Generic & Biosimilar Medicines Southern Africa
COMMENT BY THE NAPM ON THE DRAFT IP POLICY ISSUED BY THE DEPARTMENT OF TRADE AND INDUSTRY
The National Association of Pharmaceutical Manufacturers was incorporated as a not for profit organization in 1977 to represent both the manufacturers and importers of generic medicines. Currently the Association has 18 members. Our mission is to provide greater access to effective, quality safe and affordable medicine for the South African population.
The NAPM fully endorses the stated aims of the draft IP policy amending South Africa’s existing patent law to take greater advantage of policy options (aka “flexibilities”) that are permitted by the World Trade Organization’s agreement on Trade Related Aspects of Intellectual Property Rights and that would promote access to affordable medicine in South Africa as well as adherence to South Africa’s national and international human rights obligations.
A summary of our submission is detailed below:
SEARCH AND EXAMINATION
The NAPM supports the proposal for substantive searching and examination to be carried out on all patents prior to grant. The NAPM recognises that a pre-patent examination system will not of itself solve the issues relating to the granting of ,weak, spurious or bad patents, but will greatly reduce the volume of applications. Jurisdictions that have implemented search and examination offices in Europe and the USA still face challenges in preventing “evergreening” strategies by drug originator companies .However mechanisms such as “first to market exclusivity” incentivise the generic industry to challenge those spurious patents which slip through the net.
We believe an examination office could be strengthened through:
Legislation/regulations specifically debarring abuses of medicine patents in respect of processes, varied chemical forms and aspects not providing substantial benefit to the patient.
Publication of pending patent applications prior to examination, so interested parties can oppose certain claims. The NAPM is also aware that it will be time consuming and expensive to build the requisite skill set required for searching and examination at the patent office. Unless a start is made, future generations will continue to be denied access to life saving medication.
As set out more fully below, the NAPM proposes that South African patent legislation be amended to clearly specify those inventions that cannot be patented, and that opposition procedures be provided in which any interested party can provide grounds for the pre- or post-grant opposition of patents.
A search and examination facility has the potential of increased costs for the Patent Office. We believe in a user as payer principle. This however may disincentive individuals and small and medium entities from investing in discovery and innovation. We would therefore that a system be implemented in terms of which individuals and small companies pay a lower fee than that paid by large companies (much like the “large entity/small entity” system of the USPTO).
Multinational pharmaceutical companies are becoming well known for what is widely regarded as abuse of the patent system. The abuse is so well-known that the most common strategy has been given a name, “patent evergreening”.
In the past, pharmaceutical companies filed a limited number of patents that recognized the novelty and creativity of a medicine. The strategy in recent years, is to file a vast number of patents over a period of time, often decades, relating to a pharmaceutical, to delay generic entry into a market. Current practice involves a significant increase in the number of patent applications for a pharmaceutical product which include the manufacturing processes, packaging, the dosing, and the methods of treatment, the delivery systems, the combinations, the biological targets, and the screening methods pertaining to a single invention.
Furthermore, patents have been filed for metabolites of the active ingredient and polymorphs representing different crystalline structures of the same compound.
The first product to replace the new compound, referred to as an incremental product, may also be patentable. Typically the incremental product belongs to the same chemical class, having a chemical structure with a similar mechanism of action.
The introduction of second generation pharmaceuticals with significant improvements, such as improved safety, fewer side effects, better quality of life, fewer doses, etc., may be patented to maintain market exclusivity. By introducing” “so-called” next-generation pharmaceutical, brand teams hope to entice patients to switch to the new pharmaceutical at a higher price. Additionally, older products are sometimes discontinued once the patent has expired, forcing patients to switch to the still-patented version.
Thus while the original patent protecting a pharmaceutical compound may have long expired, generics are prevented for many more years from entering the market through evergreening. Curiously, however, the multinational pharmaceutical companies do not include mention of these subsequent patents in their calculation of effective patent life. Neither has this extension of their effective product lifetimes reduced the price of their products.
The NAPM submits that South Africa should not accept as patentable marginal changes to an invention. The current patent depository system passively allows an argument to be made that filing such applications constitute a fraud on the Patent Office. Unfortunately, the strategy is all too effective. Huge resources are employed to aggressively enforce the patents making the barrier to entry so high as to discourage most generic competitors. One of our members already faces a bill of over R10million in legal fees in an attempt to dispute the legitimacy of a medicine patent.
This strategy is very easy to employ in South Africa and widely used here. As a non-examining jurisdiction, patents are granted as a matter of course. This can be seen by companies as encouragement to apply for patents on even the most obvious of changes.
