JPM2024: Transactional considerations in view of a (proposed) broader Bolar exemption in EU

The annual J.P. Morgan Healthcare Conference (JPM) provides a unique opportunity to make connections among life sciences and health care emerging companies, pharma/biotech companies, investors, and advisors. This is an article in our “Life Sciences Transactional Insights” series, which aims to provide key practical takeaways for our transactional colleagues by anticipating the needs of their regulatory, intellectual property, and business stakeholders.

Recent European Commission (Commission) proposals, including a broadening of the so-called ‘Bolar exemption’, would substantially change various incentive schemes related to medicinal product approvals, with the stated goal of increasing competition from earlier market entry of generic/biosimilars. 

We anticipate many strategic questions for global stakeholders in view of a potentially broadened EU Bolar exemption when considering where to manufacture, conduct clinical trials and/or generate other regulatory data, especially in arrangements involving third party suppliers and service providers. While an implementation timeline is uncertain, the shifting regulatory landscape raises strategic questions for licensing and collaboration agreements that are prudent to prepare for now. Companies engaged in early development programs should consider the impact of the proposals on their R&D and future launch.
 

Substantial changes on the horizon

Earlier this year, the Commission announced a proposed new Directive and Regulation relating to medicinal products for human use (EU pharma regulatory package) followed almost simultaneously by a series of proposed new intellectual property rules with the stated goal of boosting innovation, investment, and competitiveness within the European Union single market (EU patent package). As we have discussed elsewhere, the EU pharma regulatory package would substantially change the incentive schemes for regulatory data protection (RDP), orphan market exclusivity (OME), and pediatrics extensions for medicinal product approvals. Fundamental changes are also proposed in the EU patent package, which provides for compulsory licensing in times of crisis, and introduces a unitary Supplementary Protection Certificate (SPC) and centralized examination procedure to complement the recently introduced Unitary Patent (UP). We have discussed some key considerations around the UP and corresponding Unified Patent Court (UPC) systems here and here.

EU Bolar exemption: current and proposed

The EU pharma regulatory package also includes a broadening of the so-called ‘Bolar exemption’, with the stated goal of increasing competition from earlier market entry of generic/biosimilars. The Bolar exemption originally developed in the United States but is now incorporated to varying degrees in local laws around the world. The exemption is intended as a limited exception to avoid delays in bringing generic medicinal products to market and allows certain acts to be carried out before patent or SPC expiry so long as they are related to obtaining regulatory data necessary for marketing authorization (MA) of the generic/biosimilar.

The current recitation of the EU Bolar exemption is set forth in Art. 10(6) of Directive 2001/83/EC as amended by Directive 2004/27/EC and states:

Conducting the necessary studies and trials with a view to the application of paragraphs 1, 2, 3 and 4 [i.e. to demonstrate equivalence/similarity of generic medicinal products and biological medicinal products] and the consequential practical requirements shall not be regarded as contrary to patent rights or to supplementary protection certificates for medicinal products.

In practice, implementation of Art. 10(6) has been fragmented, with its scope and impact largely derived from national law, resulting in a lack of harmonization across Member States. Some Members States have a broader exemption than the minimally required EU standard, which  may incentivize their jurisdiction as a favorable location for conducting clinical trials. For example, some Member States exempt not only studies carried out for generic products in EU Member States, but also those for innovator products, those for authorization of products outside the EU, and third parties supplying active pharmaceutical ingredients (API) for the studies, while others exempt only generic studies for EU Member States as required by the EU legislation.  This is also in addition to any ‘research exemption’ to protect certain activities related to other experimental uses such as research tools as governed under the Agreement on a Unified Patent Court (UPCA) and/or enshrined in national laws, and which again varies country to country.

The Commission also noted that while the goal of the prior legislation in ensuring competitive functioning has been met to a moderate extent, the varying level of success depends on many external factors, including R&D activities, international location of R&D clusters, national pricing and reimbursement schemes, business decisions, and market size.

