Policy paper

Government response to call for views on draft legislation: Supplementary Protection Certificate (SPC) waiver

Published 13 July 2020

Background and executive summary

Supplementary protection certificates (SPCs) provide for an additional period of protection for patented medicines, to compensate for delays caused by the need to get regulatory approval before these products can be sold. This protection was established through EU law, although the SPCs themselves are national rights.

The UK left the EU on 31 January 2020 under the terms of the Withdrawal Agreement. The Withdrawal Agreement provides for a transition period from 1 February 2020 to 31 December 2020 during which time EU law will continue to operate as it did before in the UK. The Withdrawal Agreement also includes specific provisions relating to SPCs, which ensure that SPC applications which are pending at the end of the transition period will be examined under the current framework. The provisions also ensure that any SPCs which are granted based on those applications shall provide the same protection as existing SPCs.

The current SPC legal framework in the UK is therefore maintained during the transition period and will be retained as domestic UK law at the end of this period on 31 December 2020. Amendments were made last year by the Patents (Amendment) (EU Exit) Regulations 2019 (“the 2019 Regulations”) which will ensure that the SPC system continues to work in the UK after the transition period ends.

In July 2019 – after the 2019 Regulations were made – the EU brought into force Regulation 2019/933 (“the waiver Regulation”). This new EU legislation allows third parties to make medicines which are protected by an SPC without needing permission from the SPC holder. This can either be for export to countries outside the EU where protection has expired or does not exist, or, in the last six months of the SPC term, for storing (“stockpiling”) the product to sell in the EU once the SPC has expired. This legislation will also be retained as domestic UK law at the end of the transition period.

From 5 July to 9 August 2019, the government ran a call for views on the proposed drafting of UK domestic legislation to fix issues in the waiver legislation that would otherwise not work correctly in UK law, using the powers set out in section 8 of the European Union (Withdrawal) Act 2018 (the “Withdrawal Act”) to fix deficiencies in retained EU law caused by exit from the EU. The call for views document included a draft of a statutory instrument (SI) and explained the changes that were proposed and why. The questions posed in the call for views document are set out in text boxes below; the full list is provided at Annex B.

The call for views was framed in terms of the changes needed to ensure the retained legislation continued to work as UK law if the UK left the EU without an agreement being in place. Since the waiver legislation will be retained as UK law at the end of the transition period, it still needs to be fixed so that it continues to work after that point, and to fulfil our obligations under the Withdrawal Agreement.

There were six responses to the call for views, received from representative organizations of rightsholders, pharmaceutical innovators, legal representatives, and the generics industry. A list of all the respondents is given at Annex A. Meetings were also held to talk through the issues raised in the call for views with respondents and other stakeholders, where further comments were provided.

This document provides a summary of the responses and sets out the government’s response to the points raised.

The government would like to thank all those who responded to the call for views and participated in the associated meetings. The responses provided have helped inform further development of the legislation.

Next steps

In response to the submissions received, the government intends to make a number of changes to the draft legislation previously presented. These are explained below; significant changes from the previous draft are summarised in text boxes below.

We currently expect these changes to form part of a wider package of measures to implement the intellectual property provisions of the Withdrawal Agreement, and to ensure the continued smooth operation of the UK’s intellectual property system after the transition period ends. We expect draft legislation to be laid in Parliament when Parliamentary time allows and will share more information as soon as we are able to do so.

Scope of the waiver

The waiver Regulation permits SPC-protected medicines to be manufactured in the EU for export outside of the EU or for stockpiling for the EU market. If this retained law is not fixed, it would be uncertain whether third parties could manufacture SPC-protected medicines in the UK under the waiver and if so what the respective markets for export and stockpiling of such medicines would be. Setting out clearly the scope of the waiver would give certainty to SPC holders and third parties alike.

In the call for views document, the government proposed that the scope of the waiver be set so that third parties could manufacture in the UK for export to countries outside of the UK and store for sale in the UK market.

