There is perpetual tension between competition and exclusivity. Competition supports multi-source supply. Exclusivity requires protection for a single source. Both have bearing on access to medicines.
There is perpetual tension between competition and exclusivity. Competition supports multi-source supply. Exclusivity requires protection for a single source. Both have bearing on access to medicines. Competition ensures access, exclusivity denies access. This tension got heightened during the negotiations on the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs) as developed countries egged by the Big Pharma pushed for higher IPR protection. The TRIPs Agreement extended the varying terms of patent protection to a uniform period of 20 years, providing legal monopoly to the innovators. What followed is history. Generics invaded the regulated markets, giving rise to many patent litigations. The last two decades witnessed intense conflicts between the IP owners and generics across continents.
This will continue as the innovators seek to extend their monopoly 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 strict interpretation of patentability norms across major markets. In addition, many governments, burdened with unsustainable health expenditure, are re-looking their IP laws. Both these have aggravated innovator companies concerns about maintaining exclusivity. Hence, they are looking for ways and means by which they can curb the menace of the generics at its origin. The battle has therefore moved a few steps backwards. Though, the issues are somewhat different, the confrontation seems to be a rerun of the past. This time round, the issues relate to:
• Innovators blocking access to pharmaceutical reference products for bioequivalence testing, thereby delaying/denying generic entry;
• Innovators using distribution safety protocol, known as Risk Evaluation and Mitigation Strategy (REMS), to impede generic/biosimilar drug development; and
• Innovators challenging the marketing approval granted by the drug regulatory authority to prevent biosimilar products.
These problems are not new. As the judiciary became more circumspect in its evaluation of alleged patent infringement, the innovator companies started seeking new ways of blocking generics. Till now, they blocked 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 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 which allows citizens “right to information” on matters of public importance, is thus abused to seek private information.
Thus, equipped with authentic information about the generic companies regarding their development plans, the innovator companies move to the Court. The case is filed to restrain the company from breaching its patent. In reality, the company is only importing samples for development. Another abuse of law. 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. The matter is heard. The applicant (innovator company) claims that launch of a generic version is eminent. It will cause the right holder “irreparable damage” and gets ex-parte injunction, restraining the company from pursuing all activities related to the development of generic version. Yet one more abuse of law. By the time this unethical and abusive practices came to light, several cases were heard.
The innovators succeeded in some, 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 US Federal Trade Commission (FTC) has intervened in legal disputes between generic and innovator companies for not providing their products for testing. In 2014, FTC backed Mylan’s REMS Antitrust Lawsuit against Celgene for bioequivalence testing. There may not be many such cases, but those that are there could still be economically significant. This practice has also attracted attention of the US law makers. The US recently reintroduced a bill: Creating and Restoring Equal Access to Equivalent Samples Act of 2017 (CREATES Act).
It speaks for the innovators’ abusive practices. Though CREATES Act allows generics to sue innovators for not providing sufficient quantities of REMS products, experts doubt if it would provide optimum solution to the issue. It is possible that under the current regime in the US, the innovator companies may behave differently. They may not flout laws to pursue a longer period of exclusivity, given the Trump administration’s focus on raising competition to reduce drug prices. Among the multiple opportunities that innovator companies now use is one of challenging the decision 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 their biosimilar. It won, but lost in 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 investigation. Roche has challenged the investigation order raising a fundamental issue: is patent enforcement anti-competitive? While, the matter is still subjudice, competition authorities have woken up to the abusive anti-competitive practices of innovators. The points to note are innovator companies’ recourse to litigations to prevent/delay entry of biogenerics and generics’ reliance on the competition authority. The litigations involving the competition authority at the development stage have, so far, been few. Not because abuses do not take place. They occur all the time. But, generic companies are hesitant to take them up for two reasons.
Firstly, they do not want their competitors to find out their product development focus and strategy. Secondly, many of them have some form of commercial alliance with the innovator companies. And, they do not wish to adversely impact their commercial alliance. 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 have timely access to samples. In this context, US 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 has limited his ambit to “older drugs” with focus on “generics”, it is not too far-fetched 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. Frederic Abbott, professor at 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 the divide. The competition authority will become a regular feature in the battle between competition and exclusivity, not just for mergers and acquisitions.
(This article first appeared in the CPhI Annual Industry Report 2017)
– DG Shah