On the other hand, the South African market is not even fractionally as lucrative as that of most developed countries. The South African Pharmaceutical market constitutes less than 1% of the world market. (A World Health Organization resource, 2013). This acts as a disincentive for generic companies to incur the high legal costs necessary to challenge
secondary patents prior to introducing a generic product into the market. Thus, generics companies often choose to wait the patent out rather than challenge it in court, clearly to the detriment of the public’s ability to access more affordable medicines.
Unfortunately examination alone will not have any effect on this practice. It is only where legislation specifically prevents certain inventions from being patented that many weak or bad patents (which result from evergreening) can be prevented from being granted (or even applied for). In this respect the NAPM proposes an increased threshold test for the “inventiveness” requirement for patents related to medicines. As a basis for this test could be the requirement that certain subject matter as defined in legislation cannot be the basis for a patent application.
Cognisant of South Africa’s obligations under TRIPS, and drawing from legislation in India, Brazil and Argentina, such legislative provisions could include the following:
The NAPM supports the DTI proposal for pre- and post-grant opposition proceedings. The NAPM notes the current proceedings for the revocation of patents must be conducted in the High Court. This results in these proceedings currently being extremely expensive, time-consuming and subject to extended delays.
The NAPM proposes the formation of an opposition board or panel which has the following key features:
It is further proposed that prior to any patent infringement proceedings being launched the patent in question must be required to undergo substantive examination with the possibility of opposition being lodged by any interested party. Any claims which are narrowed/disallowed by the examination process should not be subjected to subsequent litigation.
An appeals process must be provided. This should, however, also be available through an opposition board with skilled officers and simple procedures.
The NAPM is advised that hybrid procedures exist in other jurisdictions which may provide useful indicators that could be applied in South Africa. The Australian innovation patent system allows for the grant of patents without examination. However, the regular 20 year patent can only be enforced after being examined and certified. A similar procedure could be implemented in South Africa, even if only as an interim measure while capacity building is undertaken by the Patent Office. The burden of persuasion should be on the potential patent holder to defend the validity of the patent. We envisage that an opposition panel should be set up within six months of legislation being enacted.
It is imperative that all officers dealing with patents be well trained. This is particularly so for those officers, be they judges, registrars or panel members, who are tasked with deciding issues of patent validity and infringement.
At present our courts appear to have adopted an approach of appointing any judge to any matter. Thus it is quite possible that a High Court judge hears a criminal matter on one day, a tax matter on the next and a patent matter on the following day. The NAPM proposes that this is an unrealistic expectation of judges. Not only is patent law in itself highly complex, the subject matter is often highly technical. Judges thus have to grapple with new legal concepts while simultaneously trying to understand the technical issues being disputed.
Not only will skilled officers engender trust in the system, they will also ensure that matters are heard more expeditiously. Both of these outcomes will have the effect of promoting access to healthcare.
It is, for example, understood that the Austrian patent opposition system works very well as patent attorneys can qualify to be judges or at least be part of a panel of judges The NAPM thus supports the intention of the DTI for the establishment of a patent tribunal, similar to the Competition Tribunal.
AGAINST ANY EXTENSION OF MONOPOLY TO THE PHARMACEUTICAL INDUSTRY
No multinational pharmaceutical company has dedicated research facilities in South Africa. At best there is limited sponsored research at several or a number of our universities. Furthermore very little originator pharmaceutical manufacturing remains here. Both of these situations result in large part from global centralization and are unlikely to change.
An argument that the effective patent life without extensions or data exclusivity is insufficient to cover the costs of R&D implies that the companies are in distress and that fewer new products will be developed. Careful scrutiny of this argument, however, indicates that this “problem” does not really exist.
Since the 1950’s, the U.S. pharmaceutical industry has been considered one of the most profitable of all major manufacturing industries. This is still the case and it is doubtful that any major pharmaceutical company has not shown an annual revenue increase in recent times.
In terms of new products or innovation, two measures that are usually cited by the industry are:
Industry figures show that R&D spending is increasing, even when inflation is taken into account. If R&D spending is increasing in real terms, then it is obtuse to suggest that R&D spending is actually in decline or may go into decline as a result of insufficient length of patent protection. Furthermore, there are strong indications that the trend toward increased spending for R&D will accelerate in the future, particularly in light of tax credits for R&D offered in several jurisdictions.
