Intellectual Property and Competition Law - IPRsonline.org

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ICTSD Programme on IPRs and Sustainable Development23Government Interventions Affecting CompetitionAs mentioned above, there are a number ofareas in which IPRs play an important role andwhere actions taken by governments decisivelyshape competitive relations. This sectionconsiders some of these areas.Data exclusivityRegulations determining requirements formarketing and approval of pharmaceutical,agrochemical and other products represent asignificant component of a state’s competitionpolicy. Such requirements may be linked insome areas to IPR protection, thereby definingthe room for competition by innovators andgeneric companies.Governments have had considerable leeway todetermine the conditions to be met by marketentrants in the area of pharmaceuticals. 114 Thefirst marketing approval of a pharmaceuticalproduct normally depends on the supply ofevidence on quality, efficacy and safety (testdata). National health authorities can followdifferent models for the approval of the second(and subsequent) marketing application. Theauthority may:(a) require the second entrants to producetheir own test data or to obtain anauthorisation of use from the “originator”of the data;(b) allow the second entrants to rely on the“originator’s” test data against paymentof a compensation; 115(c) use the “originator’s” test data in order toexamine subsequent applications of similarproducts; in this case, the authority reviewsand relies on the originator’s data;(d) rely on the approval given in a foreigncountry and require the second entrantsto prove only that their product is similarto an already registered product (theauthority does not receive nor review theoriginator’s test data).In some jurisdictions, the test data necessaryfor the registration of pharmaceutical productsare subject to a sui generis system of “dataexclusivity”, which confers a temporaryright to the exclusive use of such data by thefirst applicant (generally the company thatdeveloped a new product). This means that thecompetent health authority will not be able,for a certain period, to use or rely on the datasubmitted by the first applicant in order toapprove a second entrant’s application for thecommercialisation of a similar product. Thismodel is based on the argument that withoutdata exclusivity, private firms would have noincentive to bear the considerable costs ofproducing the required data. The exclusiveperiod of use would permit the originator of thedata to recover the investment made for theirdevelopment.In other countries, however, it is possible forhealth authorities to approve a second entrantapplication by relying on data submitted by thefirst applicant or on the approval granted by aforeign authority. The rationale for this approach– which is consistent with the TRIPS Agreement 116– is that marketing approval should not erectbarriers to otherwise legitimate competitionand that investment for developing test datawill not be jeopardised, especially in caseswhere the approval is granted in a developingcountry. 117 This model of marketing approvalcan promote price competition and access tomore affordable medicines.The data exclusivity and the unfair competitionapproach obviously have very differentimplications for competition. While the firsteliminates generic competition – even in theabsence of patent protection – during theexclusivity period, 118 the second promotes it. Inaddition, procedures relating to the marketingapproval of pharmaceutical products are liableto be misused. For instance, Astra Zeneca wasfound to have misused such procedures andinfringed Article 82 of the EC Treaty by deregisteringthe original capsule version of Losecin Denmark, Norway and Sweden with a view topreventing the authorisation of generic versionsthereof. 119
24Carlos M. Correa — Intellectual Property and Competition LawLinkageRestrictions to competition may arise fromother aspects of regulatory procedures for theapproval of medicines and other products. Oneexample is the so-called “patent-registrationlinkage” applied in some countries 120 and activelypromoted by the US in free trade agreements.Under such linkage, a national health authoritycannot approve a medicine, or is obliged to takeother measures when there are patents relatingto the medicine, and the applicant has notobtained the patent owner’s consent to use thepatent in question.There are different forms of linkage, with variousdegrees of state intervention. In the case ofthe US, 121 the linkage system operates throughthe so-called “Orange Book” of the Food andDrug Administration (FDA). Patent holders mustregister information 122 on all patents, includingtheir expiry dates, relevant to products forwhich they have obtained marketing approval.The patents to be listed include those whichclaim a drug or a method of using the drug thatis the subject of a new drug application (NDA)or amendment, or with respect to which patentinfringement could reasonably be asserted if aperson not licensed by the owner of the patentengaged in the manufacture, use or sale of thedrug product. Process patents are not requiredto be registered in the Orange Book.The FDA has repeatedly argued that it lacks theknowledge and resources to undertake to reviewpatent claims to ensure that listings in theOrange Book have been correct, relying ratheron the patent holder’s declaration. The FDAmust inform patent owners who registered theirpatents in the Orange Book about the existenceof a third party’s application on the same drug,but it is the patent owner who needs to act beforethe courts if s/he wants to interfere with theapplication procedures of a non licensed thirdparty. 123 If a lawsuit is filed, the FDA’s approvalof the generic drug is automatically stayed for30 months, regardless of the merits of the case.A US FTC study found that for nearly 75 percentof the drugs covered by the study, brandnamecompanies initiated patent infringementlitigation against the first generic applicant. 124 Acourt decision had been made (at the time ofconclusion of the study) for 53 drug productsout of 75. For 30 drug products, a court decisionresolved the patent infringement claims. Genericapplicants prevailed 73 percent of the time.Settlements were reached in 38 percent of theinstances. Nine of these settlements obliged thebrand-name company to pay a certain amount ofmoney to the generic applicant. In seven casesthe brand-name company licensed the genericapplicant to use the patents for the brand-namedrug product prior to patent expiration and intwo cases the settlements allowed the genericapplicant to market the brand-name drugproduct as a generic product, under the brandnamecompany’s own marketing approval. In18 instances, a court held that the brand-namecompany’s patents were either invalid or notinfringed (FTC, 2002).In addition, litigation took place against thesecond generic applicant in cases where the firstgeneric applicant settled its patent infringementlitigation. Out of a total of 20 drug productswith first generic settlements, nine drugproducts involved litigation with the secondgeneric applicant. In four cases, there was alsosettlement with the second generic applicant;in three cases the second generic applicant wonthe patent infringement suit, while brand-namecompanies only prevailed in one infringementsuit (FTC, 2002).There has been considerable evidence on theabuse of the marketing approval procedures andOrange Book listings through patents that onlyspecify a new feature or function of the drugthat was not covered by a patent at the timethe drug was first approved by the FDA (FTC,2002) or by including non-eligible patents. Suchpatents have been used to delay the entry ofgenerics, as each new patent could be used toobtain a new automatic stay for 30 months. 125In a case decided by the FTC against BristolMyers, for instance, the company was found tohave made wrongful listings “because the FDAdoes not review patents presented for listing in
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