Non-Patent Exclusivity in US & EU
Non-patent exclusivity or Regulatory exclusivity is the core profit driver of the pharma industry. The rationale behind introducing regulatory exclusivity for drug products was that the amount of time taken to gain approval to market the drug product often leaves little viable protection period for the drug product under patents. Patents are often filed during the early developmental stage of the drug and approval from the authorities (FDA- Food and Drug Authority or EMEA-European Medicines Agency) often takes over a decade to come through, and that leaves the patent holder with a much lesser duration, and sometimes none, to actually avail a return on the huge investment in R&D.
A framework to grant exclusive marketing rights to the drug manufacturers was developed in the US by way of the Hatch-Waxman Act of 1984. Under this act, exclusivity is granted to certain pharma products if they fulfill the requisites of the act. It lays down the ground for the sustenance of generic drug manufacturers. The Act lays down the procedure for filing an Abbreviated New Drug Application (ANDA) which when approved by the FDA allows the generic drug manufacturer to market the product. So as to balance the scale between the generic drug manufacturers who make available pertinent drugs to the general population at reasonable rates and brand drug manufacturers who are responsible for innovation and extensive R&D; the Act lays down exclusivities and classifications for ANDA applications and new drug products.
1. New Chemical Entity Exclusivity-5 years
NCE is granted to a drug that has an ‘active moiety’ which has not been approved in any other New Drug Application (NDA) before. Active Moiety is defined as an ion or molecule which is attributed to the drug’s physiological or pharmacological action. This exclusivity safeguards the return on investment for a truly innovative product and therefore an Abbreviated New Drug Application (ANDA) is not approved or even accepted for review during the period of exclusivity regardless of whether the intended use of the ANDA drug is for the same indications as that of the original drug or another. The processing of an ANDA filed after the expiration of five years, takes about 2 years and thus the net exclusivity to the brand drug comes up to 7 years. However, there is no bar on filing an NDA with the same component/active moiety if its intended use is different for indications.
2. Clinical Investigation Exclusivity-3 years
These are granted to the sponsors/companies which sanction additional clinical trials and testing on the drugs which are previously approved and/or marketed. This generally results in changes to the already marketed products after the new supplemental NDA is approved. The new supplemental application is only deemed valid if; it has a new dosage form, treats any new indications, makes a switch from a prescription drug to an over-the-counter drug. Additionally, guidelines are also laid down for validity of the clinical trials; it has to be new and not have been a part of the previous studies conducted with regard to the drug, it must be pertinent for approval, it must not be a bioavailability study and that it should be sponsored by the applicant. During the period of exclusivity, no ANDA can be granted on the modification so added however an ANDA can be accepted on the previous version of the drug or the original drug. There is also no bar on acceptance of the ANDA during the 3 years and initiation of review, just that they cannot be granted during the 3-year duration. There is also no bar for a competing generic drug manufacturer on gaining approval based on their own clinical trials.
3. Orphan Drug Exclusivity-7 years
Huge investment costs are incurred during the innovation and manufacturing of the drugs and the pharma companies only thrive on the demand of the market and their subsequent profits. Thereby, there is hardly any innovation directed towards rare conditions/diseases since there is a limited market for the pharma companies to ensure return on their investment. In the US, orphan drugs are attributed to conditions that affect 200,000 or fewer people in the US or which have no return on investment in the market. Furthermore, even if a drug is introduced its mark up cost is very high for it to be affordable to all those who need it. Thus, in order to incentivize the pharma companies to direct their invention towards these drugs as well as exclusive market rights are granted for 7 years in addition to research grants and even tax benefits. During this period of exclusivity, the FDA can accept but not approve an ANDA application on the drug. However, the FDA can accept and approve any new application for the drugs which have the same active moiety but treat different indications. Additionally, the FDA can give the ODE to another drug with the same active moiety and treating the same indication if it is proved to be clinically superior i.e. safer, more efficient, and more convenient to administer. This doesn’t limit innovation and gives an added incentive to the companies which in turn increases the competition and decreases the price of the drug which essentially makes its availability better.
4. Pediatric Exclusivity- 6 additional months
The innovation in pediatrics is very limited because each child has the probability of interacting with the drug differently and giving different results. The Best Pharmaceuticals for Children Act grants exclusivity for 6 months attached to the other three exclusivities or the patent term itself. The exclusivity is granted on the basis of the pediatric studies conducted and the development of useful information or results from it. The pediatric studies are conducted on a drug that already has NDA approval and, in response to a request from the FDA to conduct such a study, and the report of which has to be submitted to FDA. Even if the study fails or the results are unsuccessful the exclusivity is independent of it. The exclusivity is granted to all of the applicant’s dosages or formulations and indications for the drugs with an existing marketing exclusivity or a patent with the same active ingredient.
