Pharmaceutical patent litigation: the Balduzzi Decree put to the test
In recent years a large number of patent infringement proceedings have started between originator pharmaceutical companies manufacturing patented drugs, and companies commercialising the corresponding generic medicinal products. These proceedings are particularly linked to the entry onto the market of the generic product before the expiry date of the patent covering the original drug. This frequently happens when the primary patent on the active ingredient has expired but the original drug – which, due to further R&D, has evolved from its “basic” version – is still covered by secondary patents (e.g. covering a new formulation, a new use etc). In similar cases, many generic companies in the past launched their version of the “evolved” original drug before the expiry date of the secondary patent, and defended themselves from infringement claims by stating that the secondary patent itself was null.
Generic companies have been supported by both national laws aimed at fostering the spread of generic drugs (for reasons connected to public expenditure), and by a number of decisions issued by the European Commission (EC) and by our national administrative courts which sanctioned originator companies for anti-competitive behaviors allegedly carried out against generic companies. These decisions have been issued in particular following the EC competition inquiry into the pharmaceutical sector, which was published in 2009, whereby the EC jabbed at originators’ behaviors allegedly aimed at delaying the entry onto the market of generic drugs, thus damaging consumers. Obtaining and enforcing secondary patents was considered by the EC to be “evergreening”, i.e. an overblown extension of the term of the patent monopoly.
The EC view was obviously criticised by originator companies because – amongst other things – it did not consider the fact that secondary patents are validly granted patents (also existing in other fields), which imply high R&D costs and bring innovation, therefore legitimately conferring a monopoly on their proprietors (although they can of course be revoked if it is ascertained that they were unduly granted). As a consequence, it does not appear correct that the mere enforcement of secondary patents should be considered anti-competitive.
In 2012 a new legal provision was issued which augured well for originator companies, namely the so-called “Balduzzi Decree” (Decree-law no. 158 of 13 September 2012, converted with amendments into Law no. 189 of 8 November 2012). Article 11(1) of the Balduzzi Decree basically provides that generic drugs cannot be included amongst the medicines reimbursed by the National Health Service (and therefore included in the substitution lists) before the expiry date of the patent or supplementary protection certificate of the corresponding original drug. It followed that generic drugs would be unable to be included in the substitution lists before the expiry date of the patent on the original drug, independently of whether it was a primary or a secondary patent.
Nevertheless, once put to the test, the interpretation given to this provision by the Italian Drugs Agency (“IDA”) was not the one hoped for by the originators: the IDA is apparently only applying the provision to patents and supplementary protection certificates covering active ingredients, and not to secondary patents.
This strict interpretation was further confirmed in 2013 by a decision issued by the Lazio Regional Administrative Court (docket no. 9537/12), which expressly stated that the existence of a secondary patent on the original product is irrelevant to the aim of putting a generic drug at the expenses of the NHS, independently of whether the patent is valid or not. In particular, the court recalled a number of prior decisions made by both itself and the Supreme Administrative Court (“Consiglio di Stato”) and stated that “to the aims of the reimbursement of the pharmaceutical expenditure, only patent coverage of the active ingredient is relevant”. This because, according to the court, in the case of a secondary patent “there is no reason, in the view of containing and rationalising the pharmaceutical expenditure, to have the collectivity bear the (full) reimbursement of the more costly patented product, the price of which is higher because of the underlying research and commercialisation costs”.
In other words the decision at issue, which is not really linear also under other aspects, acknowledges the significant activities and corresponding costs required for the R&D of new formulations, new dosages etc. (and the benefits deriving from them), but believes that the latter, although patented, “cannot justify an extension in the exclusivity period”. This assessment however collides with the laws providing for the possibility of obtaining secondary patents and the consequent exclusivity period granted by the law. In addition, it does not take into account that, from the expiry date of the patent covering the active ingredient, generic companies can launch generic drugs corresponding to the basic original product containing such active ingredient. Generic companies should instead be prevented from launching a generic product of the original drug based on the new formulation, new dosage etc., if the new feature is covered by a valid secondary patent.
In conclusion, the Balduzzi decree was apparently not able to settle the disputes between originator and generic companies: a legal framework (and a consequent case law) is still being awaited. This framework and case law needs to be both clear and able to consistently balance the need to contain pharmaceutical expenditure and the need to ensure due patent protection to companies investing in researching and achieving valid patents.