EUROPEAN COMMISSION

Brussels, 27.4.2023

SWD(2023) 118 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT REPORT

Accompanying the documents

Proposal for a Regulation of the European Parliament and of the Council on the supplementary protection certificate for medicinal products (recast)

and

Proposal for a Regulation of the European Parliament and of the Council on the supplementary protection certificate for plant protection products (recast)

and

Proposal for a Regulation of the European Parliament and of the Council on the unitary supplementary protection certificate for medicinal products, and amending Regulation (EU) 2017/1001, Regulation (EC) No 1901/2006 as well as Regulation (EU) No 608/2013

and

Proposal for a Regulation of the European Parliament and of the Council on the unitary supplementary protection certificate for plant protection products

{COM(2023) 221 final} - {SEC(2023) 172 final} - {SWD(2023) 117 final} - {SWD(2023) 119 final}

1.Introduction: political and legal context

2.Problem definition

2.1.Market context – pharmaceutical and agrochemical industries

2.2.SPC rules, market size and applications for SPC protection

2.3.What are the problems?

2.3.1.    Legal uncertainty and cumbersome monitoring of SPC protection    

2.3.2.    High cost and burden of seeking and maintaining SPC protection    

2.3.3.    Key elements affecting the problems and consequences that are out of the scope of this impact assessment    

2.4.What are the problem drivers?

2.4.1.    Divergent national practices on SPC    

2.4.2.    Lack of transparency of SPC-related information    

2.5.Consequences

2.5.1.    EU less attractive for medicines and PPP development    

2.5.2.    Hampered joint cross-country public procurement    

2.6.How likely is the problem to persist?

3.Why should the EU act?

3.1.Legal basis

3.2.Subsidiarity: Necessity of EU action

3.3.Subsidiarity: Added value of EU action

4.Objectives: what should be achieved?

4.1.General objectives

4.2.Specific objectives

5.What are the available policy options?

5.1.What is the baseline from which options are assessed?

5.2.Description of the policy options

5.2.1.    PO1: Guidelines for the application of the current SPC regimes    

5.2.2.    PO2: Mutual recognition of national decisions    

5.2.3.    PO3: Centralised filing and examination of SPC applications resulting in a non-binding opinion    

5.2.4.    PO4: Centralised filing and examination of SPC applications resulting in a binding opinion    

5.2.5.    PO5: A ‘unitary SPC’ complementing the unitary patent    

5.3.Overview of policy options

5.4.Options discarded at an early stage

6.What are the impacts of the policy options?

6.1.PO1: Guidelines on application of the current SPC regimes

6.2.PO2: Mutual recognition of national decisions

6.3.PO3: Centralised filing and examination of SPC applications resulting in a non-binding opinion

6.4.PO4: Centralised filing and examination of SPC applications resulting in a binding opinion

6.5.PO5: A ‘Unitary SPC’ complementing the unitary patent

6.6.Common impacts

6.6.1.    Biosimilar and generic market entry    

6.6.2.    Social impacts    

6.6.3.    Digital impacts    

6.6.4.    Environmental impacts    

7.How do the options compare?

7.1.Comparison of impacts

7.2.Best option and possible combinations of options to improve it further

7.3.Coherence with other EU policies and the charter of fundamental rights

7.4.Compliance with the proportionality principle

8.Preferred option

8.1.REFIT (simplification and improved efficiency)

8.2.Application of the ‘one in, one out’ approach

9.How will actual impacts be monitored and evaluated?

Annex 1: Procedural information

1.Lead DG, Decide Planning/CWP references

2.Organisation and timing

3.Consultation of the RSB

4.Evidence, sources and quality

Annex 2: Stakeholder consultations

Annex 3: Who is affected and how?

Annex 4: Analytical methods

Annex 5: Supplementary evidence supporting the Impact Assessment

Annex 6: SME Test

Glossary

Country codes used in the text:

AL- Albania

AT - Austria

AU - Australia

BE - Belgium

BG - Bulgaria

DE - Germany

DK - Denmark

CH - Switzerland

CN – China

CY - Cyprus

CZ - Czechia

EE – Estonia

FI - Finland

FR- France

EL - Greece

HR - Croatia

HU - Hungary

IE - Ireland

IT - Italy

JP – Japan

KR - South Korea

LV - Latvia

LT - Lithuania

LU - Luxembourg

MC - Monaco

MK - North Macedonia

MT - Malta

NL – Netherlands, the

NO –Norway

PL - Poland

PT - Portugal

RO - Romania

RS - Serbia

SK - Slovakia

SI – Slovenia

ES - Spain

SE - Sweden

SM – San Marino

TR – Turkey

UK - United Kingdom, the

US – United States of America, the

1.Introduction: political and legal context

Supplementary protection certificates (SPCs) are sui generis intellectual property (IP) rights that extend by up to five years 1 the 20-year term of patents related to medicinal or plant protection products (PPP). They aim to offset the loss of effective patent protection due to the compulsory and lengthy testing required in the EU for the regulatory marketing authorisation of these products. The relevant EU legislation is Regulations (EC) 469/2009 and 1610/96, on SPCs for medicinal and plant protection products respectively. Between 25 and 81 SPC applications were filed annually per Member State and more than 26 000 national SPCs have been granted since 1993 2 . The average duration of the SPC protection is estimated at 3.5 years 3 .

The Commission’s Intellectual Property Action Plan 4 of November 2020, building on the SPC evaluation 5 , highlighted the need to tackle the remaining fragmentation of the EU’s IP system, which leads to complex and costly procedures. The plan noted that, for medicinal products and PPPs, protection through SPCs is only available at national level. At the same time, there is a single procedure for granting European patents, as well as a single set of rules for obtaining marketing authorisations. In the same vein, the Pharmaceutical Strategy for Europe 6 emphasised the importance of investments in R&D to provide for innovative medicines while stressing that the differences across Member States in the implementation of IP regimes, especially for SPCs, lead to duplications and inefficiencies, affecting the competitiveness of the pharmaceutical industry. Both the Council 7 and the European Parliament 8 have called on the Commission to fix these deficiencies.

Of particular importance for this Impact Assessment is the unitary patent system, expected to enter into force in June 2023. It will allow for a single patent covering all participating Member States in a unitary manner 9 . However, but for the policy initiative in question, there would not be a corresponding unitary SPC to accompany (extend) it in a unitary manner.

The COVID-19 pandemic has underlined the importance of having a strong and balanced IP system to provide the necessary incentives to develop new treatments and vaccines to be accessible to patients. It has also further highlighted the need of transparent and easily accessible information on the status of IP rights, including SPCs, to facilitate potential collaborations, licensing and freedom-to-operate analyses 10 . Patents and SPCs are key to support the EU in its efforts to build a European Health Union and other related initiatives such as the new European Health Emergency Preparedness and Response Authority (HERA) 11 , EU FAB 12 and the Pharmaceutical Strategy for Europe.

All these combined are behind the Commission’s efforts to simplify the EU SPC system, as well as improve its transparency and efficiency, including the possible creation of a unitary supplementary protection certificate to complement the unitary patent. This initiative was announced in the Commission Work Programme for 2022 (initiative number 16 under Annex II REFIT initiatives) 13 .

This initiative runs in parallel with other ongoing Commission efforts in the field of health, with by far broader scope, and which aim at fostering innovation and availability of medicines. These may include introducing conditionality to the period of regulatory data/market protection for medicines 14 or revision of the current legislation on medicines for rare diseases and for paediatric use 15 .

2.Problem definition

2.1.Market context – pharmaceutical and agrochemical industries

The pharmaceutical industry (part of the EU Health ecosystem 16 ) is of key importance for the EU’s economy. Pharmaceuticals and other medical non-durable goods accounted for around one sixth of total current health expenditure in EU-27 in 2021 17 . This estimate excludes expenditure on pharmaceuticals consumed in hospitals and other health care settings, which typically accounts for 20% on top of retail spending 18 .

There are around 4 000 enterprises manufacturing basic pharmaceutical products and pharmaceutical preparations 19 in EU-27 that generate turnover of EUR 334 billion yearly and employ 626 thousand staff 20 . Firms active in the sector range from multinational firms to SMEs concentrating on certain niche markets. Producers can be divided into i) the developers of new pharmaceutical products (the originators); and ii) the follow-on manufacturers that develop biosimilar 21 or generic medicines 22 (once the IP and regulatory data protection have expired for the original medicines). Nonetheless, there are many cases where large pharmaceutical groups are active in both market segments. The generic and biosimilar industries association reports that its members employ 190 000 direct employees in over 400 manufacturing and R&D sites in Europe, and invest up to 17% of its turnover in R&D 23 .

The broadly understood European health industries spent roughly EUR 36.6 billion on innovation in 2020 and recorded R&D intensity 24 of around 12.1%, which was more than in any other industry 25 . In this regard, the role of SMEs in pharmaceutical innovation is significant, for example in such critical areas as the global preclinical antibacterial pipeline 26 .

The innovative agrochemical industry is part of the EU agri-food ecosystem. As in the pharmaceutical sector, two strategic groups of producers may be distinguished: firms manufacturing new products based on their own R&D and producers of generic (‘follow-on’) pesticides. There are over 544 enterprises active in this sector 27 in the EU that altogether employed 27 600 persons and generated turnover of EUR 12.7 billion 28 . The annual industry expenditure on crop protection R&D worldwide more than doubled from USD 3.06 billion to USD 6.71 billion between 1995 and 2012 29 . A study conducted in 2018 stated that around 7%-10% of the sector’s revenue was devoted to research and development annually over the last 50 years 30 .

The pharmaceutical and agrochemical sectors are global and highly competitive (see: Section 2.5.1). Finally, it is important to note that the pharmaceutical and agrochemical markets are among the most regulated, as placing products on the market requires complex and lengthy authorisations to ensure safe usage (see: Annex 5A).

2.2.SPC rules, market size and applications for SPC protection

An SPC takes effect at the end of the term of a basic patent (20 years), and is granted for a term equal to the period which elapsed between the date on which the application for the basic patent was filed and the date of the first authorisation to place the product on the market in the EU (which often takes more than 10 years of development), reduced by five years. The term of an SPC cannot exceed 5 years. An additional 6-month extension of the SPC can be requested if a paediatric investigation plan has been concluded for the protected medicinal product 31 .

SPC protection is available only for new patented active ingredients (“products”), while medicines based on new formulations (e.g. involving additional ingredients) or new uses of known products are usually not entitled to SPC protection. IPRs, including SPCs, run in parallel with the regulatory data protection 32 provided by the EU pharmaceutical legislation for medicinal products 33 .

Some products may not be eligible for SPC protection at all (if the marketing authorisation was granted quickly 34 ), some may enjoy SPC protection having the full duration (5-year, or 5 ½ years with paediatric extension). The average duration of an SPC for medicinal products in the EU amounts to 3.5 years 35 .

The benefits of an SPC for its holder 36 are significant. Since an SPC ‘confer[s] the same rights as conferred by the basic patent’ 37 , the monopoly resulting from the basic (reference) patent is extended and enables its holder to prevent competitors from exploiting the invention (manufacturing the product, offering it for sale, storing it, etc.) in those Member States in which an SPC has been granted 38 .

Market size and applications for SPC protection

In the period 2014-2021 there were between 25 and 81 SPC applications filed annually with respective national patent offices of the individual EU Member States. The highest number of applications was filed in Germany (81 on average per year), followed by Italy and Spain (76) and France (75). SPCs were less frequently applied for in smaller jurisdictions, such as Croatia (32) and Malta (25). The total number of SPC applications filed in all Member States increased from about 500 applications in 1993 (in then EU-12) to a total of 1 459 SPC applications filed in the EU-27 in 2021 39 .

Figure 1: Number of SPC applications filed – yearly average by country in 2014-2021

Source: “Current trends in activity at the NPOs and at the EPO”, Administrative Council of the EPO (documents: CA/36/19, CA/31/18, CA/13/17, CA/9/16) and “Exchange of information on current trends in activity at the NPOs and at the EPO”, May 2022. Note: data missing for the following countries – 2014: BE, SE, 2015: SE.

During 2014-2021 the European Commission 40 issued 88 central marketing authorisations on average per year 41 . An SPC can be requested within six months after receiving such authorisation 42 . With up to 81 SPCs registered annually in Member States, and given that marketing authorisations of new active ingredients via national route are negligible 43 , we can assume that nearly all new medicines benefit from SPC protection in at least one country (estimated at 86% by an earlier study 44 ).

In terms of global composition, EU firms accounted for around one third of SPCs applied for in the largest (German) patent office in 2010-2021 45 whereas up to 19% of all SPC holders were SMEs 46 – such data can be a good proxy for the EU market as whole, given that SPCs are predominantly sought in the EU largest economy. The estimates based on German data are also aligned with the SMEs share among the holders of EU-centralised marketing authorisation, as in 2010-2012 they accounted for around 13% of all firms 47 . Nonetheless, SPCs are predominantly held by companies belonging to large corporate groups, with 16 of them holding half of all SPCs granted 48 . Universities or research institutes held roughly 7% of all SPC issued in DE in the period under scrutiny 49 .

Additionally, SPCs are granted in an increasing number of Member States for a given product. Since their first entry into force in the 1990s up to 2014, SPCs were applied for in 20 countries on average 50 . In value terms, SPC protection increases the turnover generated from a given medicine, by around 13% over the period of 12.5 years from market launch of a medicine, which translates into around EUR 37 billion 51 total gain across the Single Market. Finally, nearly eight times more SPCs are applied for and granted for medicinal products than for PPPs 52 .

Different types of protections available

SPCs and patents are not the only forms of protection available for pharmaceutical products or PPPs. Besides intellectual property rights, the regulations establishing the conditions under which medicines (or plant protection products) can be marketed offer data protection (exclusivity) based on the initial marketing authorisations. In case of medicinal products, a 10-year market protection is also foreseen. Once certain conditions are fulfilled 53 , such rights will result from the marketing authorisations (MA) and are referred to as regulatory data protection (RDP). Although marketing authorisations and SPCs have some features in common, they are distinct and separate, and have different policy objectives.

First, they differ in their effect. Patents and SPCs allow their holders to prevent third parties from performing activities infringing these rights. On the contrary, market protection is the period of time within which a generic or biosimilar cannot be placed on the market, even if a marketing authorisation has already been granted. Data exclusivity concerns a period of time within which another application (e.g. from a generics maker) cannot rely on data (such as results of clinical trials) already submitted in support of the originator’s own marketing authorisation. Second, they pursue different objectives. SPCs protect patented medicines (or plant protection products) so as to incentivise innovation, i.e. the development of new products, by compensating for the years of effective patent protection lost due to the regulatory authorisation procedures. On the other hand, RDPs intend to offer protection to the investment-intensive data generated for the regulatory authorities in order to demonstrate quality, safety and efficacy of a pharmaceutical product, ignoring such aspects as novelty or inventive steps, which characterise patents.

The interactions between the two are presented in Figure 2, below – the figure assumes a basic scenario in which there was no paediatric extension of the SPC. It may be noted that the starting points of both protections are different: patent protection starts from the filing of the patent application, SPC protection starts from the expiry of the patent, while RDPs are triggered by the marketing authorisation.

Figure 2: The effective protection period for medicinal products

Source: Copenhagen Economics, Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe, European Commission, Directorate General for Internal Market, Industry, Entrepreneurship and SMEs, 2018, p.42.

As shown in the previous figure, the effective protection for medicinal products depends on the development time and the duration of clinical trials, calculated from the patent filing date (the horizontal axis). If this “delay” from patent filing to marketing authorisation is shorter than five years, then the last protection to expire would be the patent, as no SPC will be granted 54 . If that delay is longer than 5 years, then the SPC steps in to allow for additional IP protection (i.e. 15 years in total – the vertical axis), until the delay reaches 10 years. Subsequently, if the delay took between 10 and 15 years, the SPC protection would gradually decrease until the total protection time reaches 10 years (i.e. 5 years “left” from the patent and 5 years from the SPC). Finally, in cases where the delay lasted longer than 15 years, the RDP (8 years of data protection and 2 additional years of market protection) would be that last protection to expire. More details about the regulatory context of the current SPC rules, patent systems and marketing authorisations in the EU are provided in Annex 5B.

2.3.What are the problems?

This impact assessment draws from the evaluation 55 of current SPC rules, which indicated a number of problems impacting the efficiency and effectiveness of the rules currently in force. The fact that SPCs are administered and managed at national level creates significant red tape and entails extra costs for businesses, which is especially challenging for SMEs. It also emerged that national procedures have resulted in different approaches and outcomes (nearly a quarter of SPC procedures concluded with contradictory outcomes 56 ), undermining legal certainty and thus the proper functioning of the Single Market.

In addition, national granting procedures, including transparency obligations, generate costs and administrative challenges for national administrations (especially for those with limited administrative capacity). Some national administrations do not make full use of digital solutions, and there is no EU-wide SPC database. This hampers innovation and the availability of new medicines and PPPs, as well as access to affordable generic products, due to the uncertainty faced by generics manufacturers.

The findings from the SPC evaluation have been completed by more recent research carried out for this impact assessment. The key problems that have been identified in this context are: 1. Legal uncertainty about SPC status; 2. Cumbersome monitoring of SPCs; and 3. High cost and burden of seeking and maintaining SPC protection in the EU. Problem 3 mainly concerns the originators, Problem 2 is typical for the follow-on manufacturers (and to some extent other originators as well), while Problem 1 is common to both groups.

These problems are caused by divergent national practices for application and grant of SPC as well as insufficient and patchy information on the SPC status in each EU country. They should be seen in a general context of pharmaceutical and PPP sector acting globally and with increasingly cross-border value chains. Additionally, the currently fragmented SPC system will stand at odds with the upcoming launch of the unitary patent. While pharmaceutical and PPP companies will have a one-stop-shop to obtain a unitary patent to cover all the countries participating in the unitary patent system, they will still need to apply separately in each Member State to extend their patent protection by an SPC. Quoting one Member State from the Commission expert Group on Industrial Property Policy: “In the case of supplementary protection certificates based on unitary patents, it is obvious that a uniform system for the grant of unitary protection certificates is required.”

Figure 3: Problem tree – current settings of the SPC system in the EU

Note: problems are numbered, as this is how they are sometimes referred to in the following sections of the impact assessment.

2.3.1.Legal uncertainty and cumbersome monitoring of SPC protection

Although common eligibility criteria are defined in the SPC Regulations (notably Articles 2 and 3) 57 , around one in four SPC applications covering the same product resulted in divergent decisions in Member States 58 (in respect of 740 products approved between 2004 and 2014 and referring to the same basic patent). Some Member States grant SPCs for a certain product while equivalent applications are refused in others, or granted with a different scope. This was corroborated by the public consultation results: fragmentation causes legal uncertainty because decisions on granting protection can conflict across Member States concerning the national SPCs of the same product.

Divergent national SPC decisions stand in contrast to the simplicity and unitary nature of the upcoming unitary patents 59 . SPC users might be forced to rely on the current system of nationally granted SPCs to extend their unitary patents, not benefitting from certainty about maintaining the same scope of protection in the Member States where the unitary patent took effect. Moreover, 11 (out of 71) originators responding to the Commission public consultation cast doubts on the possibility of granting national SPCs for a product covered by a unitary patent, positing that only additional legislation would allow for this.

