SPC manufacturing waiver: UK Government responds to call for views on draft legislation to fix issues in the Waiver Regulation post-Brexit

23.07.2020

Following its exit from the EU on 31 January 2020, the UK is currently in a transition period lasting until 31 December 2020 during which EU law continues to apply in the UK as if it were still an EU member state while the EU and the UK try to negotiate their future relationship. After the transition period ends, most EU law will be retained as domestic UK law according to the terms of the European Union (Withdrawal) Act 2018 (the “Withdrawal Act”) subject to amendments made by the government using the special powers set out in section 8 of the Withdrawal Act to ensure that retained EU law continues to operate effectively in the UK post-Brexit.

The EU supplementary protection certificate (SPC) legal framework set out in Regulation (EC) 469/2009 (the “SPC Regulation”) is one such EU law that will be retained as UK domestic law. Using the powers set out in section 8 of the Withdrawal Act, certain amendments were made by the Patents (Amendment) (EU Exit) Regulations 2019 (the “2019 Regulations”) to ensure that the SPC system continues to work in the UK following the transition period. However, the EU subsequently amended the SPC Regulation to introduce a new “manufacturing waiver”. Regulation (EC) 2019/933 (the “Waiver Regulation”) allows third parties to manufacture medicines which are protected by a SPC without the consent of the SPC holder, either:

  • for export to “third countries” (countries outside the EU) where protection has expired or does not exist; or
  • in the final six months of the SPC term, for storing the product to sell in the EU market once the SPC has expired (“stockpiling”).

The aim of the Waiver Regulation, as described in the recitals, was to promote the competitiveness of the EU by allowing makers of generics and biosimilars to make in the EU products for export to third country markets in which protection does not exist or has expired, and to allow such makers to make and store products within the EU for a defined period pending SPC expiry for the purpose of entering the EU market upon expiry of the SPC, to help those makers to compete effectively in the EU immediately after expiry.

A number of the provisions in the Waiver Regulation would not operate effectively in UK law after the transition period (not least since the UK itself is now a “third country”) so the UK Government ran a call for views last year on the proposed drafting of new legislation under section 8 of the Withdrawal Act to fix these issues. The Government received six submissions (from the Association of the British Pharmaceutical Industry (ABPI), BioIndustry Association (BIA), British Generic Manufacturers Association (BGMA), Chartered Institute of Patent Attorneys (CIPA), Law Society of Scotland and Pharmaceutical Research and Manufacturers of America (PhRMA)) and published its response on 13 July 2020.

The most significant changes to the draft legislation proposed by the Government are in relation to the scope of the waiver. Other amendments are also summarised below.

Scope of the waiver

The Government’s initial proposal had been that third parties could manufacture in the UK:

  • for export to countries outside the UK; or
  • in the final six months of the SPC term, for storing for sale in the UK market after the SPC expires.

However, several respondents expressed concern at the increased scope of the export element, which opened up export to the EU. This could have significant consequences for innovators, particularly in relation to accession states where SPC protection may not have been possible. The respondents also raised the potential for additional litigation to challenge IP rights in EU member states, and noted that the approach went beyond what was necessary to make the waiver work.

In response, the Government has amended its proposal to allow third parties to manufacture in the UK:

  • for export to countries outside of the UK and EU; or
  • in the final six months of the SPC term, for storing in the UK for sale in the UK or EU markets after the SPC expires.

This is intended to bring the proposal much closer to the form of the existing waiver under the Waiver Regulation and to be consistent with the UK’s obligation under the EU-UK Withdrawal Agreement to ensure that any SPCs that were applied for prior to the end of the transition period and granted afterwards shall provide the same level of protection as that currently provided.

Logo

According to the Waiver Regulation, a specific “EU Export” logo and the EU emblem must be applied to the packaging of any product destined for export, to prevent it from being diverted back onto the EU market. The Government had proposed to replace the logo with a requirement to affix the words “UK Export” to the packaging instead. However, a number of the respondents believed that the presence of a specific logo was important for preventing diversion of the product and that the descriptive text proposed did not go far enough.

In response, the Government has amended its proposal so that the final legislation will still require descriptive “UK Export” text on the packaging, but will also include a power to define further requirements as to the manner and form of the “UK Export” wording through secondary legislation, allowing a logo to be set out if it turns out to be necessary.

Transitional provisions

The Government had originally included a general “catch-all” transitional provision stating that actions carried out under the waiver before the new statutory instrument came into force would still be treated as lawful. However, in light of the decision to maintain the scope of the waiver in line with the Waiver Regulation, this general transitional provision is no longer viewed as necessary. Instead, specific transitional provisions will be included to deal with particular issues, for example:

  • to ensure that medicines produced under the current waiver with the “EU Export” logo applied do not have to be relabelled to the new “UK Export” wording; and
  • to ensure that any notifications made to the SPC holder and the UK IPO of a third party’s intention to rely on the waiver as required under the current system should still be recognised under the amended law (which will require a different form).
Timing

The next step for the Government is to lay the revised instrument before Parliament. The Government confirmed in the response that it anticipates the statutory instrument to be made during the transition period and to come into force at its end.

With less than 6 months to go until the transition period is due to end, we are likely to see increased activity from the Government as it continues to review and amend retained EU law to make it work in the UK post-Brexit. Although the EU-UK Withdrawal Agreement provided a mechanism by which the transition period could be extended by mutual agreement, the Conservative Party manifesto made it clear that they would not seek an extension and that pledge is reflected in the EU (Withdrawal Agreement) Act 2020, which prohibits the Government from agreeing to an extension. Given that the deadline of 30 June 2020 set out in the Withdrawal Agreement for an extension to be agreed has now passed, it seems the Conservative Government intends to stick by its manifesto pledge notwithstanding the coronavirus crisis and the limited progress that appears to have been made in EU-UK negotiations. Therefore, absent any indication from the Government that they intend to seek an extension (which would require an amendment to the EU (Withdrawal Agreement) Act 2020 and some serious ingenuity from EU lawyers to come up with a proposal to extend the transition period despite the deadline having passed), we have to assume that the transition period will indeed end on 31 December this year and that retained EU law must be fit for purpose as UK domestic law by that date.

Charlie French

Author