5. Patent Challenge Exclusivity-180 days
Market exclusivity is also granted to generic drug manufacturers in order to encourage them to challenge existing patents. This exclusivity is granted to the generic drug manufacturers who file an ANDA with a Paragraph IV certification (PIV), which alleges that the existing patent of the brand company is invalid or is not being infringed by the generic drug product. Once the application is accepted the generic company has to send a notice to the brand company and if the brand company doesn’t initiate a suit of infringement to contest the PIV within 45 days then the ANDA is approved and the first to file generic companies are given 180-day exclusive marketing rights. However, if the brand company does institute the suit then there is a 30-month stay on the approval of the ANDA or till the conclusion of the suit, whichever is earlier.
However, in the EU similar exclusivities are granted but their evolution is not consolidated as in the US. The EU market exclusivities are developed by way of EU Regulations and are now centrally administered. The exclusivities in the EU began by extending their patent terms to compensate for the delays in market approvals. Exclusivities, otherwise, are similar to the US structure.
1. Supplementary Protection Certificate (SPC)-5 years
Since 1993, in the EU, pharma companies are eligible to obtain an SPC which grants them a five-year extension on their patent term so as to compensate for the lengthy procedural requisites of regulatory approval. An SPC is granted if on the date of application the product is patented and that it should not have previously been subject to an SPC application. The SPC only comes into effect after the expiration of the patent itself. The extension of the 5 years is counted from either the date of application to the date of first marketing exclusivity or 5 years.
2. Data Exclusivity-8+2+1 regime
EU follows what is known as the 8+2+1 regime for data exclusivity. During the 8 year period of data exclusivity, no generic company’s application for marketing authorization is accepted. For the 8 years, the drug is basically regarded as a trade secret and its data is not available to be referenced by any other party. If a competitor should wish to get marketing approval they cannot rely on the data from the inventor’s application rather they’d have to perform their own safety or toxicology studies or clinical trials. Additionally, 2 years of market exclusivity is given to the inventor company and no generic competitor is allowed market authorization for the product. Subsequently, another year of extension of market exclusivity may be granted, provided that during the 8 year period of data exclusivity an additional authorization is taken for one or more new therapeutic indications, which must be proven to have clinical benefits which are superior over the existing characteristics. Thereby, a total of 11 years of market exclusivity can be availed.
3. Orphan Drug Designation-10 years
An EU Regulation was passed in 1999 to incentivize the innovation in orphan drugs. An orphan drug is defined as being intended to diagnose, prevent or treat a life-threatening or serious condition afflicting 5 in 10,000 people in the EU or is intended to diagnose, prevent or treat a life-threatening or serious chronic condition that without incentive won’t be marketed due to not having sufficient return on investment and there must not be any satisfactory method of diagnosis or prevention or treatment in the EU community, and if there exists one the product must have a significant benefit over it. The inventor must apply for ODD before applying for market authorization and this gives an uninterrupted period of 10 years of exclusivity, which can be enough to gain sufficient profits from the orphan drug and also boost the innovation in the field.
4. Pediatric Exclusivity-6 months extension of SPC
To encourage research into the Pediatric drug market the regulations require that along with the market exclusivity application the product’s use also specifies its Pediatric Investigation Plan (PIP). The products eligible for an SPC were only exempted from his pediatric requirement if they receive a waiver or a deferral. However, the sponsors that do include the PIP are granted an extension of 6 months on their SPC period making it of up to 5.5 years. This extension is granted to all the indications that the drug treats with the same active ingredient and is not limited to the pediatric indication alone. The SPC extension on the other hand is not applicable if one-year additional exclusivity is already applied for and accepted on the ground that the new pediatric indication is clinically superior.
Subsequently, a new regulation was introduced: Pediatric Use Marketing Authorisation (PUMA). Under this, a medical product that is not covered under SPC or is not protected under it is granted 8 years of data exclusivity and in addition to that 10 years of market exclusivity, which are limited to the pediatric population alone.
The US and EU are the biggest markets for pharma products and the generic drug industry, which makes it all the more necessary for both the jurisdictions to come up with exclusivities that are not solely dependent on the terms of the patent of the products. Due to the lengthy procedures of both patent and FDA or EMEA, the drug industry suffers economic losses and are unable to procure the return on their investment. Furthermore, an administrative push is also required in both the markets to encourage the R&D in orphan drugs and pediatric drugs which statistically do not ensure sufficient return on investment. But, the market exclusivities provided in both the territories ensure that there is a judicial utilization and payback of the resources which are spent for the development of the drug products.