By D. G. Shah
There is perpetual tension between competition and exclusivity. Competition supports multisource supply. Exclusivity requires protection for a single source. Both have bearing on access to medicines. Competition ensures access, while exclusivity denies access. This tension was heightened during the negotiations on the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs), as developed countries, egged on by Big Pharma, pushed for higher intellectual property rights protection.
The 1994 TRIPs Agreement extended the varying terms of patent protection to a uniform period of 20 years, providing a legal monopoly to innovators. What followed is history. The generics invaded the regulated markets, giving rise to many patent lawsuits. The last two decades witnessed intense conflicts between the intellectual property (IP) owners and the generics across the continents. This will continue as the innovators seek to extend their monopolies beyond the 20-year period. However, the onslaught of generics is so intense that the innovator companies are now looking for a shelter beyond IP protection. They are exploring new avenues to keep generics/biosimilars at bay. The innovator companies are frustrated with the judiciary’s stricter interpretation of the patentability norm across the major markets. In addition, many governments burdened with unsustainable health expenditures are taking a new look at their IP laws. Both of these trends have aggravated innovator companies’ concerns about maintaining exclusivity. Hence, they are looking for ways and means to curb the menace of generics at the source. The battle has therefore moved a few steps backward. Though the issues are somewhat different, the confrontation seems to be a rerun of the past. This time around, the issues relate to:
These problems are not new. As the judiciary became more circumspect in its evaluation of alleged patent infringement, the innovator companies began seeking new ways of blocking generics. Previously, they used to block generics after the companies applied for regulatory approval. Now, they seek to block generics at the development stage itself. This gives them multiple opportunities to delay or block the entry of generics. The modus operandi is not only unethical but is also abusive.
In India, the innovator companies turned to obtaining commercially sensitive information from the office of the drug regulator. They hired a third party to seek information about generic companies that have applied for import of samples of patented products for development. A law that allows citizens “right to information” on matters of public importance is thus being abused to seek private information.
Once equipped with authentic information about the generic companies regarding their development plans, the innovator companies apply to the courts, filing cases to restrain the generic companies from breaching their patents. In reality, the company is only importing samples for development. More importantly, the company seeking permission to import is listed as a second or third defendant. The first defendant is an unknown entity — an executive or an independent director of the company. Thus, when the matter is listed, it would not show the name of the company, the real defendant. This ensures that the real defendant is not present in the court. When the matter is heard, the applicant (innovator company) claims that launch of a generic version is imminent and it will cause the rights holder “irreparable damage,” resulting in an ex-parte injunction restraining the company from pursuing all activities related to the development of generic version. By the time these unethical and abusive practices came to light, several cases had been heard. The innovators succeeded in some and failed in others. They include companies such as Roche, Novartis, Pfizer, etc.
The second and more prevalent practice is not providing samples for bioequivalence. The U.S. Federal Trade Commission (FTC) has intervened in legal disputes between generic and innovator companies for not providing their products for testing. In 2014, the FTC backed Mylan’s REMS antitrust lawsuit against Celgene for bioequivalence testing. There may not be many such cases, but they could be economically significant. This practice has also attracted attention of U.S. law makers. The U.S. Senate recently reintroduced a bill titled Creating and Restoring Equal Access to Equivalent Samples Act of 2017 (CREATES Act). Though the CREATES Act allows generics to sue innovators for not providing sufficient quantities of REMS products, experts doubt it will provide an optimum solution to the issue. It is possible that under the current regime in the U.S., the innovator companies may behave differently to avoid the glare of the president. They may also not flout laws to pursue longer period of exclusivity, given the new administration’s focus on raising competition to reduce drug prices in the U.S.
Among the multiple opportunities that innovator companies now use is challenging the decisions of the drug regulatory authority. In India, Roche sued Biocon and Mylan to restrain them from selling their biosimilar of breast cancer medicine Trastuzumab. Roche also challenged the drug regulator for approving the biosimilar. It won, but lost on appeal through an interim order. The parties have sued each other for contempt. Subsequently, Biocon and Mylan claimed abuse of dominance by Roche before the competition authority. The competition authority ruled prima facie abuse of dominant position and ordered an investigation. Roche has challenged the investigation order, raising a fundamental issue: Is patent enforcement anticompetitive? While the matter is still subjudice, it suffices to say that competition authorities have woken up to the abusive anticompetitive practices of innovators. The points to note are innovator companies’ recourse to litigation to prevent/delay entry of biogeneric and generic companies’ reliance on the competition authority.
Litigation involving the competition authority at the development stage has so far been few, though not because abuses do not take place. They occur all the time. Generic companies are hesitant to take them up for two reasons. First, they do not want their competitors to find out their product development focus and strategy. Second, many of them have some form of commercial alliance with the innovator companies and they do not wish to adversely impact those alliances. However, once their pipeline of new products is choked, generic companies will have no option but to invoke both the competition authority and the drug regulator to obtain timely access to samples. In this context, FDA Commissioner Scott Gottlieb’s statement is noteworthy. He told CNBC: “We don’t play a role in drug pricing, but we do affect drug competition in terms of getting new drugs on to the market, and create competition to older drugs, particularly with generic drugs.” Though he limited his ambit to “older drugs” with a focus on “generics,” it is not too farfetched to expect him to address the issue of competition in biogenerics for products going off patent in the near future. The same logic will force him to address the issue of lack of competition for new drugs going off-patent.
The subject has also caught attention of academia. Professor Frederic Abbott of the Florida State University College of Law recently spoke on the subject at the ASEAN competition authorities’ summit in Kuala Lumpur. Going forward, the pharmaceutical industry will now have to deal with new frontiers of divide. The competition authority will become a regular feature in the battle between competition and exclusivity, not just for mergers and acquisitions.
This article forms part of the CPhI 2017 Annual Report, which will be released during the CPhI Worldwide event in Frankfurt (October 24-26, 2017).
About The Author:
D. G. Shah is CEO of Vision Consulting Group and secretary general of the Indian Pharmaceutical Alliance. He can be reached by email at firstname.lastname@example.org.