Legislative Reform (Patents) Order 2014
Viscount Younger of Leckie
That the Grand Committee do consider the Legislative Reform (Patents) Order 2014.
Relevant document: 1st Report from the Regulatory Reform Committee
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, this order concerns an amendment to the Patents Act 1977. The change will allow medicinal product assessments to be carried out without risking patent infringement. This will benefit patients by giving them earlier access to new medicines. It will also reduce a legislative burden on business, and encourage our important life sciences sector to run clinical trials in the UK. The life sciences sector is of significant economic importance to the UK. It generates turnover of more than £50 billion and accounts for over 6.6% of gross value added in the UK manufacturing sector. Exports of pharmaceuticals and medical technology accounted for 11% of UK goods exports by value in 2012.
I will explain the background to the order. In 2011, the Government committed to ensuring that the intellectual property system supports the life sciences sector. Removing the risk of patent infringement when assessing a new medicine will do this. This measure delivers on that commitment. Under current UK law, the regulatory regime for new medicines and the patent system are at odds with each other. The regulatory regime requires a company to demonstrate that a new medicine is safe for patients by carrying out clinical trials. Under the patent system, that company may be sued for using a patented drug in the trial. Of course, that does not make sense. The development of new medicines is critical for public health and the pharmaceutical industry plays a key role in meeting this challenge.
Pharmaceutical companies spend large amounts of money developing new products. In 2012, the industry spent more than £4 billion on research and development in the UK. However, only a small proportion of drugs in development ever reach the marketplace. Stakeholders have told us that it can take seven to 10 years to get approval to sell a new product. In addition, the success rate for early-stage studies can be as low as 18%.
Some drugs developed by pharmaceutical companies are combination products that combine a number of drugs into a single pill, which increases patient compliance. I will explain. Many patients have to take a number of pills several times a day. It is easy to forget to take some of them. Combination products make it easier for patients to follow their doctor’s orders by reducing the number of pills they need to take each day. These products often combine a new drug with an existing patented medicine, and it is the safety of the combination that is assessed in a clinical trial. In addition to clinical trials, tests called health technology assessments may be needed before a product can be recommended for use by the National Health Service.
To summarise: many of the tests that are carried out on new drugs require them to be compared to an existing medicine, which may be patented. The patented medicine could be used as a comparator or could be part of a combination product. The infringement risk is particularly high if the patented medicine that needs to be used is not actually for sale. When this is the case, the company carrying out a trial must first make the product.
There is even some legal uncertainty in the UK as to exactly which activities in this area are infringing and which are not. Because of this risk, companies often carry out expensive and time-consuming legal assessments to determine whether it is safe to run a clinical trial in the UK or whether they should run a trial elsewhere. One company said that it spends up to £135,000 assessing the risk of infringement for each product in development. The infringement risks, and resulting costs, do not exist in many other member states of the European Union. In fact, the United Kingdom is one of only eight member states where clinical trials may infringe a patent.
The UK is in direct competition with countries such as Germany and France as a location for clinical trials work, as well as countries outside the EU, such as the US. With its narrow legal framework, the UK is at a competitive disadvantage as a location for trials and, consequently, as a manufacturing location for the final medicine. This is clearly undesirable. We want companies to be able to prove that their new medicines are safe and useful, without fear of possible legal action. This will allow them to bring new treatments to market as efficiently as possible. We also want UK patients and the economy to benefit from trials being run here. One large pharmaceutical company said that, due to current UK law, it may decide to run a particular trial abroad. This trial is for a disease which is prevalent in the UK, and there would be a clear benefit to both the company and patients for the trial to be run here in this country.
European legislation already allows trials for generic medicines to be run in the UK, to show that they are the same as the patented product of which they are a copy. This means that, as things stand, different classes of medicines and different types of trial are treated differently in UK law. This cannot be right. This legislative reform order seeks to address these problems by clarifying one of the existing exceptions to patent infringement. The change will specifically exempt from patent infringement those activities which are undertaken for the purposes of a medicinal product assessment. The change will allow data from trials run in the UK to be used for assessing medicines in any country.
The Government consulted on the changes. The overwhelming majority of responses agreed with the proposals. Responses also suggested that they will improve the desirability of the UK as a location for trials.
