole of the EU territory.

Firstly, it should be recalled that these agreements are of a voluntary nature. While in

individual cases they may have led to positive results (e.g. allowing individual companies

to advance manufacturing), originators are not bound by them. Generally speaking, and

as reflected in submissions to the public consultation, these agreements are not

considered to have been successful and these actions are therefore not sufficient to

address the challenges and objectives described in the problem definition.

Secondly, assuming they have encouraged

day-1

entry of generics and biosimilar, such

agreements are limited to the jurisdiction of one Member State and do not cover the full

territory of the Union. Even if individual Member States introduced binding rules on

manufacturing, its territorial effect would always be limited.

By contrast, action at EU level would avoid the development of possibly diverging

national legislation; avoiding such diverging national approaches has been a main

objective of the SPC Regulation. EU action would also enable the legislator to tackle

from an internal market perspective ˗ the issue of the competitive advantage enjoyed by

manufacturers based outside the EU over their competitors within the EU, a competitive

advantage unintentionally created by the SPC Regulation itself.

As a consequence, intervention at EU level is considered necessary.

3.3. Added value of EU action

EU-level action would bring significant added-value compared to national-level action to

the extent that it would preserve the integrity of the internal market, by providing for a

uniform, transparent and fair approach.

Indeed, while soft-law approaches based on voluntary agreements between originators

and generics/biosimilars manufacturers are already possible today (and used in certain

Member States), as explained above, an increasingly heterogeneous and non-transparent

situation across the EU would result if their use were generalised.

4. O

BJECTIVES

: W

HAT IS TO BE ACHIEVED

An ‘objectives tree’ is included at the end of this section.

4.1. General objectives

The general objective of the policy action is to

create a level playing field

for the

manufacturing of generics and biosimilars in the EU vis-à-vis manufacturing in third

countries, for the purposes of export to third-country markets, and for timely entry into

the EU-market

‘on day 1’. This would defend and increase the global

competitiveness

the EU pharmaceutical industry (including, but not limited to, manufacturers of

generics/biosimilars) and on jobs in the EU.

As stressed by Parliament, this objective should be achieved without undermining the

market exclusivity granted under the SPC regime in protected markets.

4.2. Specific objectives

The specific objectives sought with this initiative are the following:

(1) Ensure that SPC protection in the EU does not prevent EU-based manufacturers

of generics and biosimilars from entering unprotected third country markets

during the EU SPC protection period.

The criteria for monitoring and evaluating this objective will be, among other

things, the evolution of future exports of EU generics and biosimilars (including

APIs), the share of EU exports of these products, and the market share of EU

generics/biosimilar in third country markets.

(2) Ensure that SPC protection in the EU does not prevent EU-based manufacturers

of generics and biosimilars from entering the EU market on day 1.

For some products, this objective can be partly achieved through fulfilling

specific objective (1). This is because building manufacturing capacity in a

Member State for export purposes during the SPC term would, for certain

products, allow for a quicker scale up of production to enter the EU market on

day1.

The criteria for monitoring and evaluating of this objective will be the future

evolution of the EU market share of EU-manufactured generics and biosimilars.

Through fulfilling objectives (1) and (2), the following beneficial consequences would

result:



strengthening and retaining manufacturing capacity and know-how in the EU, thereby

reducing unnecessary delocalisation/outsourcing;



reinforcing the EU supply chain of pharmaceutical products (less dependency on

imports);



strengthening EU patients’ access to medicines by diversifying geographical sources

of supply;



reinforcing the sustainability of the EU health systems, including from the

perspective of the national public health budgets;



removing obstacles to starting generic and biosimilar businesses in the EU, especially

for SMEs that have more difficulties in overcoming obstacles and facing up to non-

EU competition

The above objectives must be compatible with: (i) keeping effective SPC protection in

the EU until the expiry date of the SPC, i.e. maintaining the exclusive sales of SPC-

protected medicines until SPC expiry in each Member State; and (ii) not increasing risks

of diversion of generics and biosimilars in Member States where an SPC is in effect.

Additional monitoring criteria for both objectives would be the evolution of the future

number of manufacturing sites in the EU, and jobs in the different segments of the EU-

based pharmaceutical industry.

Other obstacles can also exist, such as lack of funding and social/labour market conditions.

Objectives of the initiative

–

Objectives tree

5. W

HAT ARE THE AVAILABLE POLICY OPTIONS

5.1. What is the baseline from which the options are assessed?

The baseline scenario related to this initiative is ‘no policy change’ (status

quo/option

0).

With no policy action, the identified problems would not be fixed. As described in

section 2.3, this would generate a number of negative consequences for manufacturers of

generics or biosimilars (loss of competitiveness), for patients and health systems, and for

the EU pharmaceutical sector as a whole.

In this scenario, some Member States could still apply unilateral approaches at national

level, e.g. via voluntary agreements between stakeholders (as explained under section

5.3.1, 5.3.2 and 6.2). However, such approaches are not likely to be effective and risk

undermining the single market.

5.2. Options discarded at an early stage

The following options have been discarded at an early stage:

5.2.1. Trying to persuade third countries to adopt SPC protection in line with

that of the EU (i.e., reducing the existing global SPC protection asymmetry)

The Commission has already persuaded, via FTA negotiations, a few third countries to

introduce SPC-type protection. However, major trading partners have refused to accept

SPC provisions in FTAs, or have accepted lower levels of SPC protection, such as

Canada. CETA obliges Canada to introduce at least a 2-year SPC protection that will

benefit the exports of European pharmaceuticals to Canada which amount to about EUR

4bn annually

, but CETA also allows Canada-based generics and biosimilars, during

those 2-years of SPC protection, to manufacture for export purposes.

The situation of the base-line scenario could be improved by giving higher priority to the

introduction of SPC protection in third countries in on-going and future FTA

negotiations. However, giving higher priority to the introduction of SPC protection in

FTA negotiations is not a realistic option to effectively meet the objectives, since some

trade partners might not accept, in the short to medium term, to introduce SPC

protection. In addition, such negotiations take time and, as regards the outcome, the EU

–

by definition

–

dependent on the other partner.

5.2.2.

Expanding the scope of the EU ‘Bolar patent/SPC exemption’ to allow for

advance manufacturing for export purposes

The Bolar patent exemption, defined by Articles 10(6) of Directive 2001/83 on the

Community code relating to medicinal products for human use and Articles 13(6) of

Directive 2001/82 on the Community code relating to medicinal products for veterinary

use, allows small-scale manufacturing of generics/biosimilars to take place during the

patent/SPC protection period of the reference medicine, in order to conduct the testing

required to obtain regulatory approval. The aim of this exception is to speed up the

regulatory approval of generic/biosimilar medicines, and their entry into the market once

the patent/SPC of the reference medicine has expired. In theory, one option could

hypothetically be to expand the scope of the Bolar exemption to include manufacturing

for export and/or stockpiling for EU

day-1

entry (see the Roland-Berger study).

However, submissions received in the context of the public consultation did not identify

this as an option. In addition, given that the Bolar exemption applies to both SPCs and

patents, expanding the Bolar exemption to allow for export manufacturing and

stockpiling during the patent term could conflict with Article 28 of TRIPS.

5.2.3. New ad-hoc licensing measures

A specific type of license could be defined, which would be applied for by a

generic/biosimilar company and granted by a competent authority, or alternatively

negotiated with an SPC-holder under the supervision of a competent public authority

free of charge or against payment of a license fee

. This option would bring transparency

for the SPC-holders that could identify and monitor the beneficiaries of such a license.

However, from the perspective of generic companies, the administrative procedures

would involve costs and time delays, making it uncertain whether applying for a license

would be economically sound. Moreover, SPC holders could tactically delay the grant of

a license (e.g. via multiple appeals) making investment for generics very uncertain, or

asking for unreasonably high royalties.

EFPIA welcomed the European Parliament’s green light to CETA:

https://www.efpia.eu/news-

events/the-efpia-view/statements-press-releases/20170215-efpia-welcomes-the-european-parliament-s-

green-light-to-ceta/

In 1993, Italy adopted a similar measure for the SPCs granted in Italy under the Italian law preceding

the introduction of the EU SPC system.

See

Max Planck Institute

study on SPCs for the European Commission.

5.2.4. Cutting down the duration of the SPC

Cutting down SPC maximum duration (for instance, to the 2 years provided for in

CETA) would reduce the EU SPC protection asymmetry with respect to most third

countries.

However, this option has several major drawbacks:



It would significantly affect the current period of exclusivity (of up to 5.5 years in

total) enjoyed by SPC holders with respect to placing their products on the EU

market (it should be stressed that none of the retained options of this impact

assessment affect this core exclusivity of SPC holders). Such a drastic option

would go directly against the fundamental objective of SPCs, which is to

compensate for the loss of effective patent protection due to development and

authorisation procedures.



It would not solve the issue of timely

day-1

entry onto the EU market, unless the

EU SPC protection were completed removed in the EU, i.e. to align the EU with

‘non-SPC’ third countries with manufacturing capacity, such as India.

Such an approach would roll back and overturn more than 25 years of EU intellectual

property policy. It received almost no support from stakeholders in the public

consultation (only 1% of the respondents to the public consultation supported this option,

and in a different context to the problem definition articulated in this impact assessment).

5.3. Description of the policy options

Aside from the status quo (option 0), a number of policy options are considered below to

ensure that SPC protection in Member States does not prevent EU-based manufacturers

of generics and biosimilars from competing on an equal IPR footing with manufacturers

based in third countries. Apart from the status quo, two broad approaches can be

envisaged:

(1) Soft law approaches based on voluntary industry-led initiatives to allow EU-based

manufacturers of generics and biosimilars, during the SPC term of the reference

medicine, to manufacture for export and/or stockpile purposes (Option 1).

(2) Amending the EU SPC legislation so as to allow EU-based manufacturers of

generics and biosimilars, during the SPC term of the reference medicine, to

manufacture for export and/or stockpile purposes (Options 2 to 4).

The table below displays these two approaches that are considered (in addition to the

status quo option) to tackle each of the two problems:

Approaches related to the 1

problem

(Objective 1: export during the EU SPC term)

Status quo

Soft-law approach allowing advance

manufacturing for export purposes

Export waiver legislation (possibly with anti-

diversion measures such as specific labelling)

Approaches related to the 2

problem

(Objective 2:

day-1

entry in the EU)

Status quo

Soft-law approach allowing advance

manufacturing for stockpiling purposes

Waiver legislation (possibly with anti-diversion

measures), which could be an export waiver (to

some extent) or a stockpiling waiver

In total, nine (3 x 3) possible combinations of approaches are possible to tackle the two

problems. Six of these combinations would entail different types of approaches to tackle

each of the two problems (e.g. the EU SPC regime could be amended so as to allow

export during the SPC term, while a soft-law approach would be promoted in order to

allow stockpiling so as to facilitate

day-1

entry) leading to complex implementation,

requiring users to become familiar and develop different operational strategies to achieve

the two objectives. Among those six combinations, those combining the status quo with

another approach might not tackle one of the problems.

For these reasons, the options analysis below does not address specifically all nine

possible combinations, while it nevertheless distinguishes between a waiver for export-

only purposes and a waiver for

day-1

entry purposes (whose combination constitutes a

further option).

On this basis, the following options can specifically considered regarding the two

specific objectives:

Objective 1: export

during the EU SPC term

Option 0

Option 1

Option 2

Option 3

Option 4

Objective 2:

day-1

entry

in the EU

Status quo

Soft-law approach allowing advance manufacturing for both

export & stockpiling purposes

Export waiver legislation

(No action or soft law

approach)

(No action or soft

law approach)

Stockpiling waiver legislation

Legislation on both export and stockpiling waivers

5.3.1. Option 0: status quo

Not taking any policy action has already been described (cf. the baseline described

above).

The EU would continue to negotiate FTAs with an IPR chapter that includes SPC

provisions, but as explained above, this trade approach is not effective to tackle the

problems identified (FTA negotiations take years and a number of trade partners

successfully resist adopting EU-like SPC protection).

In this baseline scenario, a few Member States have already considered, or introduced,

soft-law measures at national level (e.g. the LEEM-CEPS framework agreement in

France

–

cf. below) aiming to allow advance manufacturing of generics during the

patent/SPC term of the reference medicine for timely

day-1

entry. As mentioned below,

such a national non-regulatory approach, while it may be satisfactory in individual cases,

is not desirable from the point of view of the single market, especially regarding

uniformity, fair treatment and transparency. These national approaches have not led to

successful results so far.

An export waiver might, to a certain extent, also improve EU

day-1

entry (2

problem/objective) if the

manufacturing capacity already established for export can be quickly scaled up on

day-1

to meet demand in

the EU.

5.3.2. Option 1: voluntary industry-led

agreements/‘soft-law’ approaches

Without requiring any legislative changes, the Commission in collaboration with

Member States could try to facilitate further voluntary agreements between

generics/biosimilars manufacturers and originators consisting of allowing advance

manufacturing of generics during the SPC term of the reference medicine. Such

voluntary agreements could cover manufacturing export purposes to unprotected third

countries and (this option 1)/or for stockpiling purposes for timely

day-1

entry onto the

EU market.

5.3.3. Option 2: introducing a manufacturing waiver for export purposes in

Regulation 469/2009

This option envisages an amendment to Regulation 469/2009 to create an exemption to

the SPC right

that prevents manufacturing of SPC-protected products by non-authorised

third parties. This waiver for export purposes would allow developers of generic and

biosimilar products to manufacture these products in a Member State during the term of

the SPC protection, with a view only to exporting them to third countries with shorter or

no SPC protection.

This waiver (for export-only) would also exempt a reasonable temporary storage that

would happen between production and effective export of batches. Such temporary

storage/stockpiling could not be used for

day-1

entry onto the EU market (i.e. the entire

production under the waiver of this option 2 being exclusively for export markets).

However, manufacturers producing in the EU under this (export-only) waiver could be

better prepared for timely entry into the EU market by scaling up their established

production on

day-1.

Therefore, indirectly this option 2 also tackles to some extent the

objective 2 (timely

day-1

entry). Its effectiveness in this latter regard would depend on

the capability of firms to rapidly scale up production to meet demand.

5.3.4. Option 2-bis: implementing Option 2 with anti-diversion measures

Anti-diversion measures could consist of any of the following: a special labelling

requirement, a notification requirement

, a right to conduct inspections by the SPC

holder, or the introduction of a reversal of the burden of proof in case of litigation. This

could reduce the risk that that some of the products manufactured in a Member State

under the waiver could end up on the market of that or another (SPC-protected) Member

State. Section 6.4. further discusses several anti-diversion measures and their impact.

By an amendment to Article 5 (limitation to the effects conferred by the SPC) or Article 4 (exception to

the scope of protection of the SPC).

From

Max Planck Institute’s

draft final report: A notification-based

solution was developed in CJEU

case law concerning repackaging of branded goods in the context of parallel imports. When the original

package (in which branded goods were first released on the EU market) is replaced by a different one on

which the protected mark is affixed or otherwise remains visible, the giving of prior notice to the trade

mark holder is one of the conditions that must be fulfilled in order for such measures to be admissible

under Art. 15 of Directive (EU) 2436/2015 on Trade Marks. If no such notice is given to the proprietor, the

parallel importer infringes the trade mark right ‘on the occasion of any subsequent importation of that

product, as long as he has not given the proprietor such notice’.

The design of specific anti-diversion measures would need both to take into

consideration the level of additional burden for SMEs (See Annex 16 on SME Test) and

to address confidentiality concerns.

5.3.5. Option 3: introducing a manufacturing waiver for stockpiling purposes in

Regulation 469/2009

Similar to option 2, under this option, Regulation 469/2009 would be amended to create

an exemption to the SPC right that prevents manufacturing of SPC-protected medicines

by non-authorised third parties. This waiver for stockpiling purposes would allow

developers of generic and biosimilar products to manufacture and stockpile these

products in the EU during the term of SPC protection, with a view to being fully ready

for timely

day-1

entry in Member States.

5.3.6. Option 3-bis: similarly to option 2-bis above, option 3 could be

implemented with anti-diversion measures

5.3.7. Option 4: introducing a manufacturing waiver for export and stockpiling

purposes under Regulation 469/2009

The SPC waiver proposed under this option would combine the features of the waivers of

options 2 and 3. It would tackle both identified problems. Thus, this SPC manufacturing

waiver for export and stockpiling would allow developers of generic and biosimilar

products to manufacture these products in a Member State during the term of the SPC

protection with a view not only to exporting them to third countries with shorter or no

SPC protection (as in option 2), but also to storing them to be able to enter the EU market

as and from

day-1

(as in option 3).

5.3.8. Option 4-bis: similar to options 2-bis and 3-bis, option 4 could be

implemented with anti-diversion measures

5.4. Timing scenarios for applicability of options 2 to 4bis

In addition to the key options presented above which relate to the substance (i.e. the

actual effects) of a waiver, and irrespective of which of them is preferred, a number of

choices can be made regarding the ‘time-bound applicability’ of the waiver. It should be

recalled that each SPC goes through four successive stages: (1)

not yet applied

for; (2)

applied for;

(3)

granted

(but not yet in effect, since the basic patent is still in force), and

(4)

in effect

(i.e. after the basic patent has expired).

In this context, a waiver could be made applicable as follows (from the broadest to the

narrowest capture in terms of SPCs covered):

scenario 1: to all SPCs, even those which

are already in effect

when the waiver is

introduced;

scenario 2: only to granted SPCs which

will enter into effect

only after the waiver

is introduced;

scenario 3: only to SPCs which

will be granted

after the waiver is introduced (i.e.

only to SPC applications);

scenario 4: only to SPCs which

will be applied for

after the waiver is introduced

(i.e. only to future SPC applications).

The respective impact of these scenarios

–

which anyway will be of a transient nature

only

–

is analysed in section 6.8 below.

Annex 10 provides further information about the expected numbers of SPCs that would

be affected by each of these scenarios.

6. W

HAT ARE THE IMPACTS OF THE POLICY OPTIONS

Further to the analysis below on the impact of the identified options, the tables in section

7 below provide a detailed description of the impact of the options described above. (See

also Annex 16 on SME Test.)

6.1. Impact of option 0

The evolution of the problems related to the

baseline scenario

(no policy action) is

analysed in section 2.3 above: delocalisation of manufacturing of generics and

biosimilars and related consequences such as loss of employment in the EU, loss of

pharmaceutical-related know-how, and relocation of R&D activities following

delocalisation of manufacturing. A quantification of lost opportunities can be found in

section 6.3 below.

Whilst option 0 is likely to seriously affect the competitiveness of the EU pharmaceutical

industry (in particular but not limited to the generics and biosimilar sectors), it will also

entail negative consequences for the (health) public purse and for patients, in terms of

security and quality of supply and access to medicines.

6.2. Impact of option 1: voluntary industry-led agreements

The impact of voluntary, industry-led initiatives, even if stimulated at EU level, is likely

to be limited. Indeed, being voluntary, such agreements may be refused by the SPC

holder of the reference medicine, may only be adhered to by a few manufacturers of

generics/biosimilars, or be subject to dissuasive conditions (e.g. high financial

compensation requested by the SPC-holder).

Experience shows that comparable initiatives launched in some Member States have not

been very effective. The LEEM-CEPS framework agreement, introduced in 2009 in

France

, is an example at national level of this soft-law approach. It is focused on

speeding up

day-1

entry of locally manufactured generics and biosimilars, in exchange

for compensation to the SPC holder. The LEEM-CEPS initiative has provided results for

only four medicines since 2009.

While this option might be helpful in individual cases, it may not be optimal from the

perspective of the single market as a whole, as regards uniformity, fair treatment or

transparency.

If however it were pursued, the Commission could accompany such an approach with

guidelines clarifying best practice, with the view to reducing the impact of the above-

mentioned potential drawbacks. It should be noted that neither the public consultation nor

See Art. 35.a.iii of the ‘LEEM-CEPS’ framework agreement

sante.gouv.fr/IMG/pdf/accord_cadre_version_definitive_20151231.pdf

–

http://solidarites-

the various studies feeding into this impact assessment favoured a voluntary approach to

tackle the first identified problem.

6.3. Impact of option 2: SPC manufacturing waiver for export-only purpose

6.3.1. Findings of studies

The impact of this option has been analysed and discussed by an independent study

contracted by the Commission (CRA study) and other studies sponsored by the

pharmaceutical industry (2 by generics companies and 4 by the originators industry).

Annex 12 provides a description and estimations of each of the studies sponsored by

industry.

Whilst there are divergences in opinion and in study results as regards the magnitude of

the impact of the introduction of an export waiver in the EU, all studies confirm that the

net impacts of such a waiver on the EU’s pharmaceutical

trade balance (net sales) and on

job creation in the EU would be positive.

The CRA and OHE (for EFPIA) studies estimate the additional exports for EU-based

manufacturers of generics and biosimilars, the potential negative impact on the exports of

EU SPC-holders in unprotected markets and the impact on jobs in the EU. The CRA

study, based on a sample of 117 non-biologics molecules and 17 biologics molecules

(representing about 32% of all molecules expiring in the EU over the considered period,

per each of the two categories of molecules), for which the SPC term expires later in the

EU compared to 8 third countries

, estimates that an SPC manufacturing for export-only

purposes could result in additional export sales by EU-based production of those generics

of EUR 7.6bn and for EU-based production of those biosimilars of between EUR 463m

and EUR 2.97bn over 10 years

CRA estimates, for that sample, a potential negative impact of this waiver on EU SPC

holders’ sales of between EUR 139m to EUR 278m for

unprotected non-biologics market

and between EUR 868m and EUR 1.7bn for unprotected biologics markets over a 10 year

period.

Therefore, the net additional trade balance for the EU pharmaceutical industry

represented by the sample of CRA would be between EUR 6bn to EUR 10bn over 10

years.

The OHE study reviews some of the assumptions undertaken in the CRA study and

recalculates its outcomes, estimating additional sales for EU-based manufacturers

ranging between EUR 1.2bn and EUR 3.9bn for the sample over 10 years. OHE

estimates potential negative loses of exports for EU SPC holders ranging between EUR

298m and EUR 573m (the EU pharmaceutical industry exported EUR 220bn in 2016

according to the EFPIA datacentre). Therefore, according to OHE, the additional net

trade balance for the EU pharmaceutical industry represented by the CRA sample of

molecules over a decade could be between EUR 696m and EUR 3.6bn.

In terms of job creation, CRA estimates that the additional net exports could be translated

into an additional 20 000 to 25 000 direct jobs in the generics and biosimilars sector

Australia, Brazil, Canada, China, Japan, Russia, Turkey and the USA.

These results are only based on a sample of 32% of the molecules. The real impact of the waiver could

be of much higher magnitude when considering all the market.

(assuming constant productivity in the sector). OHE estimates that the reduction of

exports by the SPC-holders would negatively impact on originator jobs. OHE also

reduced the estimations of CRA of generic/biosimilar job-growth to between 2 837 to

9 430 new jobs (if SPC-holders lose 10% of their sales). However, the OHE calculations

fail to take account of the jobs that could be created/retained/transferred across divisions

by originators, who are currently investing massively in biosimilars (see annexes 5 and

7).

These numbers above should be considered as the lower range since, as mentioned

above, the effects here are estimated on a sample of 117 non-biological and 17 biological

molecules, representing around one-third of the relevant market.

