N. 12, Dec.2003 -Jan. 2004 
IP & RTD: Articles 

'Inter utrumque tene' (Ovidious, Metamorphoses, II, 140)


Pharmaceutical Data Exclusivity in the Context of EU Enlargement
Meir Perez Pugatch1

 
Data Exclusivity is one of the most interesting issues in the current discussion on pharmaceutical intellectual property policy-making in the context of EU enlargement.

Data exclusivity is a unique form of intellectual property. It is aimed at protecting and safeguarding pharmaceutical registration files - the data submitted by pharmaceutical companies to regulatory authorities, such as the European Medical Evaluation Agency (EMEA), for the purpose of obtaining marketing approval for new drugs.

The recent European interest in data exclusivity mostly stems from the July 2003 proposals of the European Commission, entitled: A Stronger European-based Pharmaceutical Industry for the Benefit of the Patient, and the subsequent resolution of the European Parliament, dated 17 December 20032. These recommendations and decisions aim strengthen the European Pharmaceutical industry and to benefit patients by harmonizing the scope and terms of data exclusivity in Europe, both for EU members and candidate-countries.

Before discussing the above recommendations, it is important to provide a brief overview of the nature of data exclusivity.

Similar to patents, the debate over data exclusivity is a manifestation of the ongoing 'battle' between research-based and generic-based pharmaceutical companies. The scope and term of data exclusivity is also highly relevant to the European public, particularly with regard to the supply of new medicines and access to existing ones.

Nevertheless, data exclusivity differs from patents.

The patent system is based on a trade-off between the incentive to develop more knowledge-based products in the future and the grant of restrictive powers to knowledge owners in the present3. The term 'paradox of patents', which was coined by Robinson as early as 1956, seems to capture the true nature of this tradeoff: 'by slowing down the diffusion of technical progress, patents ensure that there will be more progress to diffuse'4.

Data exclusivity is based on a different type of trade-off: requiring pharmaceutical companies to provide data on the safety and efficacy of a new medicine in exchange for treating these data as a trade secret for a limited period. It follows that, compared with patents, the market power of data exclusivity is less restrictive, mainly because it does not legally prevent other companies from generating their own registration data.

The economic significance of data exclusivity derives from the length and costly process of creating a pharmaceutical registration file. All potentially new medicines have to demonstrate their safety and efficacy before being approved for market use. This is done through a complex and lengthy process of clinical trials which last 10 years on average, the cost of which is estimated at about US$ 530 million per medicine5. Today, the creation of a pharmaceutical registration file amounts to more than 60 percent of the total cost of pharmaceutical R&D (an average cost of US$ 870 million per drug)6.

Data exclusivity has two layers of protection, both of which are the responsibility of health regulatory authorities. The first is prohibiting direct-reliance - that is, ensuring that rival companies (usually generic companies) do not use the registration file of the original product during its period of exclusivity. The second, and more complicated aspect, is the moratorium on indirect reliance by the regulatory authorities themselves. Indirect reliance may occur when a regulatory authority uses the registration file of an original drug in order to compare it to the chemical and toxic levels of a potential generic substitute (so called bio-equivalency tests).

With respect to the effect of data exclusivity on generic companies, since these companies lack the financial resources for creating a complete registration file, they often look upon data exclusivity as yet another extension of the overall exclusivity period of pharmaceutical products7.

This raises a very interesting economic question about the extent to which the term of data exclusivity supercedes the term of patent protection. Empirical evidence is still insufficient. Yet, it is logical to assume that, for the majority of drugs in Europe, the maximum period of data exclusivity (usually 10 years from the date the drug is registered) is shorter than the 20-year patent term. One also has to bear in mind that a pharmaceutical patent may be extended in Europe by an additional period of up to 5 years via the grant of a Supplementary Protection Certificate8. For example, a study by IMS Health found that 'very few high-selling drugs gain further marketing monopoly from the provision afforded by data exclusivity' and that 'only drugs that do not have granted Supplementary Protection Certificates or took an exceptionally long time to traverse the R&D process gain significantly from the data exclusivity provisions'9.

Let's now return to consider the current situation in Europe. Data exclusivity in the EU is provided by Article 10 of Directive 2001/83/EC, according to which a generic drug do not require a registration file to be submitted if it can be demonstrated that it is essentially similar to a medicinal product which has been authorized within the Community for a period of not less than six years. The Directive also states that the period of exclusivity shall be extended to10 years in the case of high-technology medicinal products and that Member states can extend the period of exclusivity to 10 years to all medicinal products10.

In its July 2003 communication, the Commission proposed a compulsory data exclusivity period of 10 years for all new pharmaceutical products that are registered under the mandatory pan-European 'Centralized Procedure'11. Also, the Commission proposes to grant an extra year of protection for new indications of original medicines (this is usually referred to as the 10+1 formula)12. As to the registration of pharmaceutical drugs at national level (the so-called Decentralised Procedure') based on a decision of the European Council, the Commission recommends harmonizing the period of data exclusivity to 8 years with an additional 2 years of market exclusivity (this is usually referred to as the 8+2 formula)13. One has to bear in mind that, today, the period of data exclusivity at the national level varies between different countries. For example, a 10-year period of data exclusivity is granted in Germany, France, the UK and the Netherlands, while a 6-year period is granted in Austria, Greece, Spain, Estonia and Latvia (the latter two countries are EU candidates); Poland has a data exclusivity period of 3 years.

