The Italian Perspective on Patent Linkage, Bolar Exemption and SPC Waiver: Where the Army of Generic and Biosimilar Manufacturers Still Clashes with the Patent Cliff
This article deals with a common issue, reconciling the adequate remuneration to which a patent holder, in the pharmaceutical area, should be entitled with the need to ensure free competition and the entry into the market of alternative and less expensive drugs, including generic and biosimilar ones.
Italian laws and regulations on pharmaceutical patents are thought to be unusual, owing to the fact that Italy is an originator-friendly jurisdiction. However, some helpful judicial tools are available under Italian law that can be used, both by originators and by generic and biosimilar manufactures, to plan and implement both attack and defence strategies.
Patent linkage, Bolar exemption and SPC waiver are all faces of the same cube, where the army of generic and biosimilar manufacturers still clashes with the patent cliff.
The Patent linkage: some Italian peculiarities
Patent linkage consists of the practice of linking the marketing approval or any pricing/reimbursement rights of generic medicines to the patent status covering the original drug.
Any patent linkage is generally considered contrary to European law as potentially capable of creating an unjustifiable disadvantage for the manufacturer of generic or biosimilar drugs.
The European Union does not support patent linkage, mainly on the ground that it affects the effectiveness of the so-called Bolar exemption.
This exemption allows generic or biosimilar manufacturers to prepare generic or biosimilar drugs in advance of the patent expiration. The Bolar exemption, in particular, permits any drug manufacturer to experiment with any patented drug, so that, despite the still existing patent rights, performing research and tests in advance of regulatory approval for generic or biosimilar drugs (in Italy the marketing authorisation is named AIC) cannot be regarded as an infringing act.
In a nutshell: the status of a patent application cannot represent grounds for any refusal, stay or prevention of any marketing authorisation and, therefore, of any AIC in Italy.
Italy has been sanctioned in the past by the European Commission, on 14 March 2011, for a provision set forth in Law No 30 of 2005 (the IP Code), namely paragraph 1-bis of Article 68 containing a clear patent linkage.
This provision allowed generic drugs manufacturers to start the registration process for relevant products only during “the last year” of validity of a patent or supplementary protection certificate.
In particular, according to the European Commission, the Italian provision was in breach of Article 10 of Directive 2001/83/EC in the Community Code relating to medicinal products for human use.
Even if Article 10 of Directive 2001/83/EC provides that an authorised generic drug cannot be placed on the market until ten years have elapsed from the initial authorisation of the referenced product (and during the term the dossier is not accessible), it does not impose any time restriction for the beginning of the approval process for generic or biosimilar drugs.
In January 2012, Decree Law No 1/2012 (converted into Law No 27/2012) aligned Italy with the EU legislation, stating that a marketing authorisation application for a generic drug can be filed more than one year before the expiry date of the patent or supplementary protection certificate (SPC), because only the manufacture, import or sale of the product could be considered as an infringement in its own right.
Only a few months later, however, Decree Law No 158 of 2012 (Balduzzi Decree) was issued, which stated that: “the generic drugs cannot be classified as drugs to be reimbursed by the National Healthcare Service with effect prior to the expiry date of the patent and the certificate of supplementary protection” (Article 11, paragraph 1-bis, Decree Law No 158 of 2012). Even though the generic drug manufacturers may obtain a marketing authorisation for their products at a time when the referenced pharmaceutical product is still protected by patent, the generic drugs cannot be listed as reimbursable by the Italian National Healthcare System (SSN) until the patent or SPC has expired.
This provision has been converted into Law No 189/2012 and it is still in force.
Manufacturers of generic drugs have strongly criticised the above provision (see Council of State, 27 August 2014, No 4394), claiming that this is another form of unlawful patent linkage, which conflicts with the position adopted by the European Commission and unduly restricts the availability of generic drugs to the National Health Service, causing severe economic damages to citizens.
In 2015 the Italian Association of the Generic Drugs and Biosimilars Industry filed a position paper with the Italian Senate requesting the repeal of Article 11, paragraph 1-bis of Law Decree No 158/2012.