The Pugatch study focuses exclusively on the potential impact of the waiver on

originators based in the EU-28 and Switzerland. It estimates that between 0.6% and

1.04% of the global sales of the originators sector could be

open to competition

(i.e. as

opposed to actual losses), if the EU introduces an SPC manufacturing waiver. The

Pugatch study does not take into account that EU exports by originators can also include

biosimilars manufactured by originators.

Pugatch estimates that those percentages could represent between USD 1.34bn and

USD 2.27bn of the global sales by European originators annually. However, Pugatch

does not estimate which part of those shares opened to competition could be retained by

European originators (or taken by their own exports of EU-manufactured biosimilars and

generics), and which part will be taken by non-EU originators, EU-generics/biosimilars

and non-EU generics/biosimilars.

In terms of jobs, Pugatch estimates that the share of the exports that could be open to

competition represents 4 600 to 7 750 employees in the originators sector. It does not

estimate how many of those jobs could ultimately be lost, or transferred to the

generics/biosimilars branches of other originators benefiting by the waiver. Therefore,

the labour figures of Pugatch cannot be compared with the ones of CRA and OHE.

6.3.2. Feedback from public consultation

According to the inputs provided to the public consultation,

generic and biosimilar

companies

(63 on-line submissions) support the introduction of an SPC manufacturing

waiver. 56 out of 63 submissions are of the opinion that SPCs disadvantage EU-based

generics/biosimilars manufacturers compared with those based in countries with no SPC

when exporting their products outside the Union (1 respondent denies this problem, and 2

do not know), and indicate that they would invest more in EU manufacturing and would

expect a high increase in their exports (6 submissions expect some competition with the

exports of EU SPC holders).

Originators’

submissions to the consultation reflect their broad opposition to the

introduction of an EU SPC waiver: 54 out of 71 originators do not consider that EU-

based generics/biosimilars manufacturers face the above problems.

More specifically, as regards the

views of originators,

they consider that:

It would send a negative policy signal to originator pharmaceutical companies and to

trade partners as regards the EU commitment to IP.

However, it should be recalled that the EU has rolled out SPC protection to third

countries via FTAs in favour of originators (according to EFPIA, EU exports to

Canada of pharmaceutical products worth EUR 4bn yearly will significantly

benefit from the new SPC protection introduced in Canada through CETA).

The waiver would erode some of SPC holders’ export sales (45 out of the 71

submissions of originators to the public consultation expressed this concern).

However, as analysed above, the magnitude of that erosion is limited

compensated by the economic gains expected by the waiver. In addition,

SPC-holders will in the medium term face increasing competition as more

more countries invest in development and manufacturing of generics

biosimilars (annex 7).

and

A waiver would conflict with the Union’s

international obligations, notably FTAs

concluded by the EU.

A waiver would complement the Union’s trade policy approach overall. A waiver

would also be consistent with existing international trade agreements, such as the

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

between members of the World Trade Organisation (WTO), as well as those free

trade agreements (FTAs) that the EU has concluded with third countries and

which foresee protection of the nature of supplementary protection, such as

CETA, which provides for a manufacturing waiver for export purposes.

The waiver would disincentive investments in R&D in the EU

and may therefore

result in some relocation of R&D outside the EU.

Despite the waiver, the global IPR protection and enforcement framework in the

EU would remain the strongest worldwide.

Given that an export waiver would have a very limited effect on sales of SPC

holders (no effect in protected markets) and does not affect to other major

pharmaceutical-specific EU incentives for innovation, there would not be a

meaningful negative knock-on effect on R&D incentives for originator products

as a result (as the economic gains expected from R&D would be broadly the

same).

The waiver would create a risk of illicit diversion of generics/biosimilars (made in

the EU under the waiver) onto the EU market during the term of SPCs; this risk

would be higher since the waiver would allow manufacturing in the EU during the

SPC term

(see also section 6.4.1).

A risk of foreign products being illicitly placed on the EU market is already

present today. It is kept at bay by the EU’s pharmaceutical legislation and its

legislation regarding the enforcement of intellectual property rights. In addition,

the waiver could be implemented with specific anti-diversion measures, which

could actually help reduce the risk of diversion onto the EU market (see section

6.4).

It should also be noted that there is no evidence of illicit diversion resulting from

the existence of the ‘Bolar exemption’ in the EU, which itself if a form of

manufacturing waiver for clinical trials purposes (and is available during the term

of both patents and SPCs).

The waiver would reduce protection, to recoup originator investments in R&D in the EU (57 out of the

71 submissions of originators expressed this concern).

The exports gained by EU generics/biosimilars manufacturers would compete

principally with SPC holders’ products made in the EU (i.e. due to the EU ‘goodwill

branded effect’), and only in a negligible way with products made in countries such

as China, Brazil or India, in view of the local barriers to imports.

Contracting manufacturing organisations working under EU or US good

manufacturing practice (GMP) are stablished globally. Biosimilars are taking up

quickly not only in developed countries but globally. Asian plants are also

manufacturing for originators, including for those originators’ biosimilars

divisions (see section 2.3 and annex 7). In relation to supposed local barriers in 3

countries, the EU trade policy aims to remove those barriers (industry information

provided to the Commission indicates that EU-based manufacturers have been

able to export to those markets upon expiry of the EU SPC

Regarding the feedback of SMEs in the sector of manufacturing of generics and

biosimilars, and SMEs devoted to innovative medicines (See Annex 16

–

SME Test for

further details):

Among the 63 respondents defining themselves as mostly manufacturers of

generics/biosimilars, 12 respondents identified themselves as an SME and 1 as a start-up.

The vast majority of

SMEs manufacturing generics and biosimilars

supports the

introduction of a waiver in the EU, and considers that the longer duration of SPCs in the

Union compared to non-EU countries makes manufacturing in the Union less interesting

for them.

Regarding

pharmaceutical innovative SME,

among the 71 respondents defining

themselves as mostly originators, 2 respondents identified themselves as an SME

involved in medicines biotechnology and one as a start-up in the field of biopesticides. In

addition, several European pharmaceutical associations such as EUCOPE, EBE, and

EuropaBio conveyed the views of their start-ups and SME members in their submissions

and accompanying letters sent to the Commission during the public consultation. A few

national innovative pharmaceutical associations focused on start-ups and SMEs-members

(Belgium and Germany) also provided their views.

These associations representing innovative SMEs have expressed concerns that the

introduction of a manufacturing waiver would dilute SPC protection and therefore dilute

the financial rewards they would receive for their inventions, as well as their possibility

to get and secure funding for their innovative R&D (in particular because any process of

legislative change might stir up uncertainty and dampen the willingness of financial

institutions to invest). They also highlight that EU-manufactured generics are likely to

compete for market shares in unprotected markets with the original brands and thus

decreasing the actual or projected market share of these SMEs products.

As indicted above, these concerns may however be overstated, as the economic impact

on originators of the introduction of a manufacturing waiver would be minimal (SPC

holders maintain full SPC-related market exclusivity in the Union). Despite the waiver,

the global IPR protection and enforcement framework in the EU would remain the

strongest worldwide.

The Italian association Aschimfarma has indicated that its members exported products to the value of

EUR 150m to Brazil, China, Russia and Mexico in 2016-17.

Three

associations representing patients and doctors

favoured an SPC manufacturing

waiver on the grounds that it would promote early competition in the market, and thus

more affordable medicines. Some replies from public authorities claim that there is an

increasing dependency on imports of medicines and APIs. Increased dependency on non-

EU sources has already led to stakeholder concerns with regard to maintaining security

and quality of supply in the Union (as discussed in section 2.3).

Shifting part of the production established under this export waiver on EU

day-1

into the

EU (in cases where it is possible to quickly scale up the production to meet the demand),

could improve the timely entry of generics and biosimilars into the EU market.

It should be recalled however that EU-based manufacturers of generics and biosimilars

could also achieve additional sales from exports to Member States where SPC protection

has not been obtained. However, such a situation could in practice be easily prevented by

SPC holders by extending SPC protection to all Member States. At some point in the

future, the possible introduction of an EU unitary SPC title would also be relevant in this

context.

Many stakeholders consider that an amendment of the SPC Regulation to introduce an

export-only waiver would not imply any implementation costs for the EU budget,

Member State authorities or manufacturers of generics and biosimilars.

6.4. Impact of option 2-bis: SPC manufacturing waiver for export purpose

with anti-diversion measures

6.4.1. The risk of diversion

One of the reasons raised by SPC holders to oppose the introduction of an SPC

manufacturing waiver is the potential risk of illicit diversion onto the EU market, or onto

foreign markets still protected, of generics and biosimilars manufactured in the EU under

the waiver (58 of 71 originator respondents to the public consultation expressed this

concern). Today, any generic or biosimilar product found on the territory of a Member

State where an SPC is in effect is considered, by default, to infringe the SPC. With a

waiver, this would not necessarily be the case anymore, which these stakeholders

consider might make the identification of infringing products more difficult.

Other respondents to the public consultation (coming notably

generics/biosimilars industry) consider this risk to be low, given that:

from

the



The supply of medicines is highly regulated by the EU acquis on falsified

medicines (Directive 2011/62/EU), which includes:

Obligatory safety features

–

a unique identifier and an anti-tampering

device - on the outer packaging of medicines;

A common, EU-wide logo to identify legal online pharmacies;

Tough rules on the import of active pharmaceutical ingredients;

Strong record-keeping requirements for wholesale distributors.



The EU Bolar patent exception also created a type of manufacturing waiver in

2004 for regulatory approval purposes for generics and biosimilars (not for export

or stockpiling purposes), and no particular illicit diversion of products has been

reported in this context.



Already today, generics and biosimilars could potentially try to enter ‘at

risk’

(i.e.

in breach of existing IP protection in the EU) the EU market via imports from

unprotected third countries.

6.4.2. Possible anti-diversion measures

While opinions regarding the risks of diversion differ, anti-diversion measures could be

envisaged in order to minimise any additional risk of diversion and provide additional

transparency. This would work to the benefit of originator companies, by reducing the

risk of exposure to IP infringements compared to the situation today.

Over 70% of SPC-holding

companies who responded to the Max Planck Institute’s

survey favoured four different types of anti-diversion measures in the event that a

manufacturing waiver were to be introduced in the EU:

(a) Compulsory special labelling for the products produced under the waiver

This would require generics/biosimilars manufacturers to affix clear indications

or labelling on the product packaging manufactured under a waiver, for export

purposes (and/or stockpiling purposes under policy options 3 and 4)

That special labelling should not conflict with existing labelling requirements for

medicines in export markets. For example, in the case of medicines for the EU

market, Article 54 of Directive 2001/83/EC sets out the labelling requirements for

medicines.

This labelling option was also favoured by SPC-holders and generic/biosimilars

manufacturers (over 70% for both categories), should a waiver be introduced.

However, while such labelling can be expected to be effective in respect of

products to be exported under an export waiver (option 2), it appears to be less

necessary in respect of products to be stockpiled for EU

day-1

entry (options 3

and 4 below) given the already strict traceability requirements imposed by the

Directive 2011/62/EU on falsified medicines.

Regarding the costs associated with special labelling, the sector is already subject

to traceability measures in the EU under that Directive. As a proxy for estimation

of the cost of labelling, the evaluation of Regulation 953/2003 to avoid trade

diversion into the EU of certain key medicines

found that a pharmaceutical

company incurred costs of circa EUR 200 000 between 2003-15 for adding a logo

on its packs. However, that cost included significant fees derived from the

obligation of getting regulatory authorities to amend/extend marketing

authorisations for the medicines due to a change of packaging (which might not

be necessary to implement this option).

(b) Ex-ante information

This would require generics/biosimilars manufacturers to notify SPC holders, or a

public body (e.g. by Member State bodies), of their intention to rely on the waiver

https://ec.europa.eu/transparency/regdoc/rep/10102/2016/EN/10102-2016-125-EN-F1-1.PDF

–

possibly with a specification of the quantities and destinations

–

before starting

manufacturing

This option would create a slight additional administrative burden for

generics/biosimilars manufacturers, and might create confidentiality issues if

overly detailed information was required from such manufacturers.

A notification

–

combined with the timely publication of the related information

–

would be beneficial for SPC holders, as it would increase transparency and legal

certainty, and facilitate identification by them of possible instances of illicit

diversion, as they would have information regarding a manufacturer’s intention to

use a waiver in respect of a product. An advantage of such notification

requirements for generics/biosimilars manufacturers is that the public body to

which notifications were sent could publish the notifications, or alternatively give

them, under request, to a court (or an equivalent body) in the event of litigation,

so as to demonstrate the manufacturer’s

good faith.

In addition, a further safeguard would be the legal obligation on the manufacturer,

pursuant to existing IPR enforcement legislation, to ensure that products are not

released on the domestic market prior to expiry of the SPC.

This would require generics/biosimilars manufacturers to inform SPC holders, or

a public body, that they have manufactured products under the waiver, for export

purposes (and/or stockpiling purposes for options 3 and 4)

–

possibly with a

specification of the quantities and destinations. SPC holders could effectively use

the information to prepare customs ‘applications

for action’

aiming to prevent re-

imports.

The assessment is similar to preceding point b, with slightly increased (ex-post)

transparency for originators and an increased administrative burden for

generics/biosimilars manufacturers.

(d) Shifting the burden of proof for infringement from SPC holders to generic

manufacturers

This would require generics/biosimilars manufacturers, when they are found to

have manufactured, in a territory where an SPC is in effect, a product covered by

an SPC, to prove that the product is intended for export, failing which the product

would not enjoy the waiver.

Any legislation introducing an SPC manufacturing waiver, if accompanied with anti-

diversion and transparency measures, would take due account of the cost of such

measures (e.g. operative cost, administrative burden), which could potentially have a

dissuasive effect regarding the actual use of the waiver. The cost of anti-diversion

measures would be negligible for major manufacturers, but it could have a more

significant impact on SMEs.

The draft final report of

Max Planck Institute

study states that the SPC holder would, in that basis, be in

a better position to monitor the market for possibly infringing products. A corresponding solution was

developed in CJEU case law concerning repackaging of branded goods in the context of parallel imports

(C- 102/77 (para. 14); C-427/93 (para. 78); C-348/04 (para. 64)).

6.4.3.

Retained anti-diversion measure for option 2-bis

In view of the above analysis, the preferred anti-diversion measure for this option 2-bis

(an SPC manufacturing waiver for export-only purposes with anti-diversion measures)

would be a legal obligation to label products produced under the waiver, and a

requirement for any manufacturer of generics or biosimilars intending to make use of the

waiver to notify this intention to a Member State public authority, which would publish

that information.

This labelling would allow effective and easy identification of generics/biosimilars to be

exported under the waiver, and to check whether they are genuinely in the process of

being exported. This labelling should be removable once the products have been exported

outside the EU, in order not to conflict with any labelling requirement in the countries of

destination, nor interfere with possible repackaging.

The notification requirement would improve transparency for SPC holders. A

manufacturer to public authority notification would reduce the risk of collusion between

the SPC-holder and potential manufacturers vis-à-vis the option of a manufacturer-to-

SPC-holder notification.

This approach appears to be cost-effective and proportionate, and is favoured by SPC

holders as well as manufacturers of generics/biosimilars.

An amendment of the SPC Regulation to introduce an export-only waiver with anti-

diversion measures would not imply any implementation costs for the EU budget and

very limited costs for Member State authorities, in relation to receiving the notifications

of the intention of firms to use the waiver, publishing the information, and providing it,

under request, to a court in the event of litigation. As discussed above, the measures

should take into account the potential cost of implementation on manufacturers of

generics and biosimilars, especially for SMEs.

6.5. Impact of Option 3: SPC manufacturing waiver for stockpiling purposes

The impact of this option has been analysed and addressed by the studies contracted by

the Commission. It should be noted that stakeholder studies have focused mostly on an

export-only waiver.

Generics and biosimilars

manufacturers consider that a stockpiling waiver would

greatly contribute to level the playing field between the manufacture of generics and

biosimilars in the EU versus manufacturers based in third countries with regard to timely

day-1

entry. According to the inputs provided to the public consultation, 53 out of 63

respondents representing generics and biosimilars companies (3 respondents deny this

problem, and 3 do not know) consider that SPCs disadvantage EU-based generics and

biosimilars manufacturers compared with those based in countries with no SPC when

placing their products on the market in the EU immediately after the SPC expires. 41

submissions by generics and biosimilars companies indicate that they have obtained

marketing authorisation(s) in the EU before the expiry of the SPC of the reference

medicine (under the Bolar exemption). Many of them would be also interested in

complementing their ‘early’ marketing authorisations with the possibility of

manufacturing for stockpiling purposes (i.e. during the SPC term of the reference

medicine) in view of timely entry of their products onto the EU market, or some other

mechanism that would have an equivalent effect.

This stockpiling waiver would also support EU generics/biosimilars manufacturers that

are only interested in selling within the EU. In this regard, 3,372 pharmaceutical SMEs

manufacture in the EU, 1,765 of those SMEs export, and 1,362 of them export outside

the EU.

As discussed under option 2, originators’ submissions to the

consultation oppose the

introduction of any type of SPC waiver.

The CRA study estimates that an SPC waiver for stockpiling purposes would result in

savings on pharmaceutical expenditure from this earlier competition and therefore lead to

a speedier reduction of prices in Member States upon expiry of the SPC. CRA conducted

a simulation of the impact on pharmaceutical expenditures on the basis of observed

delays in generic and biosimilar entry during a sample period (Q1 2008 to Q3 2014) if

such delays were reduced by up to 6 months. Their analysis indicates that if generic entry

were brought forward by 6 months, savings on pharmaceutical expenditure would

amount to EUR 1.1bn over a three-year period for the sample examined, due to the faster

decline in prices, corresponding to a 4% saving. Regarding the biologics market, savings

would amount to EUR 15m over a three-year period for a limited sample of 17 molecules

examined, which corresponds to a 1% saving (it should be noted that as biosimilar

penetration increases over time, the beneficial effects on pharmaceutical expenditure

would also increase).

However, from the perspective of pharmaceutical expenditure, it could be argued that, in

the medium to long term, timely entry of generics and biosimilars in the EU would tend

to happen anyway from non-EU based producers under the baseline scenario (i.e. without

any waiver). Therefore, in the long term, and disregarding concerns related to the

strength and diversification of the supply chain, the stockpiling feature may not

necessarily have such a significant impact on savings to the health systems of those

Member States with a sizable national market.

Patients, as indicated above, would enjoy additional sources of supply of medicines with

this stockpiling waiver. As explained under option 2, a few patient and health practitioner

groups, as well as public health institutions, favoured the SPC manufacturing waiver on

the grounds that it would facilitate access to more affordable medicines.

As mentioned above, such a waiver could potentially reduce the risk of relocation, not

only of manufacturing, but also of R&D (in the biologics/biosimilars sector).

Since a stockpiling-only waiver would likely improve the timely entry of EU-

manufactured generics and biosimilars, it could tackle

–

similar to an export waiver

–

the

concerns expressed by some public authorities and citizens about over-reliance of

imported medicines analysed in option 2 above.

An amendment of the SPC Regulation to introduce this stockpiling-only waiver would

not imply any implementation costs for the EU budget and Member State authorities.

6.6. Impact of Option 3-bis: SPC manufacturing waiver stockpiling purposes

with anti-diversion measures

The labelling measures proposed for option 2-bis above (waiver for export-only purposes

with anti-diversion measures) might be unnecessary for this option 3-bis (stockpiling for

entry in the EU market) in view of the strict traceability requirements imposed by

Directive 2011/62/EU on falsified medicines.

Among the anti-diversion measures discussed in subsection 6.4.2, the preferred one for

this option 3-bis would be a legal obligation for the manufacturer to notify a public body

(e.g. a public authority of the Member State of establishment of the production facility)

of the launch of production for stockpiling purposes. That public body would publish the

content of the notification, or store it and provide it, under request, to a court in the event

of litigation. This would be a simple notification, not generating significant burden or

cost on the applicant or the public body.

An additional safeguard for a manufacturing waiver for stockpiling purposes could

consist of confining the effect of the waiver to the final months of the term of the SPC of

the reference medicine.

The introduction of a stockpiling-only waiver with the preferred anti-diversion measure

above would imply a negligible cost in additional administrative capacity in for the

public body charged with receiving, publishing and dispatching (by a court order) the

notification.

6.7. Impact of Options 4 and 4-bis: SPC manufacturing waiver for export

and stockpiling purposes (with anti-diversion measures)

An SPC manufacturing waiver for both export and stockpiling purposes would address

both identified problems (manufacturing for export purposes and for timely entry into EU

day-1

markets). The implications of these options 4 (and 4-bis) stem from the

combination of effects described for options 2, 2 bis, 3 and 3 bis above.

Options 2 to 4 would be especially beneficial for EU SMEs manufacturing generics or

developing biosimilars, because they do not necessarily have access to the necessary

funding or skills to outsource or delocalise production outside the EU.

Anti-diversion measures in options 2-bis, 3-bis and 4-bis should take account of

potentially dissuasive costs for SMEs (additional operational costs (e.g. labelling), the

need to contract specialised attorneys (e.g. for potentially complex notification

procedures, and court proceedings).

The preferred anti-diversion measure for this option 4-bis would be a combination of the

preferred measures for options 2-bis (external labelling and notification for production

for export purposes) and 3-bis (notification for production intended for stockpiling).

6.8. Impact of the options for the timing of the introduction of the

manufacturing waiver

Scenario 1

(namely immediate application to all SPCs, including those which are

already in effect

when the waiver is introduced): the manufacturing waiver could

arguably be viewed as a clarification of the initial objective of SPC protection (which, as

explained above, was never intended to prevent exports outside the EU nor

day-1

entry

onto the EU market after SPC expiry). This could justify its immediate entry into force,

as happened with the EU Bolar patent exemption in 2004. However, this approach is not

preferred, as it might negatively affect the acquired (property) rights and legitimate

expectations of SPC holders. In addition, it is not considered useful since, in respect of

SPCs already having taken effect, it would be late at that stage for generics/biosimilars

manufacturers to make investment decisions (especially for export purposes).

These objections are also, to a certain extent, valid for

scenario 2

(namely application

only to granted SPCs which will enter into effect after the waiver is introduced), and

therefore this scenario is not preferred either.

Scenario 3

(namely application only to SPCs which

will be granted

after the waiver is

introduced) would strike an appropriate trade-off, by making the waiver applicable to

specific SPCs within a reasonable timeframe without affecting SPCs already granted, or

granted and having taken effect. Under this scenario, while only a limited number of

SPCs would benefit from the waiver in the first years, the introduction of a waiver in EU

SPC legislation would already send a clear political signal, and affect investment

decisions by manufacturers of generics/biosimilars (and reduce pressure to relocate

outside the Union) well before the waiver starts to become actually applicable to a

significant number of

–

and eventually all

–

SPCs. This scenario would apply to pending

SPC applications, but a short transition period could provide an appropriate solution here.

Scenario 4

(namely application only to SPCs

which will be applied for

after the waiver is

introduced) would result in the waiver only becoming applicable to a substantial

percentage of all SPCs only after many years. This solution would not address the

problems at hand in the short to medium term, and is thus not preferred, considering the

urgency to act.

