Ref. Ares(2018)6622688 - 21/12/2018
2 August 2018
EBE VIEW ON THE SPC MANUFACTURING WAIVER
What is a Supplementary Protection Certificate (SPC)?
The duration of a regular patent for a pharmaceutical product in the EU is 20 years from the date of
approval of the patent and general y begins years before the product has reached the market. An SPC
can extend this patent right for a maximum of five years to offset the loss of patent protection that
occurs due to the lengthy time required for product development and obtaining regulatory marketing
approval.
What is the SPC Manufacturing Waiver as proposed by the European Commission on 28 May 2018?
With a manufacturing waiver, generic and biosimilar drug makers can manufacture SPC-protected drugs
in the EU to sel them in other non-SPC protected markets, and to prepare stocks for when the SPC
expires.
Context
In today’s environment of economic competition, accentuated by globalisation, Industrial Property in
its various aspects (patents, trademarks, designs, trade secrets, licensing agreements…) is growing in
importance. The chal enges of IP for a company, even just in safeguarding the development of its activity
or improving its position against competitors are very real, and are inevitably expressed in terms of
market share and jobs. Large pharmaceutical companies are facing numerous patent expiries which is
already benefiting generic manufacturers worldwide. The global generic and biosimilar drugs market is
expected to grow at an annual growth rate of 10.5% from 2016 through 2020. In a recent report, it is
estimated that the global generic drugs market wil benefit from the patent expiry of drugs worth $150
bil ion by 2020 (1). Generics and biosimilars could indeed represent 80% of the volume of medicines by
2020 (2). The market trend is clearly in favour of generic companies.
The EU has many highly innovative SMEs for whom the ability to protect their innovation is crucial to
maintaining their competitive edge. It is essential for the entire pharmaceutical ecosystem to closely
work with SMEs as larger companies increasingly rely on them to secure their product pipelines. There
is an awareness that the Unitary Patent and Unified Patent Court wil simplify administration, reduce
costs and provide greater legal certainty. Such benefits are seen as a potential tool for helping
innovative SMEs. However, many SMEs stil have only limited knowledge of IP and the impact it may
have on their business. Indeed, smal er companies rarely make a proper use of intel ectual property
rights (IPRs). That is why specific SME incentives are urgently needed in order: 1) to limit the IP cost
burden, 2) to improve specific resources and expertise, and 3) to maximise the value of their IP assets.
The SPC manufacturing waiver appears as a negative signal from the EC.
Expected Impact of the SPC manufacturing waiver
The stated objective of an SPC manufacturing waiver for exports to countries outside the EU is to al ow
both the EU generic and biosimilar industries to create thousands of high-tech jobs in the EU and fuel
the creation of numerous new companies. It is said that the waiver would improve the international
competitiveness of EU-based generics & biosimilars manufacturers. While generics and biosimilars
could represent 80% of the volume of medicines by 2020, between 54% and 70% of the active
pharmaceutical ingredients market in Europe (depending on the member states) is supplied by India,
China and Israel.
Whereas the European Commission stated that this waiver wil : 1) help create growth and high-skil ed
jobs in the EU, and, 2) generate €1 bil ion net additional sales per year and up to 25.000 new jobs over
European Biopharmaceutical Enterprises (EBE), a specialised group of EFPIA
Belgium
www.ebe-biopharma.eu
2
10 years, a
study (3), commissioned by the pharmaceutical industry and the US Chamber of Commerce,
is in direct opposition to the Commission’s findings. The latter study finds that the implementation of
an EU-wide SPC manufacturing and export exemption would potential y result in annual losses for the
global innovative biopharmaceutical industry ranging of between €2.2bn and €4.5bn. Of these losses,
up to €1.9bn concern the European innovative biopharmaceutical industry, mainly SMEs. The study also
states that a manufacturing waiver would cause between 4,500 and 7,700 direct R&D job losses (with
an additional 19,000-32,000 indirect job losses) and a decrease in R&D investment of between €215m
and €364m (2).
During a first event held at the European Parliament held in September 2017, Ahmed Bouzidi, CEO of
Vaxeal representing innovative SMEs, underlined his scepticism towards the positive impact of an SPC
manufacturing waiver on manufacturing in Europe given that countries such as India and China have
protectionist policies in place to prevent foreign companies from exporting to their countries. He also
expressed concerns that such a waiver would lower investment in R&D for new drugs should the
protection on the EU market be shortened as a result of the waiver.
Could the SPC manufacturing waiver real y help boost exports (for example to China and India)?
In 2015, the Chinese pharmaceutical industry was valued at $108bn with 95 percent of drugs approved
by the China Food and Drug Administration being generics. In April 2018, China chose to give
preferential tax rates to local generic drug makers. The State Council said it would draw up new
incentives aimed at encouraging the development and production of generic drugs, a move it said would
help safeguard public health, reduce costs and spur innovation. The document published by the State
Council said China would aim to create a system that encourages producers to copy “clinical y
necessary” drugs, including those in short supply and used to treat children, prevent major
communicable diseases, or handle public health emergencies. Quality standards of drug materials and
packing materials would be modified to promote new materials and new techniques, so that
dependency on imports for some materials would end. Tax and price preferences would be offered, as
wel as incentives regarding basic healthcare insurance (4).