Finally, the Commission recommends that generic companies be legally entitled to make commercial experiments in patented pharmaceutical drugs as part of the process of obtaining marketing approval for generic substitutes (so called 'Bolar' provisions)14 . The underlying logic of this proposal is to reduce any delays in the launch of a generic drug once the patent of the original drug expires.

In its meeting of 17 December 2003, the European Parliament adopted a compromise known as the '8+2+1' formula15. According to this formula, new pharmaceutical products would be entitled to 8 years data exclusivity, 2 years of marketing exclusivity (in which generic companies would be allowed to engage in Bolar-type activities) and an additional year of protection for new indications of existing products.

At first glance, the 8+2+1 formula strikes a balance between the diverging interests of the pharmaceutical sector, with some added advantages for research-based companies. That said, there are still some fundamental issues that need to be addressed before de-facto intra-EU harmonisation can take place.

For example, the recommendation to implement Bolar-type provisions is likely to open a whole new 'can of worms' with regard to patent protection in Europe. One can only learn from the American experience (from which the Bolar mechanism originates) how complex and problematical such a system is16. This issue would require some serious discussion and further studies.

Another huge problem is the looming debate over the actual and 'definitional' similarity between biotechnological drugs and their generic follow-ups (bio-generics)17. For this new class of drugs, data exclusivity is going to play a pivotal role, possibly more than patents. Unfortunately, the proposed legislation, which focuses primarily on chemical formulations rather than biological ones, is not going to solve this issue, not least because there is still some way to go before bio-generic drugs can penetrate the market.

Therefore, it is likely that data exclusivity will continue to play an important part in the debate on the EU's intellectual property regime, with the potential for further complications. In this context, it is advisable that the EU decision-makers be less politically subtle and more professionally and pragmatically orientated.





1. Dr. Meir Perez Pugatch (Ph.D), is an academic researcher and independent consultant specializing in the fields of intellectual property policy and the commercialization of knowledge assets (meirp@pugatch.co.il).(«)


2. Commission of the European Communities, Communication: A Stronger European-based Pharmaceutical Industry for the Benefit of the Patient - A Call for Action (Brussels, 7 July 2003), COM(2003) 383 finalEuropean Parliament, Legislative Resolution on the Common Position Adopted by the Council with a View to Adopting a European Parliament and Council Regulation Laying Down Community Procedures for the Authorization and Supervision of Medicinal Products for Human and Veterinary Use and Establishing a European Medicines Agency (10949/2/2003 - C5-0463/2003 - 2001/0252(COD)) (Strasburg, 17 December 2003), P5_TA-PROV(2003)0577.(«)


3. Hindley, B. V. The Economic Theory of Patents, Copyrights, and Registered Industrial Designs: Background Study to the Report on Intellectual and Industrial Property (Ottawa, Economic Council of Canada, 1971).(«)


4. Robinson, J. The Accumulation of Capital (London, Macmillan, 1956), p.87.(«)


5. DiMasi, Joseph, Ronald W. Hansen, Henry G. Grabowski, and Louis Lasagna. 'Costs of Innovation in the Pharmaceutical Industry', Journal of Health Economics, Vol. 10, No. 1 (May 1991), pp. 107-42; Tufts Center for the Study of Drug Development 2001; PhRMA, Industry Profile 2003, Chapter 1 (Washington DC, 2003).(«)


6. Grabowski, H. Patents and New Product Development in the Pharmaceutical and Biotechnology Industries (Duke University, July 2001), p. 5 and Figure 1. Data is adjusted to 2003 R&D expenditures. («)


7. For the expression of such views see: European Generic Association, Data Exclusivity: A Major Obstacle to Innovation and Competition in the EU Pharmaceutical Sector, (EGA, Brussels, December 2000).(«)


8. Council of the European Communities. Council Regulation (EEC) No 1768/92 of 18 June 1992 Concerning the creation of Supplementary Protection Certificate for Medicinal Products (18 June 1992).(«)


9. IMS Health, Data exclusivity - The Generics Market's Third Hurdle, (November 2001).(«)


10. Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on theCommunity Code Relating to Medicinal Products for Human Use, Official Journal of the European Communities, 28 November 2001, L 311/67.(«)


11. European Commission, July 2003, p. 14. Centralized Procedure refers to product registration in the EMEA.(«)


12. Ibid.(«)


13. Ibid., p. 13.(«)


14. Ibid., p. 16. («)


15. European Parliament resolution, Amendment 14, Article 1, Point 8 (17 December 2003). This resolution is based on the recommendations of the European Parliament Committee on the Environment, Public Health and Consumer Policy. Draft Recommendation for Second Reading on the Council amending Directive 2001/83/EC on the Community Code Relating to Medicinal Products for Human Use (28 November 2003) A5-0425/2003. This report is also know as the Müller Report, Müller Report, op.cit., p. 11.(«)


16. In the US, Bolar provisions are implemented by the 1984 Drug Price Competition and Patent Term Restoration Act. See Mossinghoff, J. G. 'Overview of the Hatch-Waxman Act of 1984 and its Impact on the Drug Development Process', Food and Drug Law Journal, vol. 54.2 (1999), pp. 187-194.(«)


17. See European Parliament - Committee on the Environment, Public Health and Consumer Policy. Draft Recommendation for Second Reading on the Council amending Directive 2001/83/EC on the Community Code Relating to Medicinal Products for Human Use (7 November 2003), PE 331.699/36-66. This report is also know as the Grossetête Report.(«)