7. H

OW DO THE OPTIONS COMPARE

Table 7.1 provides information comparing the policy options in the light of the criteria of

effectiveness (how each option achieves the specific objectives) and efficiency (cost-

benefits analysis).

Table 7.2 compares the impacts of the policy options on stakeholders. (See also Annex

16 for the SME test.)

For the proportionality assessment and coherence of the preferred option (option 4-bis)

see section 8 below.

None of the options considered can be implemented by Member States individually in a

satisfactory matter. The problems identified are of an EU dimension. Member States

taking unilateral action would lead to a distortion of the single market for

pharmaceuticals, one of the core objectives of the exiting SPC Regulation.

Table 7.1: Comparison of policy options against effectiveness and efficiency criteria

(Note: ‘G/B’ = generics/biosimilars)

Effectiveness

Objective 1:Allow

G/B export during the

SPC term

Option 0

(0)

(≈)

Such agreements would not necessarily be

available for all G/B manufacturers, as each

agreement would require case-by-case

negotiation. Risk of delays in starting exports

(SPC holder can file appeals or delay

negotiations).

This uncertainty would likely prevent G/B

manufacturers

from

making

upfront

investment decisions (in the EU) based on the

hypothetical possibility that such agreements

might be made in some cases several years

later.

Objective 2:

Allow timely EU

market entry

from

day-1

Efficiency

Net effect (≈)

Benefits (≈):

No major changes expected in

investment in the EU. Delocalisation and losses of

jobs in the EU G/B sector will continue.

Cost (≈/-):

It might need the support/involvement of

national administrations (e.g. mediation, appeals to

be handled by courts). Originators might require the

payment of royalties by G/Bs

Option 1:

voluntary

industry-led

agreements

(++)

EU-based G/Bs

could export without

any prior authorisation

(no risk of delays as in

option 1 above)

(+)

For some

products, the EU

G/B manufacturing

capacity

established for

export could be

quickly switched

for

day-1

entry in

the EU.

Net effect (+)



CRA study (see revised by OHE): Increase of the

EU pharmaceutical trade balance by EUR 6 -10bn

over 10 years for a sample of molecules

representing 32% of the relevant market; > 20 000

additional jobs for that sample.

Benefits (+):

More exports, and

–

to a certain extent

–

improved EU

day-1

entry. More investment in the

EU (jobs in manufacturing, and in biosimilars

R&D). Implementation does not require public

funding.



CRA study (see revised by OHE): Increase of EU

exports of generics/biosimilars by EUR 8-10.6bn

over 10 years for a sample of molecules of

molecules representing 32% of the relevant

market; > 20 000 additional jobs for that sample.



CRA study: in term of improving EU

day-1

entry,

it is estimated that bringing forward by 6 months

the entry of the generics/biosimilars sample

implies EUR 1.1bn savings to the pharmaceutical

health budget over 3 year.

Cost (≈):

Illicit generics/biosimilars diversion

(counterfeiting risk) would not significantly

increase. Erosion of jobs in innovators limited

compared with the new opportunities in

generics/biosimilar sector.



CRA study: decrease of EU SPC holders’ exports

of EUR 0.14 - 0.28bn over 10 years for a sample

or 117 non-biologics, and 0.8 - 1.7bn losses for 17

biologics;



OHE estimates EUR 0.3 to 0.6bn losses in the

non-biologics segment (Note: the EU

pharmaceutical industry exported EUR 220bn in

2016 with steady growth (EFPIA datacentre)).

Option 2:

SPC

manufacturing

waiver for export

purposes

(0)

(++)

Day-1

entry

onto

the

market would be

ensured

accelerated

Net effect (+)

CRA study estimates benefits in terms of savings for

EU public health budgets expenditure in

pharmaceuticals of up to 8% for the analysed sample

(Bringing forward by 6 months the entry of the

generics/biosimilars sample implies EUR 1.1bn

savings over 3 years).

Benefits (+):

More investment in the EU (jobs in

manufacturing, and in biosimilars R&D). Additional

savings for health authorities due to more efficient

day-1

entry. Implementation does not require

public funding.

CRA study estimates benefits in terms of savings for

EU public health budgets expenditure in

pharmaceuticals of up to 8%.

Cost (≈):

Risk of illicit diversion onto SPC-

protected markets could increase. Erosion of jobs in

innovators limited compared with the new

opportunities in the G/B sector.

Option 3:

SPC

manufacturing

waiver for

stockpiling

purposes

(++) A waiver for export and stockpiling

purposes would fully solve both problems.

Net effect (++)



As in option 2 and option 3

Benefits (++):

More investment in the EU (jobs, as

above). Additional savings for health authorities due

to more efficient EU

day-1

entry. Implementation

does not require public funding.



As in option 2 + option 3

Cost (≈):

Risk of illicit diversion onto the EU could

increase. Erosion of jobs in innovators limited

compared with opportunities in the G/B sector.



As in option 2 above

Option 4:

SPC

manufacturing

waiver for export

and stockpiling

purposes

Options

2 bis, 3

bis

and

4 bis:

SPC

manufacturing

waiver (for

export and/or

stockpiling

purposes) with

anti-diversion

measures

Same efficiency as corresponding option 2

((++)/(+)), option 3 ((0)/(++)) and option 4

((++)/(++)), provided that the anti-diversion

measures are not overly costly or

burdensome.

Net effect (++)



As in option 2, 3 or 4.

Benefits (++):

As in options 2 to 4 if the anti-

diversion measures are not too costly or burdensome

(especially for SMEs).



As in option 2, 3 or 4.

Cost (≈):

The risk of illicit diversion would be

virtually absent (i.e. unchanged). Negligible increase

of administrative costs for the parties (including

public administrations) related to the anti-diversion

measures.



As in option 2, with negligible additional costs for

generics/biosimilars manufacturers (and public

authorities) to implement anti-diversion measures.

Table 7.2: Comparison of the impacts of policy options on stakeholders

Notes: (1) ‘G/Bs’ = generics/biosimilars manufacturers; (2) Originators also develop biosimilars.

Stakeholders



Policy options



Option 0

Baseline

Option 1:

voluntary

industry-led

agreements

EU-based G/BMs

(attention to SMEs)

(0/≈)

They will

continue to have

strong incentives to

delocalise/outsource

production (if not

R&D, especially for

biosimilars) to third

countries that resist the

introduction of EU-

type SPC.

Possible payments to

originators (royalties)

(++)

A legal barrier to

investment in

generics/biosimilars

production in the EU

would be lifted (also

positively affecting

biosimilars R&D).

Contrary to option 1

above, they would not

face uncertainty by

linking upfront

investments on

hypothetical future

voluntary agreements.

Estimated benefits

(i.e. additional

exports) for a sample

(32% of the relevant

market): EUR 7.6bn in

generics, EUR 1.2 to

2.1bn in biosimilars

(CRA study); or EUR

2-3bn (OHE-EFPIA).

Option 3:

Introduce an SPC

manufacturing

wavier for

stockpiling

purposes only

(++)

As in option 2

above.

The stockpiling option

would be an additional

incentive for

generics/biosimilars

investment in the EU.

SPC holders

(0/≈)

Minor changes

Slightly increased

competition from EU G/Bs

in some cases, but only

when an agreement is

agreed, and possibly

compensated by royalties.

They could get possible

royalties.

EU patients and

Member States

health budget

(0/≈)

Minor changes

See positive effects as

in the options 2 to 4

below, but only

limited to a few cases

and in a few Member

States (when and

where agreements are

reached).

EU citizens as

employees

(0/≈)

No significant

improvements in job

opportunities in the

EU G/Bs industry

EU regulatory

experts/agencies

(0)

Not much effect

in limiting the risk

of losing the

predominant role

and influence of the

EU rules on the

global regulatory

environment,

especially for

biosimilars

Option 2:

Introduce an SPC

manufacturing

wavier for export

purposes only

(≈/0)

Their SPC-protected

sales would not be

affected.

They are massively

entering in the business of

biosimilars and they can

also benefit from

production in the EU.

With the export waiver, in

the short term they would

face earlier additional

competition from EU-

based G/Bs in off-patent

export markets. With the

stockpiling waiver, in the

short term they would face

earlier additional

competition from EU-

based G/Bs in off-SPC EU

market. However, in the

medium/long term they

will anyway face

competition from non-EU-

based biosimilars.

By limiting the risk of

delocalisation of generics,

originators will find more

opportunities of

manufacturing production

in the EU.

For an export waiver,

estimated lost sales by

SPC holders

(for a sample

of 32% of the relevant

market)



EUR 139 - 278m for

non-biologics and EUR

868m

–

1,7bn for biologics

(CRA study);



EUR 191 - 573m

(OHE-EFPIA) for non-

biologics.

If the waiver is

accompanied by anti-

(+)

They would enjoy

some improvement in

better timely access to

generics/biosimilars of

high EU-made quality,

and therefore a more

diversified source of

supply.

(+)

More investments

and jobs opportunities

in the

generics/biosimilars

sector in the EU.

This would overcome

any potential losses,

in the short term, in

the innovators sector

(in the medium/long

term innovators will

face competition from

biosimilars exported

from third countries).

Originators will also

create jobs for their

biosimilars activities

in the EU and can

benefit from this

option.

(++)

The stockpiling

feature would bring

additional time gains

for timely access in

the EU

day-1,

and a

more diversified

source of supply.

(≈)

It would limit

the risk of losing the

predominant role

and influence of the

EU rules on the

global regulatory

environment,

especially for

biosimilars.

The Pugatch study estimates that between 0.61% and 1.04% of global sales of originators would be

opened to competition, as opposed to sales actually lost.

Stakeholders



Policy options



EU-based G/BMs

(attention to SMEs)

SPC holders

diversion measures, this

would decrease the current

exposure of originators to

IP-infringements (and

therefore lead to clear

benefits also for this

industry).

EU patients and

Member States

health budget

EU citizens as

employees

EU regulatory

experts/agencies

Option 4:

Introduce an SPC

manufacturing

wavier for export

and stockpiling

purposes

Estimated benefits

(additional sales in the

EU market in addition

the additional export

sales estimated in

option 2):

Exceeding the above

figures which relate to

an export-only waiver.

The impacts of options 2 and 3 would be cumulative

Estimated savings

Estimated impact on

public health budgets

employment by EU-

expenditure on

based G/B firms:

pharmaceuticals of up

For the sample

to 8 % (CRA study).

considered CRA

estimate an increase

of 20 000

–

25 000

direct jobs.

OHE-EFPIA

estimates a net

increase of

pharmaceutical jobs

of 2,837 to 9,430

(assuming 10% loss

of sales for

originators).

8. P

REFERRED OPTION

8.1. Preferred option

The preferred option of this impact assessment is option 2-bis, namely amending

Regulation (EC) No 469/2009 to introduce an SPC manufacturing waiver for export

purposes, accompanied by anti-diversion measures. This option is considered to be the

most balanced and proportionate approach, which also takes account of the views and

concerns of both generic/biosimilar firms and originator firms, in a field that is

particularly sensitive.

This would fully address the first identified problem (loss of export markets) and would

address, to a certain extent, the second identified problem (lack of timely EU

day-1

entry).

The preferred anti-diversion measures would be:

compulsory labelling; and

compulsory notification to a public body of the intention to manufacture products

pursuant to the waiver.

With an SPC manufacturing waiver for export purposes, the accompanying anti-diversion

requirements would constitute an effective means to allow for easy identification of any

generics/biosimilars illicitly diverted onto the EU market during the SPC term (instead of

being exported). This would work to the clear advantage of the entire EU pharmaceutical

industry, including originators. I t would clearly be in the interest of the manufacturer to

label and notify its intention of relying on the waiver. It goes without saying however

that if the manufacturer were tempted to illicitly divert part of the production onto the EU

market during the SPC term, the products could then be deemed, by default, as IP-

infringing. Labelling and notification requirements constitute a guarantee for SPC

holders and were suggested by stakeholders during the consultation conducted by Max

Planck Institute for the Commission in the context of the contracted study on the legal

aspects of the EU SPC.

The preferred option 2-bis appears the most proportionate to achieve, in a satisfactory

manner, the objectives pursued by this initiative taking into consideration the interests

and concerns of all parties, for the following reasons:

(1) It is a realistic measure, and more effective than option 1 (i.e. industry-led

agreements) that can be unilaterally refused by SPC holders, or for which each

individual implementation can be subject to appeals or overly lengthy

negotiations;

(2) It is a simple and non-costly measure for stakeholders and Member State

authorities to implement;

(3) It could deliver potential early effects for investments and growth in the sector;

(4) Its effectiveness to achieve both objectives, and its efficiency, will be easy to

monitor (see next sub-section);

(5) The anti-diversion measures will also add transparency to the pharmaceutical

system in the EU;

(6) It does not have any impact on overall SPC protection within the EU (i.e. SPC

holders would continue to enjoy their market exclusivity in the EU until

day-1),

and any risk associated with illicit diversion onto the EU market is minimised

with anti-diversion measures;

(7) The administrative costs for the Commission to adopt the legislative proposal and

for future monitoring and evaluation purposes would not require any new

budgetary commitment.

Insofar as the objective of promoting the swift entry of EU-made generics and

biosimilars onto the EU market immediately after SPC expiry (i.e. on

day-1),

this

objective would be achieved, to a certain extent, for manufacturers having set up

manufacturing capacity for export purposes (recalling that 1 362 EU-based

pharmaceutical SMEs already export outside the Union, see Annex 16), as they might be

able, after SPC expiry, to use the same manufacturing capacity (or scale it up) with a

view to swiftly supplying the EU market.

Coherence of each option with other EU policies objectives

Regarding the coherence of each option with other EU policies objectives, it is

compatible with

health

policies (including taking due account of regulatory labelling

requirements). The preferred option would also be consistent with EU pharmaceutical

legislation. All obligations flowing from that body of law also apply to manufacturers

that would take advantage of the derogation introduced by the waiver. In particular, this

proposal would not affect the existing EU rules and safeguards laid down in Directive

2011/62/EU amending Directive 2001/83/EC on the Community code relating to

medicinal products for human use, with regard to the prevention of the entry into the

legal supply chain of falsified medicinal products, and as laid down in EU legislation on

civil and customs enforcement of intellectual property rights (namely Directive

2004/48/EC and Regulation (EU) No 608/2013). Furthermore, this initiative does not

provide for any derogation from, and is applied without prejudice to, the applicability of

all relevant Union pharmaceutical legislation on the manufacture of generics and

biosimilars, including Directive 2001/83/EC on the Community code relating to

medicinal products for human use, as amended, and Commission Delegated Regulation

(EU) No 2016/161 on the rules for the safety features, which lay down stringent

standards regarding the identification and monitoring of certain medicines placed on the

market in the Union in order to guarantee the reliability of the supply chain and to

safeguard public health.

An SPC manufacturing waiver would not contradict EU

trade

policy, because it is not a

protectionist measure for EU companies:



The aim is to

level the playing field

regarding the manufacturing of generics and

biosimilars in the EU (whether the manufacturer is an EU or non-EU company)

vis-à-vis third countries-based manufacturing. It is about improving the

competitiveness of the EU as a hub for the pharmaceutical industry.

The waiver co-exists with ongoing efforts from the EU to continue to export its

SPC model of protection to third countries via FTAs.



This proposal complements the Union’s trade policy approach overall and is consistent

with existing international trade agreements, such as the

Agreement on Trade-Related

Aspects of Intellectual Property Rights

(TRIPS) between members of the World Trade

Organisation (WTO), as well as those free trade agreements that the EU has concluded

with third countries and which foresee protection of the nature of the EU supplementary

protection certificate.

Table 8: Summary of the costs and benefit of this preferred option

Stakeholders

EU based

manufacturers of

generics and

biosimilars

-country based

manufacturers of

generics and

biosimilars

SPC-holders

Costs

(≈)

Benefits

(++)

Likelihood of the benefits

Very high. They can invest in the EU with full certainty

that their EU production can enter on

day-1

global and

EU markets

They will face additional competition from EU

manufacturing. However, the global demand for

medicines is high and they will continue to have a

strong demand

(≈)

In the short run (while the biosimilar capacity is

built in third countries) they can see additional

competition on off-patent/SPC markets due to the EU

generics/biosimilars exports. Their EU sales during the

EU SPC term would not be affected

SPC-holders also manufacture biosimilars and can

benefit from the waiver in some cases, and from a

stronger industrial base in the EU

Anti-diversion measures will offer additional protection

against IP infringements SPC-holders are currently

facing

They can benefit from a more robust supply of

medicines, and a more geographical diversification of

the supply

High for developers and manufacturers of biosimilars

and generics.

Negligible, especially in the medium and long term, for

jobs in the SPC-holders sector. SPC protection in the

EU is not affected, SPC holders will face competition

abroad either from EU-based or third-country based

(0)

(≈)

EU patients and health

budgets

EU employees

(0)

(+)

(0)

(+/++)

manufacturers, and SPC-holders can also create jobs for

their biosimilars manufacturing activities in the EU

expertise

EU R&D

regulatory

(≈)

(0)

(≈/+)

(+)

Limit the risk of losing the predominant role of the EU

rules on global regulatory environment

Positive impact on biosimilars R&D, which requires

investments of several hundred million euro per

biosimilar

8.2. REFIT (simplification and improved efficiency)

REFIT considerations are not warranted, as this initiative is not a revision of Regulation

469/2009, but a targeted amendment to tackle the problems identified.

A broader evaluation of Regulation 469/2009 may be considered in the context of the on-

going analysis of pharmaceutical incentives requested by the Council in June 2016.

The preferred option is strictly limited to the introduction of an SPC manufacturing

waiver, without affecting the other features of the EU SPC regime such as the subject

matter of protection and duration, especially since certain CJEU cases related to SPCs are

still pending.

9. H

OW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED

After the entry into force of the preferred option, the Commission will monitor its

implementation with a view to assessing its effectiveness.

Given that the manufacturing exemption will apply to the SPC entering into effect, the

first evaluation should take place about five years from the entry into force of the

exemption. In the first two to three years after the entry into force, the G/B companies

can be expected to adjust their investment decisions taking into account the exemption.

During this time, no changes in production or exporting activities are expected.

The initiative could be considered as successful if it influenced companies’

investment/location decision to produce molecules covered by the manufacturing

exemption in the EU without harming the R&D activities of companies developing new

medicines. This could be measured by means of a survey among pharmaceutical

companies active in the EU.

The table below shows the list of monitoring indicators. As a starting point, the period

five years prior to the entry into force of the exemption should be considered. These

indicators could be calculated for the EU and compared to other developed economies

(e.g. the USA, Canada) taking into account the potential impact of reforms of

pharmaceutical patent laws or pharmaceutical entry regulations.

Operational objectives

More manufacturing of

generics and biosimilars in

the EU

Monitoring indicators

- Trends in the number of EU G/B manufacturing

sites

- Profile of EU G/B manufacturing sites -

information on employment, turnover, R&D as

reported in company level databases

More exports of EU-

manufactured generics and

biosimilars

- Trends in annual exports of EU-based G/B

- Analysis of entry of EU branded/manufactured

products in export markets for molecules covered by

manufacturing exemption in the EU

- Analysis of sales dynamics and competition

(number and origin of entrants) in export markets for

the molecules covered by manufacturing exemption

Timely

day-1

entry in the

EU for EU-manufactured

generics and biosimilars

- Trends in the number of marketing authorisations of

generic and biosimilar products granted to the

companies with manufacturing sites in the EU and

timing of entry in Member States. This indicator

should take into account the size of the company and

in case of SME it dependence on the large company

- Location of manufacturing for

day-1

entry: trends

in manufacturing sites for the molecules covered by

manufacturing exemption in the EU and outside

The available data sources include, but are not limited to: Eurostat, OECD, data provided

on EMA website, Eudra GMP, databases on pharmaceutical pricing (e.g. IMS Health) or

company level databases (e.g. Bureau van Dijk). These sources should allow constructing

all the above indicators without the need for any additional reporting by companies.

As regards the benchmark for the monitoring indicators, an increase or no (negative)

change to the levels prior to the entry into force could be considered as a success. A

counterfactual analysis is required to fully capture the impacts of the proposal.

NNEX

1: P

ROCEDURAL INFORMATION



Lead DG, Decide Planning/CWP references

DG for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW)



Organisation and timing

The deadline for adoption of a proposal by the Commission is May 2018.

Interservice meetings took place on 31.03.2017, 7.07.2017, 6.12.2017, 6.2.2018,

28.2.2018 and 27.4.2018.



Consultation of the RSB

An upstream meeting with the RSB took place on 12.1.2018.

This impact assessment was sent to the RSB on 12.2.2018.

A meeting with the RSB took place on 7.3.2018. On 9.3.2018 the RSB delivered a

positive opinion with some reservations. The table below clarifies how these reservations

have been reflected in the final version of this impact assessment.

RSB comments

Main considerations

DG GROW’s replies

The views of SPC holders are better reflected

(in particular in section 6.3.2), and an SME

(1) The report does not sufficiently reflect the

Test has been included as new Annex 16.

views and concerns of relevant stakeholder

Appropriate cross-references to, and content

groups, including SPC holders and SMEs.

from, new Annex 16 are included through the

text of the impact assessment.

The content of annex 2 (stakeholders views)

has been expended (including specifically

description of the SMEs participating in the

Commission consultation and their views).

(2) The report does not elaborate all relevant

options and their key dimensions, in

particular regarding the timing of the

waivers.

The description of the options and the analysis

of their impact have been expanded; in

particular the timing issues are now

commented in section sections 5.4 and 6.8) in

addition to Annex 10. The notification

requirements (safeguards) are better explained

in section 6.4.2.

Further considerations and adjustment

requirements

(1) The different parts of the report (problem

description, objectives, impacts) should more

systematically reflect the concerns of all The views of SPC holders, including

stakeholder groups, including the SPC holders. innovative SMEs, are better reflected (in

In this regard, it could be useful to revise the particular in section 6.3.2).

A new paragraph on general objectives has

been inserted into section 4.1.

objectives in order to better reflect the The content of annex 2 (stakeholders views)

importance of the continued protection of has been expended.

patent rights.

(2) The analysis should better reflect the

strengths and weaknesses of the key studies. In

addition, it should clarify the robustness of the

cost and benefit estimates.

Annex 12 provides a summary of the eight

studies evaluating the impact of the

manufacturing waiver. The main strengths and

weaknesses of each study are discussed in

detail, and a table recapping a comparison of

all studies has been added.

The timing considerations have been

summarised in the main text (see sections 5.4

and 6.8) in addition to Annex 10.

Section 6.4.2 on possible anti-diversion

measures has been strengthened.

Clearer explanations have been provided

(section 6.5) regarding the stockpiling,

including the possibility (and rationale) of

limiting the stockpiling waiver to the last

months of the term of the SPC. The use of soft

law has also been considered.

(3) The set of options should be more complete

and detailed. The main report should include

the options for the timing of the introduction of

the manufacturing waiver. This is currently

analysed in an annex. The report further needs

to consider differentiating the options on the

duration of the stockpiling waiver in

comparison with the duration of the export

waiver. It should also consider the

accompanying use of a soft-law approach for

some options.

(4) The report should better explain the International issues (including TRIPS and

potential impacts of the manufacturing (notably FTAs) have been addressed in a more detailed

of the stockpiling) waiver with regard to the way (cf. Sections 6.3.2 and 8.1).