Consultation questions

1. Do the proposed changes correctly establish that the UK waiver permits export to countries outside the UK and stockpiling for sale on the UK market post-SPC expiry?

2. Are there any issues you might foresee with the drafting?

3. Are there any issues with replacing the references to “third countries” in this way?

Several of the respondents expressed concerns about this proposed approach, noting that it increased the scope of the export element of the waiver and therefore did not seem to accurately preserve the waiver as it is set out in the waiver Regulation. They noted that opening up export to the EU may have impacts for innovators, particularly in relation to accession states where SPC protection may not have been possible, as well as the potential for additional litigation to challenge IP rights in those new export countries.

In addition, those respondents suggested that the approach taken was not aligned with amendments made by the 2019 Regulations to maintain the existing method for calculating the duration of SPCs, and did not seem necessary to make the waiver work.

Some respondents supported an alternative approach which more closely reflected the retained EU legislation, where third parties could export to countries outside of the UK and the EU, and store in the UK for sale in either the UK or EU markets after SPC expiry.

One respondent noted that, whilst it was desirable in their view for the approach taken to align with the provisions of previous legislation, the proposed approach was a reasonable one to adopt.

Another respondent considered that it was logical to define the home market as being the UK (thereby treating EU members the same as non-EU countries), and so was generally supportive of the draft proposal. But their preferred approach was one that provided generics and biosimilar manufacturers with the greatest level of flexibility and competitive advantage by allowing UK manufacturers to both stockpile and produce for export to unprotected markets, whether in the EU or outside the EU.

One respondent asked whether certain statements in the recitals of the waiver Regulation - which set out that the export provisions are intended for countries where IP protection does not exist or has already expired - could be included in the operative part of the legislation, as without them, the legislation may not operate as intended.

Government response

The legislation will continue to allow third parties to manufacture in the UK for export to countries outside of the UK and EU, or store in the UK for sale in the UK or EU markets.

Note: significant change from the previous draft

The government recognises the important role of the SPC system in providing a balance between providing incentives for innovators which ensure they are recompensed for the research and development investment in creating new medicines; and ensuring fair competition for medicines by enabling generic manufacture within a reasonable time. Maintaining this balance enables NHS patients across the whole of the UK to benefit from access to innovative medicines, and ensures a competitive price for older medicines after their protection has expired.

We initially considered the proposed approach in the call for views – whereby third parties could manufacture in the UK for export to countries outside of the UK and store for sale in the UK market – to be the simplest and most appropriate way of fixing the inoperabilities in the retained law. However, the comments made show that there are strong views that this approach could adversely affect the balance which the SPC system provides and cause additional difficulties for innovators.

We believe that maintaining the balance of the system is key, both on this issue and on the SPC system more generally. Taking account of the concerns raised, we therefore intend to ensure that the adjustments made to the retained waiver legislation maintain the current markets for export and storing (stockpiling). Third parties will therefore be able to manufacture in the UK (i) for export to countries outside of the UK and EU, or, (ii) in the final six months of an SPC, for storing in the UK ready for sale in the UK or EU markets once the SPC expires. This stays much closer to the form of the existing waiver in the UK and avoids creating additional unintended consequences which may affect businesses. It is also consistent with our obligation under the Withdrawal Agreement to ensure that any SPCs that were applied for before the end of the transition period and granted afterwards shall provide the same level of protection as that currently provided.

We do not believe that allowing manufacturers to both stockpile for and produce for export to any unprotected markets, whether in the EU or outside the EU, would be feasible under this legislation. Such an approach would significantly expand the scope of the existing waiver, in which the respective markets for export and stockpiling are clearly distinct and do not overlap, and so would appear to go beyond fixing inoperabilities in the retained EU law.

In relation to moving statements from the recitals into the legislation itself, the government notes that section 6 of the Withdrawal Act sets out that the meaning of retained EU law will continue to be determined in accordance with the general principles of EU law. This means that recitals can be used for interpretation of retained EU law after the end of the transition period. We believe that it is therefore unnecessary to bring such statements across into the legislation for them to be used for interpretation.