Follow-on producers often face difficulties to ascertain the status of SPC protection in due time. This may hamper the launch of their competing product (i.e. generic or biosimilar), or their participation in tenders for the purchase of medicines. (In this regard, it is worth recalling that SPCs tend to protect medicines with significant sales). Follow-on producers face high cost and significant burden in up to date monitoring SPC protection throughout the Single Market. This can be onerous, if some of the follow-on manufacturers may need to monitor up to 27 SPCs (on average 20) per each product and the information may be dispersed across various IT systems, formats and linguistic regimes. In practice, such lack of transparency makes it much more cumbersome to enter the generic/biosimilar market, especially for SMEs. 

Respondents to the 2017 Commission public consultation indicated that the information published by public authorities was not always comprehensive or up-to-date, and nearly all who had an opinion (i.e. 96% of follow-on producers - predominantly SMEs, around 80% of health professionals or patients and 70% of patent offices or lawyers) stated that access to private databases monitoring SPC status is very costly 60 .

According to Medicines for Europe 61 , transparency of SPC granting procedures is of utmost importance as it guarantees possible third party observations or oppositions. The generic association also claims that lack of transparency and of harmonisation results in legal uncertainty 62 .

Finally, difficult access to SPC information may also cause problems for EU based manufacturers of generic and biosimilar medicines when applying for the SPC manufacturing waiver 63 , as they need to establish the exact status of the exclusivity in a given jurisdiction. Thus, in order to start early export to non-EU countries or prepare pre-launch stockpiling in the EU, they need to monitor SPC protection in multiple Member States, which is especially relevant in presence of cross border value chains (e.g. logistics and outsourcing of production).

2.3.2.High cost and burden of seeking and maintaining SPC protection

SPC users face excessive costs of seeking and maintaining SPC protection in the EU, as multiple parallel procedures 64 before national patent offices (NPOs) are required to obtain SPC protection in the Single Market or part of it. While in any single Member State SPC protection was sought only for up to 81 products annually (2014-2021), SPC applications in the EU totalled around 1 550 annually. The need to seek multiple national SPCs for the same product (on average in 20 Member States) results in unnecessary administrative burden (e.g. preparation of several SPC dossiers, including multiple translations of the application, exchanges with the national offices, payment of administrative fees to each NPO and engagement of in-house or external legal advisors, additional communications in case of re-examinations) and high maintenance fees for the prolongation of SPC rights, separately in each jurisdiction. This may result in heavy red tape, especially burdensome for innovative SMEs.

Based on current 65 average coverage (20 Member States) and duration (3.5 years), SPC protection of a given product would cost around EUR 98 500 66 on average. In order to cover all 27 Member States for 5 years one should pay nearly EUR 192 000 in total (not including any fees charged by patent attorneys).

If the granting of SPCs remained limited to the national routes, it would remain as burdensome as today for companies to obtain and maintain SPCs based on unitary patents. An SPC applied for and maintained for 3.5 years in the 17 unitary patent countries 67 would cost around EUR 79 000 68 (EUR 117 000 for the entire period of 5 years).

In comparison to the overall cost of medicine/PPP development the direct monetary cost of obtaining SPC is relatively minor (the median capitalized R&D investment to bring a new drug to market is estimated at USD 985.3 million and the mean investment at USD 1 335.9 million 69 ). Three quarters of innovators said the SPC cost is always relatively low in comparison to sales, while only 4% (including the only SME that replied) considered it high 70 . It should be noted however that the administrative cost of applying to up to 27 NPOs with accompanying costs on hiring legal advice in each country and translating the documents represent lost/unproductive resources.

As indicated earlier, one in five SPC applicants is an SME, for which these costs could be significant as SMEs have more limited financial resources, fewer in-house specialists, and limited geographical presence. They are also more likely to be a single invention companies that cannot easily compensate development cost of one medicine with a successful sales of another. Yet they face the same long authorisation process which reduces the effective time of patent protection as large firms. SMEs are key players in research on often neglected topics, like antibacterial substances (SMEs responsible for 81% of preclinical projects) or orphan medicines 71 (42% of medicines developed by SME according to EMA 72 ). In this regard, only one patent office in the EU offered reduced administrative fees for SPCs to universities or SMEs 73 . This is further corroborated by the public consultation results. While only 13% of originators considered SPC registration procedures as complex, this view was held by around 40% of follow-on manufacturers (generally firms with thinner resources) 74 .

2.3.3.Key elements affecting the problems and consequences that are out of the scope of this impact assessment

The following issues are significantly contributing to the identified consequences, but are outside the scope of this initiative which focuses on concerns connected to SPC. Medicinal products and PPP are subject to strict requirements to ensure the safety of their users. Before being placed on the market in the EU, medicinal products have to be assessed and the conclusion concerning their benefits versus their risks has to be favourable in terms of safety, quality and efficacy 75 . The EMA medicines marketing authorisation process 76 involves, among others, clinical trials, inspections of medicines’ manufacturers and compliance with good clinical, manufacturing, distribution and pharmacovigilance practices. All these are essential to ensure safe usage, yet very demanding on producers (not only in terms of cost). Moreover, there are differences in pricing schemes for medicines across the EU countries, as well as worldwide, that affect the pharmaceutical market. The price controls and different reimbursement schemes for national or private health services affect sales of manufacturers and their decisions to invest 77 , as well as the prices and availability of medicines to patients. In the EU, Member States are responsible for setting and controlling the prices and reimbursement of medicines. Negotiations on pricing and reimbursement of novel medicines, or generics, are conducted irrespective of the status of any patent and SPC.

In addition, SPCs are currently enforceable before national courts. 78 For litigation enforcing an exclusive right in the EU, parties might face a cost of between EUR 40 000 and EUR 200 000 per jurisdiction 79 .

2.4.What are the problem drivers?

The problem drivers form two key thematic blocks, namely “Divergent national practices on SPC” and “Lack of transparency”. Both are discussed below.

2.4.1.Divergent national practices on SPC 

Multiple procedures before NPOs are required to obtain SPC protection in the Single Market or part of it. EU NPOs’ divergent national practises concern:

(1)The substantive examination of the SPC applications.

Under Article 10(5) of Regulations 469/2009 and 1610/96, Member States may allow the NPOs to grant SPCs without verifying that the substantive conditions laid down in paragraphs (c) and (d) of Article 3 are met, i.e. that (c) the product has not already been the subject of a certificate, and (d) the marketing authorisation is the first authorisation to place the product on the market as a medicinal or plant-protection product. According to Max Planck Institute for Innovation and Competition 80 – MPI (2018), NPOs of 15 Member States do not use the exemptions from verifying substantive criteria (CZ, DE, DK, FR, HR, HU, IE, IT, LT, LV, NL, PL, PT, SE, SK) while others do 81 . Moreover regarding requirement (d) three NPOs (DE, LV and IE) reported difficulties in applying it, especially when the first marketing authorisation had been issued by another Member State, while one (DK) conducts informal internet search only. In addition it adds further confusion as there were cases where examining Member States referred questions to the CJEU wishing to refuse an SPC, but they noted that the very same SPC had been granted elsewhere in the EU. The substantive conditions causing most problems have been the scope of the patent, but also difficulties to abide by the CJEU’s case law on determining which the first marketing authorisation in the EU is.

(2)The opportunities of affected 3rd parties to get involved in the grant procedure.

The SPC Regulations rule out opposition proceedings 82 . Nevertheless, one Member State (DK) introduced a possibility for any person to request administrative re-examination of SPCs. 83 Furthermore, most NPOs (at least 18 - AT, CZ, DE, DK, ES, FI, HR, HU, IE, IT, LU, LV, NL, PL, PT, RO, SE, SK,) allow the submission of third-party observations, although this is not formally allowed by at least two NPOs (EL, LT) 84 .

(3)The duration of the grant procedure.

Time from the filing of the SPC application to the final grant decision can take, for instance, from 17 months in FR to 31 months in DE 85 .

There are differences in the way NPOs process the SPCs applications. The percentage of applications pending over all SPC applications ranged from less than 10% in 8 Member States (CY, ES, IT, LU, MT, PT, SE, SI) to up to 50% in 7 NPOs (BE, BG, DE, FI, HU, PL, RO). This was due to differences in patent-office procedures, such as waiting for decisions by national courts or proceedings of differing lengths 86 .

Some stakeholders consulted as part of the MPI (2018) study confirmed that there were significant differences in the duration of examination 87 (which can sometimes take more than a year), and expressed their wish for uniform timing and deadlines. Others have criticised the rules in some Member States that impose deadlines within the granting procedures. Both originators and generics companies highlighted the importance of a quick decision on a product’s eligibility for an SPC.

(4)The outcome of the procedure.

Rejections: globally, 80% of SPC applications were granted 88 . The ratio of rejections per Member State was quite divergent though, reflecting different approaches by NPOs. Five countries (CY, EE, FI, IT, LU) rejected fewer than 5% of applications while 6 NPOs (DK, ES, MT, NL, PL, SE) rejected more than 15% 89 .

Geographical coverage: The outcome of the procedure, typically grant or refusal, can vary across NPOs, i.e. the same product can be granted SPC protection in some Member States and not in others. Based on sample research around 26% of SPC were granted in one Member State but rejected or withdrawn in another 90 .

What is protected: Some patent offices describe the scope of the granted SPC in different terms, so the same product can have different scope of protection across the EU.

The case law regarding SPCs has evolved gradually over the years 91 . For instance, after the Neurim 92 judgement (issued in 2012 and reversed in 2020 by Santen 93 ) it was possible to get multiple SPCs for the same product based on different marketing authorisations. Some NPOs interpreted it as applicable only to a situation when one SPC is sought for a product of veterinary use and another of human use. Others considered that it applies only to products for the same species (e.g. only veterinary or only human). The reversal in Santen clarified these divergences. Moreover, several cases have been referred regarding the protection of combination products 94 and what would constitute a prior certificate. In Actavis I 95 and II 96 , the CJEU held that once an SPC had been obtained for a mono product (a product which contains one active ingredient), no certificate based on a combination product could be obtained. Yet, it is still unclear as the two recent references to the CJEU 97 concern (among others) the protection of combination products.

Additionally, the CJEU judgement on Actavis I introduced a new requirement that the product must embody the “core inventive advance of the patent” (inventive-advance test) but it was unclear when this test should apply. The “core inventive advance” in the context of Article 3a was rejected by the court in Royalty Pharma Collection Trust 98 . Nevertheless, doubts remain, as a recent court referral (Teva, Case C-119-22) inquires, among others, about the core inventive advance in the context of Article 3c. In general, the two recent references further highlight that there is uncertainty on the side of the courts regarding the relationship between Article 3a and 3c 99 . All that shows that CJEU jurisprudence on SPC is still being developed, as new issues arise, thereby progressively clarifying the interpretation of the substance of the SPC Regulations and thus improving legal certainty.

Duration of protection: Expiry date for as much as 80% of products based on the same basic patent is not homogenous across Member States. This is driven by differences in national examination and interpretations of marketing authorization date 100 .

The stakeholders feedback concerning the outcome of the procedure has shown that around 80% of innovators and follow-on manufacturers (including 6 SMEs out of the 13 SMEs responding from the generics sector), as well as nearly all patent offices, judges and lawyers (96%) responding to the Commission consultation, confirmed that authorities in different EU countries had taken different decisions (e.g. some authorities might grant a SPC while others refuse it for the same product) on SPC applications impacting at least one of their products. Only around 20% of producers reported that this had not happened to them  101 .

In the Allensbach survey 102 , 62% of the respondents (48% of originator respondents and 83% of the generic producer respondents) agreed or strongly agreed that the examining practice and procedures of the NPOs differed significantly in the predictability, transparency and quality of the rights granted (26% of the respondents disagreed). The MPI (2022) study highlights the complexity of the system as the main reason for the divergent granting practices at a national level, including lack of uniformity both in the length and outcome of the examination 103 . This in turn results in cross-country differences in the way SPC applications are handled 104 .

To conclude, as signalled earlier in the problem tree, the increasing complexity of the SPC examination process make it more difficult for NPOs to deal with it in a coherent manner. In turn, EU NPOs’ divergent national practises are the source of legal uncertainty (problem 1) and generate high cost of applying and maintaining SPC protection in the EU (problem 3). As they are in line with the SPC regulations these problems cannot be solved by Commission launching infringement actions against these Member States.

2.4.2.Lack of transparency of SPC-related information 

When it comes to transparency of SPC proceedings as such, Member States’ national patent offices follow uncoordinated and different practices (e.g. content of the application, public accessibility, updates of SPC data bases – to the extent these exist and the status of the granted/refused SPCs). A study conducted in 2018 by Technopolis 105 concluded that “Whilst most [of SPC-related] information is in the public domain, registers are not well linked or easy to navigate without expert knowledge” and recommended to “Improve clarity and ease of use of EU and national data registers on protections and exclusivities for pharmaceutical products”.

Additionally a survey of NPOs in 2020 found that publication of information can take from a couple of days to several months or even more than a year. Only 14 NPOs publish information in English in addition to official language of the country, which could especially cumbersome for SMEs. About half of NPOs do not provide online access to SPC application documents 106 .

In practice, the above translates into limited transparency about the state of play, and outcome of the SPC procedures across the EU. If available at all, the information is provided via national websites in multiple formats - from structured databases that are available for download, to selected documents in pdf format, which is cumbersome for processing. Difficulties in accessing such service can affect around 300 follow-on manufacturers 107 and procurers active in the health sector, generating an annual approximate cost of roughly 13 million EUR 108 if outsourced to private providers. Due to the complexity of accessing information on the exclusivity status of pharmaceutical products, several private companies offer specific data-intelligence products. Figure 4 summarises the availability of various pieces of information related to an SPC application that were available across EU-27 via searchable databases (i.e. with a possibility to upload search output into structured format, such as Excel or CSV file). Libraries of non-searchable PDF documents were not taken into account 109 .

Figure 4: Number of Member States where selected SPC information was available in a structured format via their NPOs websites

Source: In-house analysis based on information collected from the NPO websites in April 2022. 110

As shown above, information which is of primary importance for the generic producers, namely the SPC duration or validity, was easily available only in two countries. Alternatively, follow-on producers could calculate the SPC duration on their own by comparing patent and marketing authorisation dates 111 (with the risk of errors in case of some interruption in the administrative procedure or litigation) or else, view a pdf copy of the SPC decision (if available). Still, both approaches are error prone especially if conducted in non-native language which would be predominantly the case. Further details on country-specific practices related to limited transparency of SPC granting procedures can be found in Annex 5B.

To summarize, in the current settings, the SPC information is incoherent, dispersed across 27 jurisdictions and not easily accessible. This is in sharp contrast to high transparency and accessibility standards concerning primary patent data. Lack of transparency drives problem 1 on legal uncertainty, as well as constitutes the main direct reason for which monitoring of the SPC system in the EU is burdensome and costly (problem 2).

2.5.Consequences

All market players are impacted by significant legal uncertainty of the SPC system (problem 1). SPC users face considerable administrative and management costs associated with the current fragmented SPC system (problem 3). At the same time, lack of harmonisation of SPC-related information can be an entry barrier for the follow-on manufacturers (problem 2). These triggers several consequences that are described in the following sections.

2.5.1.EU less attractive for medicines and PPP development 

Temporary exclusivity in use offered by patent protection has been used across most jurisdictions and – at least in the case of pharmaceuticals – has time and again been confirmed to incentivise investment in R&D and facilitate knowledge sharing 112 . A precise causal relationship between R&D activities in a particular jurisdiction and the SPC coverage in this area, however, is difficult to capture given the plethora of confounders. Nevertheless, it could be broadly discussed at three levels: location of investment in the EU’s Single Market, market share of EU-based firms and overall global levels of innovation and R&D spent.

The recent COVID-19 crisis showed how vital the localization of production is for securing supplies in times of sudden collapse of global value chains. When it comes to geographical locus of pharmaceutical investment, IQVIA (2021) shows that countries with a strong IP protection 113 (any kind, not only SPC) have eight times higher levels of clinical research activities on average 114 . On the other hand, patent holders can seek SPC protection in a country different from where the R&D or manufacturing of the novel product took place, which makes unambiguous identification of SPC effects problematic. Still, since the SPC Regulations do not differentiate between EU-based companies and their foreign competitors 115 they contribute to investment location decisions of all capital intensive firms alike 116 . Finally, and somewhat intuitively, the views of the stockholders additionally expose the different perspectives between the originators and the follow-on manufacturers. Around 90% of innovators responding to the public consultation considered that possibility of obtaining EU SPC plays a role when deciding on investments in R&D, manufacturing or marketing in the EU. 80% said that there were instances where SPC eligibility was a decisive factor for product development. Half considered that SPC impacted prioritisation of innovation in their firm (e.g. on oncology). On the contrary, nearly all follow-on manufacturers responding to the consultation favoured countries with no SPC when deciding on manufacturing localisation, or considered that while it depends on the circumstances, no SPC was a key factor 117 .

We now turn to the competitive position of EU based pharmaceutical firms. Their home-base is much more fragmented than it is the case for their major global competitors originating from jurisdictions with harmonised protection systems. Currently, most big markets offer an SPC equivalent (called patent term restoration or patent term extension) of up to five years. This includes the US, JP, KR and recently also CN, which has introduced a new regime of patent term extension for pharmaceuticals. Following a single procedure in the above jurisdictions a company can not only gain protection covering the whole territory (e.g. 330 million citizens in the US or 125 million in Japan), but also pay much lower fees (for instance application and renewal fees amount to around EUR 3 000 in the US and EUR 4 200 in JP) 118 . In comparison, in the EU firms need to apply separately in each of 27 Member States, and pay considerably higher fees (for instance only in DE - 83 million citizens - the application and renewal fees of EUR 16 950) 119 . This – at least at the margin – cripples their scale up in the home base of the Single Market.

Thirdly, and in the overall global sense, the importance of SPC protection to recuperate investment is expected to grow due to the following macro trends concerning all market players:

-very high R&D intensity characterising the pharmaceutical and PPP sectors,

-decreasing productivity in pharmaceutical and PPP research and development,

-increasing regulatory pressure in both sectors.

This phenomenon can be found in many sectors, including the pharmaceutical and PPP sectors, and implies that ideas/treatments that are ‘easy’ to find are developed and exploited first. Then, as the stock of knowledge increases, new ideas/treatments become harder to find or inventions and output can only be sustained or increased by large increases in research effort that offset declining productivity  120 .

As mentioned in the introduction, in 2020 European health industries invested more than EUR 36.6 billion in R&D. In pharmaceuticals, the clinical productivity index measured by IQVIA (composite Clinical Development Productivity Index) dropped in 2021 by 30% in comparison to a decade ago 121 . This is driven chiefly by an increase in complexity and in duration of medicines development (including clinical trials and failure rates). A common hypothesis to explain this trend is that more stringent requirements to gain marketing authorisation have increased the costs of clinical trials.

Similar patterns can be observed in the plant protection sector, where the major companies invested around 7-10% of their annual sales in R&D over the last 50 years 122 . According to a study by Deloitte 123 the agrochemicals industry has experienced declining revenues and margins that were primarily due to: longer product-development cycles, escalating costs 124 and increasing stringency of regulatory requirements: this hampers the further development of innovative technologies and the use of some types of crop-protection agents. This global trend of decreasing numbers of new active ingredients can also be observed at EU level.