EU’s trade policy and to

the compatibility with

WTO-TRIPS provisions.

(5) The impact assessment should include a

more comprehensive analysis of costs and

benefits of the proposed options for SMEs. It

should also better reflect SME views on the

different options and their potential impacts.

(6) The report should include a proportionate

evaluation of the specific effects of the SPC

legislation, covering both the origins of the

SPC legislation as well as the intended and

unintended consequences of it. It should also

explain the timing of the more comprehensive

evaluation of the Intellectual Property Rights

framework for medicinal products. In addition,

it should clarify the REFIT dimension of the

initiative,

i.e.

examine

potential

for

simplification and burden reduction.

Impacts on SMEs have been analysed in a

more detailed way in the main text as well as in

Annex 16, which provides a specific

‘SME

test’.

This initiative is not about

system in general. Such

ongoing, and is related to

pharmaceutical incentives

Council.

reviewing the SPC

a review is still

a wider review of

asked for by the



Evidence, sources and quality

DG GROW has conducted and contracted several studies related to SPCs in the context

of the

Single Market Strategy

(the first 3 studies were published together with the SPC

online public consultation):



A study contracted to Charles River Associates (CRA) on ‘Assessing

the

economic impacts of changing exemption provisions during patent and SPC

protection in Europe’

(CRA study

–

2016);



An in-house

DG GROW analysis of the SPC framework in the EU: ‘25

years of

SPC protection for medicinal products in Europe: Insights and challenges’

(Mejer study

–

2017);



A study on the economic aspects of the SPC: ‘Economic

Analysis of

Supplementary Protection Certificates in Europe’

(Kyle study

- 2017)

;



A study on the legal aspects of the SPC awarded to the

Max Planck Institute

(MPI);



A study analysing the combined effect of pharmaceutical incentives in Europe,

realised by Copenhagen Economics.

In addition, the following eight studies evaluating the impact of manufacturing waiver

were sponsored by generic/biosimilar stakeholder and SPC-holders:



Vicente, V., & Simões, S. (2014).

Manufacturing and export provisions: Impact

on the competitiveness of European pharmaceutical manufacturers and on the

creation of jobs in Europe.

Journal of Generic Medicines (BluePharma)



Roland Berger (2015),

Extension of the Bolar exemption regarding production

for export and launch preparation.

(Pro Generica)



Nomisma (2015),

The generic drugs system in Italy. Scenarios for sustainable

growth.

(Assogenerici)



Sussell, J. A., Tebeka, M. G., Jena, A. B., & Vanderpuye-Orgle, J. (2017),

Reconsidering the economic impact of the EU manufacturing and export

provisions.

Journal of Generic Medicines (AbbVie)



Logendra and Troein (2017),

Assessing the impact of proposals for a

Supplementary Protection Certificate (SPC) Manufacturing Exemption in the EU.

Quintiles IMS (EFPIA)



Pugatch Consillium (2017),

Unintended Consequences

(AbbVie, La Roche & US

Chamber of Commerce)



Office of Health Economics (2018),

Review of CRA’s Report

(EFPIA)

https://publications.europa.eu/en/publication-detail/-/publication/6e4ce9f8-aa41-11e7-837e-

01aa75ed71a1/language-en

https://ec.europa.eu/docsroom/documents/26001/attachments/1/translations/en/renditions

/native

https://ec.europa.eu/docsroom/documents/25621/attachments/1/translations/en/renditions

/native



European Economics (2018),

Impacts of Reducing Patent and Extended

Protections against Manufacturing for Stockpiling and Export

(EuropaBio).

Annex 12 critically discusses main strengths and weaknesses of the studies evaluating

impact of manufacturing waiver.

NNEX

2: S

TAKEHOLDERS

’

VIEWS

consultationJanuary

A total of 231 replies were provided to the on-line consultation: 43

replies from the general public, 71 from originators industry/associations, 63 from

generics and biosimilars industry/associations, 15 from health authorities/doctors/patients

groups

(mostly

from

national

organisations

dealing

with

health

insurance/reimbursement/health technology assessment, from a doctors’ organisation,

and 2 from patients’ associations), 34 from patent offices/practitioners, and 5 from

industry/trade authorities.

The statistics corresponding to respondents identified as SMEs or start-ups are the

following:

Among the 63 respondents defining themselves as mostly manufacturers of

generics/biosimilars, 12 respondents identified themselves as an SME and one as

a start-up;

Among the 71 respondents defining themselves as mostly originators, 2

respondents identified themselves as an SME involved in medicines

biotechnology and one as a start-up in the field of bio-pesticides.

In addition, several pharmaceutical associations (Medicines for Europe, EUCOPE, and

EuropaBio) also represent pharmaceutical start-ups and SMEs and conveyed SME views

both by responding to the public consultation and/or by sending position papers to the

Commission services. The input of these position papers is taken into account in this

summary of replies.



Views expressed by generics/biosimilars manufacturers

Most generics/biosimilars (‘G/B’) manufacturers support

the introduction of a

manufacturing waiver, considering that:



SPCs disadvantage EU-based G/B manufacturers compared with those based in

countries with no SPC when exporting G/Bs outside the Union. This problem is

confirmed by 56 out of 63 G/B respondents (1 respondent denies this problem, and 2

do not know).



SPCs disadvantage EU-based G/B manufacturers compared with those based in

countries with no SPC when placing G/Bs on the market in the EU immediately after

the SPC expires; this problem is confirmed by 53 out of 63 G/B respondents (3

respondents deny this problem, and 3 do not know).



The EU SPC, in its current form, increases reliance on imports of medicines and

active pharmaceutical ingredients from outside the EU;

https://ec.europa.eu/info/consultations/public-consultation-supplementary-protection-certificates-spcs-

and-patent-research-exemptions_en



The entry into force of the EU SPC regulations in a Member State triggers the

delocalisation to another country or licensing of manufacturing to a country with no

or less stringent SPC type protection;



Already today, it is not always possible to source active pharmaceutical ingredients

(‘APIs’) from the EU;



The introduction of an SPC manufacturing waiver in the EU would increase their

sales in countries outside the EU when protection abroad expires; would lead them to

increase their manufacturing in the EU; would not increase the risk of infringement

of SPCs in the EU; and would not significantly reduce originators’ sales in countries

outside the EU when protection abroad expires.

The vast majority of

SMEs

manufacturing generics and biosimilars also share these

views, and in general consider that the longer duration of SPCs in the Union compared to

non-EU countries makes manufacturing in the Union less interesting for them.



Views expressed by originators

Originators’ submissions to the consultation reflect their broad –

though not

overwhelming

–

opposition to the introduction of an EU SPC manufacturing waiver: 54

out of 71 originators do not consider that EU-based manufacturers face export or EU

day-1

entry-related problems vis-à-vis their competitors based in non-EU countries (with

shorter or no SPC protection).

A strong majority of the originators consider that the current EU SPC framework does

not put EU based generics/biosimilars manufacturers at a disadvantage compared with

foreign-based manufacturers, neither when exporting generics/biosimilars outside the EU

nor when it comes to placing generics/biosimilars on the EU market when SPC

protection in the EU expires.

Most originators oppose

the introduction of an SPC manufacturing waiver in the EU,

considering that it would:



increase the risk of infringement of SPCs in the EU;



reduce protection to recoup their investments in R&D in the EU;



reduce their sales in countries outside the EU when protection abroad expires;



erode IPR protection, sending a negative message to those innovating and investing

in the EU, or intending to do so;



increase competition from EU-based generics/biosimilars on the EU market;



provide EU-based generics/biosimilars manufacturers with limited benefits only

–

arguing that European generics companies are often the first to market in the EU,

and that SPC(-like)

protection is also available in firms’main export markets

(the

USA, Japan, etc.).

Regarding

pharmaceutical innovative SME,

among the 71 respondents defining

themselves as mostly originators, 2 respondents identified themselves as an SME

involved in medicines biotechnology and one as a start-up in the field of biopesticides. In

addition, several European pharmaceutical associations such as EUCOPE, EBE, and

EuropaBio conveyed the views of their start-ups and SME members in their submissions

and accompanying letters sent to the Commission during the public consultation. A few

national innovative pharmaceutical associations focused on start-ups and SMEs-members

also provided their views. These associations representing innovative SMEs have

expressed concerns that the introduction of a manufacturing waiver would dilute SPC

protection and therefore dilute the financial rewards they would receive for their

inventions, as well as their possibility to get and secure funding for their innovative

R&D. They also highlight that EU-manufactured generics are likely to compete for

market shares in unprotected markets with the original brands and thus decreasing the

actual or projected market share of these SMEs products.



Views expressed by other stakeholders

A large majority of the 43 citizens who answered the consultation state that they care

about the origin of productions of the medicines they consume, while only 3 said they do

not care.

10 out of 15 respondents in the group of patients/doctors/insurers agree that the EU SPC

system puts EU-based manufacturers of generics and biosimilars at a disadvantage vis-à-

vis competitors based in third countries when it comes to export. Only 1 respondent

considers that this is not a problem. 6 respondents of this category see also an issue

regarding timely EU

day-1

entry for EU-based manufacturers of generics and

biosimilars. 3 respondents do not consider that this is a problem.

Outside the framework of the public consultation, strong political support was expressed

for the introduction of a manufacturing waiver by Parliament in a number of Resolutions;

in particular, its May 2016 Resolution on the

Single Market Strategy

‘urge[d]

the

Commission to introduce and implement before 2019 an SPC manufacturing waiver’,

as to boost the competitiveness of the generics and biosimilar sector, ‘while

not

undermining the market exclusivity granted under the SPC regime in protected markets’.

NNEX

3: W

HO IS AFFECTED AND HOW



Practical implications of the initiative

As mentioned above, the main impacts of the introduction of an SPC manufacturing

waiver would be:



EU-based manufacturers of generics/biosimilars

would benefit from a more level

playing field in respect of third-country manufacturers, as they would be able to

(1) manufacture generics/biosimilars in the EU during the SPC term for exporting

them to (‘non-SPC’) third countries, and/or –

depending on whether the waiver

would be for export and/or for stockpiling purposes

–

(2) manufacture and stockpile

generics/biosimilars in the EU just before the end of the SPC term for being able to

supply the EU market immediately after SPC expiry (from

day-1).

It should not be

forgotten that the increasing number of originator firms possessing generics and

biosimilar divisions or subsidiaries in the EU would also benefit from the waiver.

To implement anti-diversion measures, the generics/biosimilars manufacturers

would have to foresee certain obligations, such as labelling and notification.



The pressure to relocate the manufacturing of generics/biosimilars outside the EU

would reduce, positively affecting employment in that sector, including high-skilled

jobs. EU-based R&D would also benefit from this, especially regarding biosimilars,

a sector in which the EU could then hope to keep its pioneer advantage. All players

of the

EU pharmaceutical ecosystem,

including SMEs, would benefit from its

sustained strength and dynamism (including for instance sufficient manufacturing

capacities, and suitable skills), which is likely to have many outcomes including

promoting the creation and growth of EU start-ups.



Originators (SPC holders)

would face slightly increased competition in

unprotected markets (namely from EU-based manufacturers of generics/biosimilars)

(1) for export purposes during the SPC term, and/or (depending notably on whether

the waiver would be for export and/or for stockpiling purposes) (2) for

day-1-entry

purposes. This may lead to some decrease (of slower-than-expected increase) of their

sales and of the related employment. However, this increase in competition in

unprotected markets is expected to remain low compared to the intense competition

already generated

today by manufacturers established in (‘non-SPC’) third countries.

It may also be recalled that the core legal protection resulting from SPCs in the EU,

providing SPC holders with exclusive rights regarding the placing their products

onto the EU market during the SPC term, will not be affected at all. So while there

may be a second-order effect there will be no first-order one.



EU patients

and Member State

public health systems

(budgets) would benefit from

a timely market entry of generics/biosimilars onto the EU market (possibly resulting

in lower prices), and also from better security of supply.



Public authorities

may need to receive and publish notifications related to anti-

diversion measures, potentially leading to a small but manageable administrative

workload.



Summary of costs and benefits

I. Overview of Benefits (total for all provisions)

–

Preferred Option

Description

Direct benefits

Exports

EU-made

generics/

Increase of the EU

biosimilars during the SPC term, under a pharmaceutical trade balance CRA study, section 3.4

waiver that would at least cover export by EUR 6 -10bn over 10 years

purposes

for a sample of (117+17)

molecules (32% of the

relevant medicines)

Amount above revised down OHE-EFPIA

to EUR 2-3bn

Increased employment by EU-based

manufacturers of generics/biosimilars

Savings for Member States’ national

expenditure on pharmaceuticals

> 20 000 additional jobs

Revised down to 3 000 to

9 400 jobs

~ 4-8 % savings

CRA study, S. 3.4

OHE-EFPIA

CRA study

Amount

Comments

Indirect benefits

Improvement of the whole EU A healthy, vibrant EU pharma ecosystem will clearly be

pharmaceutical

ecosystem

(also beneficial not only for generics/biosimilars manufacturers but

beneficial to originators)

also for originators and research organisations, as well as for the

creation and growth of start-ups.

II.Overview of costs

–

Preferred option

EU-based

generics/biosimilars

manufacturers

One-off

Negligible

cost of

notification

of the 1st

production

EU-based SPC holders

(originators)

One-off

dministrations

Recurrent

Minor logistical

costs relating to

specific labelling

The related costs

could be around

EUR 10 000 per

product per

year

Recurrent

One-off

A few

thousand

per EU

Stablishi

ng an IT

solution

Recurrent

Manufacturing

waiver for

export purposes

Direct

costs

Considering that the evaluation of

Regulation 953/2003 to avoid trade diversion into the EU of certain

key medicines

found that a pharmaceutical company incurred costs of a few hundred thousand euro

between 2003-15 for adding a logo on its packs and for getting regulatory authorities to amend/extend

marketing authorisations for the medicines due to a change of packaging.

for e-

filing

and

publicati

on of the

notificati

Indirect

costs

Possible

loss of

employm

ent by

origina-

tors

Possible decrease in

sales (1) in export

markets during the

SPC term and (2) in

the EU immediately

after SPC expiry.

Available estimations

include:



EUR 139 - 278m

for non-biologics

and EUR 868m

–

1,7bn for biologics

(CRA study, S. 3.4)



EUR 191m

–

EUR

573m for non-

biologics (OHE-

EFPIA)

The Pugatch study mentions a range of 4,500-7,700 direct job exposes to competition. However, that

study does not estimate how many of those jobs exposed to competition might be finally lost due to the

waiver.

NNEX

4: D

IFFERENCES BETWEEN GENERIC AND BIOSIMILAR MEDICINAL PRODUCTS

Table A3.1. Differences between generic and biosimilar medicinal products

Generics

Size and structure of

molecule

Method of production

Immunogenicity

Assurance of product

quality

Simple and small chemical structure

that can be fully characterised

Chemical synthesis - identical copies

can be made by chemists in the lab

Lower potential

About 50 tests and controls are

required to demonstrate identity,

strength, quality, potency and purity.

Few months to very few years

EUR 2m -3m

Identical to reference medicine; thus

only proof of bioequivalence to the

reference product is needed

National medicines agencies or EMA

(European Commission)

80-90%

Biosimilars

Large and complex structures,

difficult to fully characterise

Made in living organisms -

identical copies cannot be made

Higher capacity to produce immune

system responses

About 250 tests and controls are

required to demonstrate identity,

strength, quality, potency and

purity.

Several years

EUR 70-300m / USD 300m

Similar to, but not identical, to the

reference product, thus additional

tests (and trials) are required

Only EMA (European

Commission)

20-30%

Development timeline

Cost of development to

reach approval

Additional tests for

marketing authorisation

purposes

Authorising agency

Discount over the

reference product price

after expiry

Interchangeability with

reference medicine

Yes for patients already treated with

the reference medicine

No interchangeability or automatic

substitution (some Member States

are introducing almost automatic

substitution)

The production is difficult to

delocalise

(i.e., once delocalised,

it might not be moved again) as it

is highly sensitive to environmental

changes; therefore development

and manufacturing tend to be close

to each other

Value chain location

Relatively easy to delocalise the

production, and delink development

from manufacturing

Sources:

Based on CRA Report (2017), Deloitte Report.

According to Medicines for Europe, the minimum cost of relocating the production of a single

biological product is EUR 10m and it takes a minimum of 1.5 to 2 years. If the relocation results in the

need for additional regulatory approvals to ensure that the safety, quality and efficacy of the product are

not affected, the costs easily multiply.

Alcacer, J. and Delgado, M. (2016), ‘Spatial organization of firms and location choices through the

value chain’.

Management Science,

62(11), 3213-3234. Analysing locations of new establishments of

biopharmaceutical firms in the USA from 1993 to 2005, authors show that collocation of activities varies in

the value chain. Although present in all activities, it is larger for R&D and manufacturing than for sales.

NNEX

5: B

IOSIMILARS

PPROVED IN THE

AS OF

ECEMBER

2017

Biosimilar Trade Name

Epoetins

Abseamed

Binocrit

Epoetin Alfa Hexal

Retacrit (2)

Silapo

Filgrastims

Accofil

Filgrastim Hexal

Grastofil (3)

Nivestim

Ratiograstim

Tevagrastim

Zarzio (4)

Follitropins

Bemfola

Ovaleap

Growth Hormones

Omnitrope (5)

Insulins

Abasaglar (6)

Lusduna (7)

Insulin lispro Sanofi

Low-Molecular Weight Heparins

Inhixa

Thorinane

Monoclonal Antibodies

Amgevita/Solymbic (8)

Cyltezo (9)

Imraldi

Flixabi (10)

Inflectra (11)

Remsima (11)

Rixathon/Riximyo (12)

Truxima/Blitzima/Ritemvia/Rituzena (13)

Ontruzant (14)

Parathyroid Hormone Fragment

Movymia

Terrosa

Fusion Proteins

Benepali

Erelzi (15)

Marketer

Medice

Sandoz

Hexal

Hospira

Stada

Accord

Hexal

Apotex

Hospira

Ratiopharm

Teva

Sandoz

Finox

Teva

Sandoz

Eli Lilly

Merck

Sanofi

Techdow Europe AB

Pharmathen S.A.

Active Substance

epoetin alfa

epoetin zeta

filgrastim

follitropin alfa

somatropin

insulin glargine

insulin lispro

enoxaparin

sodium

enoxaparin

sodium

adalimumab

infliximab

rituximab

trastuzumab

teriparatide

etanercept

Reference

Drug

Eprex/Erypo

Neupogen

GONAL-f

Genotropin

Lantus

Humalog

Clexane

Year of

Approval

2007

2014

2009

2013

2010

2008

2009

2014

2013

2006

2014

2017

2016

Amgen

Boehringer Ingelheim

Samsung Bioepis

Hospira

Celltrion

Sandoz

Celltrion

Samsung Bioepis

STADA Arzneimittel

Gedeon Richter

Samsung Bioepis

Sandoz

Humira

Remicade

MabThera

Herceptin

Forsteo

Enbrel

2017

2016

2013

2017

2016

2017

(1) Three additional biosimilars were approved by the EMA but subsequently had their

authorisations withdrawn.

(2) An FDA advisory committee recommended approval of Hospira’s U.S. biosimilar

application in May 2017, but the application was rejected by the FDA in June 2017.

(3) A biosimilar application to market in the USA was accepted for review by the FDA

but has not been approved.

(4) Approved in the USA as a biosimilar under the Biosimilar Price Competition and

Innovation Act of 2009 (BPCIA) with the trade name Zarxio.

(5) Approved in the USA under the 505(b)(2) pathway.

(6) Original EU trade name was Abasria; it was approved in the USA under the 505(b)(2)

pathway with the trade name Basaglar and launched in the USA in December 2016.

(7) In July 2017, Lusduna received tentative approval in the USA under the 505(b)(2)

pathway.

(8) Approved in the USA in September 2016 with trade name Amjevita. Amgevita and

Solymbic are different trade names for the same monoclonal antibody.

(9) Approved in the USA in August 2017 as a biosimilar under the BPCIA.

(10) Approved in the USA in April 2017 as a biosimilar under the BPCIA under trade

name Renflexis.

(11) Inflectra has been approved in the USA as a biosimilar under the BPCIA. Inflectra

and Remsima are different trade names for the same monoclonal antibody.

(12) Rixathon and Riximyo are different trade names for the same monoclonal antibody.

A biosimilar application to market in the USA has been accepted by the FDA.

(13) Celltrion’s MabThera biosimilar was first approved in Europe

in February 2017

under the name Truxima. Additional marketing authorisations under the trade names

Blitzima, Ritemvia, and Rituzena (previously Tuxella) were granted in July 2017. A

biosimilar application to market in the USA has been accepted by the FDA.

(14) Samsung Bioepis announced in November that it had received marketing

authorisation in Europe.

(15) Approved in the USA as a biosimilar under the BPCIA.

CHMP Issues Positive Opinions

Two additional biosimilars, Amgen/Allergan’s Mvasi

and Celltrion’s Herzuma, have received favorable opinions from EMA’s Committee on

Medicinal Products for Human Use (CHMP) and may soon be approved in Europe.

Mvasi, a biosimilar of Genentech’s Avastin (bevacizumab),

received a favorable

recommendation from CHMP on 9 November 2017. Mvasi was approved as a biosimilar

in the USA in September 2017. Celltrion’s Herzuma, a biosimilar of Genentech’s

Herceptin (trastuzumab), received a positive opinion from CHMP on 14 December 2017.

If, as anticipated, the Commission follows the recommendation of CHMP, Mvasi and

Herzuma likely will be approved in Europe in the coming months.

Pending Biosimilar Applications in Europe

Eleven additional biosimilar applications are

under evaluation by the EMA as of December 2017: three applications for biosimilars of

AbbVie’s (adalimumab), one application for a biosimilar of Sanofi’s Lantus (insulin

glargine), six applications for biosimilars of Amgen’s Neulasta (pegfilgrastim), one

application

for a biosimilar of Janssen’s Remicade (infliximab) and four applications for

biosimilars of Genentech’s Herceptin (trastuzumab).

The six pending applications for biosimilars of Amgen’s Neulasta (pegfilgrastim) are

particularly notable, since EMA has rejected a number of the previous applications for

pegfilgrastim biosimilars and no pegfilgrastim biosimilars have been approved to date.

Indeed, two of the currently pending applications for pegfilgrastim biosimilars are

resubmissions of rejected applications. Sandoz’s

resubmitted application was accepted

for review in October 2017, while

Mylan/Biocon’s

resubmitted application was accepted

for review in November 2017. Other pending applications include applications from

Coherus, Spain’s Cinfa, and Indian

pharmaceutical manufacturer USV.

EMA is also reviewing Mylan/Biocon’s application for Ogivri, a biosimilar of

Genentech’s Herceptin (trastuzumab). Ogivri was approved as a biosimilar in the USA

on December 1, 2017. However, Mylan/Biocon’s application for

marketing approval for

Ogivri in Europe, like its application for its pegfilgrastim biosimilar, ran into problems

last summer after a European inspection of Biocon’s manufacturing facility.

Like the

pegfilgrastim application, the Ogivri application was withdrawn in August 2017 but

resubmitted in November.

