This is the final article in our general election series on Labour’s “Medicines for the Many” policy. To view the previous articles, click here.
The most significant challenge facing Labour in implementing its medicines policy is the need to strike a balance between incentivising innovation and promoting low drug prices through a highly competitive generic market.
Unilaterally removing patent protection from all government-funded products could result in innovators re-thinking their UK operations. In that scenario, a Labour government might be able to set up its own generic production lines, but it will have done so at the risk of disincentivising UK-led innovation. On the other hand, given there is already a thriving generics market within the UK, introducing a new (state) generic company without the accompanying patent reform proposals is unlikely to significantly impact most drug prices.
In the opinion of the authors, the current patent and regulatory regimes do a relatively good job of encouraging innovation while keeping drug prices in check through a highly competitive generic market. Incentives such as Supplementary Protection Certificates (SPCs), which offer extended patent protection (up to a maximum of five years) for products containing a new active substance and “Orphan Designation” which extends the period of data exclusivity for products treating rare diseases, ensure innovators are financially compensated for their R&D efforts, within limits. By the time new products are brought to market, the period of patent protection available is often relatively short[1], and novelty and plausibility thresholds mean that discovering a new indication or dosage regime may not be sufficient to extent the period of patent protection available.
Maintaining this balance between the needs of innovators and the need for drugs to be made available at low cost is essential in maintaining a functioning drug innovation system. A key question is whether the current system of incentives and rewards is still fit for purpose and / or whether small changes could provide a “rebalancing” without the need for wholesale change and the risk this would inherently entail. Below, we explore some of the changes which could be introduced to the current system to adjust the balance.
Allow generics to “launch at risk”
The UK Patents Court expects generic companies who are launching patented products to “clear the way” before entering the market. This means bringing patent litigation proceedings to revoke any existing patents. Litigation is expensive, and once a patent has been revoked it is open to anyone to launch a generic product – meaning there is generally little incentive for a single generic manufacturer to take on the commercial risk of challenging an existing patent.
In the event a generic company tries to secure its commercial advantage by launching without first revoking the underlying patent, the patent holder can instigate litigation against them. While the litigation is pending, the Courts are willing to grant an injunction to the patent holder, preventing the generic from proceeding with its launch. The patent holder is required to give security by way of a cross-undertaking in damages, that it will compensate the generic if the injunction has been wrongly granted (i.e. the patent is held to be invalid, or the generic product found not to infringe). This secures an additional period of exclusivity (and higher drug prices) for the patent holder while the litigation is pending.
If Labour is serious about encouraging lower prices in the market, it could introduce legislation either requiring that launches should be allowed to proceed, with an undertaking in damages given by the generic challenger to the patent holder, or encouraging the exercise of judicial discretion in weighing up the relative merits of each party’s case at injunction stage. This would allow cheaper products to come onto the market earlier, while recognising that if the patent is upheld, the generic company will be required to compensate the patent holder for the loss in sales at its original market price. If generic companies are willing to take the damages risk, this seems a “no cost” option for the government.
Introduce incentives for the first generic “challenger” products
Drug developers are sometimes accused of “evergreening” their products, by making small changes to existing products to extend their market monopoly. An alternative, or complementary approach to permitting launches at risk would be to introduce incentives for the first generic challenger to weaker patents. The ANDA approval process in the United States is a good example of a system which does this. A generic company seeking FDA approval must certify that, in its opinion and to the best of its knowledge, the originator’s patent is invalid, unenforceable or will not be infringed by the generic product. If the patent holder then files an infringement suit against the generic applicant, the approval application is stayed for 30 months, allowing for any resulting litigation to take place. If the challenge to the patent is successful, the first generic company to have filed its ANDA application will generally be eligible for the exclusive right to market the generic drug for 180 days, giving it an incentive to seek out and challenge vulnerable patents.
Encourage reviews of exclusivity processes and decisions
At an EU level, data and market exclusivity regimes have been used to very positive effect to incentivise research where a market need is identified, for example, the granting of orphan exclusivity for products which treat rare diseases. However, unlike patent protection, there are limited mechanisms to challenge such exclusivities once they have been granted, and limited time periods in which such challenges will be accepted.
To take orphan exclusivity as an example, “Orphan” status is granted only to the first treatment for a given indication, or a treatment which shows a “significant benefit” over the status quo and “similar” products are then required to prove “clinical superiority”. As an increasing number of complex cell and gene therapies (generally with narrow therapeutic indications) are brought to market, we are likely to see an increase in the number of orphan designations granted, but also an increase in the number of “second-place” products which can then be excluded from the market for that orphan condition. An improved system of challenging orphan designations, and clearer guidance on assessing “significant benefit” for complex therapies will therefore be of assistance to both innovators and generics alike.
Conclusions
The three examples we have set out above apply after a product has been launched, but similar steps could also be taken in respect of research funding, as we explored to a limited extent in the third article of this series. Profits, by way of royalties, could then either be reinvested in maintaining and expanding the UK innovation economy, or used to offset the price to the NHS of the medication concerned. If the Labour Party (or any future government) wishes to engage in patent reform there is plenty of scope to do so within the current system.
[1] The SPC regime is designed only to provide 15.5 years’ exclusivity as a maximum.