Given the above described mechanism, it could be argued that the European SPC regime composed of 27 national systems 125 may not bring all benefits that could have materialised, if the rules were harmonised and more coherent across the EU. The precise impact however, is not quantifiable, but more based on the perception of the EU market as an attractive place for research, development and production. While by no means the key factor, a fragmented SPC system in the EU may contribute to lowering the incentives for the pharmaceutical and PPPs investments in the EU (especially for SMEs and innovative start-ups), as well as it may affect the global market share of EU-based firms.

2.5.2.Hampered joint cross-country public procurement

Joint cross-country procurement for pharmaceutical products in the EU is currently regulated by Directive 2014/24/EU, as well as by Decision 1082/2013/EU on serious cross-border threats to health. In Recital 33, the public procurement Directive states in particular that “contracting authorities should be able to choose to provide jointly their public services by way of cooperation without being obliged to use any particular legal form. Such cooperation might cover all types of activities related to the performance of services and responsibilities assigned to or assumed by the participating authorities […]”. Furthermore, “the important role joint procurement may play, not least in connection with innovative projects” is also recognised (Recital 71). As far as Decision 1082/2013/EU is concerned, it aims at improving cooperation of the EU and Member States in case of serious cross-border threats to health, including the possibility of conducting the joint procurement initiatives.

Furthermore, in the reaction to the COVID-19 the Commission issued guidance on using the public procurement framework in the emergency situation related to the pandemics 126 , where it mentions clearly the importance of launching joint procurement actions for various medical supplies (“public buyers […] are encouraged to procure jointly and to take advantage of the Commission’s joint procurement initiatives”).

While discussing the actual EU public procurement framework, it should be also noted that pharmaceuticals could be an ideal commodity for the aggregation of demand. Once the items(s) to be procured are described by internationally recognised nomenclature (e.g. International Non-proprietary Names (INN) 127 and/or ATC 128 ), they constitute relatively homogeneous goods (i.e. interchangeable and therapeutically equivalent). Yet, despite characteristics that should facilitate procurement processes (i.e. evaluation, comparability of bids, etc.), cross-country joint procurement doesn't happen at a large scale in the EU 129 .

Currently public procurement of pharmaceutical products is predominantly local, but contracts are often awarded to subsidiaries of foreign firm (around 60% of deals registered at the EU level) 130 . Unfortunately, calls for tender for pharmaceuticals involving two or more countries do not occur very often, although especially in case of small countries, it could leverage their buyer power by pooling volumes and/or address various concerns in terms of security of supply.

Several cross-country initiatives have been recently established in Europe to jointly procure pharmaceuticals as described in Table 1 below.

Table 1: Overview of three European country collaborations on procuring medicines and vaccines, 2010–2021

Source: Based on Vogler, S. et al., European collaborations on medicine and vaccine procurement, Bulletin World Health Organisation 2021, Policy & practice, p.717.

Currently such initiatives seem to focus on older medicines with expired patents to avoid potential legal barriers that otherwise could prevent such procurement from taking effect. It can be inferred that similar concerns also relate to newly elapsed patents where differences in SPC coverage and expiry dates could hamper the scaling-up of joint public procurement of medicines at the EU level. This in turn may make demand pooling more problematic, especially in a situation of crisis. In particular, contracting authorities intending to procure medicinal products and EU joint procurers of medicines (like the future HERA and EU Fab which aim at preparing the EU for future health emergencies by securing production capacity around the EU) could face increasing challenges to accept bids from generic and biosimilar sectors as the status of SPC protection in some Member States might not be clear. Three quarters of healthcare respondents to the public consultations considered that joint procurement by a group of countries would be easier with one SPC covering the whole EU 133 .

To conclude, the patchy and incoherent SPC systems, due to its asymmetric implementation across various EU countries and insufficient transparency about the SPC status, can be perceived as a risk factor and a legal obstacle hampering joint cross-country procurement.

2.6.How likely is the problem to persist?

Should no action be taken, the impacts of the current problems – in particular legal uncertainty and costs of obtaining SPC protection in the EU for the innovative pharmaceutical (and PPP) industry – will only intensify, driven by the steady increase in the number of new medicines authorised every year and in the average number of Member States in which SPC protection is sought for a given product. In the context of the ongoing review of the EU’s pharmaceutical legislation, it is currently envisaged to make certain regulatory incentives and rewards conditional upon the actual launch of the product concerned on the market 134 . As a consequence, shortening of the basic data protection period from 8 to 6 years is contemplated (unless the certain conditions related to market presence are met), which might impact the demand for SPC (i.e. the share of SPC as the last measure to expire 135 would increase by roughly 5% from 49.6% currently to 54.9% of molecules 136 , see: Annex 5B for more detail). While recognising that there could be interaction between the two instruments, such impact is expected to be low in the context of the envisaged reform as it would potentially add from 0 up to 5 new SPCs each year depending on firms’ response to the new rules 137 . The above factors will also exacerbate the transparency issues that have been identified (mostly affecting generics makers) as more and more Member States need to be monitored.

The above occurs in a global context with increasing product development time and R&D costs combined with stringent regulatory requirements. Medicine market is expected, nevertheless, to grow at 3–6% compound annual growth rate (CAGR) through 2026, reaching about USD 1.8 trillion in 2026, including spending on COVID-19 vaccines 138 .

In addition, should no action be taken, the unitary patent system (expected early 2023) would not be mirrored by a unitary SPC – that would have optimally ensured the availability of unitary protection over the whole duration of the entire (patent and SPC) protection period of a given product. The pharmaceutical and PPPs sectors might thus not internalise the full advantages of the unitary patent system.

Furthermore, the EU SPC regime would keep having inferior attractiveness at the worldwide level due to its fragmentation and high costs comparing with other jurisdictions. In this regard, the European Biopharmaceutical Enterprises (EBE), which represents the interests of biopharmaceutical companies in Europe (60% of its members are SMEs) in reply to the Commission public consultation, underlined that any legal uncertainty around SPCs had the potential to deter investment, postpone development decisions and undermine Europe’s reputation as a safe haven for research and development. The EBE said that any uncertainty would particularly impact EU-based pharmaceutical SMEs and start-ups, which have fewer resources to undergo lengthy development pathways for their products (they rely on the prospect of getting patent protection and a subsequent SPC in their financing strategies). This, in turn, could ultimately be detrimental to the EU’s strategic autonomy.

3.Why should the EU act?

3.1.Legal basis

Article 114(1) TFEU governs measures for the approximation of the provisions by law, regulation or administrative action in Member States. It would therefore be the appropriate legal basis for a potential harmonisation or centralisation of the SPC procedures in order to address the current divergent outcomes of national procedures and different transparency mechanisms across EU Member States.

Article 118(1) TFEU allows for measures for the creation of European intellectual property rights to provide uniform protection of intellectual property rights throughout the Union and for the setting up of centralised Union-wide authorisation, coordination and supervision arrangements. The unitary patent, governed by Regulation 1257/2012, is already based on Article 118 TFEU. A unitary SPC, if proposed, would have unitary character and confer the same rights as the basic patent subject to the same limitations and the same obligations. Hence, Article 118(1) is the appropriate legal basis for a Regulation governing the unitary SPC. A language regime for the unitary SPC could be based on Article 118(2) 139 .

3.2.Subsidiarity: Necessity of EU action 

As explained, despite the fact that SPCs are already harmonised by EU law 140 , there are still cases where some Member States have granted SPCs while identical applications have been refused in others, or granted with a different scope. SPC applicants thus face diverging decisions across the EU concerning the same application at hand, while incurring costs for applying and maintaining SPCs in several Member States. The above is equally burdensome for follow-on companies that need to monitor SPC status across many jurisdictions. National publication practices also vary across Member States. Consequently, further EU intervention is needed to address these issues and can, unlike national intervention by Member States, ensure a coherent framework, as well as ease the current burden of applications and renewal fees to be paid in several Member States.

EU action is necessary to provide a unitary SPC for the unitary patent. An EU IP right (such as a unitary SPC) can only be created by the EU 141 . National protection systems alone cannot achieve this objective, as a bundle of national SPC in the enhanced cooperation area of the unitary patent would not give full continuation of the unitary effect of the unitary patent in that area. Consequently, EU action is also needed to create a new unitary right to accompany the unitary patent.

3.3.Subsidiarity: Added value of EU action

EU-level action would enhance the integrity of the internal market by providing for a unitary/centralised, balanced and transparent SPC system in the EU and mitigate the negative consequences resulting from diverging procedures that applicants face. Hence, action at EU level is also justified to ensure the smooth functioning of the internal market for innovative products subject to marketing authorisations, and to permit the benefits of an efficient industrial property framework to be reaped in the relevant product markets.

4.Objectives: what should be achieved?

With reference to the problems presented above, the following section presents the objectives that should be achieved in order to address them (Figure 5).

Figure 5: Objectives of the initiative

4.1.General objectives

The general objective of the proposed policy actions is to improve the availability of novel medicinal products for EU patients, and of plant protection products for agriculture, and to incentivise firms to develop those products in the EU.

4.2.Specific objectives

In connection with the general objectives and with the problems identified earlier, three specific objectives have been defined:

(1)Increase predictability and legal certainty of SPC protection in the EU. This specific objective can be obtained by:

oFacilitating substantive examination procedures;

oFacilitating involvement of affected third parties;

oFacilitating granting procedures.

(2)Facilitate the monitoring of SPCs in the Single Market, preferably by offering a single point of access to information about the status of SPCs in the EU (e.g. filed, granted, refused, invalidated, renounced or withdrawn), as well as access to structured data on the subject.

(3)Reduce cost and burden of seeking and maintaining SPC protection by investigating possible administrative cost reductions; improve access to procedures to all stakeholders, especially SMEs.

5.What are the available policy options?

5.1.What is the baseline from which options are assessed?

The baseline scenario (Option 0) is ‘no policy change’. The SPC system would continue to operate on the basis of the existing EU and national rules.

5.2.Description of the policy options

5.2.1.PO1: Guidelines for the application of the current SPC regimes 

The Commission would, in cooperation with national offices, propose common guidelines/recommendations for the application of SPC rules. The guidelines would describe how to assess the eligibility of a product for SPC protection, including substantive conditions of Article 3 of the SPC Regulations. This could help narrowing gaps regarding divergent interpretations currently observed among patent offices. Guidelines would be a “living document” to be updated according to the evolution of the CJEU’s jurisprudence (e.g. on how to interpret Article 3). For example, guidelines could clarify what constitutes a prior certificate (in particular as regards any combination product), and the relationship and split between the subsections of Article 3. The guidelines would further seek to identify and build on NPOs best practices, so that the practice of the examiners remains consistent and predictable 142 .

Regarding SPC data, the guidelines would propose common rules for the publication and accessibility of SPC information in national registers. The rules would concern in particular:

-the scope of information that should be publicly accessible, such as: the SPC filing reference number, SPC application status (e.g. in force, cancelled, revoked, expired, annulled), name of the SPC holder(s) including change of ownership if applicable, description of product concerned by SPC, EP reference number, marketing authorisation reference number, SPC date of expiry (if not revoked or annulled), implementation of the SPC manufacturing waiver for medicinal products, as well as the availability of SPC information in a multilingual format (e.g. native language and English); 

-the scope of information that should be accessible to stakeholders concerned by the case 143 , such as: access to formally admissible SPCs dossiers, third parties opinions, SPC opinions or grant decisions, etc.;

-the ways in which common technical rules on data exchange, storage, publication and data exploration could be agreed between NPOs 144 (e.g. via a dedicated working group of NPO IT experts).

Additionally, the guidelines should promote cooperation and data sharing between NPOs and the EPO (regarding existing European patens) and with the EMA (on marketing authorisations). These guidelines would not be legally binding, and might co-exist with nationally developed guidelines.

5.2.2.PO2: Mutual recognition of national decisions 

Under this option, the Commission would propose a legislative initiative that would enable SPC applicants to file an SPC application in a designated NPO, the so-called “reference office”, of its choice. Only NPOs of Member States that fulfil a number of conditions could act as reference offices. These conditions would include having sufficient resources to conduct substantive examination of all the conditions for granting an SPC (in accordance with Article 3 of the SPC Regulations)57. An up-to-date list of offices would be published. A system allowing third parties to submit their written observations concerning an ongoing SPC procedure would be set up at all the reference offices. All communication with the reference office would be in the language(s) accepted by that office. Following the grant of an SPC by the chosen reference office, the SPC applicant could seek SPC protection in other Member States. In other words, the decision of the reference office would be implemented by the other national patent offices. For this option to be operative, the basic patents of the designated and reference Member States should be based on the same European patent to have a common set of claims 145 (in order to result in the same scope of patent protection). In the same vein, for medicinal products, the marketing authorisation should be based on a centralised marketing authorisation for the related SPCs.

To avoid the risk of “double SPC protection” or “double attempt of SPC protection”, the possibility of seeking SPC protection through purely national routes in the Member States should not be available once this mutual recognition procedure is triggered for a product.

The option should preferably be combined with PO1 as all NPOs that can act as reference offices would be expected to work on the basis of common guidelines relying on the best practices and on a common interpretation of EU legislation and case law. Each NPO would be expected to cooperate in setting up an SPC data exchange system with features as described in PO1.

5.2.3.PO3: Centralised filing and examination of SPC applications resulting in a non-binding opinion

The Commission would set up a single entry point for filing SPC applications in the EU for holders of European patents and EU-centralised marketing authorisations 146 . Applicants would use a common form, attach the patent dossier and marketing authorisations and select in which Member States they seek SPC protection. Such application would be examined 147 by a dedicated “central examination authority” (potentially with involvement of experts from NPOs). All conditions for obtaining a certificate would be examined 148 . The application would be published and open to written observations as to validity/eligibility by third parties (most importantly, originators, follow-on manufacturers or public health authorities). Written observations 149 would be considered by the examiners in the process of issuing the opinion. However, examiners would not have to give reasons concerning how the observations were taken into account 150 . The outcome of the examination would be a non-binding opinion on whether the SPC should be granted or not. The examination authority could be a “virtual office” composed of SPC examiners from NPOs or an existing authority such as: the European Union Intellectual Property Office (EUIPO), the European Patent Office (EPO) (both of which are specialised in granting IP rights), or an EU regulatory agency dealing with marketing authorisations, such as the European Medicines Agency (EMA) or the European Food Safety Authority (EFSA) 151 . All interactions with the authority should be possible in electronic form in all EU languages, and the same would apply to the availability of decisions taken by the examination authority (e.g. e-submission using a standard application form and e-access to SPC documents by applicants).

Applicants would be charged a central fee. It would cover filing and examination only. It should also fully cover any additional costs of the central authority. An annual SPC maintenance fee could be collected by Member States in which the SPC is granted (no application fee at the national level). The submission of written observations could also be subjected to a fee.

The application, opinion and observations would be sent for further processing to each Member State designated by the applicant. Each NPO would decide whether to grant a national SPC in its territory or not. Appeals against such national decisions would be governed by national law. While the opinion of the EU examination authority would be non-binding, the freedom of NPOs to deviate from the opinion could be restricted to cases where factual circumstances in the country concerned have changed, for instance whereas the validity of the patent underlying the SPC has been challenged by means of a request for revocation or the marketing authorization for a product has been withdrawn.

The examination authority would need to develop and maintain guidelines for its own examination practice, following open and inclusive consultation with NPOs. The national SPC route could be closed for applicants able to use the centralised procedure 152 .

The examination authority would provide a single access point for e-submission of SPCs using standard forms, as well as an IT system (a data warehouse) for a comprehensive recording and on-line accessibility of up-to-date data related to SPCs filed through the centralised procedure. The key building blocks of such IT system 153 should include a central database, ETL tools 154 , metadata, and data access tools. The business requirements of this IT tool should be in line with common rules for the publication and accessibility of SPC information foreseen in PO1. For completeness, it would be also recommended that key information on SPCs granted by NPOs via the national route is shared with the examination authority and is made accessible through its central web portal.

Figure 6: Steps of Policy Option 3

5.2.4.PO4: Centralised filing and examination of SPC applications resulting in a binding opinion 

This option is identical to PO3, except for the key distinguishing feature that the examination authority would issue a binding opinion on the validity of a centralised SPC application. The NPO of each Member State designated in the application would have to implement it and formally grant, or refuse, the SPC in its territory. Therefore, in practice, the result of the centralised procedure under this option would be equivalent to either the granting of a bundle of national SPCs, or the rejection of the application, for all designated Member States.

Given the binding nature of the above, an applicant should be able to appeal a (negative) opinion before it is transmitted to national offices.

Figure 7: Steps of Policy Option 4

A central IT system for SPC data would be set-up, as described in PO3.

5.2.5.PO5: A ‘unitary SPC’ complementing the unitary patent

Under this option, the Commission would present a legislative proposal for the creation of a “unitary SPC” title, granted by an EU-level authority (the central examination authority, as in PO3 and PO4). It would take effect at the end of the lawful term of a basic patent that would be a European patent with unitary effect (i.e. the unitary patent). Therefore, it would have unitary effect only for the territories of the Member States covered by that basic unitary patent 155 .

Figure 8: Steps of Policy Option 5

The unitary SPC protection would be optional for the users of the unitary patent system (it could become the only choice after a transitional period). Once it is chosen, the national route in Member States participating in the unitary patent system would be closed to avoid duplication of protection.

The key features described in policy options PO3 and PO4 (centralised procedure) would broadly apply to this option. In particular, applications for unitary SPCs would be submitted to the examination authority, which would conduct the formal and substantive examination of the applications, take written observations into due consideration and grant or refuse the unitary SPC protection. The unitary SPC protection would come into effect in the territories of the Member States participating in the unitary patent system (party to the UPCA – assuming that they are covered by the basic unitary patent concerned) without any validation by the NPOs.

The linguistic regime in this option could be as in PO3 and PO4, however instead of covering all EU official languages, it could be limited to the official languages of the unitary patent area. All administrative fees (application and annual renewal) would be paid to the central examination authority.

It should be possible to lodge an appeal against the decision on granting or refusing protection to the examination authority (the Board of Appeal) 156 . Judicial appeals related to the decision of the examination authority, if it is an EU agency/body, would be addressed to the CJEU. A central IT system for unitary SPC data would be set-up, as described in PO3.

Conversion of unitary SPCs into national SPCs

There are rare situations in which a European patent with unitary effect may see its unitary effect being denied or revoked by the UPC at the time when the validation deadlines have already expired – making it impossible to validate the European patent nationally any longer (except in few Member States where no validation formalities are required). To address such a risk, the vast majority of the UPCA Contracting States have introduced national “safety-net” legislation providing for a possibility to convert a unitary patent into a national patent. Although such situations should be quite exceptional, they remain possible, and therefore it would be advisable to provide for a procedure allowing unitary SPCs to be converted in national SPCs, under specific conditions.

5.3.Overview of policy options

The table below provides a short summary of key differentiating features of all options considered.

Table 2: Main features of the analysed policy options

*EA – examination authority, EP- European Patent, NPOs – national patent offices

5.4.Options discarded at an early stage

The option where the centralised examination authority would grant national SPC directly was discarded as it does not appear to be feasible based on the EU treaties (neither Article 114 TFEU on harmonisation of national laws, nor Article 118 TFEU on unitary IP rights).