2017 has been a record-setting year for biosimilar approvals in Europe. Although the first

biosimilars to the European market were approved in 2006 and 2007, the number of

approved biosimilars has doubled in the past two years. These approvals have expanded

the market into new therapeutic areas and new classes of biologics.

NNEX

6: A

NALYTICAL METHODS

The analytical methods used in the various studies mentioned in Annex 1 are explained

in the text of the respective studies.

NNEX

7: G

ENERIC AND BIOSIMILAR MARKET IS EXPANDING

1) Massive global demand for medicines

There is a worldwide increasing and massive demand for medicines. This is

confirmed by industry (IFPMA and EFPIA) data showing that the total global

spending on medicines increased from EUR 950bn in 2012 to EUR 1.1 trillion in

2017, and consistent with the US Commerce Department’s similar data pointing out

to a global spending of USD 1.3 trillion expected by 2020 with annual growths of

5%.

2) Shift towards more generics and biosimilars

In all markets, especially in developing countries, the consumption of medicines is

shifting toward generics and biosimilars. Generics and biosimilars could represent

80% of the volume of medicines by 2020 with a future growth forecast at a

compound annual growth rate of 6.9%. For the US market, data from US Generic

Pharmaceutical Association indicates an increase from 27% in 2012 to 36% of the

total sales by 2017 and making 80% of the filled prescription sales

of the

pharmaceutical market by 2020. In the Union, Medicines for Europe claims that 56%

of the volume of medicines supplied correspond to generics and biosimilars. Japan

government set a target of 80% market penetration of generics and biosimilars in

Japan by 2020.

IFPMA 2017 report

highlights that the spending on generic drugs is driving most of

the growth in the leading emerging markets, which will contribute to the increase in

the share of generic spending. The revenues from generics in 2021 are expected to

reach USD 495-505 billion.

There was a growth peak of generics

until 2012 driven by a major ‘patent cliff’

;

however, perspectives are bright with a rejuvenated pipeline of blockbuster in part

due to biologics, plans to take up generics use in major markets as Japan, strong

demand in emerging economies and new generics’ opportunities in specialised fields

or new delivery technologies. The global market for generic medicines should reach

EUR 500bn by 2021 from 330 in 2016 (a 50% increase in 5 years). According to

several sources (e.g. CRA study and Deloitte), emerging middle classes in Asia

demand branded generics/biosimilars with strong reputation.

The biologics market is booming with annual sales of over EUR 150bn. In the EEA

the share of biologics (including biosimilars) in the total pharmaceutical sales was

16% in 2008 and increased to 21% in the 12 months ending in 2014 Q3

. Now

biologics account for over a third of all new drugs in clinical trials or awaiting FDA

Generic Pharmaceutical Association, Generic Drug Savings in the USA

–

Annual Edition (2015):

http://www.gphaonline.org/media/wysiwyg/PDF/GPhA_Savings_Report_2015.pdf

https://www.ifpma.org/wp-content/uploads/2017/02/IFPMA-Facts-And-Figures-2017.pdf

A ‘patent cliff’ refers to the situation that takes place when the legal protection (afforded by a patent

SPC) of one or several successful medicine(s) expires (in a short period of time for all of them), causing a

very sharp drop in sales for the right-holder(s).

CRA report, page 24.

approval

. According to

Medicines for Europe,

by 2018, 50% of pharmaceutical

expenditure will relate to biologicals.

As well as biologics, the biosimilars sector is booming. Biosimilars providing new

avenues to address key therapy areas such as cancer, orphan conditions and chronic

diseases with increasing prevalence at a lower cost for public health authorities and

health providers. Biosimilars, despite their complexity and high cost of development

(see above) are especially interesting for the pharmaceutical industry at large

because:

The first generation of biologics

have started to reach the end of their

patent/SPC protection or other forms of market exclusivity in the coming years.

According to Baker&McKenzie, by 2019 approximately 50% of the biologics

market will be off-patent in the USA; Over EUR 90bn of current

reference/innovator products will become susceptible to biosimilar competition

by 2020

. In the USA only, it is estimated that the biosimilar market may be

worth USD 11bn by 2020 (accounting for 4-10% of the biologics market by

2020).

The best-selling pharmaceuticals in the world today are biologics

. For example,

blockbuster biologic Humira® (Adalimumab) tops the sales ranking with EUR

8bn in the 1

semester of 2017 according to Bloomberg.

Price competition in the market of biologics is not as intensive as in the case of

classic generic markets. In the EU, the discount of the biosimilar to the biologic

has averaged about 20 to 30%

(comparing with typically 50 to 80%

for

classic generics).

3) Traditional originators also interested in biosimilars

As a result, not only traditional companies in the generics sector are developing

biosimilars, also traditional pharmaceutical/biotech/R&D innovators companies have

obtained marketing authorisations to commercialise biosimilars. EMA databases

(details in annex 5) show that 15 out of 33 biosimilars currently in force in the EU

were issued directly to classic originators (Amgen, Boehringer, Eli Lilly, Merck,

Sanofi) or

their biosimilars’ divisions (Pfizer-Hospira,

Novartis-Sandoz, Novartis-

Hexal). Samsung Bioepis and Celltrion count with 6 biosimilars authorisations at

See US Commerce Department-International Trade Administration, 2016 Top Markets Report

Pharmaceuticals.

More than 400 biopharmaceutical products, including over 140 recombinant proteins approved in the

USA and Europe. Over 40 recombinant proteins have blockbuster (over USD 1bn a year) markets.

This is consistent with other estimations signalling around USD 81bn

–

see Rovira, J.,

et al, The impact

of Biosimilars’ entry in the EU Market.

Granada (Spain): Andalusian School of Public Health (2011).

http://www.expansion.com/empresas/2017/08/08/5988c908e5fdea32328b4627.html

Footnote 92 of CRA study. See Grabowski H., Guha R., and Salgado, M. (2014),

Biosimilar

competition: Lessons from Europe, Nature Reviews,

Drug Discovery, Feb 2014, Vol. 13; or

Pricing of

biosimilars,

Gabi Online, 23 March 2012 available at

http://gabionline.net/Biosimilars/Research

/Pricing-of-biosimilars).

Danzon P.M. and Furukawa M.F. (2014), ‘Cross-national

evidence on generic pharmaceuticals:

pharmacy vs physician-driven markets’,

NBER working paper no. 17226 and Charles River Associates

(2016).

https://www.dcatvci.org/5058-biosimilars-opportunities-and-challenges-in-the-us-and-eu

EMA that often manufacture and license to originators. FDA databases show that 6

out of 9 biosimilars are registered by originators (Amgen, Boehringer, Pfizer and

Novartis-Sandoz).

4) Global competition in the pharmaceutical industry; EU lead advantage on

biosimilars fading

Expecting growth is also strong in emerging markets (the so-called

‘pharmerging’

countries). China is now the second market for pharmaceuticals ahead of Europe.

This scenario of strong demand is accompanied by an increasing R&D and

manufacturing capacity and know-how in third-countries to compete on

pharmaceutical market

. Therefore the pharmaceutical industry operates in a highly

competitive and global market.

The EU was pioneering in introducing regulatory procedures for approval of

biosimilars (the EMA authorised the 1

biosimilar in 2006, 9 years before the FDA

authorised the first biosimilar in 2015) and therefore the EU gained a competitive

advantage in the development of biosimilars, however, other trade blocs, including

BRICS, have updated their regulatory rules and are becoming increasingly attractive

for investments in biosimilars

100

(IMS Health identified in 2011 South Korea, India

and Brazil as key macroeconomic drivers of growth, attracting foreign capital by

creating manufacturing and R&D centres of excellence for biosimilars

101

; In South

Korea, 35% of the national medical R&D budget was invested into biosimilars

development in 2012 according to Deloitte report).

5) First mover advantage in the market of generics and biosimilars

As the pharmaceutical market is global and highly competitive, the ‘first

generic/biosimilar mover(s)’

usually takes most of the market share where

patent/SPC expires (see third driver in section 2 below). Indeed, regarding the first-

mover advantage in the off-patent/SPC EU market, DG GROW studies show that in

the EU, generic firms entering 1 year after the first generic entrant only capture 11%

of first entrant market share during the first year, and 20% of first entrant market

share after being 2 years in the market. Late entrants in biosimilar industry also face

competitiveness disadvantage. Studies show that in 2016, first biosimilars to market

captured 72% market share, while 2

and 3

entrants only captured 30% and 5%

respectively.

6) EU giving the longest SPC protection

Despite that positive pioneering effect in the EU, and the efforts being made via FTA

negotiations to get trade partners to introduce EU SPC type protection, it is a fact that

the EU frequently gives longer patent and SPC protection for pharmaceutical

See footnotes related to pages 7 and 8 of Deloitte report 2015.

See page 3 of this US Commerce

Department-International Trade

Administration,

2016 Top Markets Report Pharmaceuticals:

https://www.trade.gov/topmarkets/pdf/Pharmaceuticals_Executive_Summary.pdf

The

Patient Protection and Affordable Care Act

signed into law on March 2010 authorised the FDA to

approve biosimilars that were approved under the Public Health Service Act of 1944 or the Federal Food,

Drug, and Cosmetic Act (FFDCA). In 2015, Zarxio became the first biosimilar product approved by the

FDA:

http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm436648.htm

100

101

See

pages

7 and 8 of Deloitte report 2015.

https://weinberggroup.com/pdfs/Shaping_the_biosimiliars_opportunity_A_global_perspective

_on_the_evolving_biosimiliars_landscape.pdf

products than its trade partners. This differential might hinder investment in

biosimilars and generics in the EU.

NNEX

8: I

MPACTS OF THE CURRENT

SPC

REGIME

(

BASELINE SCENARIO

)

The following table summarises the main impacts of the current EU SPC regime (cf.

Reg. 469/2009) on various stakeholders

during the SPC protection period:

Note:

‘G/Bs’ means ‘generics/biosimilars’

Impact on

stakeholders



according to

their location



SPC holders

(originators)

…

(holding IP

protection)

… located in a Member State…

… where an SPC has been

granted

The effects of the basic patent

are extended by up to 5 (�½)

years, allowing originators to

prevent any local

manufacturing and marketing

of G/Bs, thereby resulting in

increased sales and profits.

G/Bs are prevented from

manufacturing and marketing

G/Bs. This also prevents G/Bs

(1) from manufacturing for

export, even to countries

where no IP protection is in

force, and (2) from being

ready to supply the (SPC-

covered) EU market from

day-

if at all

104

… located in a non-EU country …

… where IP

protection is in

force

…

where no IP

protection is in

force

… where no SPC

has been granted

Originators cannot

prevent competitors

from manufacturing

and marketing

G/Bs.

G/Bs are free to

manufacture if they

have manufacturing

capacity and market

G/Bs, for domestic

use or for export (

countries without IP

protection

), or so as

Originators can

prevent competitors

from manufacturing

and marketing

G/Bs.

Originators cannot

prevent competitors

from manufacturing

and marketing

G/Bs.

Manufacturer

s of generics

or biosimilars

…

(‘G/Bs’)

to be ready to

supply the EU

market

102

day-1.

Patients can access

G/Bs manufactured

domestically (if

there is

manufacturing

capacity) or, more

likely

104

, imported

from non-EU

countries where

there is no IP

protection

(anymore).

G/Bs are prevented

from manufacturing

and marketing

G/Bs, including for

export purposes if

there is not a

manufacturing

waiver.

G/Bs are free to

manufacture and

market G/Bs, for

domestic use or for

export (

to other

countries without IP

protection

), or so as

to be ready to

supply the EU

market from

day-1.

Patients can access

G/Bs manufactured

domestically (or

imported from

similar countries).

However, they may

not be able to

access EU-made

G/Bs until some

time after SPC

expiry in the EU

103

if at all

104

Patients cannot access G/Bs

during the SPC term of

protection.

Patients cannot

access G/Bs.

Moreover they may

be unable to access

EU-made G/Bs

until some time

after SPC expiry in

the EU

103

, if at

all

104

Patients …

Moreover they may be unable

to access EU-made G/Bs until

some time after SPC expiry in

the EU

103

, if at all

104

102

103

Including SPC-covered Member States (which could not be supplied during the SPC term).

Depending on the time EU-based manufacturers of generics/biosimilars will need to make preparations

to be ready to supply the EU market after SPC expiry.

Considering the strong ‘first mover’ advantage associated with generics entry, it may well happen that

for a certain medicine no EU-based manufacturer of G/Bs

–

even when legally free to do so

–

will actually

capture a meaningful share of the EU market, leaving all/most of the market to G/Bs located in non-SPC

non-EU countries, even after SPC expiry. It is possible that some of the EU market may be captured by

G/Bs based in Member States where no SPC applies; however, today SPC protection is filed on average in

20 Member States, which means that for most (successful) medicines very few Member States are SPC-

free, and in those Member States it is not guaranteed that there is adequate G/Bs manufacturing capacity.

104

NNEX

9: C

OMPARISON OF

SPC

PROTECTION EXPIRY DATES

There is no publicly available data that would allow an assessment of the scope of

different expiry dates across different regions in the world for medicinal products whose

molecules are under SPC protection in Member States. Below, we discuss the SPC

expiry dates for the sample of molecules that were provided by Medicines for Europe and

that were used in the CRA study.

Differences in expiry dates

In their note on manufacturing waiver (October, 2017), Medicines for Europe provided

Commission services with data on 109 molecules with the SPC expiry dates (including

paediatric extensions where applicable) in the EU and five other countries

–

the USA,

South Korea, China, India and Canada. The list of molecules along with the SPC expiry

dates of the related

substance patents

can be found at the end of this Annex.

Table 1 below provides an overview of Medicines for Europe data coverage and the

differences in expiry dates. For most of these molecules, protection expires in the

Member States later than in at least one other region. This is the case only for the USA

and South Korea, as China, India and Canada do not provide for SPC protection.

Focusing only on those molecules for which expiry dates are later in the EU, the average

difference is above two years in the USA and South Korea and above three years in CN,

IN and CA. This is consistent with results provided by the CRA (2016) where, based on a

sample of 70 molecules, authors show that the protection expiry difference between five

Member States (France, Germany, Italy, Spain and UK) ranges between 2.23 (for the

USA) and 3.85 years (for Canada).

Table 1: Differences in SPC expiry dates between Member States and third country

Country

Molecules

with expiry

date

109

Molecules with

expiry date earlier

than in the EU

Difference in expiry date

between EU and third country (in years)

Average

Min

Max

2.06

2.86

3.31

3.07

3.53

0.01

0.16

5.50

5.65

6.47

5.31

6.56

Source: Calculations based on the data provided by Medicines for Europe.

Note: The maximum difference of expiry date can be as long as 6.5 years. This is due to the fact that the

duration of SPC is calculated based on application filing date and not the priority filing date.

Representativeness

The representativeness of the Medicines for Europe list is assessed using

Alice de Pastors

database. For consistent comparison between two databases, this assessment focuses on

molecules for which SPC protection (including paediatric extension) in the EU expires in

2018 or later and those approved between 2 000 and 2014. This leaves a sample of 97

molecules of the Medicines for Europe list

105

. Those molecules represent 22% (24%) of

105

For 11 molecules the expiry date is before 2018, and one molecule (sonidegic) has been first approved

in the EU only in 2015.

all medicinal products (with EMA authorisation) approved between 2 000 and 2014 for

which SPC will expire in the future

106

A closer look at the data shows that the molecules listed on Medicines for Europe cover

only few ATC classes (level-3) when compared to the Alice de Pastors data. Considering

only those therapeutic indications which appear on the Medicines for Europe list, the

representativeness of this list increases to 39%.

Table 2: SPC expiry dates in the EU and other regions for selected molecules

Product Name

ABATACEPT

ABIRATERONE

ADALIMUMAB

AFATINIB

AFLIBERCEPT (EYLEA)

AFLIBERCEPT (ZALTRAP)

ALEMTUZUMAB

(LEMTRADA)

ALISKIREN

ALISKIREN + AMLODIPINE

ALISKIREN +

HYDROCHLOROTHIAZIDE

ALOGLIPTIN

ALOGLIPTIN + METFORMIN

AMBRISENTAN

ANIDULAFUNGIN

APREPITANT

ATAZANAVIR SULFATE

ATOMOXETINE

ATORVASTATIN +

EZETIMIBE

BAZEDOXIFENE

BELATACEPT

BELIMUMAB

BEVACIZUMAB

BILASTINE

BORTEZOMIB

BRENTUXIMAB VEDOTIN

CANAKINUMAB

CASPOFUNGIN

CERTOLIZUMAB

CEFTAROLINE FOSAMIL

CINACALCET

CLEVIDIPINE

DABIGATRAN ETEXILATE

DARIFENACIN

106

23-Nov-22

15-Mar-18

16-Oct-18

12-Dec-26

23-May-25

01-Feb-28

16-Sep-28

07-Apr-20

15-Mar-18

23-Sep-28

03-Oct-20

18-Mar-18

13-May-19

04-Mar-19

28-May-19

15-Sep-19

16-Apr-22

23-May-26

15-Jun-26

16-Dec-19

03-Jun-22

26-Apr-19

25-Oct-27

26-Aug-28

25-Oct-16

01-Oct-24

17-Dec-23

26-Oct-19

03-Nov-19

17-Feb-23

17-Mar-15

02-Jul-21

13-Dec-16

31-Jul-17

22-Jan-22

18-Nov-23

02-Dec-25

24-Aug-29

21-Jul-18

13-Dec-16

27-Jun-28

29-Jul-18

17-Feb-20

17-Apr-15

20-Dec-17

26-May-17

25-Apr-17

04-Apr-17

15-Jun-25

17-Jul-23

04-Jul-19

04-Jun-17

03-Nov-17

18-Jan-25

02-Nov-27

26-Jul-15

13-Apr-24

11-Apr-22

08-Mar-18

05-Jan-21

28-Dec-21

13-Mar-15

07-Feb-21

01-Apr-19

02-Sep-26

12-Feb-25

09-Nov-27

07-Feb-21

02-Oct-17

12-Dec-21

12-Feb-25

09-Nov-27

07-Feb-21

02-Oct-17

12-Dec-21

12-Feb-25

09-Nov-27

12-Dec-21

12-Feb-25

09-Nov-27

10-Jul-15

01-Apr-16

04-Mar-18

06-Apr-17

04-Mar-18

06-Apr-17

03-Oct-14

06-May-21

05-Sep-17

11-Mar-14

11-Jan-11

03-Oct-14

06-May-21

03-Oct-14

06-May-21

11-Mar-14

02-Dec-18

11-Mar-14

There are 441 medicinal products approved between 2000-14 for which the SPC will expire in 2018

and later.

DARUNAVIR

DASATINIB

DEFERASIROX

DENOSUMAB

DERQUANTEL

DRONEDARONE

DULOXETINE

ECULIZUMAB

EFAVIRENZ+EMTRICITABINE

+TENOFOVIR

EMTRICITABINE +

TENOFOVIR

ERLOTINIB

ETRAVIRINE

EVEROLIMUS

EZETIMIBE

EZETIMIBE +

ROSUVASTATIN

EZETIMIBE + SIMVASTATIN

FESOTERODINE

FINGOLIMOD

FLUTICASONE FUROATE

FOSAPREPITANT

GEFITINIB

GLIMEPIRIDE +

PIOGLITAZONE

IMATINIB

GOLIMUMAB

INSULIN DETEMIR

INSULIN GLARGINE

INSULIN GLULISINE

IPILIMUMAB

IVABRADINE

LACOSAMIDE

LAPATINIB

LASOFOXIFENE

LENALIDOMIDE

LINAGLIPTIN

LINEZOLID

MARAVIROC

METFORMIN + SITAGLIPTIN

METFORMIN +

VILDAGLIPTIN

MICAFUNGIN

MIRABEGRON

NATALIZUMAB

OMALIZUMAB

PALIPERIDONE

PEGFILGRASTIM

PERTUZUMAB

24-Feb-19

22-Nov-21

02-Sep-21

26-May-25

25-Jun-21

06-Aug-11

11-Aug-18

01-May-20

03-Aug-18

24-Feb-20

21-Mar-20

01-Sep-23

19-Jan-19

18-Apr-18

15-Sep-19

02-Apr-19

24-Apr-22

18-Oct-18

16-Jan-23

28-Feb-20

04-Mar-19

21-Jun-21

21-Dec-16

05-Apr-25

04-Dec-19

06-May-15

01-May-20

24-Aug-25

25-Mar-18

30-Aug-23

12-Jun-23

24-Apr-20

23-Jul-22

24-Apr-22

16-Mar-17

20-Sep-22

08-Apr-23

05-Nov-24

29-Sep-20

01-Jan-28

25-Jan-20

14-Aug-17

02-Feb-15

25-Aug-17

23-Jun-25

09-May-17

28-Jun-20

05-Apr-19

19-Feb-25

27-Jun-16

26-Jul-16

18-Jan-15

16-Mar-21

21-Nov-13

25-Jan-18

08-May-19

13-Dec-20

09-Mar-20

25-Apr-17

11-May-19

18-Feb-19

03-Aug-21

04-Mar-19

05-May-17

19-Jun-16

04-Jul-15

03-Feb-24

16-Jun-19

12-Feb-15

18-Jun-18

25-Mar-25

25-Sep-12

19-Mar-22

29-Sep-20

09-Jan-15

04-Oct-19

24-Apr-17

18-May-15

06-Aug-21

26-Jul-22

09-Dec-19

17-Mar-19

04-Nov-23

16-Mar-16

30-Nov-16

27-Apr-10

20-Oct-15

15-Jul-25

02-Aug-15

11-Sep-21

07-May-22

03-Apr-22

07-Jun-17

11-Apr-23

05-Sep-21

07-May-22

12-Sep-19

05-Sep-21

07-May-22

12-Sep-19

10-Jun-15

11-Apr-23

05-Sep-21

07-May-22

12-Sep-19

06-Nov-19

01-Aug-16

01-Aug-19

01-Aug-16

01-Aug-19

02-Jun-16

04-Jan-14

06-Mar-13

08-Jul-21

04-Feb-13

08-Jul-21

04-Jan-13

08-Jul-21

12-Jan-16

08-Mar-21

05-Nov-19

07-Jan-14

12-Jan-19

05-Jan-15

08-Jun-13

11-Sep-17

06-Jun-15

08-Jun-13

05-Jan-15

09-Aug-15

04-Dec-20

POSACONAZOLE

PRASUGREL

PRUCALOPRIDE

RALTEGRAVIR

RANIBIZUMAB

RASAGILINE

RIVAROXABAN

ROFLUMILAST

ROMIPLOSTIM

SAXAGLIPTIN

SEVELAMER

SILODOSIN

SITAGLIPTIN

SOLIFENACIN

SONIDEGIB

SORAFENIB

SUNITINIB

TAFLUPROST

TEDUGLUTIDE

TEMSIROLIMUS

TIGECYCLINE

TOCILIZUMAB

TRABECTEDIN

TRASTUZUMAB

TRASTUZUMAB EMTANSINE

TULATHROMYCIN

VARENICLINE

VILDAGLIPTIN

VINFLUNINE

VORICONAZOLE

ZOLEDRONIC ACID

20-Dec-19

27-Feb-19

16-Nov-20

02-Jan-23

23-Jan-22

12-Oct-19

02-Oct-23

02-Jul-19

05-Feb-24

04-Oct-24

10-Aug-19

26-Nov-18

05-Jul-22

16-Dec-18

18-Aug-30

21-Jul-21

24-Jul-21

22-Dec-22

11-Apr-22

14-Apr-20

21-Feb-18

16-Jan-24

20-Sep-22

27-Aug-28

19-Nov-28

13-Nov-18

28-Sep-21

27-Sep-22

19-Jul-19

24-Jul-16

16-May-13

19-Jul-19

14-Oct-17

16-Nov-15

03-Oct-23

04-Jul-19

07-Feb-17

28-Aug-24

27-Jan-20

19-Jan-22

31-Jul-23

16-Sep-14

30-Nov-18

26-Jul-22

19-Nov-18

25-Jul-29

12-Jan-20

15-Feb-21

18-Dec-22

14-Apr-20

15-Aug-19

09-Apr-16

30-Jul-24

28-Jun-27

12-Oct-27

02-Jul-28

24-May-19

10-May-20

09-Dec-19

19-Jul-14

24-May-16

02-Mar-13

10-Oct-15

09-Sep-12

09-Aug-12

04-Mar-18

10-Mar-21

07-Feb-19

12-Dec-22

08-Oct-14

09-Jan-23

07-Mar-17

05-Apr-27

04-Mar-18

12-Nov-20

07-Feb-14

03-May-21

12-Nov-20

04-Mar-18

10-Dec-14

12-Nov-20

07-Feb-14

03-May-21

08-Oct-14

12-Jan-13

07-May-22

05-Apr-27

01-Dec-20

07-May-22

05-Apr-27

01-Dec-20

07-May-22

05-Apr-27

04-Nov-17

10-Mar-12

04-Nov-17

10-Mar-12

03-May-24

10-Dec-24

02-Aug-21

03-Apr-22

03-May-24

10-Dec-24

02-Aug-21

12-Sep-19

02-Feb-11

03-May-24

10-Dec-24

03-May-24

10-Dec-24

12-Sep-19

12-Oct-11

Source: Medicines for Europe

NNEX

10: A

SSESSMENT OF

AIVER

IMING

CENARIOS

If an SPC manufacturing waiver was introduced, different scenarios could be envisaged

in respect of its time-related applicability, as mentioned in the main text.