Related acts

As well as permitting the manufacturing of the SPC-protected medicine, the waiver Regulation also allows “related acts” to be carried out. These are activities done in connection with the making of the medicine, its export or storage – such as supply of an ingredient – which might otherwise infringe the SPC. The waiver Regulation allows such acts to be carried out anywhere in the EU. The proposed legislation limited these acts to being connected to the making in the UK, whilst the call for views document also noted that it was not possible to exempt actions taken outside the UK.

Consultation question

4. Is it sufficiently clear that only related acts within the UK fall within the scope of the UK waiver?

All respondents who answered this question considered the drafting sufficiently clear, although one respondent suggested some additional changes which they felt could make the drafting clearer by stating that the related acts take place in the UK.

One respondent asked if more detail could be provided in the legislation on what actions qualified as a related act, although they acknowledged that this was likely to be outside of the scope of what the proposed legislation could do.

Another respondent queried whether related acts extended to stockpiling for the purposes of export to a country where IP protection was about to expire, and whether this needed to be accounted for in the drafting.

Government response

We are unable to protect or exempt related acts taking place outside the UK from potential infringement action in those countries. With that in mind, we do not think it is necessary to set out that such acts must take place in the UK, as the legislation itself only applies to the UK, in relation to UK SPCs, and will be interpreted in that context.

We note that the recitals give examples of what may constitute a related act. As mentioned above, recitals will remain available to interpret retained EU law, and so it would seem unnecessary to reproduce those examples in the text as suggested. In any case, because the existing waiver regulation does not define what a related act is, this would not be fixing an issue caused by exit from the EU. Similarly, attempting to define whether specific activities which aren’t in those examples qualify as related acts – such as stockpiling a medicine for export to a country where protection was about to expire – would go beyond fixing problems caused by exit from the EU.

Isle of Man

One respondent indicated that the definition of “maker” set out in the draft did not state that they could be located in the Isle of Man, and that the drafting suggested that stockpiling could not take place in the Isle of Man.

In this legislation, the government can only set out how the waiver will operate in the United Kingdom. This is because the EU SPC Regulations are implemented in the Isle of Man by Manx law ^{[footnote 1]}, and the powers provided by the Withdrawal Act do not extend to the Isle of Man. So, it is for Manx law to define the maker, and the ability to store, in the Isle of Man. The Isle of Man has its own equivalent of the Withdrawal Act to make relevant changes to Manx law (the European Union and Trade Act 2019), and we are working closely with the Isle of Man government to ensure the two sets of changes are consistent.

The logo

The waiver Regulation requires a specific “EU Export” logo to be applied to the packaging of the product made under the waiver, to prevent it from being diverted back onto the EU market. The government proposed to replace the logo, as it was not appropriate for a UK product and could cause confusion if retained, with a requirement to affix the words “UK Export” to the packaging instead.

Consultation questions

5. Does the proposed drafting do enough to avoid confusion with the EU approach?

6. Do you have any suggestions as to alternative definitions or features that you may wish to see included/not included?

Most respondents agreed that the “EU Export” logo was not appropriate. However, some believed that the presence of a specific logo was important for preventing diversion of the product, and that the descriptive text did not go far enough to meet this objective. If a logo was not adopted, some of those respondents stated that stronger provisions on the visibility of the text may be required to ensure the text was clear on the packaging.

Some respondents noted that, if the scope of the waiver were to be changed, the wording of the descriptive text should reflect the corresponding territory where reimportation is prohibited.

One respondent noted that labelling requirements in other countries may prevent import of a product carrying a particular logo, but that the descriptive text provided flexibility which might reduce that risk.

Another respondent suggested that a transitional provision may be needed for products that have already had the “EU Export” logo applied to them.

Government response

The words “UK Export” will still be required, but the government will have the power to set out further conditions on how those words should be presented, if needed.

Note: significant change from the previous draft.