Extending the 20-year term of protection of the basic patent by up to five years (the US model) as an alternative to the current SPC system – while this would have the same practical result – was also discarded. First of all, this would represent an extremely drastic change and would require very deep modifications in both legislation and Member States’ (national offices’) operations. This change would likely open up several years of fluctuating granting practices and case law, and is not expected to result in particular savings as each Member State concerned would still have to examine and grant extension requests. In addition, there are no evident advantages in replacing the current SPC system with a patent term extension regime. On the contrary, a sui generis right offers more flexibility to the EU legislator, as was shown by the introduction of the SPC manufacturing waiver in 2019 (Regulation 2019/933).

An option to amend SPC Regulations by: i) elimination of the possibility to grant SPC without verifying all the criteria 157 ; and ii) codifying CJEU jurisprudence - was also rejected. From Commission’s contacts with Member States it emerges that this exemption is vital for NPOs with limited resources, and even large NPOs reported problems in applying all the criteria. More importantly, even without the exemption significant divergences between NPO decisions would remain due to differences in national SPC administrative procedures. At the moment, the transposition of CJEU jurisprudence into the EU law would be premature. While the Santen case clarified some aspects of prior case law, the latest two referrals to the CJEU have demonstrated that there are still uncertainties in particular on Article 3a and 3c (see: section 2.4.1).

Finally the option to eliminate SPCs altogether is not considered further following the findings of the evaluation that SPC system supports research of new active ingredients, is fit for purpose and brings added value. As well as the fact that all major jurisdictions (e.g. the US, JP, CN) around the world offer comparable additional patent protection. Lastly, eliminating SPCs would be incompatible with the international commitments of the EU taken in a number of bilateral and regional trade and cooperation agreements with third countries, as they include commitment to some form of extended protection.

6.What are the impacts of the policy options?

Further to the analysis below on the impact of the identified options, the tables in section 7 provide a detailed summary of the impact of all options described above. All quantifications quoted below are based on calculations in Annex 5D to 5G. Additional material on the impacts on SMEs is also provided in Annex 6 (the SME Test).

The most important analysis concerning objective 1 (legal certainty) and largely 2 (monitoring) is not quantifiable. Where possible, quantifications where made (mainly on objective 3 – cost reduction) using the following assumptions for EU wide impacts: around 100 SPC applications per year, out of which 80 SPC granted (based on the analysis in section 2 taking into account future increases and historical averages for the rejection rate); 300 follow-on companies 158 and at least one medicines procurement office per Member state interested in monitoring SPC status. It is also assumed that applicants use of legal advice in each Member State where they apply for SPC, as well as that SPC protection is sought in all EU Member States and maintenance fees are paid for the maximum five-year-long protection (for alternative scenarios see: Annexes 5D and 5E).

PO 0: No action (status quo or base-line scenario)

The problems identified in Section 2 would persist with the described consequences, even if the Commission continues to promote better implementation of the SPC Regulations. A status quo would worsen those problems considering the increasing average number of Member States in which SPC protection is sought for a given product and the entry into force of the unitary patent system.

Table 3: PO0 (baseline) costs and savings to applicants for receiving EU27 wide SPC protection (EUR).

Source: own estimations, numbers rounded see: Annex 5E

6.1.PO1: Guidelines on application of the current SPC regimes

Several Member States already have national guidelines, which could be a source of inspiration/best practices for the common guidelines developed jointly the Commission and Member States. Four out of five patent offices responding to the public consultation, several judges and IP lawyers stated that national guidelines exist in their Member State and are frequently updated following CJEU rulings 159 . Moreover, since the CJEU line of judgements on SPC is still evolving, guidelines seem a good instrument which could be frequently and easily updated.

The main drawback of this option is that the effectiveness of any guidelines is undermined by the fact that they are not mandatory. Therefore, if this option is chosen, it is essential to secure wide acceptance by Member States. This may entail a long negotiation process to settle for the commonly accepted version. Nonetheless, the adoption of guidelines alone gives no certainty that the situation would improve. Several countries would like to continue developing their national guidelines to cater for country specific legal situation/processes. The freedom to depart from guidelines, combined with the possibility to interpret them differently, shows limitations of this option.

As far as the exchange of SPC-related information is concerned, developing common guidelines on the scope of publication and the characteristics of dedicated IT tools, can prove very useful to NPOs. The degree of data integration 160 will depend on the willingness and technical capabilities of NPOs, but having better access to standardised and searchable SPC data could undoubtedly facilitate knowledge sharing. It shall be nonetheless noted that upgrading the existing SPC databases to common standards would imply certain costs (especially if historical files needed to be converted to new formats as well). If NPOs decided to create an EU-wide central SPC database, it could actually limit the IT cost per country.

Consequently, guidelines are expected to limit divergence, but cannot eliminate it altogether. Their scope and the extent of uptake would be the deciding factor. The IT costs may limit the interest of NPOs with lower number of applications or low SPC fees. Cost to applicants would not change.

Stakeholder feedback

This option was the preferred action to improve consistency of interpretation of SPC previsions throughout the EU to around 75% of follow-on manufacturers, healthcare sector and patent offices and lawyers during the public consultations. On the contrary only 7% of originators selected it.

On 21 October 2019, the Group of Industrial Property Policy (GIPP) experts from EU Member States discussed the possibility of creating common guidelines regarding the granting of SPCs. Guidance in the form of good practices prepared by a working group of national SPC experts, possibly under co-ordination by the Commission, was the option preferred by the majority of Member States taking the floor. For many participants, this option would have an advantage of offering more flexibility compared to SPC guidelines issued by the Commission, which would have to stay within the strict limits of the case law of CJEU. Some Member States pointed out that the usefulness of any such guidance could be limited in light of the still evolving CJEU case law and the fact that Court has the final say in interpreting the provisions of the SPC Regulation. A few Member States were reluctant regarding soft-law approaches as it may be premature in light of the upcoming entry into force of the unitary patent and of the evolving case law, and result in a duplication of efforts on EU and national level. During the GIPP meeting in November 2022, eight Member States expressed preliminary support for this option out of 17 that took the floor.

6.2.PO2: Mutual recognition of national decisions

Linguistic regime

As far as PO2 (mutual recognition) is concerned, only one language would be necessary to prosecute the application at the reference office, potentially eliminating upfront translation costs. However, savings of this option could be lower, if the resulting bundle of national SPCs and the dossier on examination conducted in the reference office required translation into all official languages of the designated Member States – adding around EUR 870 per each additional language 161 . The translation cost could be covered either by an increase in fees charged by the reference office, or by diminishing the income from maintenance fees received by NPOs. It is also possible that not all NPOs would require such translations. Nevertheless, EU law cannot impose the use of any (other than local) language on national authorities as this is in Member States’ competence only.

Impact on NPOs

Those NPOs that decide to act as reference office would conduct the formal and substantive examination of SPC applications (would have had to be done anyway with the current system of nationally granted SPCs, albeit the numbers of applications may differ). Since it is expected that several NPOs would obtain the status of a reference office, their SPC-related workload would decrease compared to the current situation, because the average workload would be shared by several offices. On the other hand, reference offices risk not having a homogenous workload year after year, which might create challenges regarding the employment of their SPC department. Based on an earlier analysis 15 NPOs could qualify as not applying any exemptions. Using the geographical distribution of applicants to the German office, one could expect that around 58% of applications would be in English, up to 23% in German, up to 20% in French, up to 13% in Italian, 7% in Dutch, and 3% in Swedish 162 . With around 100 SPC applications expected annually, it would be likely that only three reference offices emerge: that is IE for English applications, DE for German and FR for French 163 . Regardless of which offices become the reference ones, with an average application fee of EUR 360 charged by qualifying NPOs, the remaining NPOs would lose around EUR 0.84 million annually in application fees (on average around EUR 32 300 per NPO) 164 . Additional variable translation fees of EUR 870 per language of designated Member State would probably be charged to cover translations (around EUR 20 000 for the whole EU). Non-reference offices would get their SPC-related tasks considerably facilitated as they would receive SPC applications that had been already examined (and cleared of any formal errors, if detected). As analysed in PO1, NPOs would have to invest in the readjustment of their IT systems to common publication rules and/or invest in creating a central publication hub for the EU. The one-off cost of the latter is expected at EUR 19 000 per NPO with annual maintenance cost of around EUR 2 200 165 .

Impact on applicants and follow-on manufacturers

Regarding problem 3 (cost and burden of applying and maintaining SPC protection), option PO2 can be expected to reduce the cost (both administrative fees and attorney fees, as well as translation related to filing and prosecution) of applying for SPC protection. This option would introduce a single filing of an SPC application at an NPO that would undergo one substantive examination followed by an automatic recognition by the EU Member State designated in the SPC application (no additional re-examination by the other NPOs is expected). The application forms and internal processes would continue to differ between NPOs. Maintenance costs would not be reduced, as the outcome of this option is a bundle of national SPCs and therefore Member States would be expected to continue to request annual maintenance fees as currently.

SPC applicants would be able to choose one reference office to examine their file. This should lead to an increase of predictability and legal certainty regarding SPC protection in the EU. Divergent examination outcomes for the same product would be eliminated. In addition, the quality of examinations should improve, as only NPOs verifying all conditions stipulated by the SPC Regulations could qualify as a reference office (therefore meeting expectations of follow-on producers - 86% of whom thought NPOs should check all conditions) 166 . However, improvements in predictability would be limited by the fact that some reference offices could be more lenient than others, and each reference office could adopt/change its own standards of assessment. Consequently it is vital that common guidelines developed in PO1 are followed. The date on which SPC is granted in each Member State could still slightly differ due to length of internal processing in each NPO. This option cannot provide unitary SPC protection for unitary patents understood as a single IP title for the EU, but a bunch of national patents.

This option would, to some extent, boost transparency because as in PO1 each NPO would be expected to publish the same kind of information in comparable formats. Alternatively, a network of reference offices could establish a common publicly available database on common SPC applications, updated with national SPCs information. Nevertheless, follow-on producers and health sector procurement offices would need to consult each NPO database to gain a complete picture of the market, unless a more integrated data exchange system is agreed between the NPOs. This should produce individual savings of around EUR 40 000 (approximate cost of acquiring commercial dataset with comparable data) and EU wide annual savings of EUR 12 and 1 million respectively. Follow-on producers and health sector would also gain opportunity to influence the SPC granting process, as each reference office should allow for submission of third party observations.

One of the main advantages of PO2 is that its implementation is not linked to that of the unitary patent system, and not restricted to those Member States (currently 17) that are not part of the enhanced cooperation area. It can be operative for all EU Member States, as soon as the related legislation is adopted.

Nonetheless, this option could create forum shopping across the internal market (e.g. SPC applicants might file applications in NPOs perceived as more lenient when assessing the requirements for granting SPC applications). It would improve harmonisation between national decision-making regarding SPC applications only as far as guidelines can allow (discussed under PO1).

This option is expected to reduce the cost of applying for five-year-long SPC protection covering the whole EU by approximately 18% (due to a single application fee, a single attorney fee, as well as potentially limited translation costs). This would result in savings of around EUR 44 200 per applicant  167 . Savings on attorney fees would at the same time represent a loss of income for this group estimated at EUR 52 000 per SPC application.

Table 4: PO2 costs and savings to applicants for receiving EU27 wide, five year long SPC protection

Source: In-house estimations, numbers rounded to 100s, see: Annex 5E

Stakeholder feedback

On 21 October 2019, the Group of Industrial Property Policy experts from EU Member States discussed the possibility of creating a mutual recognition mechanism for the grant of SPCs across EU Member States. The majority of Member States expressed the view that a system based on a mutual recognition of SPC was not desirable.

In the Allensbach survey 168 , in response to question Q70 asking which one of the listed authorities should grant unitary SPCs, only 6% of respondents supported such organisational setting (i.e. 3 originators and 16 generics companies chose “national patent offices based on a mutual recognition system” as the best option). By contrast, around 85% of originators supported this option in the Commission public consultations 169 .

6.3.PO3: Centralised filing and examination of SPC applications resulting in a non-binding opinion

Linguistic regime

For reasons of accessibility (especially to SMEs) and transparency, PO3 to PO5 foresee that the SPC application filed with the examination authority, third party observations and the outcome of SPC examinations should be available in all 24 EU languages. Other language combinations are analysed in Annex 5C.

Consequently, translation costs would be generated in the examination authority which needs to process applications and third party observations in its working language(s) (e.g. for EPO: German, English, French; EUIPO: German, English, French, Italian and Spanish; EMA: English). Additionally, in case of PO3-4 the examination authority would need to translate the decision into languages of the designated NPOs.

Translation costs relating to the application itself are expected to be low. A standard application form would be available in all languages. Much of it is about information not requiring any translation, such as the references of the basic patent and of the relevant marketing authorisation (already translated) 170 , and in most cases the identification of the product. Additionally, as discussed under PO2, between 78% and 90% of applications have historically been filed in English, German and French, so in the working languages of the authorities considered. Translation of third party observations and of the SPC dossier for each designated NPO is expected to be the main cost-driver responsible for up to 9% and 65% of translation costs respectively.

English, French and German as the preferred languages for applying for an SPC were the first choice for originators (78%) and patent attorneys/lawyers (63%) and the second for follow-on producers (25%). The follow-on producers added Italian and Spanish to the three above as their preferred choice (34%). All EU languages were selected by 19% of follow-on producers, 8% of patent offices and 3% of originators. The language preferences are similar when it comes to publication of the granted SPCs. Finally, the healthcare sector (e.g. hospitals, health ministries, pharmacists) would welcome SPC publication in English, French and German (46%) followed by all EU languages (38%) 171 .

Annual translation costs for the central authority in respect of approximately 100 SPC applications are expected to be around EUR 3 million 172 . The bulk of such cost is due to translations to national languages of NPOs when transmitting the opinion of the central authority. Machine translations (if of sufficient quality) could limit the translation costs.

The choice of an examination authority

Under options 3 to 5, a dedicated authority should be designated to conduct SPC examinations. All authorities considered (EUIPO, EPO, EMA and EFSA) are potentially suitable for that task.

When vesting an institution with SPC responsibilities a few criteria should be considered. First, there is the accountability to the EU public, in particular the European Parliament. Second, there is the need for alignment with the EU’s overarching political values and current policy priorities. Third, experience with substantive SPC assessment, and more broadly post-grant patent law, is relevant. Last but not least, the possibility of judicial review by EU Courts is of an appreciable importance.

The EPO has been granting European patents for nearly four decades; hence it has accumulated valuable practical expertise in similar matters or functions (including its Boards of Appeal). It will also be granting unitary patents. However, the EPO is not an EU body, thus any decision to enhance or modify its mandate (e.g. amending fees) would go beyond the competences of the EU and require the consent of all members of the European Patent Organisation (39 countries including 12 non-EU countries). It is impossible to foresee whether or not the European Patent Organisation members would agree to take up a new duty related to SPC examination, especially if it didn't affect all the contracting parties. Finally, the decisions of the EPO are not subject to the review of the CJEU, nor to the scrutiny of the European Parliament. Full and clear accountability of the granting body was requested by the main European association of generic and biosimilar industries.

These concerns do not affect EU agencies. When looking at experience in administering IP rights, the EUIPO would be best equipped to take up the role of centralised SPC examination authority, while the current duties of the EMA/EFSA are probably the least related to such new tasks. Furthermore, entrusting the EMA/EFSA with SPC evaluation and granting would also imply a split in the registration of SPCs for medicinal products (EMA) and PPPs (EFSA), creating room for disparity of practices.

If the role of the examination authority is taken up by any of the above organisations, a specific department for the implementation of the task related to the centralised SPC procedure should be set up. Alternatively, the substantive examination could be conducted by a pool of national SPC examiners (a “virtual office”) acting alone or under the administrative support/coordination of a central body. This would allow to benefit from the experience of national SPC examiners, gathered through national procedures. A self-standing virtual office would most likely require one coordination office, thus cost-wise it would be similar to choosing an agency. It would also appear to be legally impossible for a virtual office itself to grant unitary SPCs as in PO5 173 .

A system of compensation to national offices (loss or SPC revenue, remuneration to examiners) should also be set up (e.g. EUIPO already has a system of sharing its surplus with Member States) 174 . Key characteristics and consequences stemming from a decision in favour of any of the above institutions is presented in Table 46 in Annex 5C.

Around 85% of originators in the public consultation preferred that NPOs acted as such authority (either as virtual office, or through mutual recognition (PO2)). The EPO was chosen by 48% of follow-on manufacturers and 6% of originators. The EUIPO was selected by only 1-2% of those respondents 175 . Similarly, 54% of respondents to the Allensbach survey were in favour of establishing a virtual patent office composed of examiners from national patent offices 176 . The second most supported choice was the EPO (25%), followed by the EUIPO (8%) and the EMA (7%). The virtual office solution shows that stakeholders recognise that SPC expertise is located in NPOs. High support for the EPO can be due to the fact that SPC stakeholders are most familiar with this organisation as it deals with patents, while EU agencies are not associated with patents by stakeholders, which could explain the low support they enjoy.

Though such preferences are divergent, the choice in favour of the EUIPO is compatible with Medicines for Europe’s (largest association of follow on producers in the EU) view that the granting authority for the unitary SPC should be accountable to the EU Institutions (e.g. CJEU and European Parliament) given the impact of SPC protection on access and affordability of medicines.

Table 5: Merits of potential candidates for the central authority

* Stakeholders support based on MPI (2018) – Annex III Allensbach survey
Source: Own analysis

The table above compares merits of different choices for the central authority. Against such a multi-dimensional backdrop none of these organisations is perfect for the job. It would seem however, that the best result in terms of the three criteria identified at the beginning of this section could be achieved by combining the expertise of NPOs with the EU accountability of the EUIPO (which already implements various aspects of the EU IP policy). Such solution would allow to implement both centralised (PO3 and 4) and unitary (PO5) SPC activities. The new authority would be tasked with setting up a network of examiners from NPOs, creating guidelines and standard application forms, developing working methods and an IT system, as well as dealing with the daily routine of administering the SPC procedure (implying expenses related to salaries of examiners and translations).

Cost-wise, the establishment of a centralised SPC processing function in an existing authority is expected to create one-off costs of around EUR 1.4 million (including EUR 0.5 million for creating a central database) and recurrent annual costs (without translations) of around EUR 0.75 million (PO3).

In PO3 the examination authority would only charge a single application fee. In order to cover all costs (depreciation of one-off cost and recurrent cost) the minimum fee should amount to around EUR 19 500, accompanied by translation fees of EUR 870 per language, i.e. per designated Member State (thus around EUR 20 000 for the entire EU) 177 .

Impact on NPOs

As the application fee of the examination authority would be high (at least 3.8 times higher than the sum of national application fees), NPOs might continue seeing demand for national SPCs, limited only by other costs that applicants would need to bear such as national attorney fees, or by the hassle of dealing with several offices and national procedures, in various languages and by using national agents where required (unquantifiable).

In case all applications arrived via the central authority, the workload of NPOs relating to SPCs would be substantially diminished. The patent offices would also lose income from application fees, amounting to up to EUR 32 600 per NPO (around EUR 0.88 million for the EU) 178 . NPOs would still be entitled to charge maintenance fees. At the same time, a centralised examination scheme able to cover all Member States will result in savings of resources at NPOs, compared to today’s situation where multiple examination procedures are (redundantly) conducted in parallel in several Member States.