To evaluate the impact of the proposed scenarios 1 and 2 on the number of existing SPCs

that would be actually affected by the waiver, this assessment relies on information

provided in the

Alice de Pastors

database. The sample is limited to SPCs filed with

reference to a first marketing authorisation granted in the EU until end 2015 and to those

SPC for which the basic patent expires before 1 January 2026. Croatia, where SPC

protection became available only recently, is excluded. SPCs are national rights and their

geographical scope of protection differs as illustrated in Mejer (2017). In the assessment

that follows, we are therefore looking at the number of distinct

basic patent-product

pairs

for which the SPC was applied for in the EU (i.e. number of SPC bundles). For

each

basic patent-product pair

we consider the first expiry date in the EU. Finally we

assume that the amended Regulation will enter into force as of 1 May 2019.

There are 481

basic patent-product pairs

for which the SPC will expire on 1 May 2019

and later. The distribution of those pairs by the basic patent expiry year is presented in

graph below, with the red line indicating 1 May 2019.

Scenario 1:

Immediate effect.

This option will directly impact 136 SPC bundles which

will be in effect as of 1 May 2019, and then progressively 28 additional bundles still in

2019, then with an average of 52 bundles per year between 2020 and 2025.

Scenario 2:

Only those SPC bundles for whose SPCs

will enter into effect

on or after

1 May 2019 will be subject to the waiver i.e. those for which the basic patent protection

will expire on or after 30 April 2019. This will be about 52 bundles per year between

2020 and 2025.

Scenario 3:

We do not have data on SPC grant dates (which vary between Member

States due to procedural differences). Still, assuming that an SPC is granted on average

five years before patent expiry, the waiver would, on average, be available from 2025.

Scenario 4:

SPCs are filed on average 9 years after the basic patent filing (Kyle, 2017;

Copenhagen Economics, 2018). Assuming that the Regulation enters into force on 1 May

2019, the main impact of manufacturing waiver would be on patents expiring in or after

2028

107

It could be that few SPCs enter into effect very rapidly after they are applied for.

Graph: Number of SPC bundles by the basic patent term expiry year

Number of SPC bundle

2019.4

2019.5

2014

2015

2016

2017

2018

2020

2021

2022

2023

2024

Note: The graph above shows the number of SPC bundles (i.e.

basic patent-product pairs)

by year of basic

patent expiry, i.e. year when SPC protection begins. The dashed red line indicates the assumed date of the

entry into the force of Regulation (1

May 2019). Only those bundles with first SPC expiry after 1

May

2019 are considered. Source: own calculations based on

Alice de Pastors Database.

2025

NNEX

11: B

IOPHARMACEUTICALS

R&D

AND MANUFACTURING ACTIVITIES

This Annex provides an overview of the structure of the pharmaceutical industry in the

EU, by looking at the manufacturing, R&D, trade, FDI and EMA-compliance

manufacturing sites.

Production in the EU

Data Box:

Pharmaceutical manufacturing in the EU

The analysis presented below is based on the ESTAT database for structural business statistics (SBS)

and size class data, all of which are published annually. It presents an overview of statistics for the

pharmaceuticals manufacturing sector in the EU, as covered by NACE Rev. 2 Division 21.



In 2015 there were around 4 000 enterprises throughout the EU-28 for which

pharmaceuticals manufacturing was their principal activity. They employed

nearly 570 000 persons. The value of production amounted to EUR 260bn in

2015 and the value added generated was EUR 84bn, a little more than one third of

the turnover generated.

The pharmaceuticals manufacturing (Division 21) sector in the EU-27 is

characterised by its small number of very large, capital-intensive enterprises. The

manufacturing is very international as 60% of production is generated by firms

with foreign ownership (i.e. with a controlling company located outside the

reporting country).

Pharmaceutical production in the EU is quite concentrated as 62% of EU-28

production takes place in four Member States: Germany, Ireland, France and

Italy. 55% of the overall value added in the sector is generated in those economies

(cf. Table 2 below).

Four small Member States appear to be specialised in pharmaceutical

manufacturing: Ireland, Belgium, Denmark and Slovenia. In 2014, the

contribution of value added in pharmaceutical manufacturing relative to the total

manufacturing ranges between 10-20% and is the highest for Ireland (34%) (cf.

Table 2).



Innovation within the pharmaceuticals manufacturing sector

Data Box:

R&D in pharmaceutical manufacturing

R&D data have been collected according to 2002 guidelines of the Frascati Manual. This table

presents research and development (R&D) expenditure statistics performed in the business enterprise

sector by industry according to the International Standard Industrial Classification (ISIC) revision 4.

Depending on the country, R&D institutes serving enterprises are either classified with the industry

concerned, or grouped under ‘Research and Development’ (ISIC rev.4, Division 72). When these R&D

institutes are classified with the industry served, the evaluation of R&D in these industries is more

accurate and more comparable between countries for the industries concerned. This results, however,

in an underestimation of the percentage of BERD performed by the service sector as compared with

other countries.

The data covers 21 Member States. The following are missing: Bulgaria, Croatia, Cyprus, Malta,

Luxembourg, Latvia and Lithuania.



In 2013, among the Member States for which data is available for pharmaceutical

sector, intra-mural expenditure was USD 15 billion and put the EU-28 and

represented 16% of overall R&D spending in manufacturing in OECD countries,

China, Romania and Singapore.



For the sample of counties reported, R&D spending grew by 26% from its values

in 2009 to 2013.

EU-28 is the second larger R&D spender behind the USA. But its relative

importance is decreasing vis-a-vis China. The data indicates that R&D

manufacturing expenditure in China more than doubled from the level of USD 4.2

billion in 2009 to USD 9.8 billion in 2013, while to level of expenditure in

Germany increased by 10% from USD 4.8 billion in 2009 to USD 5.2 billion in

2013.

In Belgium, Denmark, Hungary as well as Slovenia, R&D expenditure in

pharmaceutical manufacturing accounted for about one third of all R&D

expenditure in manufacturing. In contrast, this share was well below 10 % in

Germany, France and the United Kingdom.



International trade

Data Box:

International trade in pharmaceutical and medical products

The data used in this section comes from Eurostat’ COMEXT database for the Member States and in

United Nations’ COMTRADE database for the non-EU

countries.

The focus is on Division 54 ‘Medicinal

and pharmaceutical products’ of the Standard international trade classification revision 4 (SITC Rev. 4)

108

Bias in the data:

Extra-EU imports and exports are reported by the Member State where the customs

declaration is lodged, usually the place where the goods cross the EU external frontier (here referred to as

the exit/entry Member State). This is not necessarily the Member State of actual import or export. The

geographical allocation of an extra-EU flow is biased in the case the entry/exit Member State is not the

actual importing/exporting Member State. This issue particularly impacts the extra-EU imports of Member

States having important ports for transhipment (e.g. Antwerp in Belgium or Rotterdam in the Netherlands).

Furthermore, differences in the VAT schemes.

Limitations:

Trade statistics do not fully reflect the globalised nature of the pharmaceutical industry where

value chain is fragmented. Intermediate input (e.g. products and substances) may cross borders at several

points in the manufacturing chains. This is particularly true for the simple products being produced in

chemical synthesis. Furthermore, existing classification does not allow distinguishing between patent

protected and off-patent products or the production process i.e. chemical v. biological.



Trade in medicinal and pharmaceutical products has been growing steadily since

2002. Extra-EU trade almost tripled from EUR 76 billion in 2002 to EUR 220

billion in 2016 which translates to an average annual growth of 7.8%. In the same

period, intra-EU trade more than doubled from EUR 156 billion to EUR 327

billion, equivalent to an average annual growth of 5.4 %.

Increasing demand in the developing countries and medicinal products going off

patent in the developed world are drivers behind this increase.



In 2002, both intra-EU and extra-EU trade in medicinal and pharmaceutical

products accounted for 4.2 % of total intra-EU and extra-EU trade. These

remained fairly close between 2002 and 2014 but started diverging in 2015. In

108

http://ec.europa.eu/eurostat/statistics-explained/index.php/International_trade_in_medicinal

_and_pharmaceutical_products

2016, the share was more than 1% higher in extra-EU trade (6.4 %) than in intra-

EU trade (5.3 %).



The EU was by far the major world trader in medicinal and pharmaceutical

products (SITC division 54) in 2016.

The EU export pharmaceutical products to highly regulated markets with strong

patent protection and high per-capita spending on healthcare. The USA stands out

as the EU’s main trading partner

over the period 2001-2016. 50% of Extra-EU

export concentrated in three countries: the USA (33.6%), Switzerland (11.4%),

and Japan (6.1 %). Those countries are suitable for high-quality, complex

medicines for which the EU has comparative advantage in manufacturing. On

fourth place there is China (5.7%) followed by Russia (4.3 %) and Australia

(3.1%) (see Table 1 for details).

Switzerland and the USA were however not the countries with the annual highest

growth rates. Market growth is shifting toward emerging markets in Asia, Latin

America and elsewhere, where pharmaceutical sales are forecast to expand at

double digit rates (see Annex 7 for the data on trends in global demand for

medicines).

For extra-EU exports both China (21 %) and Russia (10 %) had higher annual

growth than the USA (9.2 %). Strong export growth rates were also present in

Brazil (8.7%) and Singapore (8.6%). Further reforms of legislative systems,

especially regarding patent protection and enforcement, as well as improving

regulatory conditions, will make these markets increasingly attractive for EU

industry, which competes on quality, not on prices.

In imports to the EU double digit growth was found in Singapore (17.8 %), Brazil

(13.5 %), Canada (12.4 %), China (11.4 %) and Israel (11.3 %) while Switzerland

(8.3 %) and the USA (7.0 %) grew somewhat less strongly. Medicinal products

going off patent in the EU as well as increasing ability to compete from these

countries contribute to increased importation into the EU market.

While for the EU15 the main trading partners are developed economies, many of

the Member States who joined the Union in and after 2004 Russia remains a key

trading partner, along with other former Soviet Republics.

Finally, looking at the relative importance of intra-EU exports to extra-EU

exports shows that for the largest Member States who joined the Union in and

after 2004 (i.e. Hungary, Poland and Romania), the value of their export to the

EU is more than double than export to non-EU markets. The opposite holds for

the western and northern Member States (and, amongst those, in particular for the

Nordic Member States).



Table 1:

Extra EU-28 exports of medicinal and pharmaceutical products, top 10 trading partners, 2001, 2006, 2011 and 2016 (EUR million)

Export

Average

annual

growth

2001-

2016

8,8%

9,2%

8,3%

8,1%

21,1%

10,3%

7,5%

5,9%

8,7%

7,1%

8,6%

Share of

exports by

country

2016

100,0%

33,6%

11,4%

6,1%

5,7%

4,3%

3,1%

2,9%

2,2%

0,8%

Import

Average

annual

growth

2001-

2016

8,1%

7,0%

8,3%

0,7%

11,4%

6,5%

-1,0%

12,4%

13,5%

11,3%

17,8%

Share of

imports by

country

2016

100,0%

42,0%

34,7%

1,7%

3,9%

0,0%

0,4%

1,5%

0,4%

3,8%

3,5%

EU-28

USA

Switzerland

Japan

China

Russia

Australia

Canada

Brazil

Israel

Singapore

Source: Eurostat, Trade Statistics.

2001

40.860

12.985

4.946

2.750

466

1.428

1.513

1.771

907

434

351

2006

66.813

23.525

9.334

3.081

863

3.658

2.414

3.266

1.014

432

650

2011

103.400

30.722

11.503

6.297

3.981

7.292

3.875

3.412

2.593

762

1.220

2016

144.200

48.408

16.431

8.789

8.256

6.240

4.446

4.206

3.175

1.214

1.213

2001

23.528

11.526

7.901

1.148

578

381

193

581

227

2006

35.314

15.416

13.731

1.222

890

414

746

111

410

780

2011

53.137

19.149

19.771

1.310

2.355

326

1.002

446

1.961

2.925

2016

75.386

31.658

26.171

1.279

2.912

326

1.113

277

2.889

2.656

Foreign Direct Investments

Data Box:

FDI in development and manufacturing of medicinal products

The Financial Times, a leading global daily business and economic publication, tracks

worldwide

announcements for investments

by companies across all industries and activities through its FDI

Intelligence (FDI) database.

In this section information the focus is on pharmaceuticals and biotechnology industries with the activities

related to manufacturing and development (i.e. ‘R&D’ as well as ‘Design, Development and Testing’).



FDI data indicates that between 2003 and 2015, nearly 2,400 investments have

been announced in the activities related to development and manufacturing of

medicinal products totalling approximately USD 140 billion around the world and

creating over 275 000 jobs in 98 countries.

Investments and announcements have been primarily concentrated in a number of

the emerging economies and established markets.

Combined, the 80% of the

invested dollars have been invested in the EU (32%)

109

, the USA (24%), China

(13%), Singapore (7%), and India (5%). 76% of the global announcements took

place in these regions (see Table 2 for details).

Table 2:

Summary of Worldwide announcements of FDI projects, 2003-2016

Total value

(million USD)

total

Announcements

(number)

total

860

490

220

151

333

2,366

36%

21%

14%

100%

Jobs estimated

(number)*

total

63,469

61,646

29,476

9,353

25,579

3,019

5,894

6,436

3,075

2,306

28,426

238,679

27%

26%

12%

11%

12%

100%



EU-28

Rest of the World

TOTAL

45,086

33,322

18,495

10,307

7,516

3,397

3,197

2,236

1,999

1,331

1,058

11,241

139,185

32%

24%

13%

100%

Source: FT fDi database. *where the data is available



Within the EU, 75% of the value of FDI announcements was for the following

receiving Member States: Ireland, Germany, France, UK, Belgium, Spain and

Italy.

The vast majority of announcements concerned pharmaceuticals. Over the last

decade, 77% of announced projects in the field of medicine development and



109

The figures above take into account cross-border investments of European firms in Europe. About 50%

of the FDI in Europe is coming from Europe.

production with the value of announced capital investment amounted to 79% of

planned capital investment took place in pharmaceuticals.



There is relatively more new greenfield investment in biotechnology when

compared to pharmaceuticals. (Table 3).

Table 3:

Projects announced in pharmaceuticals and biotechnology by their type

Pharmaceuticals

Number of countries

Total announcements:

1705

Collocation (share in Total)

Expansion (share in Total)

37%

New (share in Total)

58%

Source: FT fDi database. *where the data is available

Biotechnology

517

26%

70%



The EU is very attractive as a place for biotechnology investments with the

31%

of the value announcement concerning this region. It is followed by the USA

(28.5%), China (15.4%), Singapore (6.8%), Switzerland (5.8%) and India (3.8%).

While FDI in pharmaceutical R&D and manufacturing are widely spread across

the globe (95 countries), projects in biotechnology are more geographically

concentrated (50 countries, including 18 Member States).



Location of Biopharmaceutical manufacturing sites

Data Box:

EudraGMP database

The data provides complete information on all pharmaceutical manufacturers who are compliant with

Good Manufacturing Practice (GMP). The GMP is a code of standards concerning the manufacture,

processing, packing, release and holding of a medicine. Any manufacturer of medicines intended for

the EU market, no matter where in the world it is located, must comply with GMP. We are considering

only Good Manufacturing Practice (GMP) compliance for authorized sites in the EEA and in in third

countries and

limited to ‘Manufacturing operations’. Sites that produce biological products are identify

as sites for which the certificate has been granted for manufacturing of ‘Biotechnology products

(1.3.1.5)’.

Table 4:

Global distribution of FDI projects and European GMP-compliance for biotechnology

manufacturing of medicinal products

Number of FDI

projects (2003-2015)

EU-28

193

156

Number of sites that are

EU GMP compliant

234

Note 1: Biotechnology is used to produce medicinal products for complex therapeutic purposes when they

cannot be synthesized chemically or produced in sufficient amounts from biological material by simple

extraction. Source: FT fDi database and EudraGMP database.

Note 2: The number of EU GMP compliant plants in China, India and Canada are expected to increased

(from one plant in each of those countries in 2015) in view of the number of FDI projects (47 in China, 32

in India, and 12 in Canada).

Table 5:

Overview of the biopharmaceutical R&D and manufacturing activities

Notes:

Pharmaceutical manufacturing refers to activities performed in the business enterprises which report

pharmaceutical manufacturing

as their primary activity (C21 in NACE Rev.

2 and ISIC Rev. 4. The OECD data on R&D refers to R&D expenditure statistics performed in the

pharmaceutical manufacturing

companies. Data on R&D projects comes from IMS,

R&D Focus (see Table 3 in Kyle study). IMS R&D Focus includes information on drug development projects, including the organizations involved in each project and their respective

roles. The projects are report by country of leading company headquarter. Trade statistics comes from Eurostat’ COMEXT and United Nations’ COMTRADE databases.

The focus is

on Division 54

- Medicinal and pharmaceutical products.

FT fDi Intelligence is a source of FDI data.

Pharmaceutical and biotechnology projects in ‘Life science’ cluster are taken into

account. Statistics reported refer to FDI project announcements in manufacturing and R&D -

i.e. ‘R&D’ as well as ‘Design, Development and Testing’

- of medicinal products.

Table 5

(cont.) Overview of the biopharmaceutical R&D and manufacturing activities

Notes:

Pharmaceutical manufacturing refers to activities performed in the business enterprises which report

pharmaceutical manufacturing

as their primary activity (C21 in NACE Rev.

2 and ISIC Rev. 4. The OECD data on R&D refers to R&D expenditure statistics performed in the

pharmaceutical manufacturing

companies. Data on R&D projects comes from IMS,

R&D Focus (see Table 3 in Kyle study). IMS R&D Focus includes information on drug development projects, including the organizations involved in each project and their respective

roles. The projects are report by country of leading company headquarter. Trade statistics comes from Eurostat’ COMEXT and United Nations’ COMTRADE databases.

The focus is

on Division 54

- Medicinal and pharmaceutical products.

FT fDi Intelligence is a source of FDI data.

Pharmaceutical and biotechnology projects in ‘Life science’ cluster are taken into

account. Statistics reported refer to FDI project announcement in manufacturing and R&D -

i.e. ‘R&D’ as well as ‘Design, Development and Testing’

- of medicinal products.

NNEX

12: S

TUDIES ON THE MANUFACTURING WAIVER

This impact assessment draws on eight studies that evaluate or discuss the impact of a

manufacturing waiver: one contracted by the Commission, two sponsored by generic/

biosimilar manufacturers and five by SPC-holders.



CRA (2017),

Assessing the economic impacts of changing exemption provisions

during patent and SPC protection in Europe

(European Commission)



Office of Health Economics (2018),

Review of CRA’s Report

(EFPIA)



European Economics (2018),

Impacts of Reducing Patent and Extended Protections

against Manufacturing for Stockpiling and Export

(EuropaBio)



Vicente, V., & Simões, S. (2014).

Manufacturing and export provisions: Impact on

the competitiveness of European pharmaceutical manufacturers and on the creation of

jobs in Europe.

Journal of Generic Medicines (BluePharma)



Sussell, J. A., Tebeka, M. G., Jena, A. B., & Vanderpuye-Orgle, J. (2017).

Reconsidering the economic impact of the EU manufacturing and export provisions.

Journal of Generic Medicines (AbbVie)



Roland Berger (2015),

Extension of the Bolar exemption regarding production for

export and launch preparation.

(Pro Generica)



Logendra

et al

(2017),

Assessing the impact of proposals for a Supplementary

Protection Certificate (SPC) Manufacturing Exemption in the EU.

Quintiles IMS

(EFPIA)



Pugatch Consillium (2017),

Unintended Consequences

(AbbVie, La Roche & US

Chamber of Commerce)

The table below provides an overview of these studies and summarizes the main strengths and

weakness of each of them. A detailed discussion follows.

Table 12.1:

Overview of the economic studies evaluating the manufacturing waiver

Study

CRA (2017)

Funding

European

Commission

Type of study

Quantitative : micro data

(117 molecules with expiry

dates 2015-2025)

Sensitivity analysis of CRA

Coverage

Export waiver

Stockpiling

Strengths

Assumptions well-

grounded in the literature

and supported by data

Counterfactual scenario

Office of Health

Economics (2018)

European Economics

(2017)

Quintiles IMS (2017)

also cited as Logendra

(2017)

Pugatch Consillium

(2017)

Vincente & Simoes

(2014)

Sussel

et al

(2017)

Roland Berger (2015)

EFPIA

Assumptions based on case

studies (ref. to Quintiles

IMS)

Critical review

Identifies specific barriers

to enter in 3rd countries

Biased assumptions to minimise the

effects estimated in CRA

Weaknesses

Limited data on

the biosimilar market

EuropaBio

EFPIA

Critical discussion of CRA

Case study: 25 medicinal

products (23 molecules)

Export waiver

Fails to offer solution/alternative data

to address limitations

Biased sample does not reflect reality

of SPC landscape in the EU: MA

prior enlargement, products with

invalidated SPCs.

