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EU Commission on SPC system: fit for purpose but less red tape needed

Posted on 08 December 2020

The European Commission has published an evaluation of the SPC Regulations, as part of its also recently published IP action plan, and which will feed into the pharmaceutical strategy for Europe. The evaluation report finds that the EU SPC framework is 'largely fit for purpose' in meeting its objectives, but that significant issues of fragmentation and 'red tape' undermine its objectives by causing legal uncertainty and unnecessary bureaucracy and expense.

Supplementary Protection Certificates (SPCs) provide for up to an additional five years of protection (up to five and a half years for certain medicinal products authorised for paediatric use) for medicinal or plant protection products (PPPs) that are protected by a patent and covered by a related marketing authorisation. The additional term of protection is intended to provide an incentive to conduct research in recognition of the amount of time and resource involved in going through regulatory approvals.

Whilst the framework for SPCs is set at the EU level – through the SPC Regulation – applications for SPCs are made at a national level, and are then enforced (and their validity assessed) in the national courts. The average duration of SPCs for medicinal products granted in the EU is three and a half years. There are some exemptions to SPC rights, such as the Bolar exemption (relating to tests and trials on generic medicines as part of the abridged regulatory approval process) and the recently introduced manufacturing waiver, discussed in more detail here, which, under certain conditions, allows generic products to be manufactured during the SPC term of protection for export or storage purposes. 

Main findings on the EU SPC system

Effectiveness in achieving the objectives of the Regulation

The objectives of the Regulation are to:

  1. Encourage global R&D in the field of new active ingredients of medicines and PPPs
  2. Attract R&D centres and jobs to the EU and prevent relocation
  3. Promote a uniform SPC system in the EU

Whilst SPCs do promote innovation and availability of new medicines and PPPs, and promote R&D in Europe to some extent, the Commission's main concern is that SPCs are administered at a national level, albeit under a common EU framework. This has led to fragmentation, bringing with it high costs and administrative burdens, and also giving rise to legal uncertainty, as the scope of protection can differ across the EU. This clearly has an impact both on SPC holders and also generic makers, as well as more generally. This fragmentation is made worse by a lack of transparency.

Efficiency

In relation to the efficiency of the SPC system, the Commission consider the outcome to be balanced. SPCs may delay the market entry of generic medicines and TPPs, with a negative impact on accessibility and affordability – however, the Commission considers this is offset by the need for companies to recover investments in R&D, given the steady increase in timelines and costs in developing new products, and global competition. The Commission also points out that SPC protection only affects a fraction of medicines and PPPs, and in many cases is not the last protection to expire in the EU.

Relevance

The Commission concludes that the SPC system remains relevant because:

- The three objectives of the Regulation are of major political importance

- COVID-19 has highlighted the need for Europe to have a strong pharmaceutical sector, and to be a world leader in innovation and manufacturing

- The SPC system has supported major developments that have emerged since 1992, such as biotechnology techniques. However, the current SPC regime does not encourage research in less commercially visible areas such as medicines for orphan and paediatric conditions.

Coherence

The Commission believes that the SPC Regulations are 'internally coherent', with the European Court of Justice having 'progressively refined its case law on the most disputed provisions'. Given the lack of clarity of some of those CJEU decisions, and the different approaches highlighted by the report in the Commission's comments on the impact of national fragmentation, this is a finding that would be disputed by many.

Conclusions

The main shortcoming identified in the report is one of national administration and management of SPCs, albeit under an EU framework. The report notes that, under the proposed Unitary Patent and Unified Patent Court regime, whilst there is no proposal for a Unitary SPC, a nationally granted SPC might be centrally enforced before the UPC in relation to participating Member States.

In its IP action plan, therefore, the Commission states that it is exploring measures to address this issue, noting that one option may be to introduce a centralised unified grant procedure, under which a single application would be subjected to a central examination. This would lead still lead to the grant of national SPCs in each Member State designated in the application. Alternatively, a unitary SPC, complementing the future Unitary Patent (which the Commission calls upon Member States to implement quickly) is also an option.

The UK meanwhile is retaining the EU's SPC Regulation in its laws after Brexit, adapted for the UK context. Whilst the general approach to SPCs will therefore remain the same (albeit with some important points of nuance, discussed here), it appears likely that over time the UK courts may welcome the opportunity to diverge or at least clarify aspects of the SPC framework.

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