A number of examiners from NPOs would be carrying out substantive analysis of SPC applications for the examination authority. This task is expected to be equivalent to the involvement of two persons working full time to cover all SPCs per year (2 FTEs/year). It can of course be spread among a higher number of persons working on SPCs only occasionally. Their remuneration could be covered by maintenance fees charged subsequently by each designated NPO, or they could be paid by the central authority directly. The risk of the former solution is a perverse incentive to give a positive opinion, as otherwise no income would follow for that application. A further problem, could arise if examiners came from countries where protection is not sought, as it would further increase the costs of application process borne by the central authority, while the NPOs of countries that have not contributed to the evaluation would collect substantial amounts for maintenance fees. To avoid such dubious incentives, the examination authority should pay examiners directly. The NPOs additional income from such transfers is estimated at EUR 0.62 million EU-wide. The net result of this option on all EU NPOs is thus estimated at – EUR 0.26 million (or – EUR 9 500 per NPO) 179 .

As regards non-binding opinions issued by the central authority, it is expected that NPOs would implement them without reopening the file, at least in the case of positive opinions – mainly because it would guarantee the maintenance of fee income for up to five years. For the same reason, however, NPOs might be tempted to reinvestigate negative opinions. Re-examination might also be triggered by appeal by an unsatisfied applicant. In any case, historically only around 20% of decisions were negative 180 , so the re-opening should not concern more than around 20 applications a year. NPOs may also reinvestigate positive SPC decisions, if for various reasons they consider that the central authority is too lenient in granting SPCs. The likelihood of NPOs issuing divergent opinions could be limited if the central authority guidelines became a reference point also for NPOs, thus contributing to harmonisation of practices. Moreover, if the right to deviate from the central examination authority’s opinion was restricted only to changes in factual circumstances (e.g. patent revocation, marketing authorisation withdrawal), the room for divergence would be almost completely eliminated.

Finally, it is also difficult to propose maintenance fees that would be much lower (so that the centralised procedure is even more cost-attractive when compared to the national route), because the central examination authority must bear all the cost of SPC examination (including translations), while not being able to recuperate it later via maintenance fees - the latter would be still collected by the NPOs. At this stage, it is not expected that NPOs would either lower the maintenance fees or remove them completely.

Impact on applicants and follow-on manufacturers

PO3 should significantly reduce the problem of divergence, as this option implies a single filing of the SPC application that would undergo one substantive examination by the same authority (unless the NPOs’ discretion to reinvestigate files goes beyond changes in factual circumstances, as explained above). As no possibility to centrally challenge the non-binding opinion is envisaged, dissatisfied applicants would need to launch appeals in all designated Member States. In any case, such divergence is not expected to concern more that 20% of cases.

Applicants will be required to present a centralised marketing authorisation 181 when applying for an SPC based on the new rules. This is in line with the current situation where most of the national applications for medicinal SPCs are based on centralised marketing authorisations 182 . Although using national marketing authorisations would not be impossible, it could cause additional difficulties due to possible differences between the national decisions (such as divergent identification of products concerned 183 , different permitted uses or different issuing dates 184 ). Mitigating these differences within the national marketing authorisations would entail a considerably higher examination workload for the authority. It should be noted, however, that a majority of originators and follow-on manufacturers called for allowing national marketing authorisations in the process 185 .

The centralised procedure reduces applicants’ need for national legal assistance (estimated at EUR 2 000 per country), translations of applications and costs of dealing with separate authorities. At the same time, national appeals would entail the need to rely on legal advice in each designated country. The EU wide loss of income for IP attorneys is estimated at EUR 0.4 million. Nevertheless, the sum of central application and national maintenance fees in PO3 for SPCs protected in the whole EU is expected to be higher than the sum of national fees by 16% due to added cost of the examination authority. Taking all the above factors into consideration, PO3 would be cheaper than the national route for applicants seeking five-year-long SPC protection in 17 or more Member States. In case of the SPC sought in EU27 for the full term of five years, PO3 is expected to be on average 6% cheaper than the baseline 186 .

Despite all that, results of the public consultation suggest that for most stakeholders SPC costs are less important than legal certainty/predictability and their ability to monitor the status of SPCs. It is challenging to quantify the former factors, though.

By creating one central, multilingual SPC database 187 covering all SPCs (granted by the central procedure and preferably also by the national route) PO3 would significantly decrease the burden of monitoring SPC protection for SPC users e.g. hospital procurement, and competing generics and biosimilars. These savings are estimated at around EUR 40 000 per company with the EU wide saving of around EUR 1 and 12 million respectively. Nevertheless, the completeness, accuracy and timeliness of data would depend on cooperation among NPOs. They would provide information on whether they followed the non-binding opinion, as well as on any changes in status (e.g. withdrawal of the application or revocation of the patent). Any failures or delays in updating the database could mislead or confuse market participants and consequently undermine the credibility and usefulness of this dataset. Additionally, follow-on producers would be able to influence the SPC granting process and provide written observations in any EU language before the decision on granting an SPC is made.

PO3 would not provide unitary SPC protection based on unitary patents, but a bundle of national SPCs. As in PO2, the implementation of PO3 is not linked to the unitary patent system, and can cover all Member States irrespective of whether they are part of the enhanced cooperation area of the unitary protection.

Table 6: PO3 costs and savings to applicants for receiving EU27 wide, five year long SPC protection

Source: In-house estimations, numbers rounded to 100s, see: Annex 5E

Stakeholder feedback

The idea to develop PO3 was a result of analysis of earlier consultations where stakeholders opted for a unitary SPC and granting by NPOs 188 , hence PO3 combines “unification” at the SPC application examination level with national SPC granting.

This was also suggested by e.g. the European Federation of Pharmaceutical Industries and Associations (EFPIA) expressed that “As the timeline for the entry into force of the unitary patent/Unified Patent Court system remains unknown, EFPIA commends the Commission’s reflection to provide an intermediate solution. A single application portal and a unified grant mechanism can be helpful steps towards a unitary SPC”.

During the Commission expert Group on Industrial Property Policy (GIPP) meeting in November 2022, five Member States expressed preliminary support for this option out of 17 that took the floor.

6.4.PO4: Centralised filing and examination of SPC applications resulting in a binding opinion

Linguistic regime

The rules for the use of languages would be as in PO3 (see: section 6.3).

Impact on the examination authority

Impact under this option would be as in PO3 (see: section 6.3), albeit the creation of a review mechanism (that allows for the authority’s binding decision to be challenged under a simplified procedure) would increase annual costs to EUR 1.5 million. Since the examination authority could only charge an application fee, to cover all the cost it should amount to around EUR 20 800 plus variable translation fee of EUR 870 per language of designated Member State (around EUR 20 000 for the whole EU) 189 .

Impact on the NPOs

The key difference between PO3 and PO4 is that the NPOs would be expected to follow the binding opinion with no room for discretion. While most Member States/NPOs should recognise the merits of a binding opinion in terms of EU-scale coherence, some of them might possibly deplore that the central examination authority is more strict, or less strict, than their average national practice. However, such concerns would be mitigated by involving NPO examiners in the centralised examination process.

The remaining impacts on the NPOs would remain as described in PO3 (in particular, the maintenance fees would be paid to NPOs). Given the relatively high application costs of the centralised procedure 190 compared to a single national SPC application (and other factors such as the requirement that the centralised procedure would only be available where the basic patent is a European patent and, for medicinal products, where the product was centrally authorised), the demand for national SPCs is expected to diminish but not disappear entirely. As in PO2 and PO3 the maximum income loss of NPO is estimated at EUR 20 000 per office and EUR 0.5 million EU-wide annually.

Impact on applicants and follow-on manufacturers

A single examination procedure and a single decision on granting protection as foreseen in PO4 would eliminate nearly all currently observed sources of divergence described in the problem statement. The central procedure would substantially increase legal certainty and predictability. Although the central fees are higher in comparison to the national route, this option produces overall cost savings of around 10% for applicants on attorney fees and translation for a EU-wide protection for five years 191 . It would also be easier to contest the negative opinion on granting an SPC by filing a request for review. The central review system would help companies economise on attorney fees. This option would bring benefits to all EU countries regardless of their participation in the enhanced cooperation. However, it would not provide unitary SPC protection for the unitary patents, but a bundle of national SPCs.

Table 7: PO4 costs and savings to applicants for receiving EU27 wide, five year long SPC protection

Source: In-house estimations, numbers rounded to 100s, see: Annex 5E

A central database envisaged under PO4 would provide an accurate and timely picture of the SPC status covered by the central procedure, as data feeds could occur once the binding decision is taken. Follow-on producers and health sector procurement offices would benefit from up-to-date information on SPCs with estimated savings as in PO3 of EUR 40 000 per firm or EUR 12 and 1 million EU-wide respectively. As in PO3 follow-on produces would also be able to submit written observations before an SPC is granted.

Loss of income of IP attorneys is equal to the gain of applicants and amounts to EUR 52 000 per case and EUR 5.2 million EU-wide.

European SPC title

An alternative model could be based on the EPO system for European patents. The examination authority would issue one central “European SPC title” which would be subsequently registered in each designated Member State. Such a title would have exactly the same economic consequences as described above. It might, however, require a different legal basis – Article 352 TFEU 192 - which requires unanimity of the Council and the consent of the European Parliament. This means that the Parliament would have the power to accept or reject a legislative proposal by an absolute majority vote, but could not amend it. Therefore, the Parliament would have less influence on the contents of the legislative proposal than in the ordinary legislative procedure.

Stakeholder feedback

The idea to develop PO4 was a result of analysis of earlier consultations, where stakeholders opted for a unitary SPC and granting by NPOs 193 , hence PO4 combines “unification” at the SPC application examination level with national SPC granting.

This was also suggested by e.g. the European Federation of Pharmaceutical Industries and Associations (EFPIA) expressed that “As the timeline for the entry into force of the unitary patent/Unified Patent Court system remains unknown, EFPIA commends the Commission’s reflection to provide an intermediate solution. A single application portal and a unified grant mechanism can be helpful steps towards a unitary SPC”.

During the Commission expert Group on Industrial Property Policy (GIPP) meeting in November 2022, eight Member States expressed preliminary support for this option out of 17 that took the floor.

6.5.PO5: A ‘Unitary SPC’ complementing the unitary patent

Linguistic regime

The rules for the use of languages would be as in PO3 and PO4. However, as the unitary SPC would be granted directly by the central authority, 2/3 of translation costs relating to the transmission of the SPC dossier to the designated NPOs would be eliminated. This would result in a translation budget of around EUR 1 million, or EUR 10 000 per SPC application. For reasons of transparency and accessibility it could be advantageous that firms from UP Member States are allowed to communicate with the central authority in their own language.

Impact on the examination authority

As in PO3 (see: section 6.3), but the examination authority would (in addition to assessing applications) grant unitary SPCs, and collect maintenance fees. Since the costs can be spread now over the lifetime of each SPC, the application fee could be lowered to be more competitive vis-à-vis NPO fees and the outstanding cost could be recuperated via maintenance fees. Nevertheless, an application fee that would be too low could create a bias towards granting SPCs to recover all costs as they are generated mostly during the registration phase. It would also mean that successful applicants would subsidise unsuccessful ones by paying higher maintenance fees. As discussed in Annex 5D, the easiest solution is to charge all fees at the application stage with no central maintenance fees. This would mean fee of approximately EUR 28 900.

Impact on NPOs

As long as the unitary SPC fees are cost-based, they would be up to four times lower than total fees charged by the 17 UP Member States for a five-year-long SPC 194 . Taking all costs into account it appears that the national SPC route would likely be chosen only if protection is sought in less than four Member States 195 – or where the conditions for obtaining a unitary SPC (e.g. the existence of a basic European patent with unitary effect and, for medicinal products, of a centralised authorisation) are not met. As on average an SPC covers 20 countries, it is safe to assume that for the UP countries most/all applications would be for a unitary SPC (at least in the medium/long term, as explained below). If NPO experts were to be involved in the central examination network, they would receive remuneration directly from the examination authority to the tune of EUR 0.75 million EU wide. The total loss of income for the 17 UP NPOs is estimated at EUR 8.7 million (EUR 512 900 per NPO), which is equivalent to 2.6% of their income from patents 196 .

However, it is to be expected that NPOs will be affected in a very progressive manner only by the introduction of a unitary SPC, due to:

-the progressive penetration of the unitary patent in the first years following its introduction – both because of users’ initial cautiousness (as it happened when the European patent was launched) and of legal factors (e.g. where the conditions for attributing unitary effect to a certain European patent are not met), and

-the fact that the criteria for granting a unitary SPC may not be fulfilled in each and every case.

Impact on applicants and follow-on manufacturers

The unitary SPC would make it possible to extend a unitary patent in a unitary manner. For applications requesting unitary protection in the UP Member States there would be a single procedure and therefore no scope for divergent national outcomes 197 . Legal certainty and predictability could be assured. Costs associated with the SPC (application fee, maintenance fees, a single attorney fee, no translations) would be five times lower than seeking five-year-long SPC protection in each UP Member State separately 198 . The central database would provide a full, accurate and up-to-date picture of the status of unitary SPCs, while as regards nationally granted SPCs it would continue to rely on input from NPOs.

Nevertheless, this option does not cover all EU countries and would not provide any solution concerning the 10 Member States that will initially be outside the UP system. Thus, applicants wishing to obtain protection in the whole EU 199 would need to file 10 additional SPC applications. In this case, the cost of EU-wide protection for five years would amount to half of the cost of the baseline. For the applicants filing with NPOs outside the UP MSs, the problems of the baseline would continue (divergent national assessments or dates of granting SPCs). Follow-on producers and health sector procurement centres would need to monitor ten additional national databases. This means that their savings would be proportionally lower than in PO3-4 and amount to around EUR 25 000 per firm, or EUR 7.6 and 0.7 million per year respectively. That said, the UPC Agreement is open to all Member States, and more may be expected to join in the medium and longer term.

Even taking the above factors into consideration this option would produce savings of almost 50% for SPC applicants in comparison with the baseline for an EU-wide, five-year-long SPC 200 . This translates into saving of EUR 122 400 on average per applicant on a five-year-long SPC protection and may be a key factor in case of smaller firms. Legal attorneys would lose the equivalent of what applicants save – around EUR 32 000 per SPC, or EUR 0.32 million for the whole EU.

Table 8: PO5 costs and savings to applicants for receiving EU27 wide, five year long SPC protection

Source: In-house estimations, numbers rounded to 100s, see: Annex 5E.

Stakeholder feedback

The joint position paper of 2015 of the European industry associations of innovators 201 in the field of pharmaceutical and agrochemicals (ECPA, EFPIA and IFAH-Europe), i.e. the users of the SPC system, supports the concept of unitary SPCs being granted on the basis of unitary patents. In an EFPIA statement on the Commission SPC evaluation report of 2020, EFPIA expressed that “We particularly await the entry into force of the Unitary Patent & Unified Patent Court and further support the creation of a unitary SPC: one SPC for the EU rather than one SPC by country […] the unitary SPC can simplify the application procedure, reduce duplication and facilitate a consistent application of the SPC Regulation across the EU.” 202 There was a wide support to creation of a unitary SPC across all respondents to the public consultations (see: table below). As well as among Member States participating in November 2022 GIPP meeting (11 out of 17 who expressed preliminary views).

Table 9: Do you favour the creation of a unitary SPC title for the unitary patent?

*response did not receive this question instead we report here those who chose “Create a unitary SPC for the unitary patent” as answer to Q37 “What would be your preferred option to improve consistent interpretation throughout the EU of the ‘substantive’ provisions of the SPC regulation (e.g. the scope of protection, eligibility of SPC protection)?”.
Note: ”Don’t know“ and No answer not taken into account. Questions had slightly different formulations to each group but with the same meaning.
Source: Public Consultations on Evaluation of SPC

Respondents from all groups (originators, follow-on producers, health sector representatives, patent offices and lawyers) were expecting (almost unanimously) the following benefits of a unitary SPC: higher legal certainty, the same protection across the EU, the reduction of registration, maintenance and SPC monitoring costs, easier licensing and access to joint procurement by group of Member States, as well as a boost to investments (see: table below).

Table 10. The benefits of a unitary SPC – stakeholders’ views

* the residual to 100% is the number of those disagreeing; x - response not available to that group of respondents
Note: No answer and “Neither agree nor disagree” not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

6.6.Common impacts 

The following section analyses impacts common to PO2-PO5. The impacts presented below are chosen because of their political and/or economic significance.

6.6.1.Biosimilar and generic market entry 

Although the proposed reform does not affect the core provisions of the SPC rules (such as conditions for granting, its scope or duration), but focuses mainly on the administrative simplification of the procedures, the relationship between the loss of exclusivity of SPC-protected products and the market entry of follow-on equivalents will undoubtedly form part of the discussion surrounding the proposed review. In particular, in case of the pharmaceutical sector, it could be claimed that a more efficient and coherent SPC system could, indirectly but adversely, affect access to less expensive generic or biosimilar medicines 203 . It could also be claimed that one could expect similar patterns in the agrochemical sector.

Generics and biosimilar medicines play a key role in today’s pharmaceutical markets and health care systems. Since the introduction and codification of the SPC regime in 1993, the European and global markets for pharmaceuticals have undergone very significant changes. Above all, global demand for medicines has been increasing, with a significant switch towards generics and biosimilars 204 that keeps public health expenditure in check.

In this context, IQVIA data covering years 2010-2021 were used to verify whether market entry patterns differ significantly across the EU and how quickly the follow-on medicines actually start to compete with the original products. The results are presented in Figure 9 and indicate how much time (in months) it took for a first follow-on product to enter the market after the loss of exclusivity due to the SPC expiry 205 . The four-year period was chosen, as the average SPC duration is 3.5 years. The figure presents biosimilar and generic molecules separately, because the complexity of introducing these two types of products on the market differs significantly (i.e. it is much more challenging in case of large biosimilar molecules). These different characteristics are also confirmed by the number of products captured in both parts of the graph – up to 10 products in case of biosimilar and 40 in generic molecules. Nonetheless, Figure 9 shows that in case of both types of products the speed of entry is much faster in lager and/or wealthier countries, which may be explained by the fact that market entry decisions are related to other factors than only the market exclusivity. In other words, in certain EU markets - especially the EU-10 enlargement countries - the entry of follow-on equivalents seem to be delayed when compared with the rest of the EU (it is not to say that the entry does not occur, but if it happens, this may take place within period longer than 4 years) 206 . This said, it should be also added that, contrary to analysis presented in section 6.6.2, the present analysis does not adjust for the turnover of considered products 207 . Markets for high turnover products are known to be more contestable and hence entry delays can be expected to be shorter for products with higher usage (and higher related health benefits) across the population. 

Figure 9: Time-to entry of follow-on medicines over 1 to 48 months after the loss of exclusivity (LoE), by country - number of medicines that were previously covered by SPC

Source: In-house analysis based on IQVIA data covering molecules with the loss of exclusivity from 01/2010 onwards.

It can be therefore concluded that a more centralised SPC system would not significantly slow down entry of follow-on products in smaller/lower income Member States, as these markets face delayed entries anyway, due to other factors than SPC 208 . Literature on the subject, as well as reports prepared by the industry corroborate the above asymmetry and point towards the price and reimbursement rules 209 , legal uncertainty connected to the country, quality and readiness of healthcare systems, differences in the value assessment process, overall levels of pharmaceutical spending, size of the market, etc. 210 All these elements are outside the scope of the proposed initiative.

