Supplementary Protection Certificates (Amendment) (EU Exit) Regulations 2020

Lord Callanan Excerpts

Friday 27th November 2020 Lords Chamber

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 14 October be approved.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, this instrument was laid before the House on 14 October. It seeks to ensure that the UK’s supplementary protection certificate system takes account of regulatory changes arising from the Northern Ireland protocol.

Intellectual property plays a vital role in the UK economy; it supports creativity, ingenuity and innovation, and provides incentives for research and development. The life sciences sector is one of the UK’s most valuable industries and is crucial to our success as a science superpower. It has consistently been the largest investor in research and development in the UK, investing over £4.5 billion in 2018.

Supplementary protection certificates, or SPCs, are a particularly valuable IP right for this sector. They provide a way for the industry to recoup the costs of developing a new drug, which the Association of the British Pharmaceutical Industry has estimated may exceed £1 billion. The SPC system is designed to operate as a balance between supporting the development of new drugs and ensuring that those drugs become available more cheaply, through competition from generics, in good time. This enables the NHS to benefit both from innovative new medicines and the wide availability of existing treatments. It is important that the system is as clear and comprehensible as possible, so that rights holders and third parties have certainty about what they can and cannot do in relation to such a valuable right.

It may be beneficial if I explain briefly how the SPC system currently works, to set the context for the changes in this instrument. Before medicines and agrochemicals can be placed on the market, they must be approved for use by a regulatory body. Extensive testing of the product is required to demonstrate its safety, efficacy and quality, which of course takes time. If the product is patented, there can be a significant delay before the rights holder can benefit from the exclusive rights provided by their patent. SPCs are intended to limit the effect of that delay. In order to qualify for the additional protection of an SPC, the product must be protected by a patent and must have a valid authorisation that allows it to be sold on the market in the UK. The SPC system derives from EU law, which will be retained as domestic law at the end of the transition period. The Government have previously taken legislative steps to ensure that the system will function in the same way before and after that point. Noble Lords may recall that they approved the most recent of these after a good debate in early September.

However, the Northern Ireland protocol will result in changes to how medicines and agrochemicals are approved in the United Kingdom. This will have an indirect effect on the SPC system. The protocol means that products placed on the market in Northern Ireland must be approved in line with EU regulatory requirements. This ensures that they can move freely between Northern Ireland and the EU, avoiding a hard border. Approval to place a product on the market across the UK may therefore be provided by more than one authorisation, with different territorial and legal scopes. As I mentioned, one of the conditions to get an SPC in the UK is to have a marketing authorisation for the product which allows it to be placed on the market in the UK. The current SPC system assumes, however, that there will be a single authorisation across the whole of the UK; it is not designed to accommodate the arrangements that arise from the protocol.

This instrument therefore amends the two retained EU regulations on SPCs to fit the new regulatory arrangements into the SPC system. Let me be clear: an SPC will remain a UK-wide right. There will not be separate SPCs for Great Britain and Northern Ireland. If a patented product has been authorised for sale somewhere within the United Kingdom—whether in Great Britain, Northern Ireland or the UK as a whole—an SPC may be granted. However, the protection provided by the SPC will extend only to the territory in which the product has been authorised. This preserves the link between the SPC and the approval for the product. Up until the point the patent expires and the granted SPC takes effect, the protection can be extended further if another authorisation is granted for the product, covering additional territory. But, once the SPC is in force, no further changes will be permitted.

Taking this approach provides certainty for all parties. It would not be fair for a third party to find that a legitimate action they had taken, in a territory where the SPC did not provide protection, suddenly became an infringement at a later date. This is why the scope of protection is fixed in place when the SPC comes into force. Similar limitations will apply to the award of an additional six months of SPC protection, which is available for products that have been tested for paediatric use.

In terms of engagement with business on these changes, IPO officials contacted representative bodies and individual businesses in the pharmaceutical and pesticides industries as well as the IP legal profession, of course, following the publication of the Command Paper on the protocol. They set out the potential effect on SPCs and invited comments. Officials met with those who responded to discuss the proposed changes in more detail and get views on whether any additional issues needed consideration. At a later stage, these stakeholders were also invited to comment on a working draft of the legislation, providing valuable feedback to help finalise the wording.

Looking forward, the IPO is preparing business guidance to explain what the changes will mean in practical terms; this will be published shortly. Alongside the guidance, informal consolidations of the legislation will be provided, similar to the Keeling schedules, which were placed in the House Library. These were intended to allow noble Lords to see the amendments in context; I hope they were useful in that regard and that they will have the same benefit for businesses.

In conclusion, these regulations will ensure that the effect of the Northern Ireland protocol on the approval of medicines and agrochemicals is properly taken into account, while preserving the balance inherent in the current SPC system. I commend these regulations to the House.

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, first, I thank all noble Lords for their valuable contributions to this short and simple—actually, not simple but complicated debate.

This instrument is vital to ensure that the SPC system is effective and operable from 1 January next year. The amendments take a pragmatic approach in providing protection which reflects the regulatory approval of a particular medicine or agrochemical. Failing to address these issues would put valuable rights at risk and force businesses to go to the expense of litigation to clarify what can and cannot be done.

As noble Lords will be aware from our debate just a few weeks ago, the World Intellectual Property Organization recently listed the UK as the fourth most innovative country in the world. Our ambition, of course, is to be the first most innovative country in the world. With that goal in mind, this Government have pledged to increase UK investment in research and development, with the goal being to reach 2.4% of GDP by 2027, and our R&D road map puts science and technology at the forefront of our economic and social recovery. As my noble friend Lord Lansley observed, intellectual property is a crucial part of that effort, so that great research and ideas can be turned into great businesses.