It is the responsibility of the Government to ensure that patent law achieves an appropriate balance between protecting the rights and interests of patent holders, and the wider public interest in new medicines coming to market as quickly as possible. To maintain this balance, commercial use of a patented product after obtaining regulatory approval or a health technology assessment recommendation is not covered by the amended exception. Someone who has completed successful trials and wants to commercialise a patented medicine in combination with their own product will still need the patent holder’s permission to do this.
The draft legislative reform order was laid before Parliament on 6 May and is made under Section 1 of the Legislative and Regulatory Reform Act 2006. This allows a Minister to make an order which reduces burdens resulting directly or indirectly from legislation. As I have previously explained to noble Lords, under the current legal provisions, companies often carry out expensive legal assessments before running trials in the UK. It is these cost burdens which will be removed by the order. The changes will also remove the cost to a company of a clinical trial being delayed by legal challenges. The Legislative and Regulatory Reform Act also requires that certain conditions are met before an order such as this can be made. Exempting medicinal product assessments from patent infringement cannot be achieved by non-legislative means.
The changes contained in the order will apply only in limited circumstances. They will not allow the commercial exploitation of a product containing a patented component without the agreement of the patent holder. In any case, a company that wishes to avoid the risk of infringing a patent in the UK may simply choose to locate the trial in a country where the risk does not exist. A patent holder cannot prevent this. For these reasons, I am satisfied that the conditions of Section 3 of the Act are met.
Finally, it may be helpful if I briefly summarise for the Committee the benefits of this order. It will remove the risk of patent infringement when companies are assessing the safety of medicines, and this will make the UK a more desirable location for clinical trial work and help to support our life sciences sector. This in turn will bring economic benefits to the UK and new medicines to patients more quickly. I commend the order to the Committee.
Lord Stevenson of Balmacara (Lab)
My Lords, I thank the Minister for his comprehensive introduction of this order. It is an important one and I recognise the case that is being made. I should like to cover three issues because in essence I do not have any objections to what is being proposed; indeed, quite the reverse. I compliment the team responsible on a good job well done because it was a joy to read the order. I understand fully what is being done and therefore my questions are really rather trivial, which I am sure the Minister will be pleased to hear.
It is good to see that the LRO system is working well. It was introduced by the previous Government precisely for the sorts of purposes that are being envisaged today. There are hurdles in the way of its use, but they can be jumped over easily in the way that has been expressed today, and I understand why the LRO route has been taken. I have already touched on my second point, which is that this is a well-explained document which I enjoyed reading.
The issue as I understand it is that it is unfortunate that the way in which the original exception for research set out in Section 65(2) of the Patents Act 1977 has been to some extent subverted by judge-led changes in the sense that what the document refers to as a very “narrow interpretation” of that in terms of what constitutes research has been brought forward. My first question turns on this issue. I wonder whether the Minister has thought about reforming the Patents Act 1977 so as to introduce a broader definition of “research”. In saying that I am minded to think about other areas where the narrowing of what constitutes research may cause problems. One can see where this is going: research is obviously done for experimental purposes related to the subject matter of an invention, and that is a clear and important definition. However, we live in the real world where people who are doing what is called research do it in an applied environment in which one may be testing the efficacy and effectiveness of what was originally discovered or developed. I worry slightly that we might be stumbling down a cul-de-sac in terms of other policy areas in the future. I think that the Minister is in a good position to reflect on that and give us his thoughts. Having said that, I think that the LRO route is the correct one, but I would be interested to know what arguments were used within the department, if they can be shared with us, as to why it was taken.
I understand the noble Viscount’s position on ensuring that clinical trials, field trials and health technological assessments can be carried out in the future without any risk of infringing a patent. He explained with care what the benefits would be not only to UK pharma, which we obviously support, and to UK plc in terms of economic developments but, more importantly, to future patient health that will benefit from new medicines and technologies that preserve lives and extend people’s ability to enjoy a good life.