The fact that follow-on market entry usually takes several years and is especially challenging in case of biosimilar products is also confirmed when looking at the sheer number of molecules (see Figure 10 below). Only 15% of biological medicines had their first biosimilar product available on the market within less than 4 years. In case of smaller molecules (generics), the number grew from 28% of molecules in year one to roughly 1/3 of molecules having a follow-on equivalent in four years.

Figure 10: Share of molecules with a follow-on products in 1 to 4 years after the loss of exclusivity (LoE) [%]

Source: In-house analysis based on IQVIA data covering molecules with the loss of exclusivity from 01/2010 onwards.

The above doesn't preclude a situation that for some molecules the follow-on competition is quite fierce – the available data show that fewer, but more profitable substances are chosen by the generic companies for which several competitors come up with follow-on equivalents.

When analysing the generic and biosimilar market entry it should be also noted that even if an SPC is granted for a certain medicinal product it may happen that another protection measure (e.g. the 10-year market exclusivity, as defined by EU pharmaceutical legislation) expires after the SPC 211 . In such case the SPC has no decisive influence on the moment from which follow-on products may be placed on the market. Although the current proposal does not refer to any changes in the scope or duration of SPC regime, a change in the regulatory protection rules which is contemplated within other current Commission initiatives might impact the role of SPC as the last protection to expire. In this context, the impact of a hypothetical shortening of the regulatory protection by two years was estimated, showing that the share of SPC as the last exclusivity to expire would increase by roughly 5% - from 49.6% 212 currently to 54.9% of molecules (see: Annex 5C for more details). Needless to say, this relatively modest increase is not due to any SPC reform contemplated in this impact assessment, but rather the consequence of the SPC system’s existence as such (i.e. it might materialise also in the status quo, should market exclusivity rules be reformed).

As mentioned above, claims that a more streamlined SPC system would affect the entry of follow-on products could also be made with regards to the agrochemical sector 213 . However, such negative impact on PPPs seems to be even less probable than in the case of medicines. First, the market is highly consolidated 214 (e.g. in 2018, the top four firms controlled around 70% of the global pesticide market 215 or top six firms controlled 81% of the EU market 216 ), whereas a large share of non-patent-protected products are also sold by the originators 217 , leading to potentially lower price reductions 218 and hence lesser market impacts. Second, due to factors linked to the specific characteristics of the agrochemical sector and its future developments 219 , including efforts to promote diversified cropping systems in the EU 220 , a more coherent and streamlined SPC system could actually foster and incentivise R&D in safer and more sustainable alternatives to agrochemicals.

Finally, it should be noted that PO2-PO5 propose various instruments intended to support new entrants, such as the right to submit third party observations during the SPC procedure, as well as significantly increased transparency in the publication of SPC-related information. The central SPC database should benefit around 300 follow-on producers 221 annually, each saving up to EUR 25 000 (PO5) to EUR 40 000 (PO2-4) (approximate cost of a commercial dataset), producing EU wide savings of EUR 7.6 million (PO5) to EUR 12 million (PO2-4). These instruments are expected to be bring positive impacts on entry of competing – more affordable – generic and biosimilar products.

6.6.2.Social impacts 

Healthcare budgets

Regarding likely social impacts, this initiative aims to improve incentives for pharmaceutical and agrochemical innovation in the EU and as a result generates demand for advanced skills Europe (e.g. researchers, doctors, engineers).

Broad social impacts in the context of healthcare can be also understood as “ensuring access to affordable medicines and that health systems remain financially sustainable” (i.e. one of the objectives of the EU pharmaceutical strategy). Against this background, an argument can be made that a unitary SPC (PO5) could actually worsen the supply possibilities for health systems of smaller Member States, which prior to the unitary SPC entry were typically not covered by SPC protection (and as part of the unitary patent system will now automatically be). An example might be useful here. Latvia will be part of the unitary patent system. As a result of PO5 a unitary SPC will be binding in Latvia (through a ‘blanket effect’ common to all Member States participating in the unitary patent) whereas in the counterfactual/baseline, there might not be an SPC binding in Latvia (possibly due to delayed generic entry into smaller Member States, described earlier and thus limited incentive to apply for an SPC).

In order to investigate the size of such an effect in practice the same IQVIA dataset for years 2010-2021 was used to estimate the budgetary impacts of a hypothetical unitary SPC, if it resulted in a longer period of exclusivity in some countries otherwise not covered by an SPC 222 . The estimated hypothetical expenditure was defined as the supplementary payment for original medicines in the period concerned in the absence of generic products. Figure 11 below presents the results of such analysis using 2010-2021 sales data for UP Member States 223 , as only those countries would be concerned by the proposed unitary SPC.

Figure 11: Estimated (theoretical) budgetary impacts of a hypothetical unitary SPC, as % of overall spending on pharmaceuticals by country

Source: In-house analysis based on IQVIA data covering molecules with the loss of exclusivity from 01/2010 onwards.

As shown on the graph, the estimated additional expenditure to healthcare systems could reach up to 0.48% in LV, while being negligible for many other countries (e.g. LU, BE, and IT). Figure 11 also confirms what has been argued earlier, that SPC protection has been sought less frequently in smaller Member States, potential benefits would not play out equally across countries.

Overall, for all countries covered by this analysis (i.e. UP Member States except for Malta) the total lost benefits of a unitary SPC would amount to EUR 37 million budgetary impact per year. 224  If the above costs (lost benefits) for public healthcare budgets was re-invested by innovative companies in R&D, the option would produce a neutral cost-benefit outcome.

Healthcare stakeholders

Health stakeholders along with others would be able to influence SPC granting process by submitting third party observations during the SPC procedure. Additionally, central database for SPCs envisaged under PO3-5 and possibly also PO2 would benefit national medicines procurement offices and can facilitate cross-border joint purchases. At least 27 central purchasing bodies (there could be more than one per Member State though) could benefit from savings of up to EUR 25 000 (PO5) to 40 000 (PO2-4) per year (commercial database access cost), resulting in EU-wide savings of EUR 0.7 million (PO5) to EUR 1 million (PO2-4).

IP attorneys

The changes proposed in PO2 to PO5 by creating one central application procedure are likely to reduce demand for legal advice/representation before NPOs in each Member State where SPC is sought. Under assumption of an average cost of legal help of EUR 2 000 per country and SPC, the loss of income for this group in case of SPCs protected in the whole EU and 100 SPC applications per year can amount up to EUR 0.3 million (PO5), EUR 0.4 million (PO3) to EUR 0.5 million (PO2 and PO4) 225 .

6.6.3.Digital impacts

With regards to the potential digital impacts, this initiative fulfils the objectives of the European Strategy for data, insofar as the establishment of the centralised SPC procedure and a single database is concerned. In particular, the digital accessibility to all steps of the SPC procedure would be ensured (e.g. e-submission via one-stop-shop, e-access to SPC documents). The new database would also contribute to a single market for data 226 by facilitating the availability of data, as well as data quality and its interoperability across Member States. The envisaged SPC database would improve the cross-border access, exchange (in particular by better sharing of data between national public authorities i.e. NPOs) and analysis of data on the market exclusivity status of pharmaceuticals and PPPs, which consequently should support the earlier market entry of the follow-on equivalents.

6.6.4.Environmental impacts

None of the proposed options influences the current EU legal provisions concerning the environmental protection directly. However, sustainability is one of the four key pillars of Pharmaceutical Strategy for Europe 227 . Similarly, as far as PPP are concerned, there is a number of initiatives concerning the sustainable use of pesticides 228 . Against such backdrop, modernising the SPC regime and thus – at the margin – increasing resources available to pharmaceutical and plant protection firms is to be expected to generate also an environmentally positive impact. Consequently the considered options “do no significant harm” in terms of achieving the EU’s environmental objectives 229 .

7.How do the options compare?

7.1.Comparison of impacts

Table 11 provides information comparing the policy options in the light of the effectiveness and efficiency criteria as well as impact on most affected stakeholders (see: also Annex 6 for the SME test). Table 12 overleaf provides information comparing the policy options in the light of the criteria of effectiveness (how each option achieves the specific objectives) and efficiency (cost-benefits analysis).

Table 11: Comparison of policy options against the effectiveness and efficiency criteria

Note: For details of calculations see Annex 5G. Quantifications present maximum potential impacts. Not all impacts are quantifiable. Numbers rounded.

Table 12: Comparison of the impacts of policy options on stakeholders (including quantifiable annul costs and benefits).

Note: For details of calculations see Annex 5G. Quantifications present maximum potential impacts. Not all impacts are quantifiable. Numbers rounded.

All the options are expected to improve on the status quo, but to a varying extent.

PO1 is the least effective as it is uncertain whether guidelines would be followed by all Member States, and how they would be interpreted. Thus the same application would continue to be assessed separately by different NPOs, which might - as currently - result in different SPC granting decisions. It is equally uncertain if best practices on the publication of SPC information would be followed by all NPOs. Consequently, the benefits of PO1 are low and uncertain. SCP applicants will most likely not benefit in terms of legal certainty or the costs of procedure. In NPOs where an SPC database is setup, follow-on manufacturers or national health public procurement authorities may get a slightly better picture of the SPC situation, yet they would still need to collect such information across multiple websites containing information on other jurisdictions.

PO2 should improve the situation substantially, as SPC applications would be examined by only one office. This means no risk of divergent decisions on the same file. However, if there were more than one reference office, the applicants may tend to choose a more lenient one over others (the risk of forum shopping). SPC would continue to be granted by several NPOs and the duration of such procedure may be different in each of them. Applicants would be charged one application fee, but would continue to pay national maintenance fees to each office where an SPC is sought. Their savings would come mainly from the reduced need for legal assistance in the filing process and savings on translation cost which would be no longer necessary (estimated savings of 18% in comparison to the baseline). Follow-on manufacturers and health sector would be able to influence the SPC process by providing written observations to the reference office. They are also expected to benefit from the improved access to SPC data (saving of up to EUR 40 000 per company), although it is uncertain whether such information is to be available in one central or several local databases. NPOs other than the reference office are expected to lose revenue from the application fees of up to EUR 32 300 per year, but would also take advantage from significantly reduced workload while still receiving maintenance income. The demand for legal advice is also expected to be reduced especially in Member States without the reference office. To summarise, although PO2 provides substantial benefits, it cannot however guarantee the same level of examination quality in situations, where there is more than one reference office.

PO3 eliminates the problem of forum shopping and inconsistencies in the examination process of PO2, as there would be only one central authority following the same methodology. It would however allow NPOs to re-examine the SPC application (estimated to occur in up to 20% of cases), which could still result in divergent decisions on the same file. This option is also slightly more expensive than PO2, as the centralised examination authority would be established and its expenses would need to be covered by the application fees (including the costs of translations of documents to be transmitted to NPOs, as the latter would continue to grant SPCs). Thus the cost of PO3 are only 6% lower in comparison to the baseline. The follow-on producers and the healthcare representatives should benefit from the possibility of providing written observations, as well as an access to one central SPC database. The loss of revenue for NPOs would be lower than in PO2 (EUR 9 500 to EUR 36 400 per NPO). The patent attorneys would also see their revenues diminished, but to a lesser extent than in PO2 as they might still handle national appeals in cases of negative decisions. Overall, PO3 thus appears slightly more efficient in terms of reaching the objectives, but still carries the risk of national challenge to the centralised opinion.

PO4 eliminates the NPO’s discretion, as the central opinions would be binding. There would also be no risk of forum shopping as in PO2. The only difference could be the potential difference in the registration date, as the granting would still take place at the NPOs (these however are expected to be minor differences). This option scores highest in terms of providing legal certainty and predictability, which should also benefit follow-on producers and health sector procurers seeking an up-to-date information on the SPC status. Nevertheless this option is producing only limited savings of around 10% in comparison to baseline, as the application fees should cover the cost of the central authority and applicants would have to pay maintenance fees to each selected national office. The bulk of savings would come from the reduced need for legal advice and elimination of applicant own translation costs. The follow on producers and health sector procurement officers would have access to the most complete and up to date database on SPC and would be able to submit written observations during the application examination process. Patent attorneys are likely to lose income to the amount similar to PO2. Also, the national patent office are likely to lose revenues from application fees, but would see significant reduction of the workload and would continue receiving maintenance fees. This option is producing the best results in terms of objective 1 and 2 albeit with only moderate cost reductions.

PO5 scores best across all the objectives but only for holders of a European patent with unitary effect. Applicants seeking protection in the (currently) 17 Member States participating in the unitary patent system would only need to interact with the central authority in order to have their applications assessed and SPC granted. Consequently all the fees would be paid only to one authority, and due to elimination of most of the translation costs this option is producing significant cost reductions. However, applicants seeking to cover the whole EU would need to additionally apply individually to each NPO outside the UP system. Consequently the cost of covering the whole EU is expected to be halved in comparison to the baseline. But the savings of this option would increase as more countries join the UP system and as unitary patents become more widely used. Similarly to PO4, the follow-on producers and health procurement officers would be able to influence SPC examination and would have access to the most accurate SPC database (nonetheless, containing information limited to unitary SPCs only). Patent attorneys are likely to lose income in the UP-MS. The NPOs in the UP-MS are likely to lose both application and maintenance fees. This option may result in a wider territorial SPC coverage, as unitary SPC would automatically cover all UP-MS. This may mean that SPC would be protected in countries where it was not the case before – resulting in delayed entry of generic/biosimilar competitors and increased spending on medicines (by up to EUR 2.2 million on average per Member State per year). These additional resources as well as savings on administrative fees should however contribute to higher R&D spending on novel medicines.

7.2.Best option and possible combinations of options to improve it further

As discussed above PO5 is the best option to fulfil the policy objectives and produce the highest benefits. However, PO5 provides for a single examination (and granting) procedure only for the (currently 17) Member States participating in the unitary patent system. As the UP system still covers only a subset of Member States, in order to eliminate the key problem of divergences between national SPC systems, it is necessary to combine the unitary SPC with another option to cover the remaining (currently 10) Member States that are not part of the UP enhanced cooperation - at least in the interim, until the UP system covers the whole EU. In other words, given the current coverage of the unitary patent system, a dual system that differentiates between the participating and non-participating Member States must be proposed. Although a combination of two options means that two different administrative settings would need to be implemented, it seems to be the only method to ensure implementation across the whole EU. Moreover, there may be cases where the basic patent may not be a unitary patent, thus requiring the applicant to file applications in up to 27 Member States. A combination of options would therefore also cater to these scenarios, allowing applicants to benefit from a centralised examination, despite not meeting the granting criteria for a unitary SPC. When deciding on which option could best complement PO5, all possible combinations are analysed below, notably PO1, PO2, PO3 and PO4.

Combining PO1 with PO5 would not bring much change for SPC applicants in the 10 non-UP MS. Even if the guidelines were followed and NPO practices were aligned, there would still be 10 different authorities deciding on the SPC application, resulting in potentially contradictory decisions. Thus predictability and legal certainty of the SPC procedures would not improve much.

The situation would ameliorate if PO5 was combined with PO2 (mutual recognition). However, companies would still need to file two applications: one to the central authority to cover the 17 UP-MS and another one to the NPO acting as a reference office for the remaining Member States. As two different authorities would evaluate and grant SPCs, the risk of divergent decisions would remain. Also any third party willing to submit written observations (either electronically or in traditional way) would need to run the procedure twice.

PO3 or PO4 envisage that the central authority (the same as in PO5) would receive applications, conduct their examination and issue either a non-binding (PO3) or binding (PO4) opinion regarding whether a national SPC should be granted or not in the various Member States designated in the application. PO3, however, allows NPOs to depart from the central examination outcome (e.g. an NPO could grant an SPC even if the central authority concluded it should not be granted, or vice-versa). This would create a risk of perpetuating the problem of divergence. Only PO4 eliminates the risk of NPOs diverging from the central examination, as it envisages a binding opinion which the NPOs of the designated Member States would need to follow.

Consequently a combination that provides the highest level of legal certainty and predictability, while covering all Member States, is the combination of PO5 with PO4.

7.3.Coherence with other EU policies and the charter of fundamental rights

The EU policy areas which have the closest links with the proposed initiative are those concerning the protection of public health, especially with regards to pharmaceuticals, and food safety – the latter with regards to PPP.

As far as the medicinal products are concerned, the proposed initiative is aligned with the following objectives of the Pharmaceutical Strategy for Europe:

·Equal and affordable access to medicines: As discussed in section 2.3, follow-on producers face difficulties to ascertain the status of SPC protection in due time. This may hamper the launch of their product (i.e. generic or biosimilar), their participation in tenders for the purchase of medicines, or their reliance on the SPC manufacturing waiver. The proposed centralised SPC procedure would increase predictability and legal certainty for generic/biosimilar companies by improving overall transparency of the SPC protection status across the EU. This is expected to facilitate market entry of generic and/or biosimilar products, which by inflicting downward pressure on medicine prices, should positively impact the access to affordable medicines for EU patients.

·Enhancing crisis preparedness and response mechanisms, strengthening the resilience of pharma supply chains: The pharmaceutical supply chains are increasingly complex and exposed to vulnerabilities, including the EU’s dependency on third countries for materials or ingredients used in pharmaceutical manufacturing. In this context, the proposed review of SPC rules is expected to strengthen the EU’s industrial base, and our manufacturing capacity for medicines. The proposed SPC reform would provide additional transparency in the process, as well as a single access point to up-to-date information on SPC status. This should help the EU (generic) industry to map dependencies, and facilitate cross-border procurement of medicines (e.g. better pricing and procurement practices are recognised as enablers to security of supply). Given the competition for raw materials and (relatively) fewer dependencies on patented drugs, assuring the right balance of investment incentives through robust SPCs enhances resilience.

·Administrative burden reduction: As explained earlier in this impact assessment, the fact that SPCs are administered at national level creates significant red tape and entails extra costs for businesses, which is especially challenging for SMEs (nearly 19% of all SPC holders). As the result of the proposed changes, the cost and burden of obtaining and maintaining SPC protection in the EU will be significantly reduced. Additionally, the cost of monitoring the SPC status should also decrease (currently follow-on manufacturers need to assess it separately for each Member State), as such information would be publicly available through a single access point provided by a new central website. The central database could also provide information on the RDP status of SPC medicines.

·Supporting competitiveness, innovation and sustainability of the EU’s pharmaceutical industry: As mentioned above, the improved coherence and legal certainty as regards SPCs will facilitate and thus promote the operation of pharmaceutical firms in the EU. A more coherent SPC protection provided for these products is expected to generate savings and encourage investment in research and development for innovative medicines and treatments.

Finally, it is important to highlight that the proposed pharmaceutical legislation revision does not affect the incentives pertaining to intellectual property rights (patents and SPCs), however as mentioned earlier, both policies are interlinked 231 .

As far as PPPs are concerned, the proposed initiative is aligned with the integrated Food Safety policy of the EU with regards to plant health and approval of active substances used in PPPs.

Finally, the proposed options do not extend the scope of the existing SPC protection which is already defined by the EU regulations. The options proposed do not conflict with other EU international treaties or EU pharmaceutical and phytosanitary legislations. The SPC-related procedures would be available to applicants from the EU and third countries alike. To summarise, all the considered options are compatible with the goals of the EU health and food safety policies. Finally, the initiative is also coherent with the Charter of Fundamental Rights (e.g. Article 35 on access to health 232 ).