Italian Courts have, however, interpreted the provisions of the Balduzzi Decree narrowly, holding that the linkage is to be applied only to the patent over the active pharmaceutical ingredient patent (ie, “the primary patent”, or the API), as opposed to other related patents (the so-called “secondary patents”).
One decision of the Regional Administrative Court of Rome on January 2018 (T.A.R. Lazio, sez. III, - Roma, 19 January 2018, No 662), however, supported a different view.
The case was brought against AIFA (an Italian pharmaceutical agency) by Medac Gesellschaft Fuer Klinische Spezialpraeparate mbH, the owner of a patent covering a drug called Reumaflex.
After the expiry of that patent on 19 October 2016, AIFA inserted Reumaflex in the transparency list along with the generic drug having the same active ingredient.
The patent owner challenged AIFA’s decision, claiming that Reumaflex was different from the other drugs having the same active ingredient because it would have a specific dosage of the active ingredient, covered by a secondary patent (a so-called dosage regime patent), which was still in force and would expire in 2027.
Thus, the patent owners argued that Reumaflex should have been reimbursable in full until the expiry of that secondary patent.
The court clarified that the link established in the Balduzzi Decree is to be applied also to secondary patents concerning a particular formulation of a product using the same active ingredient (whose patent has expired) and not to the API only, when the effectiveness and therapeutic innovation of the formulation can be compellingly demonstrated.
The scope and boundaries of the Bolar Exemption according to Italian case law
While the law containing the patent linkage described above was in force, prevailing Italian case law held that experimentation carried out for the purpose of obtaining the release of a marketing authorisation for a generic or biosimilar drug corresponding to a pharmaceutical product still covered by patent could not even benefit from the Bolar exemption, unless it was part of at least potentially “innovative research”.
This innovative-research condition is normally not met by bioequivalence experiments – ie, those aimed solely at proving that the generic drug has equivalent effects to the original drug, so as to make use of its registration dossier and thus obtain the marketing authorisation by simplified procedure, without having to carry out the relevant clinical trials ex novo.
Italian courts have progressively come to share the opposing view; that pre-clinical tests and clinical trials aimed at obtaining the authorisation for generic and biosimilar drugs are permitted.
In particular, the Court of Milan, on 11 June 2009, in Eli Lilly and Company Ltd. and Eli Lilly Italia Spa v Sandoz International and others, found that the mere filing of a request for marketing authorisation for a generic drug – lacking any actual proof of the commercial exploitation of the same – is not a sufficient ground, per se, to claim a patent infringement (for a different view see the Court of Turin, 11 February 2011, in AstraZeneca v EG). The filing of a request for, and even the subsequent obtaining of, a marketing authorisation does not indicate a mandatory timeframe for market entry.
More recently, on 24 July 2018, in Boehringer Ingelheim v Teva, the Court of Milan held that API manufacturers are not within the scope of the Bolar exemption where they manufacture, market or offer for sale APIs substantially pursuing their own business interest. In this respect, general disclaimers on their websites or product brochures to inform potential customers that the supply is intended only for Bolar-exemption purposes are not sufficient to take advantage of the exemption.
In the court's view, manufacturing and selling patent-protected APIs without the consent of the patent holder could be exempted under the Bolar exemption only further to a specific request from a third party (such as a generics company) seeking to use the API in regulatory procedures aimed at obtaining the AIC, and if the API manufacturer informs its customers that it is only trying to obtain market approval. This means that some preparatory activities capable of causing prejudice to the originator could be considered as infringing act (eg, advertising campaign, set-up of a distribution network, inclusion of the drug in the transparency list, publication of the generic drug price) even if the product may only be available after the lapse of a patent or SPC).
In addition, the early filing of an application for a marketing authorisation, even if it does not represent a preparatory act aimed at the marketing of an equivalent drug before the expiry of the relevant patent or SPC, could be read as a clue in that direction, particularly if the manufacturer does not reply to a specific cease and desist letter not to manufacture, import and sell the equivalent drug before the expiry of the relevant patent or SPC.
The last development: the SPC Waiver
The need to give a pro-competitive interpretation of the law in the pharmaceutical sector has also clearly emerged from the latest developments in the matter of SPCs.