My questions, apart from the principal one that I have already asked, are really about the consultation process; I was intrigued by the worries that seemed to be behind the idea of not one but two consultations. Governments are pretty bad at consulting. They do not like to do it; it slows things up and sometimes they get results that they do not want, so perhaps the Minister can reflect and let us know why, in October to December 2012, the same sort of questions were repeated that were asked in June to July 2011. One consultation would seem to be enough; two seems somewhat otiose. I am interested to know whether there is an answer to that.
Secondly, despite the fact that this is an important change and obviously one that will have good economic and, indeed, health outcomes, why did it take so long from the decision arising from the Plan for Growth report to get to this point—which is, after all, July 2014? Given that, as I understand it, the consultees were ranked in the tens rather than the hundreds or thousands, one would have thought that things could have been done better. Was there a particular issue that needed to be resolved, given that the consultation seemed to go well and the results were very clear?
My third and really very trivial point—which the Minister may dismiss and not answer—is that I have a slight whinge about consultations involving very small numbers being summarised in a numeric rather than qualitative way, so that on page 7 of explanatory document we initially get a response to the informal consultation that talks about “almost unanimous agreement” and the “majority of responses”. Given that we are talking about—as I think it says in the note—something like 16 responses, I find the terms “unanimous” and “overwhelming” a little underwhelming. That approach is taken again in paragraph 2.12 on the second, formal consultation, which refers to the “overwhelming majority” of responses. In this case, in notes 26 and 27, we again discover that there were 16 responses. I wonder whether they are the same ones that came up with an “overwhelming” figure. It is a trivial point, but I think you demean the quality of the response if you try to overclaim for what was happening. It would have been interesting just to see the formal responses that the Government got, even though the number of respondees listed later on in the document shows that very few actually did respond. However, the responses clearly were of very high quality and allowed for a decision.
To conclude, I simply wish to record that this is a very good document. It is well expressed and the right route has been chosen for it. The reasons for it have been so well explained that I have no wish to delay further the implementation of the order.
Viscount Younger of Leckie (Con)
My Lords, I start by thanking the noble Lord, Lord Stevenson, for his general support for this particular order. I note, and thank him for, his complimentary comments on its drafting, which will be very much appreciated by the officials involved. A number of questions were raised, although I may not be able to answer all of them. I also have questions of my own that I will answer myself in the process, which may help to round off this short debate.
The first question raised by the noble Lord concerned the definition of research and its scope. That was a fairly strong question and I will write to him with an answer. The second question was about the consultation. He will know that he mentioned that there were two consultations required; needless to say, they were to try to clarify the exact scope of legislative change and to gather evidence from industry. It is fair to say—and the noble Lord may have read—that there were issues in trying to get enough evidence. We were determined to push the evidence base and that is why we needed to go for the second consultation. It was a challenging process but that may give him an answer which satisfies him.
However, I want to raise a point that was made in the other place concerning the Regulatory Reform Committee, which had raised concerns about the lack of monetised evidence for the change. That links in with the consultation. We have considered very carefully the points made by the RRC and we did the best that we could to obtain evidence from the industry and apply the current guidance. We note, however, that at the end of the day the RRC recommended that the order be approved, although I imagine that it would be in its gift not to approve it.
A further issue that was raised in the Commons and which I thought might be helpful for the noble Lord and for the Committee is whether a patentee can have access to data generated on their own drug. The aim of the legislative change is to remove the need for companies to carry out assessments of infringement risk prior to running clinical trials. For this reason, it is entirely possible that the patent holder will not be known. To require sharing of data would simply replace one burden with another—that is, replacing assessing the infringement risk with identifying the rights holder. That would go against the aim of simplifying the patent landscape in relation to clinical trials. However, clinical trials regulation will require clinical studies to be properly acceptable.
I should like to answer a point raised by the noble Lord, Lord Stevenson, concerning the Patents Act, which needs to balance the rights of the patentee with benefiting legitimate research. To define the term “research” in legislation—this comes back to the point that I was going to write to him on, and I believe that I will still write to him—may cause some difficulty in the future. We have attempted to clarify the research exception in a proportionate way to target a specific problem. However, I will write to the noble Lord with a fuller answer.
I think that there were a couple of other questions. I will revert to Hansard, which no doubt in its usual way will report accurately what the noble Lord said, and I will then respond to the final question, if not two questions, that he raised. In the mean time, I commend the order to the Committee.