7.4.Compliance with the proportionality principle

None of the options go beyond what is necessary to achieve the identified problems/objectives. Their respective scope is limited to those aspects that Member States cannot achieve satisfactory on their own and where the Union action can produce better results (for example, in terms of consistent decisions on SPC applications in order to remove current legal uncertainty, as well as transparency) or is necessary (as in case of creating a new EU IP right - a unitary SPC to complement the unitary patent). Options considered provide a mix of Member States and EU level actions with gradual increase of the EU level intervention. Possible legal instruments for implementing policy options are in case of PO1 a set of recommendations; and in case of PO2-5 an amendment (or recasting) of the existing SPC regulations.

8.Preferred option

The preferred option of this impact assessment is policy option PO5 (the establishment of a unitary SPC, i.e. a new IP right) combined with policy option PO4 (a centralised procedure with a binding opinion). It combines the advantages of a one-stop-shop SPC procedure with the possibility to obtain unitary SPC protection in countries where the corresponding unitary patent takes effects (i.e. Member States participating in the enhanced cooperation area of the unitary patent that have ratified the Unified Patent Court Agreement at the date of the grant). The preferred option would encompass:

-a centralised procedure for the filing and examination of SPC applications that rely on European patents, with the possibility to request a unitary SPC (if applicable);

-the possibility to submit third parties’ observations during the examination;

-stakeholders’ right to use any EU language when contacting the examination authority in relation to the centralised SPC procedure;

-a single access-point providing information on the SPC status, also available in all official languages of the EU.

As discussed in section 6.3 the EUIPO managing a virtual office of SPC experts from NPOs would be the preferred choice for the central examination authority. This solution combines both the expertise in the assessment of SPCs with accountability to the EU public and assurance that EU IP policy goals are implemented.

The considered combination of options (PO4 and PO5) would not replace the existing nationally-filed SPCs, however it may be foreseen that under certain conditions the centralised procedure has to be used in order to reduce the risk for national discrepancies.

The implementation of the preferred option would require adopting a new regulation establishing unitary SPC protection in the Member States where the unitary patent has effect, and amending Regulation (EC) No 469/2009 on medicinal product and Regulation (EC) 1610/96 on PPPs to introduce the centralised procedure with a binding opinion that can operate in all 27 Member States. The mandate of EUIPO would have to be extended to cover new responsibilities. Additional legislation to establish the linguistic regime of the unitary SPC might also be required.

This option offers the most balanced and proportionate approach, which also takes into account the views and concerns of stakeholders. The preferred option would fully address the three identified problems (i.e. legal uncertainty, cumbersome monitoring of SPCs and high costs and burden of seeking and maintaining SPC protection). It would:

-Increase predictability and legal certainty in the Single Market regarding SPC protection by eliminating the possibility of divergent national decisions on granting SPC protection across the EU. Such outcome would be achieved through unitary SPC protection for the participating EU Member States in the enhanced cooperation area and through a binding opinion of the examination authority about the validity of the SPC in the non-participating Member States;

-Significantly decrease the cost of monitoring SPC protection across the EU and therefore improve transparency, because such information would be publicly available through a single access point provided by means of a website with search functions.

-Significantly decrease the cost and burden of SPC protection in the EU, as it would simplify the SPC procedure and reduce the current cost of up to 27 application and renewal fees. For instance a five-year long, EU-wide SPC would cost 55% less than the baseline 233 , producing savings of around EUR 137 000 per product. The bulk of savings would result from the unitary SPC, as the firms would avoid paying high renewal fees annually in each of the Member States of the unitary patent protection (initially 17). In addition, the filing and prosecution of one single SPC application could potentially be carried out by one patent agent/attorney office, thus also leading to savings as compared to the necessity to involve potentially up to 27 patent agents/attorneys.

Table 13: PO4+5 costs and savings to applicants for receiving EU27 wide, five year long SPC protection

Source: In-house estimations, numbers rounded to 100s, see: Annex 5E

This preferred combination of two options (PO4 and PO5) would overcome the limitations in scope that characterise PO5 (i.e. creating a unitary SPC). First, the unitary SPC would be limited to EU Member States of the unitary patent area (initially 17 Member States). Second, a unitary SPC could only be granted on the basis of a unitary patent, whereas many SPC users might still continue using European patents without unitary effect to protect some of their products (or, in certain cases, the conditions for attributing unitary effect to the basic patent may not be met). The preferred combination of PO4 and PO5 would provide for a centralised procedure able to result in the granting of national SPCs in some or all Member States, and/or in a unitary SPC (covering those Member States in which the basic unitary patent has effect). Applying for a unitary SPC would never be mandatory.

Regarding the options set out in the Call for Evidence, there was overall support for an EU initiative which would comprise a combination of the unitary SPC and a centralised granting procedure (sometimes referred to by the respondents as a “dual” system). Some stakeholders took the view that a centralised granting mechanism alone may not be sufficient to tackle the problems identified. Respondents further highlighted the need for a transparent system. In particular, some stakeholders emphasised that there was a need for a balanced system and that the initiative should not shift the current relation between generics and originators. The combination of a centralised grant mechanism for national SPCs based on European patents and a unitary SPC system for unitary patents, was supported by representatives from all key groups of market players, namely manufacturing new products based on own R&D and producers of generics in both sectors (i.e. pharmaceuticals 234 and PPPs 235 ) .

Table 14: How the preferred option achieves the policy objectives?

Table 15: Impacts of the preferred option (PO4 + PO5) on stakeholders (qualitative analysis)

Note: Tables present maximum potential impacts from 5th year of new system operation; numbers rounded.
Assumptions: 100 SPC applications per year, 80 SPC granted; 5-year-long SPC protection.
Source: In-house analysis.

8.1.REFIT (simplification and improved efficiency)

The following table summarises cost savings of the preferred option, in relation to the single grant mechanism (which would be introduced as amend existing legislation on SPC).

Table 16: REFIT – cost savings

8.2.Application of the ‘one in, one out’ approach

This initiative would allow SPC applicants to use a single filing and examination procedure instead of up to 27 national procedures. It would in particular lower the translation costs incurred by applicants before filing an SPC and limit the need for legal advice while dealing with each NPO. This is expected to produce annual EU-wide savings of EUR 5.6 million. This figure includes annual savings of EUR 52 000 on legal advice and EUR 4 000 on translation for approximately 100 SPC applicants per year.

9.How will actual impacts be monitored and evaluated?

The legislation to be proposed would include a provision requiring an evaluation every five years, the first one five years after the grant of the first SPC under the new procedure. This should be done taking due account of the combined effect of other features of the EU legislation, especially in the pharmaceutical sector. The objective of the monitoring would be to determine whether or not the new initiative impacted long-term trends in the availability of novel medicinal products and plant protection products (albeit, it should be recognised that a direct causal link may be difficult to establish). To that aim, the available data on medicines 237 and PPPs 238 should be monitored, for example in 5-year intervals (in line with the evaluation schedule), as well as using other monitoring tools (e.g. dedicated surveys among SPC holders to test perceptions). The historical data on new product entries before this legislation enters into force should serve as a baseline. Additionally, the following indicators will be established and monitored with regards to each objective:

Table 17: Monitoring indicators

Annex 1: Procedural information

1.Lead DG, Decide Planning/CWP references

DG for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW).

2.Organisation and timing

The deadline for adoption of a proposal by the Commission is April 2023.

Inter-service meetings took place on 26.01.2021, 06.05.2022, 19.07.2022 and 24.08.2022.

The following Commission services participated: DG COMP, EUIPO, SANTE, SJ, SG, TRADE, RTD and GROW.

3.Consultation of the RSB

A meeting with the RSB took place on 28.09.2022. On 30.09.2022 the RSB delivered a negative opinion. On 23.11.2022 a revised version of the impact assessment was submitted to the RSB. The table below shows RSB initial comments and how they were addressed in the revised text.

Table 18: RSB comments to the initial version of the impact assessment

On 16.12.2022 delivered a positive opinion on the revised text. The table below shows further changes implemented in the impact assessment in order to align it with RSB comments expressed in the second opinion.

Table 19: RSB comments to the revised version of the impact assessment

4.Evidence, sources and quality

The analysis presented in this impact assessment is based on the following key sources:

-Max Planck Institute for Innovation and Competition, Study on the Options for a Unified SPC System in Europe, 2022 (https://op.europa.eu/en/publication-detail/-/publication/94cb20ea-2ff0-11ed-975d-01aa75ed71a1/language-en).

-European Commission, Evaluation of EU Regulations 469/2009 and 1610/96 on supplementary protection certificates for medicinal and plant protection products, SWD(2020)292, 2020 ( https://ec.europa.eu/docsroom/documents/43847 ).

-Max Planck Institute for Innovation and Competition, Study on the Legal Aspects of Supplementary Protection Certificates in Europe, 2018 ( https://ec.europa.eu/docsroom/documents/29524 ).

-Technopolis, ‘Effects of supplementary protection mechanisms for pharmaceutical products’, 2018 ( https://www.ivir.nl/publicaties/download/effects-of-supplementary-protection-mechanisms-for-pharmaceutical-products.pdf ).

-Copenhagen Economics, Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe, Publications Office of the European Union, Luxembourg, 2018 ( https://ec.europa.eu/docsroom/documents/29521 ).

-European Commission, Summary of the replies to the public consultation on Supplementary Protection Certificates and patent research exemption for sectors whose products are subject to regulated market authorisations, SWD(2018)242, 2018 ( https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018SC0242 ).

-Mejer, M., 25 years of SPC protection for medicinal products in Europe: Insights and challenges, European Commission, DG GROW, 2017.

Additionally, the following data sources were used in order to perform in-house analysis:

-MIDAS database provided by IQVIA, as a flat file covering EU–27 except for MT and CY, for the years 2010–2021;

-National data related to the cost of SPC (application and maintenance), as collected from respective NPO websites in March 2022.

-German Patent and Trade Mark Office, Data uploaded from the German national patent office, DPMA concerning SPCs - Schutzzertifikat ( https://register.dpma.de/DPMAregister/pat/basis ).

The remaining sources are provided in the footnotes, whenever they are referred to in the text.

Annex 2: Stakeholder consultations

This annex documents all the consultation activities conducted in the context of the revision of SPC regulation.

From 8 March to 5 April 2022 interested parties could provide feedback to Commission’s Call for Evidence 241 . In 2020 there was a dedicate survey to Member States on SPC transparency. Questions relevant to this initiative were also asked in earlier consultations: on evaluation of the EU SPC system (took place between 12 October 2017 and 4 January 2018) 242 and as part of a legal study (between 22 May and 23 June 2017) 243 . Additionally several bilateral meetings with stakeholders took place between 2018 and 2022, including meetings with Member States as part of the Commission expert Group on Industrial Property Policy 244 , representatives of associations of pharmaceutical companies (originators, generic and biosimilar producers) and plant protection products manufacturers.

Feedback on call for evidence

By the end of consultation period 59 replies arrived (51 from the EU Member States). Almost half of responses came from business and business organizations. One in six was from EU citizens and similar number of NGOs. Five percent came from authorities and two percent from trade unions.

Figure 12. Distribution of respondents to call for evidence by type of respondent and country of origin.

Source: Commission services’ own analysis

While the answers or the respondents were grouped into businesses, NGOs, citizens 245 , etc., the analysis also looks at the subgroups of originator companies and generic companies and their respective associations into account to reflect the group of stakeholders’ views best. The following feedback could be broadly observed:

The originator companies and their associations supported the introduction of a unitary SPC and the creation of a centralised procedure. Guidelines could help as supporting measures, but not as a standalone solution to the problems highlighted in the Call for Evidence. In particular, using the expertise of NPOs through a virtual examination body, was favoured by a majority of stakeholders.

The generic companies and their associations highlighted that a Unitary SPC may tackle the current fragmentation with several advocating that a single procedure should only be considered if there were pre-grant opposition proceedings (a procedural element that should ideally be introduced for both procedures). They further took the view that the timely access to generic medicine as well as the impact on generics should be taken into account, in particular regarding the potential extension of the geographical scope through the Unitary SPC. Moreover, it was underline that multiple litigation in several Member States was also a problem faced by stakeholders at the moment.

More broadly, the main takeaways from the feedback are discussed below. Regarding the options set out in the call for evidence, there was overall support for an EU initiative which would comprise a combination of the unitary SPC and a centralised granting procedure. National procedures should still exist alongside them. Some stakeholders took the view, that a single granting mechanism alone may not be sufficient to tackle the problems identified. Respondents further highlighted the need for a transparent system. In particular, some stakeholders emphasised that there was a need for a balanced system and that the initiative should not shift the current balance between generics and originators.

Those respondents that addressed guidelines, mostly favoured them as measures to support the new system, but not as a standalone option. In particular, these guidelines may for example either codify or clarify CJEU case law, or be based on best practices from NPOs, and thus provide guidance for national procedures.

Responses were split on point c2) of the Call for Evidence regarding targeted amendments of the SPC Regulations on the basis of the best practices of national patent offices and CJEU case law aimed at further harmonising the current SPC system. Some responses were in favour of this option, while others cautioned that any further amendments might lead to even more cases and would therefore cause further uncertainties. As regards the granting authority, the majority of feedback received favoured a virtual granting authority. Some organisations favoured the EPO, while others highlighted the need for a central EU granting authority which would also be accountable to the CJEU. Expert knowledge, whether this be within the authority itself or its appellate body, was also pointed out as an important criterion by some stakeholders.

Last, while only very few respondents represented the PPP industry, the feedback received also favoured the single procedure in combination with the unitary SPC to address the current fragmentation.

Survey to Member States on SPC transparency

The European Commission conducted a targeted survey among national patent offices in early 2020 to obtain details on their transparency practices. Based on this survey, different practices across NPOs have been identified. Most national patent offices (NPOs) provide for an online searchable database, although the search criteria are very variable (in two Member States, only the SPC number can be used as a search criterion). Publishing SPC-related information takes varying amounts of time, ranging from a few days to several months, and even more than a year in specific situations. Only a slight majority of NPOs (14) publish SPC-related information in English in addition to their official languages. Only about half of the NPOs make the documents of the file of a given SPC application accessible online (e.g. in PDF format). However, the other ones usually provide for file inspection and/or are able to provide copies. Only a slight majority of NPOs (15) provide the European Patent Office with detailed information on SPCs (which the EPO then publishes). When asked which source they would consider to be the most suitable for providing centralised access to SPC information, seven NPOs mentioned the EPO databases (possibly with improvements), four did not express any preference, and 14 mentioned a new centralised website.

Public consultation (responses relevant to this initiative)

A total of 231 replies were provided to the on-line consultation: 43 replies from the general public, 71 from originators industry/associations, 63 from generics and biosimilars industry/associations, 15 from health authorities/doctors/patients groups (mostly from national organisations dealing with health insurance/reimbursement/health technology assessment, from a doctors’ organisation, and 2 from patients’ associations), 34 from patent offices/practitioners, and 5 from industry/trade authorities. The tables below present statistics on those respondents who took a position that is “don’t know” answers and “no answers” are not taken into consideration 246 .

Problems with current SPC rules: Respondents broadly support the way in which SPC issues are regulated at EU level, which is found to be globally effective. However, most respondents claim that there are different practices for registration and SPC enforcement across Member States (a few originators and generics manufacturers disagree).

Table 20. Have authorities in different EU countries ever taken different decisions on SPC applications for one (or more) of your products? Examples: some EU countries granted SPC national applications for one of your products but refused others; you were granted different durations of SPC protection for one of your products in different EU countries; national grant authorities interpreted EU Court of Justice rulings differently).
Q11 (to Originators) and Q4 (to Follow on manufacturers) Q2 (to to Patent offices, judges, lawyers)

Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

Generics manufacturers mostly support SPC registration with substantive examination, but consider that transparency is not optimal (information published by public authorities is not always comprehensive or up-to-date, and private databases monitoring SPC status are expensive).

Table 21: Based on your experience, do you think that all EU countries’ national patent offices should conduct substantive examination (i.e. actual verification of the conditions stipulated in the SPC Regulation) of SPC applications? Q28 (to Follow-on manufacturers)

Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

Table 22: About your use of databases to monitor the status of your competitors’ SPC protection across EU Member States. Q6 (to Follow on manufacturers), Q5 (to Customers, health), Q4 (to Patent offices, judges, lawyers)

* the residual to 100% is the number of those disagreeing.
Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

The level of registration fees or litigation costs is predominantly acceptable for SPC holders, as such costs can be compensated by additional sales resulting from the SPC protection.

Table 23: How would you rate the degree of complexity of registration procedures for SPCs in the EU?
Q13 (to Originators) and Q9(to Follow on manufacturers)

Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

Table 24: Is the cost of registering and maintaining an SPC in all 28 EU countries proportionate?.
Q15 (to Originators):

Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

Respondent noted however that other jurisdictions such as the US or Japan provide more attractive SPC-type protection than the EU system.

Table 25: In your experience, do other jurisdictions (e.g., the US or Japan) provide for SPC-type protection to certain types of innovations you develop that are not eligible for an SPC in the EU?
Q26 (to Originators) and Q13 (to Follow on manufacturers)

Note:”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

Unitary SPC: A very large majority of the respondents across all categories favour the creation of a unitary SPC, which would extend unitary patents once such exclusive rights expire.

Table 26: Do you favour the creation of a unitary SPC title for the unitary patent? Q37 (to Originators),
Q29 (to Follow on manufacturers), Q15 (to Customers, health), Q27 (to Patent offices, judges, lawyers). Q9 (to Other public authorities)

* respondents did not receive this question instead we report here those who chose “Create a unitary SPC for the unitary patent” as answer to Q37 “What would be your preferred option to improve consistent interpretation throughout the EU of the ‘substantive’ provisions of the SPC regulation (e.g. the scope of protection, eligibility of SPC protection)?”.
Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided). Questions had slightly different formulations to each group but with the same meaning.
Source: Public Consultations on Evaluation of SPC

Regarding the benefits of a unitary SPC, a great majority of originators consider that it could boost the value of investments, reduce the red tape related to registration and litigation, provide a uniform protection across the EU, improve legal certainty, reduce maintenance costs, offer a specialised court, and finally - it would make licensing easier. A large majority of follow-on manufacturers, including SMEs, shared these views.

One Member State considered that it would also simplify and enhance the efficiency of the SPC application process.

Table 27. What would be the benefits of a unitary SPC?:Q43 (to Originators), Q35 (to Follow on manufacturers), Q17 (to Customers, health), Q34 (to Patent offices, judges, lawyers). Q12 (to Other public authorities)

* the residual to 100% is the number of those disagreeing;x - response not available to that group of respondents
Note: No answer and “Neither agree nor disagree” not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

Opinions diverge regarding the practicalities for implementing such a new title 247 . While some respondents favour the grant of that title by a virtual office composed of national experts working on behalf of an EU agency, others prefer either to entrust the EPO with this task, or to set up a new EU agency to do so.

Amongst SMEs manufacturing generics and biosimilars, half of them favoured the grant of unitary SPCs by a new EU agency, while the other half favour the EPO for this purpose.