Over-interpretation of results:

sales at risk

= ‘lost

sales’

Lack of counterfactual scenario

AbbVie, La Roche

& US Chamber of

Commerce

BluePharma

Quantitative:

approximation from global

demand for medicines

Quantitative: micro data

(55 molecules)

Sensitivity analysis of V&S

Quantitative: micro data

Export waiver

Illustrates the strong

evolution of pharma market

Assumptions base on the

information from generic

producers

Counterfactual

Export waiver

Stockpiling

Export waiver

AbbVie

Progenerica

Not transparent about assumptions

Difficult to assess as no methodological annex is available;

still, results in line with CRA

CRA (2017) Assessing the economic impacts of changing exemption provisions

during patent and SPC protection in Europe (European Commission)

The CRA estimates that an SPC manufacturing for ‘export-only purposes’ could result in

additional export sales by EU-based production of those generics of EUR 7.6bn and for EU-

based production of those biosimilars of between EUR 463m and EUR 2.97bn over 10 years.

CRA estimates, for that sample, the potential negative impact of this waiver on EU SPC

holders’ sales in EUR 139m to EUR 278m for the generics market and in between EUR

868m

to EUR 1.7bn for biologics over a 10 years period. Therefore, the net additional trade balance

for the EU pharmaceutical industry represented by the sample of CRA would be between

EUR 6 - 10bn over 10 years.

The estimations are based on the sample of 117 non-biological molecules and 17 biological

molecules whose SPC protection in Europe expires during the period 2016-2030 and earlier

in at least one of 8 third countries considered (i.e. Australia, Brazil, Canada, China, Japan,

Russia, Turkey and US) which account for 60% of the EU export in the pharmaceuticals. The

117 molecules represent 32% (by count) of all molecules whose SPCs expire in Europe

during the period 2016-2030.

To estimate the impact of the SPC export waiver to third countries the CRA deducts the

estimated sales achieved by European generics producers in third countries without the

waiver from the sales achieved under an SPC export waiver. This simplifies to the sum of

lost sales during the SPC term in Europe, plus the benefit of first mover advantage from

earlier entry under the export waiver.

In their analysis of manufacturing waiver the CRA makes assumptions about market

structure, price dynamics and sales volumes that could be achieved by generic and innovator

firms located in the EU. These assumptions are made for each export market separately and

are based on results of the studies published in peer-reviewed journals or in Reports.

Due to the lack the detailed data on the individual drug sales in export markets the CRA

made assumptions at the country level - in a way averaging over medicinal products with

different characteristics.

Another limitation is the estimation of the impact of manufacturing waiver for biological

molecules. The CRA has information on 17 molecules only. The issue is that biologic

revolution came in the late 1990s but the biosimilar entry - i.e. marketing authorization

procedures to show that the biosimilar drug is therapeutically equivalent to an already

approved original biologic drug

–

have only been approved recently: in 2006 in the EU and

in 2015 in the United States.

Underlying assumptions of CRA Study have been critically reviewed by Office of Health

Economics (2018) and European Economic (2018) Reports. The Commission has analysed

the different critical remarks. Below we discuss the main criticisms in detail.

Office of Health Economics (2018)



Claims that SPC protection is not often the longest in Europe

Relying on the finding of the case studies in Logendra

et al

(2017), the OHE claims

that only 2 out of 25 molecules expire later in the EU than in three or more non EU-

countries. However, the same case study analysis also shows that 14 out of 25

molecules expire in at least one out of six non-EU countries before the EU. Taking

into account the high volume of sales derived from one product only, plus the fact that

this sample only considers 25 molecules for only 6 export markets, we consider that

OHE does not prove that opportunities for export markets are not relevant or

significant.

Relying on the finding of the case studies in Logendra

et al

(2017), the OHE claims

that only 1 out of 25 molecules has earlier expiry date in the USA compared to the

EU. From this, it is derived that only 4% of the molecules could benefit from an

export waiver in 3

countries, implying that an export waiver would result in net gains

of only EUR 2bn. This figure has been misinterpreted by other position papers who

stated, in turn, that only 4% of molecules will have market opportunities in all third

countries. The OHE study, based only on 25 molecules expiring in the EU vis-à-vis

the USA, offers less robustness than the 117 samples examined in the CRA study,

which includes 8 different export countries.

It also needs to be noticed that OHE paper is based on the results of Quintiles IMS

study (Logendra

et al

2017), which presents biased expiry dates for SPC protection in

the Union because it includes Poland and Slovenia (which introduced SPC protection

only after 2004). Therefore, any reference to expiry dates offered by Logendra

et al

does not reflect the current situation where the SPC can be applied for in all Member

States.



Claims that estimates of markets shares are not consistent across countries

Estimations from US, Canada, Australia, & Japan come from the IMS Institute for

Healthcare

Informatics November 2013 Report on ‘The

Global use of medicines:

Outlook through 2017’,

which bases its estimations also on IMS Health Midas data

(2013). Therefore, all estimations, based on primary and secondary information, come

from the same source, IMS data.



Claims that CRA fails to take account of erosion curves for generics

Given the long-term nature of diseases treated by biosimilars, switching between

reference product and biosimilar are slower. This is why CRA puts a specific

emphasis on erosion curves for biosimilars. Switching rates between reference

products and generics are faster. Generic market erosion is not as gradual as for

biosimilars, therefore first-move advantage is likely to have a bigger impact. CRA

models the market share adapting it to the specificities of each market.

Therefore, market shares addressed in the CRA cannot be deemed incorrect, they are

modelled according to the mains dynamics which characterise each market.



Claims that potential market shares for generics in 3

countries are exaggerated

OHE refers once more to case studies in Logendra

et al

(2017) to exemplify, based on

a sample of five molecules, that the potential market share for generics is

overestimated in third countries. These five molecules are treatments for chronical use

in cardiovascular domain. Given the chronic nature of these therapies and the initiating

specialist prescription, slow generic entry is justified for these cases

110

. The market

110

Example of low take-up of Losartan in European market, same molecule used in Quintiles IMS. In this case,

low generic take-up is not only an export market characteristic, but a product characteristic:

http://www.gabionline.net/Generics/Research/Impact-of-delisting-ARBs-in-Denmark

shares of these case studies is used to reduce by 4 percentage points the market shares

put forward in the CRA study (sample of 117 molecules).

While we acknowledge market shares to be different depending on the molecule, and

the export country, we do not find justified to claim CRA market shares are not

correct, especially when comparing those to a selected sample of five molecules which

have very particular characteristics that are not representative of the overall market.



Claims that the first-mover advantage is not proven

OHE questions the validity of a first-mover advantage by arguing that this is a very

country specific effect and that it cannot be assumed to exist in other countries

different than Canada.

What literature points out, is that the magnitude of the first mover advantage depends

on different factors. The nuances will vary depending on the market context, such as

prescriber characteristics, route of administration, competitive dynamics, capabilities,

lead time and product label. First-mover advantage can be difficult to surmount, but it

is not always impossible, especially for 2

market entrants having experience and

large resources. Strong clinical developments and commercial strategies are also

important factors for determining market advantage

111

The CRA study already takes a conservative approach by estimating a first mover

advantage of limited impact: it is only estimated over two years and the magnitude is

limited. On top of that, no first mover advantage is modelled in the study when

quantifying the benefits of a possible waiver for biosimilars.

Removing completely the effect of a first mover advantage from the model is not

deemed appropriate or realistic, especially considering the already conservative

approach taken by the CRA study.

Relying on the information from case studies discussed in Logendra

et al

(2017) OHE revises

downward the CRA estimates: for the generic gains on export from EUR 7.6bn in CRA down

to EUR 1.3bn and on the potential losses for SPC holders from EUR 139m in CRA up to

EUR 573m according to OHE. This recalculation by OHE does not, however, contradict

CRA’s conclusions: namely those generic gains on exports

- and losses for SPC holders will

largely compensate any potential losses for the SPC holders.

In 2018,

Europe Economics,

sponsored by EuropaBio, published another review of CRA’s

study. This study offer critique similar to the OHE (2018) but no alternative quantification is

provided. The final conclusion of Europe Economics (2018) is that CRA study could be

overestimating the benefits of an export waiver, but their main concern is the possibility that a

manufacturing waiver will undermine the sustainability of protection against stockpiling.

The issue of the sustainability of protection raised by industry is not addressed in the CRA

report, since it was not the objective of this study, but it has been properly addressed in this

impact assessment with the possibility of introduction of anti-diversion measures.

111

https://www.mckinsey.com/industries/pharmaceuticals-and-medical-products/our-insights/pharmas-first-to-

market-advantage

Logendra

et al

(2017) Assessing the impact of proposals for a Supplementary

Protection Certificate (SPC) Manufacturing exemption in the EU, Quintiles IMS

Analysing 25 case studies, Logendra

et al

(also quoted as Quintiles IMS), sponsored by

EFPIA, argues that there would be potential losses to European originators in the form of

decreased export value for the EU, if an SPC manufacturing exemption is introduced. This

study argues that an export model based on a ‘SPC manufacturing waiver’ would not yield

much result for different reasons.

Several arguments are brought to justify their claims: 1) market opportunities for generics in

countries are little; 2) European generics will erode sales of European innovative products

in 3

countries because they will compete on the European brand; 3) the potential

opportunities for molecules having a later expiry date in the EU than in the rest of the world is

very limited; 4) API production is already located in a cost-efficient way.

1) One of the main critics of the study is that opportunities for generics in 3

countries are

few, mostly because of high take-up of local generic products in 3

countries, incentivized by

localization policies. In order to support its argument, the authors present case studies of five

molecules for chronic use in cardiovascular diseases in 4 different market shares.

This factor is already acknowledged in the CRA study, which presents a sensitive analysis

reducing the possibility of export for European generic firms in 3rd markets (see pages 121

and 132 of the CRA Report). The final impacts show that when assuming that sales of

European generic firms can only attain 10% market share in 3rd markets, the additional sales

obtained are only 12% (for generics) and 5-6% (for biosimilars) lower than the original

estimates.

Firstly, while the few case studies that Quintiles show that different market shares might exist

depending on the molecule, they fail to provide solid justification on why the estimation

provided by CRA is not valid.

Secondly, if new European generics cannot enter export markets, European innovators should

not experience any erosion. An export waiver in any case would then create a substitution

effect between generics to the advantage of EU generics by speeding the entrance of

European generic in export markets.

2) The study presents the idea that European generics will mostly take sales at the expense of

European innovative companies, by competing with branded generic products in 3rd countries

post patent expiry. The report grounds this argument on few case studies which show that

originators’ brands retain some volume share after patent expiry. From this evidence, it is

extrapolated that generics manufactured in the EU would capitalise on their ‘European brand

value’ and go on to compete with originators’ exports.

On one hand, considering the chronic nature of the diseases represented by the molecules

analysed by Logendra

et al,

one could expect a low rate of switching between the reference

product and the generic (whether that generic were imported from the EU or from another

developed country, or produced locally), as patients’ established medication is not easily

subject to switching (this phenomenon can also be observed in the EU).

On the other hand, where significant market opportunities are expected, the Logendra

et al

study

does not take into account that originators’ exports would anyway face competition

from branded generics produced in other developed countries such as Canada, or generics

production outsourced by EU firms to non-EU countries.

3) The report argues that SPC protection expires earlier in a sample of analysed Member

States than in export markets. A close look into their data shows that more than 50% of the

molecules considered have an earlier expiry date in a non-European country. In addition, it

needs to be noticed that earlier SPC expiry in the chosen EU sample is due to the inclusion of

Poland and Slovenia (which introduced SPC protection after 2004). As this means that this

study relied on now-outdated data, its conclusions are no longer valid.

4) Finally, the study argues that APIs are currently sourced mostly from China and India

because of cost-effectiveness decisions. However, the study fails to acknowledge that this

competitiveness advantage is reducing over time

112

. This proposal does not aim to promote

European API production per se, but to ensure that if this competitiveness advantage from 3rd

countries currently supplying API disappears, Europe will not be constrained by regulation to

keep importing from less cost-efficient countries.

Pugatch Consilium (2017) Unintended consequences

The Pugatch study (2017) sponsored by AbbVie, La Roche and the US Chamber of

Commerce estimates that with an EU SPC manufacturing waiver between USD 1.34bn to

USD 2.27bn of annual exports of European originators (0,61% to 1.04% of their total global

sales, corresponding to 4.600 to 7.750 originators’ jobs in the Europe) would be exposed to

generic and biosimilar competition in export markets.

On one hand, this study seems to assume that all innovators sales open to competition are

sales at risk. This assumption would imply that currently SPC-holder do not face competition

from other countries in 3

markets on the off-patent period. As Logendra

et al

(2017) study

shows, currently European generic firms face strong competition from the rest of the world.

On the other hand, the study seems to suggest that the totality of sales at risk, are potential

sales which can be lost because of the increased competition of the export waiver. As

reasoned above, it is unrealistic to assume that the totality of EUR 1.34bn

–

EUR 2.27bn will

be lost, because they are already currently open to competition from other non-European

countries, and because the waiver would also benefit their own EU-based manufacturing of

biosimilars and generics (for exports and EU

day-1

entry).

The Pugatch study attempts to quantify the potential job losses that could be derived from the

export waiver. In order to do so, they assume that the reduction of R&D jobs will be by the

same magnitude that the share of sales at risk

–

0.61

–

1.04%.

Finally, the Pugatch study fails to acknowledge that, as shown in Annex 5, the waiver will

also benefit EU-based generics & biosimilars branches of originators as most biosimilars

approved by EMA and FDA as of December 2017 are commercialised by the main innovative

companies (originators).

Vicente and Simões (2014). Manufacturing and export provisions: Impact on the

competitiveness of European pharmaceutical manufacturers and on the creation

of jobs in Europe. Journal of Generic Medicines

In 2014, the

Journal of Generic Medicines

published a study by Vicente & Simões, sponsored

by the European generics and biosimilars association (Medicines

for Europe).

This study

analysed the potential impacts of introducing a manufacturing and an export waiver in the EU.

112

Competition in the World API’s market, Chemical Pharmaceutical Generic Association, 2015.

Based on a sample of 55 generics, 5 European markets (France, Germany, Italy, Spain and

UK), and considering only export markets in Latin America, the implementation of an SPC

manufacturing and export waiver would create 8 890 direct jobs and 30 000 additional

indirect jobs within 8 years. Disaggregating both effects, manufacturing provision only

accounts for the creation of 8 000 jobs direct jobs, 24 000

–

32 000 indirect jobs.

The methodology behind the study relies on the first mover advantage. Considering the

limited sample and the omission of a counterfactual, generalisation of these results should be

taken carefully. Even though this study presents some limitations, such as lack of evidence for

the parameters provided or the omission of a counterfactual, its merits lies on settling the

grounds for a controversial debate, which was later replicated by others researchers.

In 2017, the

Journal of Generic Medicines

published a study by

Sussell

et al,

financed by

AbbVie, that replicates the model used in the study of Viente & Simoes (see above), applying

a number of adjustments. Those adjustments include an arithmetical correction

113

, the

introduction of a counterfactual

114

, a revision of the parameters and a sensitivity analysis.

While some of these adjustments are well justified - such as the arithmetical correction or the

introduction of a counterfactual

–

others (e.g. the revision of the parameters) present the same

weaknesses since no clear evidence is presented to justify their validity

115

This study considers that the effects of an SPC manufacturing waiver would be smaller those

reported by Vicente & Simoes (2014): 30% less additional production in the EU and 1.898

new direct jobs (and 6,642 new indirect jobs). The results of the study were also notorious

because under some scenarios, the authors claim that the number of job losses in the

innovative sector could be higher than the job creation in the generics sector. However, this

result relies on an important assumption: after patent expiry, competition of generics will not

drive prices of innovative products down, thus post-patent innovative products will be sold at

their pre-generic price. Evidence shows that, while branded generic products can hold a

higher price than generics after patent expiry, market competition drive prices down once the

patent has expired

116

. It also needs to be observed that, in order to obtain a negative net effect

on job creation, the authors compare an upper bound estimation of 2,490 jobs loss in the

innovative sector (as acknowledge by the authors) with a lower bound for the creation of jobs

in the generic sector (1,890 jobs).

Based on the limited evidence provided by Sussell

et al

as regards their estimates and the type

of calculations used, no robust results can be inferred on positive or negative net effects on

job creation. The study only offers a counterfactual and arithmetic correction and alternative

parameters which are used as a robust test to criticise Vicente and Simoes study.

113

In their arithmetical calculation, Vicente & Simões (2014) duplicate the business volume to be captured by

generics after the 3rd of patent expiry. This leads to an overestimate of the calculations.

114

Predicted decrease of market share due to one month delay after entry of 1

generic manufacturer is taken

from the results of Hollis

et al

(2002).

Robustness checks are a valid and a common measure to validate the results of obtained through models.

However, usually some insight or reasoning is given in order change the parameters. In this case, Sussell

et al

not offer any explanation which justifies the magnitude of the variation of the parameters.

Copenhagen Economics, ‘Study of the economic impact of supplementary protection certificates,

pharmaceutical incentives and rewards in Europe’.

116

115

Roland Berger (2015) Extension of the Bolar exemption regarding production for

export and launch preparation

In 2015, Roland Berger consultants finalised a study contracted by Progenerika (the German

association of generic manufacturers) that estimates the highly positive impact of a

patent/SPC manufacturing waiver for export purposes in additional EUR 4.7bn exports for the

German industry over a decade and additional 6 900 jobs.

NNEX

13: N

UMBER OF MARKETING AUTHORIZATION

EFERRED TO IN

SPC

APPLICATIONS

Table 22.1: Number of marketing authorisations (MA) granted between 1995

and 2014 that have been listed in SPC applications

Year of 1

in the EU

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Total:

MA with SPC

(all)

755

MA with SPC

(Biologicals only)

124

Source: Alice de Pastors database and EMA website.

NNEX

14: P

ATENT CLIFF AND GEOGRAPHICAL SCOPE OF

SPC

PROTECTION

Graph 23.1: Number of SPC bundles and the geographical scope of protection in the EU

Number of EU MS

Number of EP

2005

2010

2015

year

2020

2025

the end of basic EP term

the end of SPC

average number of MS where basic EP was validated

Note: The Graph shows the number of SPC bundles by the year of patent term expiry (solid red line)

and the year of the SPC expiry (dash red line). Solid black line shows the average number of Member

States where the basic patent has been validated. There are two periods where the patent term ends for

substantial number of patents

–

60 and above - i.e. 2010 and 2021. The black line shows that the

geographical coverage of protection in the EU is increasing over time indicating that the SPC

protection in the EU is getting mainstreamed.

The data used to develop this graph comes from the Alice de Pastors database. We consider only those

SPCs that were applied with reference to EP patent. We exclude SPC that were rejected in the granting

process or withdrawn by the applicant. Similar to Annex 10, we count distinct

basic patent-product

pairs

for which the SPC was applied for in the EU (i.e. number of SPC bundles). As the expiry dates

differ from one Member State to another, for each

basic patent-product pair

we assume that SPC

expires 3 years after the end of patent term.

The geographical scope of protection is the number of countries where the SPC was applied for the

same basic-patent product pair. The average shown in the graph should be considered as a lower

bound for the following reasons. First, Member States are not obliged to cite the EP patent application

number. Second,

for 20% of the products the SPC was applied for with reference to more than one

basic patent in at least one Member State and we are not able to identify the product patents.

Finally,

depending on patent availability the same product may be protected by two different patents

in two different geographical regions.

To illustrate the point, the graph shows that average geographical scope of protection with the basic

patent terms expiry in 2024 is about 13 Member States. Still, according to Mejer (2017) and Kyle

(2017) the average geographical scope of SPC protection for the medical products approved in 2014

was about 20 Member States.

NNEX

15: I

MPACT OF A POSSIBLE

SPC

MANUFACTURING WAIVER ON

R&D

IN THE

Originators / SPC holders

Classical medicines

(non-biologics /

‘small molecules’)

G/B manufacturers

Biologics

Generics

Low

(no need for clinical

trials; minor risk of

failure; EUR 2-3 m

development cost)

Biosimilars

R&D

requirements

Very high

(need for clinical trials; up to EUR 2 000m per

medicine; high risk of failure)

For biologics: Mixed location factors as

manufacturing and R&D tend to be co-located

- Many factors other than IPR-related (e.g.

skills, tax incentives) determine R&D

location and EU will remain attractive due to

excellent ecosystem and infrastructure to

conduct R&D.

- Other EU pharmaceutical-specific incentives

will not vary with the waiver (e.g., orphan

incentives).

- The global IPR protection and enforcement

framework in the EU remains the strongest

worldwide;

High

(need for some

clinical trials;

medium to high risk

of failure; up to

EUR 300 m R&D

cost)

Positive impact is

expected since, for

biosimilars, as R&D

and manufacturing

tend to be co-located.

Impact of a SPC

manufacturing

waiver on R&D

conducted in the

High positive impact

is expected since the

waiver would help

retain and promote

generics

manufacturing in the

EU.

NNEX

16: SME T

EST

The Union aims to improve the overall approach to entrepreneurship, and has permanently

anchored the ‘Think Small First’ principle in

policy making to promote growth of SMEs (and

start-ups in particular). SMEs are the backbone of the EU economy, creating more than 85%

of new jobs in Europe. Also in the pharmaceutical sector, SMEs play a key role.

The potential impacts of the proposed initiative on SMEs have therefore been considered;

they are reported throughout the impact assessment and below in an aggregated format.

This impact assessment and the preferred policy option have taken into account the

pharmaceutical SMEs, and an SME-test has been conducted in line with the 4-steps foreseen

in the Commission’s Better Regulation

policy.

Step-1: Identification of affected businesses

There are various types of SMEs active in the pharmaceutical sector. For the purpose of

assessing the effects of this proposal, the following types of SMEs active in the

pharmaceutical sector can be distinguished:

1. SMEs engaged in manufacturing activities related to generics and biosimilars

They include companies manufacturing on their own behalf as well as companies

working as a subcontractor (e.g. such as contract development and manufacturing

organisations, ‘CDMOs’).

2. SMEs engaged in research supporting the development of biosimilars

117

;

3. SMEs engaging in R&D with a view to developing innovative pharmaceutical

products (i.e. potential future SPC holders), and SMEs manufacturing those products.

The SMEs covered by points 1 and 2 above are the main beneficiaries of the proposal. The

impact of the proposal on SMEs covered by point 3 needs to be assessed.

SMEs engaged in manufacturing activities related to generics and biosimilars

According to Eurostat, in 2015 in the EU28 there were 3 724 SMEs active in pharmaceutical

manufacturing, representing 88% of the firms and 22% of the workforce, in the

pharmaceutical sector

118

. This includes only those SMEs whose primary activity is

pharmaceutical manufacturing

119

, and does not necessarily capture SMEs specialized in other

activities

120

such as pharmaceutical R&D, commercialisation of generics

121

or innovative

products (for the later type of SMEs see data below).

117

As explained in the impact assessment, biosimilars are highly intensive on R&D investments (in the range of

several hundred million euro per molecule).

118

Annex 4, 7 and 11 of this impact assessment describe more general the pharmaceutical sector and its weight

in the EU economy (export, employment, FDI).

119

120

It includes both SMEs manufacturing original as well as generic/biosimilar products.