Against this background, the Commission opined that it is necessary to clarify the scope of the current limited exemption – particularly the rather ambiguous concept of “consequential practical requirements” – in order to ensure a harmonized application in all Member States regarding both covered activities and beneficiaries. The resulting proposed new Article 85 makes express that patent rights and SPCs:

shall not be regarded as infringed when a reference medicinal product is used for the purposes of:

(a) studies, trials and other activities conducted to generate data for an application, for:

(i) a marketing authorization of generic, biosimilar, hybrid or bio-hybrid medicinal products and for subsequent variations;

(ii) health technology assessment (HTA);

(iii) pricing and reimbursement.

(b) the activities conducted exclusively for the purposes set out in point (a), may cover the submission of the application for a marketing authorization and the offer, manufacture, sale, supply, storage, import, use and purchase of patented medicinal products or processes, including by third party suppliers and service providers.

This exception shall not cover the placing on the market of the medicinal products resulting from such activities.

Location, location, location: transactional impact on (expanded) covered activities and beneficiaries

Transactional teams necessarily take a long view in negotiating provisions relevant to their business goals. The proposed EU Bolar exemption raises a number of considerations for stakeholders thinking strategically about where to invest in manufacturing, clinical trials sites, and/or contractor relationships in EU Member States and neighboring markets, including the UK and the impact these may have on their agreements and the prospect of future litigations. The more harmonized and permissive approach would, if implemented, provide a broader choice in terms of options for such investment.

With regard to covered activities, the proposed exemption provides that these must be conducted exclusively for the listed purposes, as well as the offer, manufacture, sale, supply, storage, import, use and purchase of patented medicinal products or processes. The Commission’s discussion (Recital 63) suggests, however, that test product generated during the regulatory approval process may be used for commercial purposes after the patent/SPC expiry. An expanded exemption could thus make the impacted jurisdictions more attractive as manufacturing locations for generic/biosimilars.

In addition, the proposed exemption would expressly protect activities conducted to generate data for HTA and pricing and reimbursement. Under current national laws in certain Member States such as the Netherlands and Spain, the submission of pricing and reimbursement data are sufficient to trigger the granting of a preliminary injunction (PI). A change in the Bolar exemption could make these jurisdictions more attractive for administering clinical trials and generating other types of data. Another consideration is to what extent implementation in local laws may allow that activities performed within a jurisdiction could be used for the purpose of seeking regulatory approval in jurisdictions outside of the EU, which again, could encourage investment in local manufacturing and clinical trials sites.

Notwithstanding the stated efforts toward harmonization, the impact of a potentially broadened EU Bolar exemption on covered activities may still largely depend on implementation in local laws. Accordingly, some uncertainty may still remain, for example, in the context of data requested by a regulatory authority for confirmatory trial data that goes beyond the initial MA submission. Moreover, the covered activities only apply in the context of a generic/biosimilar MA, and not to data generated in the context of the approval of other innovative medicines. For these reasons, stakeholders will likely still need to grapple with the delicate interplay of an expanded Bolar exemption as it relates to each jurisdiction’s research exemption.

Finally, the proposed exemption would broaden to expressly include activities performed by third party suppliers and service suppliers. With regard to these covered beneficiaries, the proposed framework would likely provide more legal certainty for contract manufacturing organizations (CMOs) involved in generic/biosimilar production. This could provide welcome relief to parties negotiating contracts related to their APIs or other essential product components.  

Next steps

The EU Bolar exemption is one of several changes on the horizon that stakeholders should consider in developing a holistic approach to their regulatory, patent, and commercialization and supply chain strategies. While implementation of these specific proposals is subject to further policy advocacy and may still be several years away, prudent stakeholders should take note because the underlying EU policy goal of facilitating patient access to innovative medicines through pharmaceutical and patent reform will likely remain.

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This is an article in our series “Life Sciences Transactional Insights” series, which aims to provide key practical takeaways for our transactional colleagues by anticipating the needs of their regulatory, intellectual property, and business stakeholders. Our dedicated team of life sciences and health care licensing and commercial transactions lawyers understand the challenges and opportunities that strategic alliances and other partnering relationships present. We draw on the depth of our life sciences practice and work seamlessly with our regulatory experts to provide unparalleled transactional support. Ensure you are subscribed to Hogan Lovells Engage to receive our insights.

 

 

Authored by Katie McConnell, Penny Powell, and Hein van den Bos.

 

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