1. Key issues
2. Intellectual property

A world united? The US approach to the protection of regulatory data

Patent World, December 2004

A world united?
The US approach to the protection of regulatory data

The US has been using Free Trade Agreements to push a US-style system for data exclusivity. Loran Brazell, Bird & Bird, considers the impact of this approach.

Patents and patent extensions are the front line of defence for the researchbased pharmaceutical companies in maintaining a monopoly over their new drugs. But they are not the only weapons in the legal armoury.

In order to obtain a marketing authorisation for a pharmaceutical product, it is necessary to demonstrate to the relevant national or regional regulatory authorities that the product is clinically proven to be safe and effective. For the originator of a product, this necessarily involves carrying out controlled trials to generate the necessary data. Since this involves substantial skill and expense, the resulting regulatory data represents a significant investment. In recognition of this, many countries give the originator exclusive rights over their data, even once it has passed into the hands of the regulator.

It is in general uneconomic for subsequent applicants to generate their own clinical data independently, since the newcomers will be selling into a competitive rather than a monopolistic market. Thus, in practice data exclusivity confers a monopoly right in respect of a particular regulated product. This right is wholly independent of the patent status of the product, but has recently become equally controversial in the debate over access to medicines in developing countries.

In some cases, regulatory data protection may provide the sole effective protection for a compound or its use. For whatever reason, there may be no patent protection for the product in question, or the patents’ validity may be relatively vulnerable to attack. Or, in the changed political climate at international level following the September 11 attacks, a country may be able to justify granting a compulsory licence over the patent.

All these considerations are irrelevant to the effectiveness of regulatory data exclusivity.

The World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) mandates certain minimum standards of patent protection to be provided by all signatories.

Deriving from the Paris Convention of 1883, they include patent protection for pharmaceutical products as well as for processes, and for products obtained directly by use of a process.

The principle of regulatory data exclusivity, on the other hand, is a relative newcomer to international law. It appears for the very first time in TRIPS, at Article 39(3):

“Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilise new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.”

This leaves uncertain key aspects of the protection to be provided.

The term “new chemical entity” is not defined in TRIPS. In the regulatory context, it is used to mean an active ingredient being approved for the first time within the particular regulatory framework under discussion (as a given chemical may have activity in different contexts, such as pharmaceutical and veterinary). The European Court of Justice has recently confirmed this interpretation applies within Europe. But was this meaning intended?

“Unfair commercial use” is also undefined.

Clearly non-commercial use, such as for public health and safety, is excluded. As to commercial use, such as that made when the regulatory authority assessing a second applicant’s application, relies on the fact that such data exists (whether or not it is actually referred to), the issue is whether or not such use is “unfair”. This raises the question of what term of protection is appropriate.

TRIPS contains no guidance at all.

A variety of protection regimes have emerged, differing both as regards the length of protection, and the categories of data protected. For example, the United States protects new chemical entity product data for five years, but data relating to a new indication for an existing product only for three years, unless it is a paediatric indication in which case protection lasts six months.

Australia, Canada and New Zealand give five years protection for new chemical entities and nothing else. Some EU Member States have in the past provided up to six and others ten years’ protection for new chemical entities, but in some cases the period is curtailed if the patents protecting the product expire.

The mechanism used also varies. Japan has a particularly idiosyncratic system, providing protection for test data only indirectly. It gives the first applicant for approval a period of effective regulatory exclusivity while the applicant carries out post-marketing surveillance obligations. During this “reexamination” period, of between four and ten years depending upon the kind of approval, no other approval can be granted for the drug unless the applicant provides its own data, and also assumes its own postmarketing surveillance obligations.

Linking patents and approval

In the US, in addition to the specified periods of data exclusivity, there are specific procedures for notifying those patent holders who wish to be alerted to a third party request for approval of a product covered by their patent. To market a generic version of a brand-name drug, the generic manufacturer must file with the Food and Drug Administration (FDA) an Abbreviated New Drug Application (ANDA). In this, the generic manufacturer must certify, based on the FDA’s list of approved patents, either:

1. no brand-name drug patent was submitted to the FDA;
2. the relevant patent has expired;
3. the generic wants approval only after the patent expires; or
4. there is a patent but the generic manufacturer claims the patent is invalid or will not be infringed.