Prior to the harmonisation of SPC regulations in Europe by Council Regulation 1768/92, Italy enacted its own SPC protection: the duration of the supplementary certificate was equal to the period between the filing of the patent application and the date of first AIC, as long as this term did not exceed 18 years after the end of the lawful term of the patent. This scheme was repealed and changed in 2002 when a new law was enacted providing for an annual six-month reduction to the term of these pre-1992 SPCs.
Regardless of this peculiarity of the Italian system, on 28 May 2018, the Commission of the European Union published the "Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 469/2009 on the supplementary protection certificate (SPC) for medicinal products", which aims to introduce a waiver/manufacturing exception for export purposes in EU law (the SPC Waiver). The choice of the legal instrument of the European regulation (instead of a directive) is aimed at avoiding local deviations, such as the Italian one discussed in the paragraph above, with regard to the SPC's duration.
This proposal was designed to harmonise some aspects of the current patent and SPC legal framework, and in particular as to the scope of the Bolar exemption, as well as to boost the European generic and biosimilar industry, making it more competitive in relation to the non-EU market.
On 1 July 2019, the Regulation UE 2019/933 introduced some amendments to the previous Regulation (EC) 469/2009 concerning the SPC, setting forth a waiver which, under certain conditions, will allow the manufacture of SPC-protected products if those products are manufactured only to be exported into countries outside the European Union (Manufacturing Exception) or to enter the European Union market on the very day after expiration date of the SPC (the Stockpiling Exception).
The Manufacturing Exception will apply throughout the entire SPC term, while the Stockpiling Exception will only be allowed during the last six months before the SPC's expiry.
The SPC Waiver will not limit the rights derived from the basis patent, but only those derived from the SPC.
Leaving aside the irreconcilable interests of the originators and the generics manufacturers, some Italian scholars have questioned the compatibility of the SPC Waiver with the TRIPS Agreement and in particular with Article 30 of the Trips Agreement “Exceptions to rights conferred” [by patents]. According to this provision, “Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties”. In this respect Recital (12) of Regulation UE 2019/933 reads as follows: “By limiting the scope of the exception to making for the purpose of export outside the Union or to making for the purpose of storing, and to acts strictly necessary for such making or for the actual export or the actual storing, the exception provided for in this Regulation should not conflict with the normal exploitation of the product, or the medicinal product containing that product, in the Member State in which the certificate is in force, namely with the core exclusive right of the certificate holder to make that product for the purpose of placing it on the Union market during the term of the certificate. In addition, that exception should not unreasonably prejudice the legitimate interests of the certificate holder, whilst taking account of the legitimate interests of third parties”.
Other scholars hold the opposite view and are of the opinion that the new regulation strikes a good balance between the need to award exclusivity to originators and to favour market competition, in particular in Italy, which has always been an originator-friendly jurisdiction.
The available judicial tools under Italian law
Some helpful judicial tools are available under Italian law that can be used both by originators and by generic and biosimilar manufacturers, to plan and implement both attack and defence strategies.
Originators can look for a preliminary injunction or at least a protective measure to verify if the manufacturer has already started manufacturing or importing the generic drug.
The Italian IP Code sets forth a procedure for the collection of evidence in cases of infringement of intellectual property rights, such as patents or SPCs (the so-called descrizione).
Two key conditions must be fulfilled in order for a descrizione to be granted.
There must, first, be fumus boni iuris, which requires a demonstration that: (i) there is likelihood of infringement; and (ii) the IP right is valid (this requirement is in general the subject of a mere presumption).
In relation to the demonstration of a likelihood of infringement, full evidence is not required, but it is necessary to put forward arguments (based on the evidence available at the time of the claim) to persuade the court that the alleged infringement is at least likely to have taken place. In certain cases, since it is not possible to prove any likelihood of infringement, the Italian courts are inclined to grant the descrizione based on the applicant's allegations, unless they believe that the application merely represents a fishing expedition.
There must, secondly, be periculum in mora, which means the applicant must show that the delay that would occur in the course of ordinary litigation would result in an “irreversible loss”. This requirement is generally taken for granted in cases of violation of patents and SPCs.
