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[e-drug] TACD on early working of pharmacuetical patents

E-DRUG: TACD on early working of pharmacuetical patents
[copied from Pharm-Policy; WB]

I'm sure this could be better.   I'm working on several other 
statements on pharamceutical drug issues.  Jamie

Draft TACD position paper on Early Working of Pharmaceutical

version 1.0

1.   Early Working of Pharmaceutical Patents
a.   Background

The United States, Canada and some EU countries provide "early
working" exceptions for patent rights, permitting the testing of
medicines prior to the expiration of patents in order obtain
regulatory approval to market a product.  The US early working
exception is sometimes referred to as a "Bolar" provision  -- a
reference to a US Supreme Court decision that prohibited this
practice and was later overturned by legislation, as part of the
US Hatch/Waxman Act.  Some EU governments have early working
exceptions as part of more general exceptions for experimental

The International Federation of Pharmaceutical Manufacturers
Associations (IFPMA) and other large research based
pharmaceutical industry trade associations have lobbied the US
and the EU to eliminate or limit "Bolar" type early working
patent exceptions.   The US and the EU have both objected to the
use of Bolar type provisions in other countries.    In Israel,
the US government has objected to early working provisions,
unless Israel agreed to provide patent extensions for
pharmaceutical products.   The US has also objected to early
working provisions in Cyprus, Argentina, and in several other

b.   The EU/Canada early working WTO dispute

The EU has a WTO complaint (DS 114) against Canada for Canadian
provisions for early working of pharmaceutical patents.   The
Canadian law includes two key provisions.  The first is similar
to the US Bolar provision, and permits early working of a patent,

     "solely for uses reasonably related to the development
     and submission of information required under any law
     that regulates the manufacture, construction, use or
     sale of a product (subsection 55.2(1) of the Patent
          The second provision provides an exception for a "limited,
prescribed period immediately preceding the expiry of the
patent," for
     "the manufacture and storage of articles intended for
     sale after the patent expires (subsection 55.2(2) of
     the Patent Act)."
Both provisions in the Canadian law are designed to permit rapid
introduction of generic drugs into the market following the
expiration of pharmaceutical patents.   The first provision
permits a firm to conduct the tests on a product that will be
required by regulators, such as evidence of bioequivalancy.  The
second provision permits a firm to manufacture and store the
product, so that when the patent expires, a generic product can
entire the market immediately.  

The WTO provision for exceptions to patent rights is Article 30
of the TRIPS, which says:

                           Article 30
                 Exceptions to Rights Conferred

     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

The EU has lodged a complaint with the WTO claiming that the
Canadian law early working exception is an unreasonable use of
Article 30, and further that it violates Article 27.1 of the
WTO's TRIPS accord, which states that,

     "patents shall be available and patent rights enjoyable
     without discrimination as to the place of invention,
     the field of technology and whether products are
     imported or locally produced,"

on the grounds that the Canadian Act cannot single out
pharmaceutical drugs for special treatment.   

Canada says its early working provisions are reasonable and
consistent with the provisions of Article 30 of the TRIPS, and
are necessary to prevent the patent owner from unfairly
benefiting from a monopoly due to a regulatory system that is
designed to protect the public's health:

     "TRIPS contemplates that Members may, in implementing
     their obligations within their legal systems, adopt
     measures which, like those in issue here, introduce
     limited exceptions to the exclusive rights conferred by
     a patent and confine the patent monopoly to the
     specific term for which it is granted, in the interests
     of promoting full competition in regulated-product
     markets after the expiry of that term and of realizing
     the cost-saving benefits that competition in those
     markets (particularly the health care products market)
     confers on society. TRIPS does not contemplate that
     these important societal interests should be overridden
     by an alleged right of patentees to exploit
     time-consuming regulatory review systems -- which are
     neither designed nor intended to protect intellectual
     property rights -- in order to extend the term of
     patent protection and to gain a windfall monopoly."

With respect to the issue of the WTO and the non-discrimination
language in TRIPS Article 27.1, Canada says that the EU is wrong
to say that country's cannot have special provisions in patent
laws for particular industries:
     . . . TRIPS does not contemplate that these important
     societal interests should be overridden by the
     anti-discrimination requirement of Article 27.1. The
     latter provision is not intended to require "across the
     board" derogations from patent rights. That would only
     defeat Article 30's purpose of permitting exceptions
     that are "limited", and would compel the application of
     exceptions where they are not needed. Instead, since
     Article 27.1 does not purport to define the "patent
     rights" that it requires to be made available and
     enjoyable without discrimination, those rights are the
     ones enumerated in Article 28.1, subject to any
     exception that may be made under Article 30, 31 or 40.
     This interpretation gives effect to the language of
     Article 27.1 in its context rather than in isolation,
     and achieves the balance contemplated by Article 7 as
     an objective of the TRIPS Agreement. 