Whilst the final legislation will still require descriptive text on the labelling, it will also include a power to define further requirements as to the manner and form of the “UK Export” wording through secondary legislation. This would allow a logo containing that wording to be set out if it turned out to be needed.

The government considers that the “UK Export” wording, which would identify the product as having been made under the UK waiver legislation, should be sufficient to mark it as not appropriate for reimportation. We feel that setting out the territory in which reimportation is prohibited would make the labelling requirement excessively onerous.

In terms of a transitional provision, although we expect that only a small number of SPCs subject to the waiver will be in force by 1 January 2021, it is possible that medicines will have been produced under the current waiver with the “EU Export” logo applied. A provision will therefore be included so that such medicines do not have to be relabelled to the new “UK Export” wording.

Notification requirements and the form

A third party who wishes to rely on the waiver is required to provide the relevant national IP office, and the rightsholder, with certain information, and to update that information if it changes. A standard form is provided to do that. The government proposed to remove some of the information as it was no longer relevant, and to move the form out of the legislation and make it a “prescribed” form like other UK patents and SPC forms.

Consultation questions

7. Do you foresee any issues with removing the form from the SPC Regulation and making it a prescribed form?

8. Would you prefer a single form covering both initial notification and renotification, or separate forms for each action?

Respondents who answered these questions generally saw no issues with the approach of replacing the form. No preference for a single form or separate forms was expressed. One respondent recommended that a clear indicator of whether the notification was new or updating a previous notification be included if a single form was used. Another asked whether notifications filed with the old form would be treated as having been validly filed under the new system, and whether a transitional provision was needed to do that.

Government response

We will keep the approach of a single form for both new and updated notifications. The existing form already asks whether it is being used for a new notification or to update an existing notification, and we will retain that in the replacement form.

The government agrees that any notifications made under the old arrangements should still be recognized under the amended law. It is also more likely that a notification might be made before the end of the transition period than an actual medicine being manufactured, as notification must precede any manufacture. We will therefore include a provision in the forthcoming legislation which covers this issue.

Other changes

Some more minor amendments were also proposed in the draft. In particular, changes to remove the reference to the EU system for ensuring security of pharmaceuticals under the Falsified Medicines Directive, and to remove the requirement for the European Commission to review the legislation, were proposed.

Consultation question

9. Are there any issues with the changes suggested in this section?

Several of the respondents acknowledged the need to remove the reference to the EU’s authentication system for medicines, but asked whether an equivalent UK system was envisaged and whether the waiver would need to take account of it.

Several respondents asked whether the review clause could be kept, with references to EU bodies replaced with references to UK bodies.

Government response

We note the interest in the possibility of a future UK falsified medicines framework and will carefully consider the interaction with the waiver if the issue arises.

In relation to the review clause, the government still considers the provision as it is currently written to be deficient, and that removing the entire clause is the most appropriate way to deal with the issue.

Transitional provisions

The government proposed to include a provision in the final legislation which would state that actions carried out under the waiver before the SI came into force would still be treated as lawful.

Consultation questions

10. Can you foresee any issues with all relevant SPCs becoming subject to the new waiver scope?

11. Are there any further transitional provisions you think may be needed?

12. If you do not agree with the approach we have set out then;
a. What types of situations should be accounted for?
b. Should there be a distinction between how we treat applications for SPCs filed i) between 1 July and exit day; ii) between exit day and when this SI comes in?
c. Should the date of grant of the SPC be considered in any transitional provisions?

Those respondents who answered these questions were generally supportive of the need for transitional provisions and agreed that actions which had already been done under the waiver should be protected, although many acknowledged that the likelihood of such protection being needed in practice was low.

Respondents suggested several other transitional provisions which may be needed to deal with particular situations. Those relating to use of the logo and use of the old form have already been discussed above.

One respondent suggested additional transitional provisions covering acts that were an infringement of the SPC but would now be covered by the waiver, and acts that would have been permitted under the existing EU waiver that would no longer be covered. The respondent also raised concerns about any period between EU exit and when the SI enters into force, as if there was any such gap the retained law would contain the inoperabilities which this SI is designed to remove.