The Indian Pharmaceutical market (IPM) accounts for approximately 1.4% of the global pharmaceutical
industry in value terms and 20% in the volume terms. Generic drugs are currently the highest earners
within India’s pharmaceutical landscape, accounting for 70% of market share by revenues. India is the
largest global provider of generic drugs and exports to more than 200 countries.
Over the years, the Indian Government has initiated several attempts to promote the production of
generics by local pharma companies. In April 2008, the Government launched the ‘Jan Aushadhi
Campaign’, to provide quality generic medicines at lower prices than their counterpart branded drugs
available on the market. In the 2016-2017 budgets, the Government set the goal of opening 3000 "Jan
Aushadhi Stores" across the country (5).
Both China and India, as other countries, have anticipated the SPC manufacturing waiver with a number
of local y aimed initiatives that clearly undermine its potential impact.
Expected Impact on EU-based Innovative SMEs
Strong patents are the lifeblood of the innovative biopharmaceutical industry. They are critical in
ensuring a steady stream of capital to biopharmaceutical companies developing innovative medicines.
And they are essential to the technology transfer process from inventions in the lab to products for
patients. The majority of biopharmaceutical companies are SMEs that are at pre-profit stage (no
marketed product), and thus their research and development activities rely on very large amounts of
private sector investment over many years. Without an economic and institutional environment that is
conducive to entrepreneurship and innovation including a strong, predictable and enforceable
protection for patented inventions, investors wil shy away from investing in biopharmaceutical
innovation, reducing the ability of SMEs to provide solutions for the most pressing medical chal enges
facing Europe and the world. The setting up of the SPC regime in the 1990s in Europe gave the region a
European Biopharmaceutical Enterprises (EBE), a specialised group of EFPIA
Belgium
www.ebe-biopharma.eu
3
boost in terms of increasing its attractiveness for investors and was considered a major step forward in
terms of rewarding innovation and better valuing innovation and innovative SMEs in Europe.
For EU innovative SMEs, the ability to protect their innovation is crucial to maintaining their competitive
edge. EBE feels very strongly that an SPC manufacturing waiver would create uncertainties in term of
market potential for innovative biopharmaceutical SMEs, making it more difficult for them to access
financing. In addition, al owing biosimilar companies to prepare stocks before the SPC expires wil lead
to a loss of sustained competitiveness for biopharmaceutical SMEs.
How wil the SPC manufacturing waiver significantly impact exports from the EU?
The impact of exports wil be very limited for a very limited time for generics and biosimilars
manufacturers while third countries implement their generic policies. Pricing policies wil stil remain an
issue. However, the waiver wil have a direct and long-term negative impact on innovative SMEs
because: 1) IP represents the main asset to value innovative SMEs, 2) the waiver wil decrease the
attractiveness of EU-based innovative SMEs, and 3) it wil also decrease the value of innovative SMEs.
What positive economic and social impact do we expect from the SPC manufacturing waiver?
Such a manufacturing waiver would cause more direct and indirect job losses in innovative EU-based
companies that it would create jobs in the generics industry during a very limited period of time. The
uncertainty it would create would also directly negatively impact R&D investments in the EU.
EBE Concern
We believe that al owing generic and biosimilar drug makers to manufacture for export before the SPC
expires would be unfair to EU biopharmaceutical companies and in particular to innovative SMEs. While
the waiver wil only have a very limited positive impact for the biosimilar and generic industry, it wil be
detrimental to the biopharmaceutical innovation in the EU on the long term. EBE requests that policy
makers to consider its concern and stands ready to engage in a constructive dialogue on the issue.
REFERENCES
1-
https://www.businesswire.com/news/home/20160616006037/en/Global-Generic-Drugs-
Market-2016-2020---Patent, announcing the "Global Generic Drugs Market 2016-2020"
report by Research and Markets (www.researchandmarkets.com)
2- Sarantis Michalopoulous, EURACTIV.com | 13 OCTOBER 2017;
https://www.euractiv.com/section/health-consumers/news/new-commission-study-fuels-
generic-drugs-industry-manufacturing-dispute/
3-
http://www.pugatch-
consilium.com/reports/Unintended_Consequences_October_%202017.pdf
4- Business News | 3 APRIL, 2018;
https://www.reuters.com/article/us-china-drug-tax/china-gives-preferential-tax-rate-for-
generic-drugmakers-idUSKCN1HA17E
5- Pharmacy & Pharmacology International Journal | 2 JUNE, 2017
Galani V (2017) Choice of Better Medicine in India: Branded Vs Generic Medicine. Pharm
Pharmacol Int J 5(3): 00125. DOI: 10.15406/ppij.2017.05.00125
http://medcraveonline.com/PPIJ/PPIJ-05-00125.php
Authors:
European Biopharmaceutical Enterprises (EBE), a specialised group of EFPIA
Belgium
www.ebe-biopharma.eu
Document Outline