There has also been no decline in innovation. Examining the second measure of “innovation,” approval for marketing of new chemical entities (NCEs), one is similarly hard-pressed to find any evidence of a decline in innovation.
RESEARCH AND DEVELOPMENT
The determinants of location of pharmaceutical R&D activity include a host of factors which typically include historical influences, availability and cost of skilled personnel, proximity to
centres of academic research and to clinical testing facilities, and government incentives, such as tax treatment of R&D expenditures. Increased patent terms in themselves do not encourage further spending in any country. Rather the economic framework as a whole has to be considered, with tax incentives playing a critical role.
Also, the tax incentives that are already provided in the jurisdictions in which R&D is carried out are likely to more than make up for any loss in revenue from any “”ability to extend patent life.
With most successful pharmaceutical products, the R&D costs are recovered within the first few years of marketing, mainly from sales in developed countries. Multinational pharmaceutical company revenue from Africa as a whole is less than 1.5%. (A World Health Organization resource, 2013) The effect of increasing revenues by extending patent life or exclusivity in any other way in South Africa will thus be so negligible as to be insignificant, whilst the added burden to the public in cost and denial of access to healthcare will be most significant.
Finally, R&D is driven by market forces and not medical need. It is estimated that 90% of the burden of global disease is carried by a population for whom only 3% of the R&D expenditure is directed. Of the 1,223 new chemical entities developed between 1975 and 1996, only 11 were for the treatment of tropical diseases (Martin, G., Sorenson, C. and Faunce, T. (2007) Balancing intellectual monopoly privileges and the need for essential medicines. Globalization and Health doi:10.1186/1744-8603-3-4). Thus, much of the R&D being carried out has no direct benefit to the majority of South Africans in any event.
The most vulnerable of the global population, and this includes large segments of the South African population, continue to suffer from diseases such as HIV/AIDS, tuberculosis and malaria, but being a small contributor to multinational pharmaceutical manufacturer sales, only a small percentage of their R&D budget is directed to these diseases.
Multinational pharmaceutical companies in South Africa often indicate that they conduct R&D in the country by conducting their clinical trials here.
However, this is more likely to be a matter of convenience than it is one of intentionally trying to contribute to the economy. The outsourcing of clinical trial to developing countries not only provides a degree of cost relief but also takes advantage of the considerably more relaxed regulations governing these activities in such jurisdictions. It also finds people more willing to subject themselves to testing and less able to claim compensation should they experience any negative effects.
It must also be borne in mind that research in developing countries creates a greater risk of exploitation. Individuals or communities in developing countries assume the risks of research, but most of the benefits may accrue to people in developed countries, particularly in that the focus of R&D is not on developing world diseases.
PATENT TERM EXTENSIONS
The availability of patent term extensions brings with it a large degree of uncertainty. Usually a patentee must apply for a term extension and provide grounds for the extension as well as motivate the length of the extension sought. Third parties cannot predict whether an extension will be applied for, whether it will be granted and for how long.
Other than there being no economic necessity for patent term extensions as indicated above, the public benefits when there is certainty as to when it is safe to exploit the
invention. It allows generic pharmaceutical companies to plan properly and so provide the public with the full benefit of the invention on a free market basis as soon as possible after the patent expires.
Also, if patent term extensions are permitted there will be added costs to generic pharmaceutical companies for opposing grant of extensions.
It should also be noted that it is possible to claim a one=year priority period in terms of the Paris Convention. In such cases, which account for the overwhelming majority of pharmaceutical patents in South Africa, patent protection extends for 20 years from 1 year after the priority date. In effect the patentee gets 21 years of protection.
A 20-year patent life is also in line with the requirements of TRIPS (Article 33). The only specific requirement of TRIPS regarding patent terms is that patents be valid for at least 20 years. Nothing more is required to comply with TRIPS in this regard.
Importantly, the Doha Declaration of 2001 specifically acknowledges that TRIPS does not and should not prevent members from taking measures to protect public health. It also underscored countries’ ability to use the flexibilities that are built into TRIPS to promote public health. This has been taken to the extent of permitting parallel importation of patented pharmaceuticals as well as a mechanism to apply compulsory licenses from the patentee.
Thus, far from prescribing patent extensions, TRIPS in the South African context should be seen as encouraging the adoption of means to rather facilitate more widespread access to pharmaceuticals.
The “TRIPS-Plus provisions” include efforts to extend patent life beyond the 20-year TRIPS minimum; limit compulsory licensing in ways not required by TRIPS; and limit exceptions which facilitate the prompt introduction of generics. However, in light of the fact that the public health impact of TRIPS requirements is yet to be fully assessed, the World Trade Organisation (WTO) has recommended that developing countries be cautious about enacting legislation that is more stringent than the TRIPS requirements. This caution should be well heeded.
