The SPC waiver: How do we restore the intended balance between protection and innovation?

Biosimilars promote cost-effective solutions to critical healthcare challenges. Innovative biologics are the fruits of healthy competition and innovation, which require careful regulation of intellectual property (IP) rights. Unfortunately, when these IP systems are leveraged to extend drug monopolies unfairly, the system no longer provides proper incentives to invest in innovation.

Under these circumstances, the IP system is used to thwart competition, while raising prices, eventually harming the welfare of patients in the process. This has regrettably been observed in the short history of the Supplementary Protection Certificate (SPC) waiver.

Patent owners in the UK and European Economic Area (EEA) can request an extension of their patents by up to five and a half years, to compensate for time lost during the regulatory review process, through an SPC. SPC holders are therefore well protected, and companies who seek to launch generic and biosimilar medicines upon SPC expiration have in the past often decided to manufacture in countries outside of the UK and EEA because of the threat of costly litigation.

The purpose of the SPC waiver regulation, which was passed in 2019, was to give generics and biosimilar companies a chance to develop supply chains in the UK/EEA, in order to be able to launch a generic medicine or biosimilar in the UK/EEA (or markets outside of the region) on day one of loss of patent exclusivity. The SPC waiver regulation was welcomed as a catalyst for innovation, by generics and biosimilar manufacturers alike, and finally became effective in July 2022.

The challenge faced

Despite the SPC waiver system only being in full effect for a little over a year, I am disappointed to see that SPC holders have already attempted to exploit the new system in unintended ways. A recent report from Medicines for Europe, based on a survey of member companies, provides a summary of experiences by organisations seeking to utilise the SPC waiver system. In positive news, the use of SPC waivers seems to be growing, with over half of the surveyed companies indicating they have submitted at least one SPC waiver notification since the regulation came into force.

On the negative side, several companies report that they have chosen to avoid manufacturing in the UK/EEA, due to the fear or actual experience of unfair tactics from SPC holders. The weapons of choice for SPC holders include threats of litigation, or actual lawsuits, which are intended to delay or suppress competition. This is not a proper way to maintain and protect valid IP rights. I fear such abuses could escalate if they are not addressed immediately.

In the Medicines for Europe report, various methods leveraged by holders of SPCs are outlined. I find it particularly problematic that some SPC holders claim that patents in export markets outside the UK/EEA can be used as grounds to block an SPC waiver in Europe. This is, of course, irrational and unfair, as patents in countries outside the UK/EEA are irrelevant in the context of the SPC waiver. Nevertheless, the mere threat of a frivolous, but costly, lawsuit can prove sufficient deterrent.

Unfortunately, it is common for organisations to exploit legislative ambiguities and delay the expiration of patents. This manipulation of legal loopholes creates uncertainty for companies who wish to develop generics and biosimilars. The ultimate outcome of these tactics? Less availability of transformative therapies for patients at affordable prices.

How do we restore balance to the well-intentioned IP system?

Actions must be taken to disincentivise SPC holders from discouraging legitimate manufacturing activity. This could be achieved, for example, through courts, anti-competition action by the European Commission (EC), and/or National Competent Authorities (NCAs). Rapid action is needed without introducing new legislation. The next opportunity to introduce amendments to the current legislation is in 2024, when the regulation comes up for review.

Anti-competitive behaviour by SPC holders to monopolise the market directly hurts both manufacturers and workers in the industry. Most importantly, it also harms patients, as it delays and limits supply of transformative therapies, in addition to raising prices. This behaviour must not be taken lightly, and it is the shared responsibility of all relevant stakeholders and innovators to ensure we have a well-functioning market system and IP protection that serves the best interests of patients, healthcare providers, and payors. The goal of any policy that regulates the pharmaceutical industry should be more affordable and quality healthcare, leading to improved well-being for patients.

I view the regulation of the SPC waiver as a step in the right direction for the pharmaceutical industry and I believe it to be a valuable tool. When properly functioning, the SPC waiver system can help reduce entry barriers for manufacturers of biosimilars and generics. The result is improved access and more affordable medicines. It is therefore our collective responsibility, as a highly regulated industry, to ensure that the system works properly. If abuse of the legal system by SPC holders is acting as an obstacle to optimal use of the SPC waiver, and therefore access to lower-cost medicines, it must be stopped.