Table 28: Which granting authority would you favour to grant and register a unitary SPC? Q38 (to Originators),
Q30 (to Follow-on manufacturers), Q10 (to Other public authorities)

* the residual to 100% is the number of those disagreeing.
Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided). Not all groups of respondents have received this question.
Source: Public Consultations on Evaluation of SPC

Similar results emerged from the MPI (2018) study:

Figure 13. Authority to grant SPC title - study survey, MPI (2018)

Source: MPI (2018), Annex III

Concerning the languages to be used for a unitary SPC, a clear majority favoured the EPO language regime (English, French, German), which is the regime that is applicable to the unitary patent. However, SMEs manufacturing generics and biosimilars preferred the five-language regime of the EUIPO (English, French, German, Italian and Spanish).

Table 29: Which language combination would you prefer for registering unitary SPC applications? Q39 (to Originators), Q31 (to Follow on manufacturers), Q29 (to Patent offices, judges, lawyers). Q9 (to Other public authorities)

* the residual to 100% is the number of those disagreeing.
Note: No answer not taken into account (also in no. of answers provided). Source: Public Consultations on Evaluation of SPC

Table 30: Which language combination would you prefer for publishing unitary SPCs? Q39 (to Originators), Q31 (to Follow on manufacturers), Q16 (to Customers, health), Q29 (to Patent offices, judges, lawyers). Q9 (to Other public authorities)

* the residual to 100% is the number of those disagreeing. ** response not available to that group of respondents
Note: No answer not taken into account (also in no. of answers provided). Source: Public Consultations on Evaluation of SPC

The majority of respondents considered that national marketing authorisations should be also allowed (in addition to the EU marketing authorisations) as a basis for getting a unitary SPC, even though the latter would then not be enforceable in those Member States where no marketing authorisation would have been granted (through mutual recognition or decentralisation procedure).

Table 31: Should the unitary SPC be available only for products authorised by way of a centralised marketing authorisation (e.g. assessed by the European Medicines Agency)? Q40 (to Originators),
Q32 (to Follow-on manufacturers), Q30 (to Patent offices, judges, lawyers).

Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

In the absence of a unitary SPC, a majority of the respondents were of the opinion that NPOs could grant – pursuant to the current legislation – national SPCs for products covered by future unitary patents.

How SPC rules should be updated: EFPIA suggests that guidance at EU level would improve the situation. This should not extend to amending the SPC acquis, as EFPIA considers that such an amendment process could lead to years of uncertainty; generics manufacturers seem to be split on whether to clarify aspects of the SPC Regulation implementation via legislative amendments.

IP practitioners (including patent offices), generics manufacturers and health practitioners support ‘guidance’ approach, especially since court proceedings in some Member States may take too long. Additionally many IP practitioners already have experience with national guidance.

Table 32: How to improve consistent interpretation throughout the EU of the ‘substantive’ provisions of the SPC regulation (e.g. the scope of protection, eligibility of SPC protection)? Q37 (to Originators),
Q27 (to Follow on manufacturers), Q14 (to Customers, health), Q25 (to Patent offices, judges, lawyers).

* Stakeholder was not presented with this answer
Note: Single choice question to Originators, multiple choice question for the rest. ”Don’t know“ and No answer not taken into account (also in no. of answers provided). Questions had slightly different formulations to each group but with the same meaning. Source: Public Consultations on Evaluation of SPC

Table 33: National implementing guidelines and their updates. Q6 (to Patent offices, judges, lawyers).

Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

Impact on innovation. SPCs are considered to have a proportionate impact on investment along all steps of the value chain: R&D, clinical trials, manufacturing, distribution and commercialisation. Some innovators consider SPC availability as the main factor for investment decisions in manufacturing. However, the importance that the majority of innovators ascribe to SPCs is moderate, as they consider that SPCs are one factor in a package of elements: aside from the availability of SPCs, decisions on investments in research (excluding clinical trials and field trials) are driven by a combination of factors such as access to high skilled labour and recruitment of patients. With regard to the most important factors when investing in clinical trials, innovators consider health infrastructure and proximity of research universities.

Table 34: For innovative products or potential innovative products, does the possibility of getting EU SPC protection play a role when your company/organisation is deciding on the following investments? Q6 (to Originators)

* Composed of answers: YES, always, YES, to some extent, YES, but only if the investment will take place in the EU
Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

Table 35: Impact of SPC on originators decision on innovation (Q7 and 8 to Originators)

Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

On the other hand follow-on manufacturers favour countries without SPC when deciding where to produce generic/biosimilar medicines.

Table 36: Do you favour countries with no SPC protection when looking for a location to base or outsource your biosimilars manufacturing? Q19 (to Follow on manufacturers):

Note: ”Don’t know“ and No answer not taken into account (also in no. of answers provided).
Source: Public Consultations on Evaluation of SPC

The Commission expert Group on Industrial Property Policy (GIPP)

The meeting of the Commission expert Group on Industrial Property Policy (GIPP) on 18 November 2022 was dedicated solely to the SPC reform. Several Member States shared their preliminary positions regarding the policy options presented in this impact assessment in the meeting and/or in written contributions in advance (see table below).

Table 37: Preliminary support of the Commission expert Group on Industrial Property Policy (GIPP) to policy options expressed during 18 November 2022 meeting:

Source: GIPP meeting 18 November 2022.

Among 17 Member States who took a preliminary position, a clear majority (11) supported PO5 – unitary SPC to complement unitary patent. Regarding the current national SPC framework Member States taking the floor agreed that current SPC fragmentation is a problem. To solve this fragmentation, some called for solely guidelines (PO1) others for a centralised procedure and/or the unitary SPC. Among those recognising the need for a centralised procedure, more Member States opted for PO4 where the examination opinion is binding on national authorities (8 Member States) than PO3 where it is not binding (5 Member States).

As regards functioning of the central procedure all Member States who replied (9) considered that opposition procedure should not be added to SPC examination process – some noting that such an opposition is not even available during patent granting process. Five Member States agreed that third party observations should be allowed (no Member State was against). As regards adding a possibility to review a central SPC decision (and consequently reduce the risk of post-grant national litigation) three Member States were in favour and one was against.

In addition to the questions sent in advance, some Member States taking the floor also referred to the need for more transparency in the system.

Last, the role of NPOs was emphasised by several Member States. In particular, more information on the exact design of a system in practice would be required. Some Member States referred to the need to uphold the high quality of substantive examinations.

How stakeholders’ views were matched with different policy options

This section explains how we used the available consultations to gauge stakeholders’ opinion on the different policy options presented in this impact assessment.

Stakeholders views on PO1 (guidelines) are based on responses presented in Table 32 (second row). Views on PO2 (mutual recognition) are approximated by responses presented in Table 28 (fifth row) and Figure 13 (last row). There were no questions that could directly show stakeholders views on PO3 and PO4 (centralised application examination, with national SPC granting following non-binding or binding opinion respectively). We indirectly infer these from i) general support for a unitary SPC ( Table 26 ), as both these options provide “unification” at the SPC application examination level; and ii) support for granting of a unitary SPC by NPOs ( Table 28 , fifth row). All consultations point to generally wide support for creating a unitary SPC to supplement the unitary patent (PO5) – see for instance Table 26 above or Table 27 for the expected benefits of a unitary SPC.

The binding vs. non-binding nature of the central opinion was discussed during several meetings where Member State participated, the views however were not systematically collected, so we decided to assess these two option mostly on efficiency of achieving the objectives (especially predictability and legal certainty) without presenting the views of stakeholders.

Table 28 shows stakeholders views on the most appropriate authority to grant SPC. While Table 29 and Table 30 present language preferences for SPC application and publication respectively.

Finally, amendment of the Regulations to clarify SPC rules was favoured by several stakeholders ( Table 32 , third row) - it was however an early discarded option due to reasons explained in section 5.4.

Annex 3: Who is affected and how?

Practical implications of the initiative

The proposed initiatives (a centralised SPC granting procedure and/or unitary SPC) are of a procedural nature, in the sense that they would not provide new rights, or alter the scope of the rights already conferred by the existing national SPCs. These initiatives are intended to simplify the granting of SPCs, through a centralised application and examination procedure. This would reduce the cost and administrative burden for the applicants, increase legal certainty and facilitate access to information on SPCs status (which is beneficial for all stakeholders, including for instance generic and biosimilar manufacturers). The proposed changes also secure more stakeholders involvement through the new rules on third parties observations.

Summary of costs and benefits

Relevant sustainable development goals

Annex 4: Analytical methods

Section 1.2

Key economic indicators for the two sectors of interest provided in Section 1.2. of this impact assessment are based on Structural Business Statistics of Eurostat (Annual detailed enterprise statistics for industry, NACE Rev. 2, B-E) 248 . The sectors are defined according to NACE Rev.2 classification 249 namely group 20.2 with its only sub-class 20.20 and the entire division 21 with all its subcomponents:

o20.2 Manufacture of pesticides and other agrochemical products 250 ,

§20.20 Manufacture of pesticides and other agrochemical products

·21 Manufacture of basic pharmaceutical products and pharmaceutical preparations 251 ,

o21.1 Manufacture of basic pharmaceutical products,

§21.10 Manufacture of basic pharmaceutical products 252

o21.2 Manufacture of pharmaceutical preparations,

§21.20 Manufacture of pharmaceutical preparations 253 .

The remaining analytical methods applied in each of the above-mentioned studies and consultations are explained in the respective documents.

Section 2.1.

The estimates on the SMEs shares among the SPC holders were based on data
uploaded from the German national patent office – DPMA ( https://register.dpma.de/DPMAregister/pat/basis ) concerning SPCs (Schutzzertifikat). The SPC holders names (Anmelder/Inhaber) were matched with Orbis database 254 in order to obtain their size classes and information on the global ultimate owner name and type. The above was implemented using the batch matching tool available in Orbis and complemented by manual inspection of the output that resulted in some further corrections.

Finally, 86% of German SPC holders (present or past) were successfully matched with Orbis. At this point, only data covering years 2010-2021 were kept for further analysis (by the year of submission provided in the Anmeldetag variable). Firms’ company size classes as provided by Orbis (i.e. very large companies, large companies, medium-sized companies and small companies) were compared with their corporate ownership information and all SMEs belonging to a corporate group were removed from their initial size class. As a result, 8% of SPC holders were identified as SMEs. Within the retained dataset, another 11% of observations had no size class allocated, ether because such information was missing in Orbis or because it was not matched. It can be assumed that Orbis coverage is are biased towards large companies therefore if a company is not found/matched, it is more probable that it is a smaller organisation. Such assumption backed the 8% to 19% estimate for SMEs presented in section 2.1.

The universities were identified by text search of SPC holder’s names using the following or similar terms: university, universität, academy, research institute, college, education, research council, research foundation, forschungszentrum, etc. The search resulted in 4.4% of observations being captured. Then, the SPC holders with a global ultimate owners classified by Orbis as "Foundation, research Institute" were added to the count (another 2.8%) resulting in the final estimate of 7%, as mentioned in section 2.1.

Sections 6.6.1 and 6.6.2

The dataset underpinning the findings presented in sections 6.6.1 and 6.6.2 was the MIDAS database of IQVIA 255 , containing various descriptive variables characterising the pharmaceutical market 256 . The dataset used in this impact assessment covered sales from 2010 to 2021 and its geographical coverage was 25 Member States, notably EU-27 except for CY and MT. In case of several countries, only retail market data was available – these included DK, ET, EL, LV, LU and SI. For all remaining countries, data for the retail and hospital markets were combined and used (238 215 observations).

The IQVIA dataset contains a variable e_dt_prtexp, which refers to the estimated protection expiry date of a given product. Unfortunately, this variable may refer to various reason behind the loss of protection, namely not only the SPC expiry date, but also the estimated patent expiry date, data exclusivity expiry date, orphan drug exclusivity expiry date, SPC extension expiry date granted for a paediatric formulation or even on-going litigation. In order to establish whether or not the loss of exclusivity was due to the expiry of SPC, a publicly available dataset containing information on the central marketing authorisations was uploaded from the EMA website 257 . After basic text cleaning of both dataset (i.e. the intprd variable referring to the international product name in IQVIA and the medicine name from the EMA), the names of medicines were matched. As a result, the IQVIA working dataset has been expanded by the marketing authorisation date. Based on this, the standard regulatory protection date could be established by adding 10 years to the EMA decision date 258 . Only observation having at least one of the following dates were retained for further analysis: the patent expiry date, the estimated protection expiry date of the original product (per country) or the estimated regulatory protection date (EMA-based). At this stage, the potential SPC expiry date was calculated, as follows:

·Step 1: Patent filling date was calculated by subtracting 20 years from the patent expiry date available in IQVIA (pat_exp_dt).

·Step 2: Time elapsing between the patent filling date and marketing authorisation was calculated.

·Steps 3 and 4: The above period was shortened by 5 years and adjusted to 5 years maximum.

·Step 5: A potential SPC expiry date was established by adding the above period to the patent expiry date.

In order to generate an SPC dummy variable 259 the expiry dates of the three instruments were compared (i.e. the patent expiry date, the EMA plus 10 years date and the potential SPC expiry date). If the potential SPC expiry date was the last one to lapse and it was shorter than the loss of exclusivity as provided by IQVIA, then the observation was identified as positive 260 . In case of observations where the IQVIA loss of exclusivity date was missing, but the potential SPC expiry date, the EMA plus 10 date or the patent expiry dates were available, the dataset was completed by using one of these dates, depending on which one elapsed the last. Observations without the loss of exclusivity date were removed from the dataset, as well as those where the above date lapsed before 1 January 2010 261 . As a result 61 080 observations were retained for further analysis.

The biosimilar and generic molecules entry was first calculated only for products, which entered the market following an SPC expiry (determined by the earlier created SPC dummy variable) and then separately for all follow-on products entering the market (i.e. irrespective of the instrument behind the loss of exclusivity, notably the patent expiry or regulatory protection expiry). The market entry was defined as the first launch of a follow-on product on a local market after the loss of exclusivity (or SPC expiry in particular 262 ). The number of competitors that could have appeared on the market after the first entry was not taken into account.

The budgetary impact of the unitary SPC has been estimated using the same IQVIA database, but using only data for the enhanced cooperation countries 263 . The following steps were undertaken:

·Step 1: An average SPC expiry date per substance was calculated across all UP Member States, where this substance was awarded an SPC.

·Step 2: The sales at manufacturing prices, as well as the volume of sales in standard units for years 2010-2021 were summed up by country, molecule and by four product classes 264 .

·Step 3: Sales in each year were divided by sales volume expressed in standard units to obtain unit prices for each group (i.e. for a particular molecule in a given country, when it was sold as an original product and/or as a follow-on product).

·Step 4: For each molecule in a given country and year (e.g. Adalimumab in Austria, in 2018) a ratio between the price of the original product and its follow-on version was calculated, if the latter was actually put on the market. In rare cases where the calculated ratios per product were lower than 1 (i.e. biosimilar or generic product would be more expensive than the original) or higher than 10 (i.e. the follow-on product would enter the market at a price of 10% of the original product) the results were judged implausible and replaced by nulls.

·Step 5: For each country and year, a median ratio of price differences between the original products and their follow-on equivalents was calculated 265 , separately for biological and small molecules (i.e. two ratios per country for each year in 2010-2021).

·Step 6: The yearly sales of follow-on products (generic and biosimilar) after the loss of exclusivity were identified for each molecule in a given country. Then, they were retained only if the sales occurred under no SPC coverage and before the year of an average SPC expiry date per substance calculated across all UP Member States where this substance was awarded an SPC (see: Step 1 above). The period between the individual loss of exclusivity in a given country with no SPC and the year where SPCs for a given molecule would on average lapse in all SPC-covered countries is referred to as the “gap years”.

·Step 7: The sales in gap years were retained and multiplied by the ratios of price differences for each country (see: Step 5 above), molecule and year. As a result, a hypothetical value of sales of original products was obtained (i.e. the “would-be” cost of medicines purchased in the gap years, if original products were bought these countries instead of follow-on equivalents).

·Step 8: A difference between the amounts spent on follow-on medicines and the estimated cost of original products was calculated to obtain a hypothetical extra cost that would have been borne by the healthcare systems if the generic entry did not occur in the gap years.

·Step 9: The extra cost was compared with the overall yearly spending on pharmaceuticals by country, as provided by Eurostat in the COFOG database 266 and presented in Table 55 .

·

Annex 5: Supplementary evidence supporting the Impact Assessment

A.Evidence supporting section 1 (introduction)

Regulatory context of the current SPC rules - patent systems in the EU

SPCs are granted only for products protected by a ‘basic patent’ in force in the respective Member States. In the EU, patents are governed, and can be implemented, according to the following three different levels (the table below displays the applicable levels in each EU Member State):

(1)    The national legislation of the 27 Member States for national patents, which are filed, examined and granted in each Member State where protection is sought, and are enforceable before their national courts. Contrary to other IP rights, there is no EU directive on patent law and, therefore, the national patent legislation of EU Member States is not harmonised by EU law.

(2)    The European Patent Convention (EPC), which establishes a one-stop-shop for the filing, examining and granting of European patents by the European Patent Office (EPO). Once granted, a European patent requires validation in most of the Member States where protection is sought. It confers to its owner the same rights as national patents, enforceable before national courts

(3)    The unitary patent package , which will introduce a European patent with unitary effect (the unitary patent) – that is single patent not requiring national validation – and a single jurisdiction, the Unified Patent Court (UPC), for the Member States having ratified the UPC Agreement. Regarding the UPC, once operational, all European patents (unitary or not) as well as any SPCs based on them may be enforced before the UPC (optionally during a transitional period of 7 years) for these Member States.

Figure 14: Example of patent application following points (2) and (3) above

A key advantage of the unitary patent system is that centralised litigation before the UPC will apply not only to unitary patents but also to non-unitary European patents and to SPCs based on (unitary or non-unitary) European patents (see: Art. 3.b Unified Patent Court Agreement together with Art. 2.g). The figure below explains the procedural simplifications for patent applicants brought about by the unitary patent in the participating Member States.

Figure 15. Unitary Patent system, participating Member States and applicable procedures for registration.
state of play expected as of mid-2022.

Source: Commission services’ own analysis

The table below summarises EU Member States’ profiles regarding patent and SPC protection, as well as EU official languages (updated in March 2022).

Table 38: Patent protection across the EU

Regulatory context of the current SPC rules - marketing authorisations (MA) in the EU, other relevant legislation

An SPC shall be granted if, among other conditions, in the Member State in which the SPC application is submitted and at the date of that application, the product is protected by a basic patent in force and a valid marketing authorisation to place the product on the market as a medicinal product (or PPP) has been granted in accordance with the relevant EU legislation 268 .

Under Union law, medicinal products for human or veterinary 269 use, as well as PPPs, need a marketing authorisation before they can be placed on the EU market.

Marketing authorisations for medicinal products

In the EU, a medicinal product for human use may be authorised either by the European Commission through the centralised procedure or by national competent authorities through a mutual recognition, decentralised or national procedure.

Table 39: Overview of marketing authorisation types available for medicinal products

According to calculations of the Max Plank Institute study of 2022 270 , based on the example of Germany, the number of new active ingredients authorised for the first time by the national authorities is negligible. Therefore, almost all recently SPC applications for medicinal products rely on an EU-wide marketing authorisation.

The SPC aims to incentivise investments for new active ingredients of medicines and PPPs that require lengthy development times. With the exception of the 6-month paediatric extension of the SPC 271 , the SPC does not target specifically medicines for specific parts of the population or specific conditions (e.g. orphan diseases or antibiotics). The EU legislation has specific incentives for orphan and paediatric medicines that are out of the scope of this impact assessment.