(See http://www.dfait-maeci.gc.ca/tna-nac/summary-e.asp)
The EU complaint is important, because it seeks to restrict the
experimental use and production without sale exceptions, and also
because it seeks a restrictive interpretation of the non-
discrimination language in Article 27.1 of the TRIPS.  These are
matters of first impression, and the EU's complaint will set
important precedents.

c.   Early working is needed to avoid undue regulatory barriers
to entry by generic drugs.

The EU is seeking to give pharmaceutical patent owners a
significant extension of the effective period of exclusivity, by
making it impossible to undertake measures needed to satisfy time
consuming regulatory obligations until after patents have
expired.  This may result in years of delays before generic
products can be tested and approved, and will harm consumers
through higher prices for pharmaceutical.

All WTO member countries, including Canada, are required to
provide a minimum of 20 years of patent protection for
pharmaceutical drugs.   The EU is seeking trade rules that will
permit pharmaceutical patent owners to use health and safety
regulatory systems as a barrier against competition in the period
when patents have expired.  

d.   Article 27.1 should not be interpreted as requiring a "one
size fits all" patent law.

Also troubling is that contention, by the EU, that Article 27.1
of the TRIPS prohibits countries from having provisions in patent
laws that are sector specific.  There is no virtue in "one size
fits all" patent provisions in national law.  The United States
has special compulsory licensing provisions for nuclear energy
and air pollution control patents, and some EU member countries
also have sector specific provisions in patent laws, such as the
French provisions regarding compulsory licensing for
pharmaceutical drugs.  Both the EU and the US have patent
extension provisions that apply specifically to pharmaceutical
drugs.  The new field of biotechnology may benefit from special
rules to address specific issues, and there may be merit in
special rules for software patents.

The drafters of the TRIPS clearly intended to extend patent
protection to all fields of technology, specifically including
pharmaceuticals, which were excluded from many national patent
laws.  However, there is no consensus that a "one size fits all"
or "lowest common denominator" patent law is in the public
interest, and it is our view that this would be an unwise and
unreasonable restriction on national sovereignty.

e.   Precedents for Production for Export. 

The EU complaint against Canada addresses the question of whether
or not Canada can permit production and stockpiling of
pharmacueticals prior to the expiration of patents.  In our view,
such a provision is reasonable and benefits consumers by speeding
the introduction of cost saving generic drugs, after patents have
expired.   However, there is an additional issue that may be
affected by a decision in this case.  Public health groups are
seeking a consensus on the issue of patent exceptions for
production for export, where the patent rights in the export
market have expired, or are subject to a TRIPS compliant
compulsory license.  This is a very important issue for access to
medicines in developing countries, many of which have small
markets and must import drugs.  A WTO ruling on the EU/Canada
dispute over early working may have an adverse impact on the
jurisprudence for the production for export issue. 

f.   US and EU trade policy on early working of patents

The United States and the EU should not seek to prevent countries
from adopting Bolar style early working provisions in national
legislation.  The rapid introduction of generic drugs following
the expiration of patents is in the public interest.  Patent
owners have a limited monopoly, and that monopoly should not be
extended by regulatory and technical barriers to trade.  The
expiration of patents is a spur for innovation -- firms have to
develop new products.  It is not in the public interest to pay
high prices of inventions that are more than 20 years old. 
Investors do not base current investment decisions on
expectations of revenues more than 20 years in the future. 
Changes in regulatory environments have lead to shorter time
periods for regulatory approvals -- leading to longer effective
patent life.  A recent study by CPT of 14 HIV/AIDS drugs found
that the average time between the filing of a US patent and the
FDA approval of the drug was only 4.4 years.  

James Love 
Center for Study of Responsive Law | Consumer Project on Technology 
P.O. Box 19367, Washington, DC 20036 | http://www.cptech.org
Voice 202/387-8030 | Fax 202/234-5176 | love@cptech.org

James Love 
Center for Study of Responsive Law | Consumer Project on Technology 
P.O. Box 19367, Washington, DC 20036 | http://www.cptech.org
Voice 202/387-8030 | Fax 202/234-5176 | love@cptech.org

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