All the documents obtained may be used in the infringement proceedings on the merits and may be used in support of interim applications such as preliminary injunctions.
The descrizione is typically granted and performed ex parte – ie, without requiring all of the parties to the dispute, and namely the defendant, to be present – by the Italian Bailiff (ufficiale giudiziario) who is assisted by a court-appointed expert (CTU) and accompanied by counsel (which term includes any technical expert advisor) to the party bringing the claim.
After the confirmation hearing, where the counterparty is entitled to have a say and to defend himself or herself, the descrizione can be confirmed and the findings of this phase will be reported in court together with the documents found.
Under the IP Code, if the descrizione has a positive outcome, the right-holder may seek injunctive relief in order to require or prevent the generic or biosimilar manufacturers from taking certain actions and in particular from continuing their unlawful activities.
Injunctive relief can be issued by an Italian court before the case is decided on the merits in the form of a temporary restraining order (TRO) or preliminary injunction (PI). TROs and PIs are generally granted with a penalty sum (astreinte).
The PI/TRO application must meet the same two requirements mentioned above for the descrizione.
In addition to the descrizione, it is possible to obtain further preliminary measures, such as the seizure of documents and products related to the infringement. For most serious violations, it is also possible to obtain the publication of the interim decision in the Italian press and/or online.
The order granting a PI or other measures is appealable before a panel a three judges belonging to the same division of the court (this phase is called reclamo).
According to general Italian civil proceeding law, a PI or a TRO can become stable without the need to start an action on the merits.
On the contrary, for the other measures, such as the descrizione and the seizure, the right-holder is obliged to pursue an action on the merits (within a term established by the judge) to maintain the efficaciousness of the obtained measures. Otherwise, these become ineffective.
The main goal of the proceedings on the merits is the award of damages.
Following the general rule governing damages suffered by an IP right-holder, the holder of a patent or an SPC is also entitled to seek the full recovery of the infringer’s profits, instead of compensation for damages (for loss of profits) or to the extent they exceed such damages (this is the so called retroversione degli utili).
Whilst the proceedings to obtain the descrizione, the PI and the other interim measures are quite quick (typically a few months, depending on the complexity of the case), the time taken to reach a decision on the merits is longer and varies not only according to the complexity of the case, but also to any possible reopening of the phase of proof and discovery, and to the agenda of the judges. Generally, first instance proceedings last from a minimum of two-and-a-half years to a maximum of four years.
On the other side, manufacturers of generic or biosimilar drugs might commence actions for preliminary declaration of non-infringement (permitted under Italian law), also on an urgent basis, if there are elements indicating that the originator is going to initiate legal action against them (eg, warnings or legal actions taken abroad against other manufacturers of the same generic drug).
Preparing a strategy of attack or defence is essential and it is important, in the majority of cases, to act or react as quickly as possible.
From a regulatory perspective, a further tool to protect, in advance, the economic interests of the patent holder could be access rights to the AIC dossier of generic or biosimilar drugs in order to ascertain the effective equivalence between the generic product under the AIC process and its corresponding pharmaceutical product still covered by patent.
According to Law 241/90, patent holders are entitled to apply for access to the AIC dossier of generic products on the basis of a duly motivated application, whenever they have a direct legally relevant interest. In this respect, Italian case law is rather originator-friendly and, recently, the two following principles have been set forth:
First, that a relevant interest, capable of legally grounding an access application for the AIC dossier of a generic drug, may be identified in the need of the patent holder to verify whether the generic product under the AIC process is effectively equivalent to its own referenced product covered by patent.
Secondly, that the access right of the patent holder prevails over the confidentiality rights invoked by the AIC applicant of the generic drug whenever the access to the AIC dossier is strictly necessary to protect a legally relevant interest as it is in case that the patent holder needs to verify the equivalence between the generic drug under the AIC process and the referenced drug covered by patent.
On the basis of such principles, access to the AIC dossier of generic drugs has been granted with regard to bioequivalence studies, alternative tests on the composition of the active substances of the generic drug or other sections of the AIC dossier containing potentially confidential information.
Judicial tools before the administrative courts are also available if the access applications are unlawfully denied or postponed by the competent regulatory authorities.