Pharmaceuticals And The Law: As Patent Laws Converge, Attention Shifts To "Data Protection"

Tuesday, February 1, 2005 - 01:00

Adrian Zahl
Ridout & Maybee LLP

Patent laws in most countries are heading towards a reasonably uniform standard, largely in response to World Trade Organization (WTO) requirements. This standardization is of great interest to many industries, especially the pharmaceutical industry, which is probably more patent-driven than any other. However, there still exists a large disparity in laws between countries relating to another important form of protection for pharmaceuticals: data exclusivity.

For many years, a disparity existed in the patent laws between countries having a domestic research-based pharmaceutical industry, which provided a full measure of patent protection and those without, which provided a reduced level of protection. All WTO member countries are now required, or are on a schedule to eventually require, by the TRIPS Agreement ("Trade-Related Aspects of Intellectual Property Rights") to provide full patent protection to all fields of technology, including pharmaceuticals.1

Attention has now shifted to another form of protection considered to be of nearly equal importance, namely so-called "data protection" and "data exclusivity."2 This type of protection prevents others from using data, which has been generated by a drug company, to obtain an approval of a generic version of the same drug. Companies seeking approval of any new drug, or a new treatment regime or other change relating to an existing drug, must submit extensive test results to the department of health of each national government where approval is being sought, showing that the drug is safe and effective. This data is generated by a staggering investment of time and money to carry out a program of pre-clinical and clinical testing.

A generic drug company seeking to market its own version of the same drug is for practical purposes forced to rely on the originator's data. Although the generic company could in principle carry out its own tests, the time and money involved makes this a practical impossibility and the cost of such research would significantly drive up the costs of generic drugs or keep them off the market. Thus, most countries have provisions that permit companies to obtain an approval for a generic version of a previously approved drug based on more limited testing. Typically this involves a showing that the generic drug is the equivalent of the original drug. In such cases the approving body must rely at least implicitly on the original safety and efficacy data generated by the originator of the drug.

In some countries, the drug originator is given a period of exclusivity, during which no generic drug company will be entitled to obtain an approval for its generic version of the drug without submitting its own original data. In some cases, the company's application cannot even be considered during this period. This has the practical effect of keeping generic competition off the market until the end of this period of exclusivity and beyond, if the approval process commences only at the end of this period.

Data exclusivity is thus different conceptually from patent protection. While patents protect innovation and novel inventions, data exclusivity protects "sweat of the brow" investment. "Data exclusivity" is generally independent of the patent system and provides pharmaceutical companies with important advantages over patent protection. For example, patent protection may have expired by the time a drug is finally approved, making data exclusivity the only available form of protection.3 Data exclusivity is also critical if the patent on a drug is found to be invalid or is otherwise not available. Data exclusivity operates prospectively to prevent a generic competitor from entering the market, while patents are usually enforceable only after a product has entered the market; a competitor may be permitted to sell its product for years while the patent trial makes its way through the courts. However, Canada and the United States both provide a mechanism by which a drug originator may use its patents to prevent generic competitors from entering the market until its patents on the drug all expire.4

Many countries do not provide any form of data exclusivity. Indeed, in 2003 PhRMA listed 18 countries that provided neither patent term extensions nor formal data exclusivity.5 Other countries provide patent term extensions but no formal data exclusivity, although some countries such as China claim to provide informal data exclusivity by refusing to authorize the sale of generic drugs for several years after the original drug has been approved. Japan takes a similar approach and provides an informal six-year period of data exclusivity.

NAFTA and TRIPS both include provisions that require member states to maintain confidentiality of data and to protect confidential data against "unfair commercial use." Article 1711(5) of NAFTA states that if a Party requires submission of test data for approval of pharmaceutical or agricultural chemicals, the Party shall protect against disclosure of such data except where necessary to protect public health or when steps are taken to protect against unfair commercial use. Article 1711(6) states that no person not approved by the data's originator may "rely" on this protected data to support an application for product approval for a "reasonable time" after the submission of the original data's submission, which is stated to be for at least five years.

In Bayer Inc. v. Canada,6 the Federal Court of Appeal interpreted Article 1711(6) restrictively and ruled that Canada's abbreviated drug approval regime does not contravene the NAFTA provisions because in a typical instance of a generic drug approval, the generic company does not "rely" on the originator's data. Canada's system permits the Minister of Health to grant a Notice of Compliance to a generic drug company upon submission of bio-equivalence and bio-availability test results which compare the generic drug to the original approved drug. The Court ruled that this system does not involve "reliance" on the original confidential data since in most cases the approving body does not actually review this Ñ data approval of the generic product is based simply on the existence of the original approval.

The TRIPS Agreement contains provisions similar to NAFTA Rule 1711. TRIPS Section 7 describes members' obligations with respect to confidential information. Article 39.3 states that test data which has been generated through "considerable effort" to obtain an approval of a pharmaceutical or agricultural chemical shall be protected against "unfair commercial use." The Agreement does not define "unfair commercial use" of data, nor does it contain any specific prohibition against "reliance" on another's data to obtain an approval, nor any explicit recognition of the right to permit abbreviated approval procedures.