In conclusion, the NAPM supports the DTI proposal that it should not be possible to extend patents beyond their 20 year lifespan. Furthermore any bilateral agreements or investment treaties should not undermine TRIPS flexibilities relating to intellectual property.
For the same reasons that patent term extensions are neither required nor desirable, the NAPM supports the DTI proposal that data exclusivity should not further hamper the public’s access to affordable healthcare. We refer to point 5 on page 1 of this submission. ( Clarify that the protection of undisclosed pharmaceutical test data in Brazil prevents unfair commercial use and unauthorized disclosure, but permits “use, by government bodies of test results or other undisclosed data, for market approval of products equivalent to the product for which they were initially presented,” as allowed by TRIPS Article 39.3 )
We support the concept of data protection, which precludes commercially sensitive information being disclosed to third parties other than government/statutory agencies such as the MCC or its successor. Data exclusivity should not be imposed so as to hamper the ability of the medicines regulatory authority to base approval of a generic medicine on data in its possession consequent to the registration of a patented medicine.
More fundamentally, data exclusivity protects the confidential data of any company against disclosure to third parties. However, the MCC never releases or makes available information used in the registration of a medicinal/pharmaceutical product to generic manufacturers or any third party. The data merely forms the basis for a decision by the MCC to register a product. Thus, at present, data exclusivity is in fact preserved.
The NAPM supports the maintenance of so-called Bolar provisions which permit generic product registration during the term of a patent as this enables generic medicines to be made available to the public without delay after patent expiry.
PERIOD OF OPPOSER EXCLUSIVITY
The NAPM notes that it is both expensive and time consuming to engage in patent revocation proceedings. For this reason patents which may be invalid are often left unchallenged and the public forced to pay inflated prices for medicines.
This problem is exacerbated by the fact that generic manufacturers will often wait for a competitor to engage in legal proceedings and then launch if the competitor has a successful outcome. This further disincentivises companies to attack patents as there is the knowledge that their competitors are likely to reap the benefit without incurring any expense or risk.
Although it is hoped that cheaper, faster opposition proceedings will become available, there will always be a costs and risks associated with such proceedings.
The NAPM thus proposes a provision in our legislation which provides a period of exclusivity to the first party to successfully challenge or oppose a patent. Thus, the successful challenger would be the only company permitted to sell generic products during the period of exclusivity. Taking into account the size of the South African market this period of exclusivity should be in the order of 12 months.
A requirement of the sale of any medicine in South Africa, as in most countries, is that a package insert (and patient information leaflet) must accompany the medicine. The NAPM fully supports this requirement.
There is a clear decision by the Supreme Court of Appeal which found the use by generic manufacturers of package inserts that are identical to those of the originator products to be copyright infringement. An extension of this principle would be that each generic manufacturer would also enjoy copyright on its version of the package insert, with the result that each generic product would have different package inserts to avoid copyright infringement. As the MCC approves the final package insert before registration of a medicine, it too, claims copyright.
An inordinate amount of resources are being spent by both the MCC and NAPM members in approving and developing PI’s which do not infringe copyright. This situation is fairly unique to South Africa and should be addressed by legislation.
The NAPM proposes a specific provision in our legislation which requires all generic medicines to have the identical PI as the originator product and that this shall not constitute an infringement of copyright in terms of the Copyright Act.
The NAPM has noted various attempts by originator companies to protect tablet shapes and colours by way of trade marks. There is significant resistance by patients to accept a generic substitute, prescribed by a Doctor, or dispensed by a Pharmacist that has a different appearance to the originator medicine. Such resistance often results in poor compliance and has a direct impact on public health.
To avoid costly litigation around this issue the NAPM proposes a specific provision in the Trade Marks Act to the effect that a trade marks shall not be registered for the shape, colour or configuration of medicinal products, particularly tablets, capsules and the like.
Similarly to the above proposal in relation to trade marks, the NAPM proposes a specific provision in the Designs Act to the effect that a design shall not be registered for the shape, colour or configuration of medicinal products, particularly tablets, capsules and the like
The NAPM supports the DTi proposal to improve public access to health by facilitating legislation that encourages parallel importation of pharmaceuticals under patent where they can be acquired in other jurisdictions at prices below those available in South Africa.