One respondent asked whether the July 2022 date in the existing provisions, when SPCs filed before 1 July 2019 (but not in effect on that date) will become subject to the waiver, would still apply to the retained law.

Government response

Specific transitional provisions relating to use of the old form and use of the “EU Export” logo will be included.

Note: significant change from the previous draft

Because we have decided to maintain the scope of the waiver essentially unchanged from the current law, we expect that there will be few instances where there would be a difference in how the law operates that would need to be accommodated. A general “catch-all” transitional provision is therefore not now viewed as necessary.

Instead, we will include some specific transitional provisions to deal with particular issues. As noted in previous sections, we will include provisions dealing with notifications made under the original form and medicines manufactured before the end of the transition period which carry the “EU Export” logo.

If other actions were to take place which are not addressed by those specific provisions, they would in any event be covered by general provisions in law that deal with transitional issues. In particular, section 16 of the Interpretation Act 1978 and paragraph 37 of Schedule 8 to the Withdrawal Act should ensure that those actions are unaffected by the change to the law.

As we currently anticipate the SI to be made during the transition period and to come into force at its end, we do not envisage there being any gap during which the law in this area is unclear and so no provisions are needed to cover this.

The July 2022 date will still apply; the legislation will not change that provision. The only difference will be that the relevant UK SPCs will, on that date, become subject to the waiver as retained in UK law rather than the original EU waiver. No additional transitional arrangements are needed to accomplish that.

Other issues raised

Consultation question

13. Please raise any other issues or concerns you feel are appropriate.

A number of respondents made general comments about the waiver, and whether the government will reconsider its retention of the legislation.

Government response

The government is committed to ensuring that it has a functioning statute book at the end of the transition period so that UK law will be operable, and will be consistent with the Withdrawal Agreement. The proposed legislation aims to achieve these goals in relation to the manufacturing waiver. The government has noted the views expressed on the wider policy issues, and is very grateful to all the respondents for their input.

Annex A: List of respondents

• the Association of the British Pharmaceutical Industry (ABPI) (supported by the IP Federation and Merck Sharp & Dohme)
• BioIndustry Association (BIA)
• British Generic Manufacturers Association (BGMA)
• Chartered Institute of Patent Attorneys (CIPA)
• Law Society of Scotland
• the Pharmaceutical Research and Manufacturers of America (PhRMA)

Annex B: List of questions

Scope of the waiver

1. Do the proposed changes correctly establish that the UK waiver permits export to countries outside the UK and stockpiling for sale on the UK market post-SPC expiry?

2. Are there any issues you might foresee with the drafting?

3. Are there any issues with replacing the references to “third countries” in this way?

Related Acts

4. Is it sufficiently clear that only related acts within the UK fall within the scope of the UK waiver?

The logo

5. Does the proposed drafting do enough to avoid confusion with the EU approach?

6. Do you have any suggestions as to alternative definitions or features that you may wish to see included/not included?

The form

7. Do you foresee any issues with removing the form from the SPC Regulation and making it a prescribed form?

8. Would you prefer a single form covering both initial notification and renotification, or separate forms for each action?

Other changes

9. Are there any issues with the changes suggested in this section?

Transitional provisions

10. Can you foresee any issues with all relevant SPCs becoming subject to the new waiver scope?

11. Are there any further transitional provisions you think may be needed?

12. If you do not agree with the approach we have set out then;
a. What types of situations should be accounted for?
b. Should there be a distinction between how we treat applications for SPCs filed i) between 1 July and exit day; ii) between exit day and when this SI comes in?
c. Should the date of grant of the SPC be considered in any transitional provisions?

Other issues

13. Please raise any other issues or concerns you feel are appropriate.

Footnotes

1. The Patents (Medicinal Products) Order 2014 and the Patents (Supplementary Protection Certificate Waiver) Order 2019. ↩