Once a generic manufacturer submits an ANDA with a Paragraph IV Certification, it must notify the brand manufacturer, which has an immediate right to sue for patent infringement. A patent infringement action filed within 45 days of notice delays approval of the first generic for 30 months or longer. But the first generic to file a Paragraph IV Certification receives a bonus: no other generic can go to market until 180 days after the first generic goes to market or wins the patent lawsuit at appeal.

This process has created further incentives for brand-manufacturers to file multiple patents over a given product, forcing generic manufacturers to file a Paragraph IV Certification.

The Doha Declaration

The Ministerial Declaration made at Doha aims to clarify the circumstances in, and extent to which, Article 31 of TRIPS permits compulsory licences to be imposed under pharmaceutical patents. It states that TRIPS should be interpreted and implemented in a manner supportive of WTO Members’ right to protect public health and, in particular, to promote access to medicines for all. Each Member has the right to determine what constitutes “a national emergency or other circumstances of extreme urgency”. This leaves developing countries’ governments to define the conditions under which they may invoke Article 31.

The Declaration was silent on the question of whether compulsory licences can be issued cross-border, the question being remitted to a working group. In August 2003 consensus was reached that compulsory licences can be issued within a country for the manufacture of drugs for export to countries with inadequate pharmaceutical manufacturing capacity to provide the necessary drugs for their own population. The road appeared open to the issuing of compulsory licences over a range of pharmaceutical patents.

Free Trade Agreements

Against this background, the free trade agreements (FTAs) which, for several years now, the US has been negotiating with a number of individual trading partners and regional blocks, are being viewed with some suspicion.

FTAs have been signed so far with Jordan, Chile, Singapore, Guatemala, El Salvador, Nicaragua, Honduras, Costa Rica, Australia, Morocco, the Dominican Republic and Bahrain. A further series are under negotiation, notably with the Central American states as a group (CAFTA) and, most ambitiously of all, to create a Free Trade Area of the Americas (FTAA), comprising all of North and Latin America.

The Bush Administration also aims to create a Middle East Free Trade Area by 2013.

The FTAs tighten up issues left unclear by the TRIPS Agreement, by spelling out in detail the mechanisms to be used to implement the TRIPS standards. In most cases, the FTAs specify a period of data exclusivity of between five and ten years.

Where countries permit the granting of marketing approval based upon the existence of an approval for the same drug in another country, some of the FTAs require the second country to protect the regulatory data filed in the first country for the same length of time as the first country does, or for an independent period [1].

Several also involve implementing a US-style system whereby the patent holder is notified of any attempt by a generic company to apply for a marketing authorisation before patent expiry - even if the application is for approval to launch after patent expiry [2]. Indeed, in many cases, the regulatory authority is prohibited from granting a marketing authorisation before patent expiry [3], turning the regulators into patent policemen. Delaying approval will postpone launch of any generic version of a drug for an uncertain time after patent expiry.

Protection is sometimes [4] required for test data submitted in support not only of authorisations for pharmaceutical products incorporating new chemical entities, but for any pharmaceutical product. This goes beyond the standard of protection currently provided in Europe [5]. Other FTAs specify limited circumstances in which compulsory patent licences may be issued in the first place, potentially fettering the discretion given by TRIPS and affirmed at Doha.

Such enhanced, “TRIPS plus”, provisions have raised considerable controversy, being seen by some major aid charities as an attempt by the US to restrict or delay generic competition in the pharmaceutical marketplace.

The use of data exclusivity as a protection mechanism circumvents the Doha concessions on compulsory licensing, since there is limited value in holding a compulsory licence if the holder nevertheless has to spend time and money generating its own clinical trials data in order to obtain marketing approval. It would certainly make it impossible to respond rapidly to a national emergency, which might justify the granting of the compulsory licence.