Another statistical source of pharmaceutical SMEs (not limited to manufacturing activities) in the EU is the

pharmaceutical sector in the EEA having the SMEs status. This presents a sharp increase (10 times more than in

2006). Pharmaceutical enterprises can apply for SME status at the EMA before requesting financial or

A high number of SMEs manufacture generics in the EU, and to a lesser extent biosimilars

(the 1

biosimilar was approved in the EU in 2006, and biosimilars require higher investments

and risks

122

Recent decades have seen a steep shift towards outsourcing of manufacturing to reduce the

risk of onerous overcapacities. Thus, manufacturing outsourcing to ‘contract development and

manufacturing organisations’ (CDMOs) represented a USD 62bn market in 2016. Industry’s

annual growth rate was almost 7% (slightly above the growth of the pharmaceutical sector as

a whole which is almost 6%)

123

. Despite an on-going trend towards concentration in the

CDMO sector, it still remains fragmented with a majority of CDMO being privately owned

(small family-run or mid-market companies).

Export performance of European SMEs: the Table below provides an overview of exporting

activities by SMEs focused on pharmaceutical manufacturing. About half of the 3,724 SMEs

in pharmaceutical manufacturing (i.e. 1 765 firms) are exporting, 77% of these exporting

companies export outside the EU.

The exporting activities of these SMEs vary from one Member State to another. The share of

exporting firms is the highest in Germany, Belgium, Austria and Spain (with more than 60%

of SMEs exporting outside the country of production) and lowest in in Poland, Denmark or

UK (less than 35%). Exporting SMEs in Poland, Hungary, Austria and UK are relatively more

focused on the EU market than non-EU

124

. In 2015 about 40% of the turnover generated by

SMEs has been exported out of this 50% outside the EU. SMEs in Denmark, Hungary and

Spain exported more than 50% of their turnover.

Table 16.1: Overview of EU SMEs activities in pharmaceutical manufacturing, 2015

Number of SMEs

Total

459

296

Exporting

362

197

Exporting

68%

70%

48%

79%

30%

60%

67%

Exporting

outside

262

177

exporting

outside EU

68%

74%

79%

72%

89%

78%

90%

Turnover

(EUR m)

n.a.

806

278

4916

357

764

3904

Export by SMEs (EUR

Total

1234

275

111

1323

182

2396

Extra-EU

644

630

1227

administrative

assistance

from

the

EMA.

For

https://fmapps.ema.europa.eu/SME/search_advanced2.php

121

the

EMA

SME

see:

Of the 282 SMEs in the EMA register that gave their consent to publish their data, 247 are developing and

commercializing generic medicines (of which 70 SMEs in ‘early manufacturing/Research & Discovery stage’,

76 in ‘development stage’ and 195 in ‘Commercialisation/Marketing

stage (EU/Non-EU)).

122

According to the Eudra GMP database 234 sites in the EU are GMP compliant for biotechnological

manufacturing. This is much smaller than the overall number of 4 000 of pharmaceutical manufacturing

companies as reported in Eurostat (cf. Annex 11).

123

http://www.ey.com/Publication/vwLUAssets/ey-study-opportunities-in-the-consolidating-cdmo-

industry/$File/ey-study-opportunities-in-the-consolidating-cdmo-industry.pdf

124

This is under the assumption that all companies which export outside the EU also trade within the EU.

100

Total

274

n.a.

394

208

301

127

121

138

531

133

234

102

176

49%

38%

41%

n.a.

59%

49%

27%

39%

36%

46%

33%

125

195

120

94%

100%

65%

77%

83%

59%

62%

74%

84%

83%

68%

n.a.

246

n.a.

6661

1371

444

622

368

725

2527

733

127

5130

2366

736

144

226

270

1195

294

4518

1081

170

167

756

9909

3372

1765

1362

24051

16691

Source: Eurostat. Only Member States for which data is available are included in the Table.

- SMEs engaged in research supporting the development of biosimilars

In the EU, biosimilars are evaluated by the EMA (annex 5 shows that, so far, only 36 have

been authorised in the EU).

The EMA SME-register shows that 23 SMEs are registered under the product category

‘biosimilars’, 9 in ‘early manufacturing/Research & Discovery stage’

125

, 14

in ‘development

stage’

126

, and

13 in ‘Commercialisation/Marketing

stage (EU/Non-EU)’

127

- SMEs doing research with the view to view to developing innovative pharmaceutical

products (i.e. potential future SPC holders)

In the field of pharmaceutical innovation, start-ups and SMEs are playing an important role,

especially

in the initial steps of innovation. The Commission’s pharmaceutical sector inquiry

reported that approximately 25% of molecules in clinical development were acquired from

other companies, including SMEs. This shows that pharmaceutical companies are

increasingly externalising their R&D. According to EBE, when the EMA analysed the origin

of new medicines, 27% of all new medicines, and 61% of new medicines for orphan

indications originated from SME. Newer figures confirm that significant medical innovation

comes from SMEs. The cumulative figures from the EMA’s PRIME scheme indicate that

44% (15 out of 34) of PRIME applications granted in 2017 came from SMEs.

The SMEs register of the EMA has 185 SMEs registered with a focus on new

formulations/delivery methods, and 2 SMEs developing complex biologically derived

proteins and peptides. We can observe a high number (256) of SMEs specialised in orphan

treatments (these category of SMEs especially relies on orphan incentives, under Regulation

125

These 9 companies are located in BE (2 employees), FR (3 employees), ES (201 employees), DE (68

employees), PL (102 employees), HU (two companies with 38 employees), IE (85 employees), and AT (69

employees).

126

These 14 companies are located in CY (85 employees), UK (11 employees, 83 employees ), BE (2

employees, and 18 employees) FR (3 employees), ES (201 employees), DE (68 employees, and 26 employees),

PL (102 employees), HU (two companies with 38 employees), IE (85 employees), SE (10 employees) and AT

(69 employees).

127

These 13 companies are located in GR (1 employee), CY (85 employees), DK (5 employees), SI (13), DE

(three companies with 47, 7 and 26 employees), PL (102 employees), HU (two companies with 38 employees),

IE (85 employees), LV (1 employee and 5 employees).

101

(EC) No 141/2000 on orphan medicinal products, for their investments in innovation). We can

also observe a high number, 118, of SMEs specialised in paediatric treatments. 77 of these

SMEs are also involved in orphan treatments, with a majority of them having less than 10

employees. 159 SMEs are registered as active in the medical devices field.

IP protection is very important for these SMEs. The European Patent Office (EPO), for

instance, has produced a series of case studies on European SMEs, including SMEs dealing

with biotechnology and medical devices, which are leveraging the power of patents and other

IP rights to achieve business success. The resulting case studies illustrate how new and

established SMEs have developed the IP management capabilities they need, and how they

are using IP to their advantage.

Step-2: Consultations that captures the SME angle

This impact assessment has been elaborated paying due consideration to all inputs provided

by stakeholders. The SME angle has been taken into account throughout the consultation

process, visits to industrial sites, bilateral meetings, and the participation of the Commission

services in seminars/round tables, as explained below.

Commission’s public

consultation on SPCs and patent research exemptions

This public consultation included a set of six specific sub-questionnaires for the six groups of

stakeholders, including (II) originators industry/associations and (III) generics and biosimilars

industry/associations, both of which included SMEs.

The questionnaires addressed to these industrial-related stakeholders (groups (II) and (III)

above) included identification-related questions allowing for the identification of submissions

corresponding to start-ups and SMEs. In the case of SMEs, following the EU definition of

SME (Small/medium company (except start-up), fewer than 250 employees, annual turnover

of EUR 50m or less, and annual balance sheet of equal to EUR 43m or less) and start-up).

The statistics corresponding to respondents identified as SME or start-up profiles are the

following:

Among the 63 respondents defining themselves as mostly manufacturers of

generics/biosimilars (group III), 12 respondents identified themselves as an SME and

1 as a start-up. The table below reflects the answers of those 13 SMEs and start-ups

(they are anonymised) to the questions related to the problems defined in the impact

assessment (and related questions).

Yes

N/A

Yes

Anonymised

respondents

Agreement with

problem 1 (export

losses)?

Agreement with

problem 2 (EU

day-

1)?

Over-reliance on

import of APIs?

SPC triggers

delocalisation?

Biosimilar R&D

and manufacturing

tend to be placed

together?

Yes

N/A

Yes

N/A

Yes

N/A

Yes

N/A

Yes

N/A

Yes

N/A

Yes

N/A

Yes

N/A

Yes

N/A

Yes

N/A

102

Among the 71 respondents defining themselves as mostly originators (group II), only

2 respondents identified themselves as an SME involved in medicines biotechnology

and one as a start-up in the field of biopesticides. The table below reflects the answers

of those 3 companies (they are anonymised) to the questions related to the problems

defined in the impact assessment (and related questions):

Do you agree with problem 1

(loss of export)?

Do you agree with problem

2 (EU

day-1)?

No answer (N/A)

Yes

N/A

Are problems 1 and 2 more

relevant for biosimilars?

N/A

Yes

SME respondent 1

(biologics)

SME respondent 2

(start-up biotech)

SME respondent 3

(biopesticides)

Yes

N/A

In addition, several European pharmaceutical associations such as Medicines for Europe,

EUCOPE, EBE, and EuropaBio conveyed the views of their start-ups and SME members in

their submissions and accompanying letters sent to the Commission during the public

consultation. A few national pharmaceutical associations with start-ups and SMEs-members

also provided their views.

ii)

Max Planck Institute’s SPC stakeholders consultation

The terms of reference for the study on the legal aspects of the SPC that the Commission

contracted to the Max Planck Institute (MPI) flagged the need to pay attention to the needs of

SMEs in biopharmaceutical sector. The final report of the study discusses a few aspects of the

SPC that specifically affect SMEs (e.g. the issue of ‘third party holders of marketing

authorisations’, the scope of the Bolar exemption regarding third party

supply of APIs that

seems to affect especially to SMEs). Some SMEs and universities replied to the consultation

launched by MPI in the context of the study. Some respondents to the consultation highlighted

the potential benefits of a manufacturing waiver for SMEs

128

iii) Visits to premises of pharmaceutical SMEs

As part of the Commission services’ SME experience, a representative of DG GROW

involved in this initiative visited two pharmaceutical SMEs in Barcelona in November 2015.

iv) Participation of the Commission in round tables and seminars

The Commission was active in participating in events organised, or co-organised, by

representatives of pharmaceutical SMEs, as follows:

12th EGA Legal Affairs Conference, 8-9 March 2016, Brussels

European Parliament SME Intergroup in cooperation with Medicines for Europe,

Boosting SMEs through the Supplementary Protection Certificate (SPC) Waiver, 27

September 2017

EuropaBio’s roundtable on ‘The important role of SMEs in fostering healthcare

biotech innovation’, 28 September 2017

Question

67 of the questionnaire addressed by the MPI and the IfD Allensbach to industry asked: ‘What do

you think of the idea of introducing such an ‘SPC waiver’?’ cf. Annex to the Final Report.

128

103

EUCOPE Members’ meeting: revision of the EU framework for SPCs, 17 October

2018

Bundesverband der Pharmazeutischen Industrie

(BPI) 10th parliamentary evening

‘Sustainable Healthcare Systems and a competitive pharmaceutical industry –

mission impossible?’ on 18/10/2017

Presentation on SPCs

–

at an event organised by White&Case, which counted with the

participation of pharmaceutical stakeholders such as EUCOPE, 3 November 2017

Small and Medium Entrepreneurs of the European People’s Party, in cooperation

with

EUCOPE, ‘How to foster Europe as an R&D hub of pharmaceutical SMEs?’, 28

November 2017

European Parliament - SME Europe, in cooperation with the European Association for

Bioindustries: The Future of Medicine: Promoting an Innovative Ecosystem to

Position. European Biotech SMEs at the Forefront of Cutting-Edge Science, 11 April

2018

Workshop at the European Parliament ‘Boosting

jobs, growth, competitiveness and

consumer rights in Europe through the Supplementary Protection Certificate

Manufacturing Waiver’ organized by EPP in association with Polish Union of

Employees in Pharmaceutical Industry on 21 February 2018

The Commission representatives have attended additional workshop on issues related to the

SPC, that involved SMEs, organised

inter alia

by the Permanent Representations before the

EU of Denmark, Hungary and Poland, (bio)Pharma Ireland high-level seminar in Brussels,

EuropaBio Healthcare Council meeting attended by senior industry representatives, or the 7th

European Innovation Summit in the European Parliament (with EuropaBio as co-organiser).

v) Bilateral meetings of the Commission representatives with pharmaceutical industry

representatives

Commission representatives have had numerous bilateral meetings with representatives from

the pharmaceutical industry, who conveyed the position of pharmaceutical SMEs involved in

manufacturing of generics and biosimilars and innovative medicines.

vi) Letters send by SMEs and start ups

Following the publication of the Single Market Strategy in October 2015, and especially in

the context of the public consultation on SPCs, international, European and national

pharmaceutical associations with significant members representing SME, start-ups and

universities sent letters to the Commission stating their position on the SPC manufacturing

waiver (confirming the position provided by the SPC-holders, generics and biosimilar

manufacturers during the public consultation). These associations included the International

Council of Biotechnology Associations (ICBA), Medicines for Europe, The European

Biopharmaceutical Enterprises (EBE), European Confederation of Pharmaceutical

Entrepreneurs (EUCOPE), Aschimfarma, BioM Biotech Cluster Development, and BIO

Belgium.

Step-3: Measurement of the impact on SMEs

The impact assessment analyses a number of policy options, which pay particular attention to

the SME-angle.

The baseline scenario (status quo/option 0 of the impact assessment)

104

policy action

would continue to result in a number of negative consequences for

manufacturers of generics or biosimilars (loss of competitiveness), especially for SMEs that

manufacture in the Union (either on their own behalf or as a subcontractor). Manufacturers of

generics and biosimilars highlight that SMEs cannot easily circumvent the unintended

consequence of lack of an intellectual property protection level playing field, vis-à-vis non

EU-based competitors, by delocalising production. SMEs have less financial resources and a

more limited negotiating position when it comes to outsource production to third countries.

Some large manufacturers of generics and biosimilars can make use of their factories located

in third counties with shorter or no SPC protection to duly enter export markets and the EU

day-1

market.

Therefore, not doing anything would especially affected to EU-based SMEs in the generics

and biosimilar sector.

New had-hoc licensing measures

SME might also not have the same negotiating position when negotiating license fees with

SPC-holders as larger companies, nor can easily engage in a process of application for a

licence

129

as the decision of the granting authority could be subject multiple administrative

and judicial appeals until the decision is firm potentially years after the upfront investment in

manufacturing is needed.

Cutting down the duration of the SPC

As indicated by associations representing SPC-holders, a reduction of the term of SPC

protection would have a direct negative impact on the ability of SMEs active in R&D and/or

manufacturing of original products to secure sufficient funding.

Soft-law approaches (including voluntary agreements) (option 1 of the impact assessment)

As explained in the main text, soft law approaches have already been tested at national level

but are considered not effective. They might be of very little interest in particular for SMEs

that engage in generics and biosimilars manufacturing. SMEs cannot advance investments or

make them subject to subject to future case-by-case agreements, in particular not where

complex products like biosimilars are at stake. In general, SMEs are less resilient to

uncertainty.

For SMEs, voluntary agreement could only work if there were to be a strong involvement of

public authorities (national authorities and/or the Commission) to support the participation of

SMEs in these types of initiatives. SMEs have limited human resources to engage in

cooperation agreements with third parties, and their negotiating position vis-à-vis large

companies holding SPCs might be limited.

SPC manufacturing waiver for export and/or stockpiling purposes, without anti-diversion

measures (option 2 to 4 of the impact assessment)

A manufacturing waiver, as a statutory targeted derogation from the scope of protection of the

rights conferred by the EU SPC, would exempt from SPC infringement those acts directed to

the manufacturing of generic and biosimilar medicines for the purposes of export and/or

stockpiling. According to the impact assessment, this statutory derogation would be the most

effective and simplest option to tackle the problems identified in the impact assessment. This

129

E.g. Italian

Decreto legislativo

of 10.2.2005,

n. 30, articoli 81 e 200.

105

would be especially true for EU-based SMEs manufacturing generics and would be measured,

given their financial, resources and negotiating position limitations, as discussed above.

Throughout the consultation process, associations of SMEs engaged in the research and

development (and sometimes manufacturing) of original products (in particular biotech

products) have expressed concerns that the introduction of a manufacturing waiver would

dilute SPC protection and therefore dilute the financial rewards they would receive for their

inventions, as well as their possibility to get funding for their innovative R&D. In particular,

representatives of innovative SMEs have expressed the concern that policies reducing the

value of their IP will have direct impact on SMEs’ ability to secure sufficient funding.

In practice however, these concerns appear to be overstated. As demonstrated in this impact

assessment, the economic impact on originators of the introduction of an export waiver is

minimal. SPC holders maintain full market exclusivity in Europe during the term of the SPC

protection, which on average is amongst the highest in the world. They will, as a result of the

waiver, face an increased competition in unprotected markets. However, such competition is

increasing anyway (even if it does not come from EU-based manufacturers of medicines, then

it comes, or will come, from manufacturers based in third countries).Given that the likely

negative impact of the export waiver on SPC holders is limited, it should not adversely affect

SMEs engaged in R&D and manufacturing activities.

In addition, given that the scope of a manufacturing waiver proposal is clearly confined and

limited, there should be no grounds to assume that access to capital is affected by ‘regulatory

uncertainty’.

The table below comprises a ‘competitiveness analysis’ of the policy option of introducing a

manufacturing waiver for export (Option 2) and stockpiling (Option 3) in EU legislation, from

the perspective of SME:

Table: Impact of Options 2 and 3 on SMEs

SME type

Option 2:

Export waiver

SMEs

with

EU-based

manufacturing activities in

generic and biosimilars

The potential window of opportunity for

exporting European generics to non-

European markets without SPC protection

prior to European SPC expiry is no

negligible as the SPC protection in the EU

extent the patent life on average of 3.5

years.

The waiver will lift the barrier allowing

for additional investment in the local

production or more efficient use of

manufacturing capacity for primary (APIs)

and secondary manufacturing.

The waiver is also expected to improve

access to the APIs and make the supply

chain stronger.

40% of the SMEs manufacturers of

medicines in the EU (1 362 firms) who are

currently exporting outside the EU will

directly benefit from this measure.

Part of the 60% SMEs not currently

engaged in extra-EU export might scale up

Option 3:

Stockpiling waiver

For SME manufacturers that are

currently not exporting outside

the EU, and do not plan to scale

up to export outside the EU, a

stockpiling waiver would assist

in scaling up production to be

ready for timely entry into

domestic or to other Member

State market upon SPC expiry.

106

production for export purposes taking

advantage of the export waiver.

Indirectly, the export waiver will support

SMEs who currently export outside the

EU, and those that will take advantage of

the export waiver to scale up production

for extra-EU export, and scale up

additional production as of EU

day-1.

SMEs with EU-based R&I core

activities



For innovative products, there should be very little to no impact on

the reward to innovation (given that SPC holders maintain the core

of their SPC rights and are exposed to a limited additional

competition only). Thus, any negative impact on innovation

incentives and the possibility to get funding should be minimal.

For biosimilars, a legal barrier to investment in generics/biosimilars

production in the EU would be lifted. This would have a huge

positive impact on biosimilars R&D, which might otherwise

delocalise (given that for biosimilars R&D and manufacture tends to

happen at the same location)



Note: The qualitative impact on competitiveness in terms of exports and job-creation is analysed in detailed in

the impact assessment and its annex on the studies (Annex 12). For the general assessment of options see Section

7 of the impact assessment

Foregoing option with anti-diversion measures

While opinions differ regarding the risks of diversion, anti-diversion measures could usefully

be envisaged in order to minimise any additional risk of diversion and provide additional

transparency. The impact assessment identifies two preferred anti-diversion measures: a

special labelling requirement and a once-off notification of manufacturing under the waiver in

each Member State of making.

In order to benefit from the manufacturing waiver with anti-diversion measures,

manufacturers of generics and biosimilars, including SMEs, would need to comply with

additional labelling requirements, and bear additional administrative costs related to

submission of a notification to a public authority.

These anti-diversion measures might not have a positive impact on micro and small SMEs if

the cost of the measure or its implementation procedures were cumbersome and of uncertain

outcome. The pharmaceutical sector is already highly regulated; SMEs need to comply with

the EU strict general regulatory rules, and specific anti-falsified medicines rules as large

businesses do. Additionally, the pharmaceutical sector, especially the originators and

biosimilar ones, can be highly capital intensive. Therefore additional cost of compliance

should be minimised, considering the limitations faced of SMEs.

A proxy to estimate the cost of labelling can be found in the Commission’s evaluation of

Regulation 953/2003 to avoid trade diversion into the EU of certain key medicines

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That

evaluation found that a pharmaceutical company incurred costs of up to EUR 200 000

between 2003-15 for adding a logo on its packs. However, that cost included fees of EUR

100 000 derived from the obligation of getting regulatory authorities to amend/extend

marketing authorisations for the medicines due to a change of packaging, which would not be

necessary for the notification scheme proposed in this initiative. Deducting that figure, the

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cost of labelling on the basis of this initiative would amount to a cost of EUR 10 000 per year.

Given that the total turnover of SMEs active in the pharmaceutical sector in 2015 was

EUR 24bn, with average per SME of EUR 8m, the labelling cost would impose the cost equal

to around 0.1% of annual turnover. Therefore, the potential impact of those safeguards on

SMEs is low and would not significantly increase the cost of production. In this light, and

given the need to protect originators against illicit diversion of IP-infringing products on the

European market, these extra costs appear justified.

The envisaged notification should be simple and should be a once-off exercise in each

Member State of making.

Preferred option

Bearing in mind that EU legislation, administrative rules and procedures are meant to be

simple and easy to understand, the preferred option for this initiative has taken into account

SMEs’ interests, by including a set of non-cumbersome

labelling and notification

requirements..

Step-4: Assessment of alternative options and mitigating measures

The impact assessment and abovementioned analysis shows that SMEs,

as defined in

Commission Recommendation 2003/361 and its subsequent amendments,

manufacturing G/B

are facing a significant higher burden than large companies in relation to the SPC protection.

This is because they cannot easily circumvent the unintended consequences of lack of level

playing field in intellectual property protection vis-à-vis non EU-based competitors, by

delocalising production. Measures to tackle this issue need to take SMEs into account.

The preferred option of the impact assessment (option 2 bis) envisages mitigating measures to

minimise negative impact on SMEs (both SMEs intending to apply for the waiver and SME

which hold SPCs). On one hand, it introduces safeguards that are easy to comply with by

SMEs, such a simplified reporting obligation (a notification and a simple labelling, bearing in

mind that SMEs need already to fulfil labelling requirements for their production). This

notification would ideally be conducted via on-line with automatic receipt of submission of

the notification with all the required information fields completed. That notification will then

be published, so that SMEs holding SPCs can be aware of any manufacturing activity, by a

third party, taking place during the term of their SPCs.

Authorities in charge of handling the notification can consider a level of administrative fees in

accordance with the size of the companying which files the notification.

It is not appropriate to exempt any category of SME from the transparency/anti-diversion

measures related to a manufacturing waiver, i.e. an SPC exemption should be accompanied by

measures that minimise risk of illicit diversion of medicines. Finally, an SPC exemption

should not entail lower transparency in the pharmaceutical system by comparison with the

base line scenario.

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