Many countries have complied with the TRIPS agreement by simply adopting its wording directly into their laws without defining the nature of "unfair commercial use." A complaint currently before the dispute resolution body of the WTO brought by the United States against Argentina has asked the question whether Article 39.3 of TRIPS requires member states to institute data exclusivity rules.7 The United States alleged that in the absence of any "data exclusivity" law, Argentina has failed to protect against "unfair commercial use" of test data.8 The parties mutually agreed that the consultations would remain ongoing and the United States may in the future request a WTO panel to decide issue.9

The United States provides data exclusivity in the Hatch-Waxman Act, which also provides term extensions for pharmaceutical patents. In Europe, drug approvals are granted either by a centralized procedure or by individual EU countries, although members of the European Union are required to bring their domestic laws into conformity with EU directives in this regard. The governing law is EU Directive 2001/83/EC which requires EU countries to provide either a six or ten year period of data exclusivity during which no approval will be given for any drug which is "essentially similar" to a previously approved drug. Countries have the option of electing either a six- or ten-year term. For example, Britain, France, Germany, Sweden, Belgium and Italy are all ten-year countries. All drugs approved via the European "centralized procedure" are given a ten-year period of exclusivity.

The European Parliament has recently amended the EU data exclusivity regime to provide a harmonized data exclusivity regime (as well as numerous other changes to the drug approval process).10 The amendments to Directive 2001/83/EC will be fully effective November 2005. The amended regime will provide a European-wide protection period, which provides a three-part protection regime known as 8+2+1. The first period is an eight-year data exclusivity period, during which the departments of health of each country cannot review a proposal for a drug which is "essentially similar" to a previously approved drug and which relies on the same safety and efficacy data. This is followed by a two-year period of "market exclusivity" during which the government may review the generic company's data but may not issue a marketing approval. This market exclusivity is extended by a further year if during the initial eight-year period the holder of the original approval has obtained a further authorization for use of the drug for a new therapeutic application, which has "significant clinical benefit." The one-year extension may also be obtained if the original product switches from being a prescription to over-the-counter drug, or if it is shown to have "well-established use."

Internationally, there have been relatively few legal challenges to data exclusivity. It is probably only a matter of time before challenges increase, particularly in Europe where data exclusivity is a new concept for many countries. The floodgates may also open if the WTO rules in favor of the United States in the Argentina dispute and WTO members are required to provide effective data exclusivity written into their laws. There are several areas of potential litigation in this area, in particular as the "pipeline" for new drugs dries up and more attention is turned to developing improved versions of existing drugs and identifying new diseases treatable by existing drugs. In these cases, companies may seek to re-start exclusivity periods, which will of course be resisted by generic producers.

Since data exclusivity arises from "sweat of the brow" rather than inventiveness or originality, one cannot challenge "data exclusivity" by alleging that the information gathered is not innovative. Indeed, as data exclusivity becomes more widespread and longer lasting, generic drug companies will find themselves challenged to develop innovative strategies to challenge this type of exclusivity. One can rest assured that such challenges will occur.

1 TRIPS Agreement Article 27.
2 A distinction must be drawn between so-called "data protection" and "data exclusivity." The first is used to refer to rules, which maintain the confidentiality of data submitted to the government, while the second refers to the direct or indirect use of this data by others to obtain an approval for a generic version of an approved drug.
3 Although it should be noted here that most industrialized countries provide for term extensions of pharmaceutical patents - in the case of Europe for up to ten years.
United States: Patent Term Restoration and Drug Price Competition Act of 1984 (usually referred to as the "Hatch-Waxman Act"). Canada: Patented Medicines (Notice of Compliance) Regulations SOR/93-133 as amended SOR/98-166; SOR/99-379.
PhRMA "Special 301" Submission to the United States International Trade Commission, 2003.
6 1998) 84 C.P.R. (3rd) 129 (F.C.T.D.); aff'd. (1999) 87 C.P.R. (3rd) 293 (F.C.A.).
WTO Dispute WT/DS 196: Argentina -Certain measures on the protection of patents and test data (request for consultations by the United States).
8 Supra, Request for Consultations May 30, 2000.
9 Supra, Notification of Mutually Agreed Solution, May 31, 2002.
10 Directive of the European Parliament and of the Council amending Directive 2001/83/EC on the Community Code relating to medicinal products for human use, 17.2.2004.

Adrian Zahl practices with Ridout & Maybee LLP in Ottawa, Canada. He is a lawyer and patent agent with a background in molecular biology. Prior to entering law, he worked in research labs at McGill University and the Massachusets Institute of Technology. He is the author of International Pharmaceutical Law and Practice (Matthew Bender 2004), as well as numerous articles on the topics of patent and pharmaceutical law and speaks frequently on these topics.

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