The charities argue that the effect of the various provisions included in the FTAs is systematically to undermine the international consensus reached in 2001 about the proper balance between private commercial interests and public health [6]. In reality, they say, generic competition is the only force proven to systematically reduce the price of medicines, and excessive data protection inhibits this.

While the introduction of a minimum five-year period of regulatory data protection is certainly more than is mandated by TRIPS - which left each TRIPS signatory free to introduce any protection it chose - it is no more than has started to emerge as an international norm for this form of protection. Where patents are available for pharmaceutical products, a five-year period of protection will normally expire before the patents themselves, though it would remain an obstacle in a situation where a country wished to grant a compulsory licence over a drug which had only recently been launched.

In its response [7] in September 2004, the office of the US Trade Representative pointed out that no country has in fact yet availed itself of TRIPS to issue any compulsory licence for drug production. Such a step involves not merely the issue of how to manage the legalities of marketing approval, but the more challenging ones of how to define a national emergency justifying such a step; what company or companies to licence; the proper pricing and distribution of the products; and how to diagnose, prescribe and monitor treatment, since patient compliance is a recurring issue even in countries with high standards of average education.

Cheap versions of existing drugs do not necessarily solve the problem, but in order to avoid the imposition of compulsory licenses research companies have sometimes been prepared to negotiate to licence or to supply their products at generic prices, or even free - as for example Boehringer Ingelheim offered its AIDS treatment in South Africa.

However, since that statement Zambia has in fact granted a compulsory licence to Pharco, a local firm, to manufacture and sell in Zambia a combination antiretroviral AIDS treatment [8].

The impact of the provisions requiring a linkage between marketing approval and patent protection depends very much upon the precise mechanism involved. If all that results is notification of an application, then the generic company is little worse off than if no notification had been required. To be sure, the patentee is forewarned of potential future competition, but this does not necessarily amount to a basis for immediate infringement proceedings. In practice the research companies are active in policing the markets and are likely to find out about a new entrant if the generic launches before patent expiry.

This would always bring the risk of patent infringement proceedings, and the advantage of a few days operating before the patentee finds out is not great compared with the risk of being sued. If, however, the provision prevents authorisation being given while patents exist, the effect is to increase the burden upon generics considerably, since their only options are to await expiry - which, where secondary patents on formulations, second indications and so on exist, may be a long time coming - or to attempt to revoke all relevant patents - also a formidable undertaking where a raft of secondary patents are in effect. Regulatory agencies rarely have the time, resources or competence to make any independent assessment of the relevance or validity of patents asserted by their holders over a given product.

The FTAs are not necessarily the final word, however. Draft legislation introduced in Australia to implement the obligations under the Australian and US FTA required the applicant for a generic marketing authorisation, on pain of penalties, to certify either that there was no patent or that the patent owner had been notified. The Australian Parliament then passed amendments [9] limiting this requirement to the applicant’s reasonable belief, and also requiring the patent owner in its turn to certify that any proceedings it intends to commence are in good faith, have reasonable prospects of success and will be conducted without unreasonable delay. The patent owner must further have reasonable grounds to believe it is entitled to relief, and that each and every one of its claims is valid. False or misleading certification of these matters can lead to a fine of up to A$10m. These amendments may serve mainly to create a market in legal opinions attacking or upholding the validity of patents, similar to that in the US for opinions confirming that there is no infringement[The possession of such an opinion being necessary to rebut a potential allegation of wilful infringement, with its attendant spectre of any infringement damages being trebled.]], but it does demonstrate an intention to hold the research companies accountable for their actions in filing multiple patents over different aspects of a drug [10].

Indeed, in the last resort it is also open to the United States’ trading partners, in cases where a compulsory licence is granted in accordance with TRIPS/ Doha, to waive their own regulatory requirements for marketing approvals.

International law does not mandate the existence of any such regulations.

About the author

Lorna Brazell joined Bird & Bird upon qualifying as a solicitor in 1994 and became a partner in the IP department in 2001. Her practice is broadly based, including a substantial proportion of litigation in patents and copyright but also advising on regulatory aspects of the pharmaceutical industry.