It is currently a requirement that the parallel importer after been issued with a permit to import, must apply to Council for registration of the medicine, as well as a cGMP certificate. . The data required for registration is confidential and is the proprietary property of the patent holder. It would not be in its commercial interests to release such information and
certification to a parallel importer. It is also a requirement that the importer provide comparative dissolution data against the MCC approved product. This requirement is irrational as it is the same product and will therefore produce identical dissolution profiles.
The NAPM proposes that the MCC has aligned itself to PICS and therefore the parallel importation from any PICS countries should be made possible without further registration requirements, or alternatively a simplified registration for the parallel imported product and that legislation be amended to facilitate this.
We propose following the European Commission recommendations with respect to the information required for registration:
The European Commission recommended that the information supplied by the importer should be sufficient to ensure that the medicine is covered by an existing authorisation in the country of destination. The parallel-traded version must therefore:
We have attached for your convenience a communication from the Commission of European Communities on Parallel Imports of Pharmaceutical Products on which we propose the DTI base its legislation on parallel imports.
Currently the SEP regulations require that all sellers sell the product at the approved Single Exit Price. The point of parallel trade is to reduce the price of medicine. Therefore, the Single Exit Price regulations also require amendment to allow the importer to sell the parallel imported product at a discount to the approved product.
The NAPM concurs with the recommendations in Chapter 2 of the policy regarding compulsory licensing, especially as a price negotiating tool. We believe the policy should spell out under what circumstances compulsory licensing should be allowed. For simplification we attach a document outlining the policy of India which should be congruent with cases in South Africa.
Also worth noting, is that to obtain a compulsory license in South Africa, currently, involves a High Court Application, which cost and timing negates any party to pursue the issue.
SEPARATION OF FUNCTIONS
Insofar as intellectual property rights are complex and require a solid grasp of the law involved in their administration, the NAPM proposes that only the patent, trade mark and designs offices be given jurisdiction over these and that the MCC and other regulatory or state bodies not be tasked with or given jurisdiction over any aspect of IPR’s.
Also, excessive delays in product registrations are already experienced with the MCC. To further require the MCC to adjudicate or advise on patent applications will only exacerbate this problem.
In summary, the NAPM proposes as the cornerstones of a strong IP regime:
The NAPM opposes any form of extension to monopolies whether by patent term extension or data exclusivity.
The NAPM proposes amendments be made which will encourage parallel importation and compulsory licensing to take place.
In pursuing the patent law reforms outlined above, South Africa would exercise its lawful sovereign right to make use of TRIPS-compliant flexibilities so as to meet its aspirations and needs with respect to self-reliant and sustainable development, participation in the global knowledge economy, and fulfillment of its human right obligations to its people. South Africa would also be joining countries like India, Brazil, the Philippines, Argentina, and Zanzibar, which have already incorporated legal rules that prevent excessive granting of patents and promote patent quality, particularly on global public goods such as medicines, and with progressive civil society. Indeed, many of the steps that South Africa proposes to is take to help ensure patent quality and eliminate abusive patents practices can be understood as locally tailored versions of steps recently taken in high-protection jurisdictions such as the U.S. and E.U., where increasing concern has been expressed about the anticompetitive effects of overgrown patent laws. In the US, for example, both Congress and the Supreme Court have recently imposed new restrictions on patent law and introduced new measures to improve patent quality.
If history serves as a guide, we can expect that the United States, Europe, and patent-intensive industries, especially the patent-based multinational pharmaceutical industry, will oppose the proposed reforms both internally in South Africa and internationally in various forums. We fully expect that there will be vigorous, even angry protest; claims that South Africa is undermining pharmaceutical innovation locally and globally; and threats of retaliatory action. But in our collective and considered view, South Africa’s patent reforms are modest and prudent, as well as fully compliant with international norms. Armed with these reforms, South Africa should be able to reduce the number of weak pharmaceutical (and other) patents that are filed; weed out poor-quality patents through informed opposition procedures; prevent evergreening of patent monopolies by restricting secondary patents on new forms and new uses of known substances and by limiting patents to 20 years only;
preclude the creation of a new form of monopoly on data submitted to drug regulators; and allow South Africa to have ready access to government-use licenses upon notice and payment of adequate remuneration so as to meet the needs of its patients for affordable medicines.
If adopted and implemented, the proposed reforms will help South Africa to protect, respect and promote human rights, and also help incentivize local production, generic entry, and competition, and lead to greater technological capacity and employment in patent-based industries.
We applaud the South African patent reform proposals and hope for its speedy adoption and implementation.