Innovation and creativity have never been more important or more valuable, especially in the life sciences sector. UK R&D in this sector is at the forefront of the efforts to combat coronavirus, with the Oxford Vaccine Group and AstraZeneca in particular leading efforts to develop a vaccine, with promising results emerging from clinical trials in recent days.

Of course, global access to a vaccine is critical to an effective response to the pandemic, ensuring that no-one is left behind, particularly the poorest and most vulnerable. We believe that the best way to provide equitable access to vaccines, treatments and tests is by fully funding the ACT accelerator. The UK is proud to have put in $1 billion of the global total of $5 billion raised so far.

Of course, I am also aware of the calls for greater flexibility on IP rights to create and enable equitable access. The Government’s view is that meeting the objectives of prevention, containment and treatment of Covid-19 is best achieved through the existing flexibilities within the Agreement on Trade-Related Aspects of Intellectual Property Rights.

Looking more broadly, I know that concerns have been raised about whether businesses adapting to the new regime may have to cope with further changes to regulation in the future. Of course, it is impossible to rule out that changes might be needed to regulations which affect the medicines or agrochemical sectors, but I hope the House will be reassured that any proposals for changes, and any effect they might have on the SPC system, would be subject to consultation with stakeholders and interested parties. I am also conscious of the concerns about whether drugs being available under different rules in Great Britain and Northern Ireland will cause any issues for trade within the UK, and whether the analysis of the impact of this SI took account of this.

In response to the point made by the noble Baroness, Lady Bowles, we believe that most SPCs will take effect UK-wide in the future, as the majority of SPC applicants will want regulatory approval for the whole of the United Kingdom. Although small numbers of SPCs may provide protection in only part of the UK, the right itself will not introduce a barrier to movement of goods. Marketing authorisations will be needed to put medicines or agrochemicals on either the Great Britain or Northern Ireland market.

In response to the point made by the noble Baroness, Lady Wheatcroft, about the costs and impacts—also raised by the noble Baroness, Lady Bowles—the purpose of the instrument is to incorporate the changes to the regulatory system into the existing SPC framework so that businesses will not have to do anything significantly different. They will file the same forms, pay the same fees and engage with the same authorities as at present. The only significant new element of the process would be the need to inform the IPO about any additional authorisations. The administrative and information requirements will be similar to existing processes and the numbers small, so the need for familiarisation will be limited.

Although the SPC system is linked to the regulatory regime, the direct effect of this SI does not cover any impacts or changes to the regulatory system itself. The changes to the SPC system are required to take account of all marketing authorisations that will be valid in the UK when the protocol takes effect.

The noble Lord, Lord Stevenson, raised what I think is a very valid point—this is a particularly complicated SI, and I confess that he is not alone in finding the drafting quite tricky to follow at times. But this is a complex area of IP law, and all the provisions are indeed necessary. This complexity was part of the reason behind the material placed in the House Library. The IPO will ensure that an informal consolidation of the legislation is available so that businesses can see, in one place, the legislation as it will operate, and I would be happy to place a copy of that in the House Library as well.

My noble friend Lord Lansley asked about the importance of SPCs in helping to keep the UK competitive—I completely agree with him on that. There are a number of factors which business should consider when deciding when to launch medicines in particular territories. R&D pharmaceutical companies are very clear that a strong intellectual property regime is vital to their business models, as this helps recoup their large up-front investment costs. The SPC regime is an important part of the UK IPO regime for these companies.

My noble friend also asked about our participation in the Unified Patent Court. In view of its withdrawal from the European Union, the UK no longer wishes to be a party to the Unified Patent Court system. Participating in a court that applies EU law and is bound by the CJEU would be inconsistent with the Government’s aim of becoming an independent, self-governing nation.

My noble friend also referred to the recently completed EU legal and economic analysis of the SPC system. These reports were comprehensive and looked at many different aspects of the existing SPC regulations. The implications of their conclusions are still being considered. It is important to consider the SPC regulations and other forms of IP protection holistically, so that amendments in one area do not have unforeseen consequences in another. Any future changes to the system would be carefully considered in light of evidence as to their potential impacts on the UK market.

My noble friend also asked about the recognition of UK SPCs in the EU. As he will be aware, SPCs are currently a national right and are granted separately in each member state. He also asked about the Bolar exemption; this was added, as I am sure he is aware, to the Patents Act in 2005. In 2014 we introduced a new exemption by way of a legislative reform order. The two exceptions are of similar scope but have different purposes. The Bolar exemption specifically relates to abridged authorisation processes, while the LRO exception ensures that clinical trial work is fully protected by the exception on experimental use of a patented product. It is therefore possible that some activities may fall within one exception but not the other, so it is important that both continue to function effectively.

My noble friend Lord Lansley and the noble Baronesses, Lady Wheatcroft and Lady Bowles, raised the paediatric extension. This is a six-month extension of SPC protection for a medicine which has been tested for use in children. The protocol does not require EU law covering this to apply in Northern Ireland. The paediatric extension will instead be provided in UK law with conditions set by the Human Medicines Regulations. These will apply whether the medicine has been approved under EU or UK law. The paediatric extension will provide protection only in the territory in which the SPC does. Equally, if the conditions are met in only part of the territory protected by the SPC, it will provide protection in that territory.

The noble Baroness, Lady Wheatcroft, raised her favourite subject: the end of the transition period. The Government continue to deliver the necessary primary and secondary legislation required to ensure a functioning statute book at the end of the transition period so that we can seize the opportunities as an independent sovereign nation, something I know she passionately believes in. She also asked about the erosion of SPC rights, giving them shorter protections. The Government still consider their approach entirely reasonable, as it keeps the current way of calculating term in place and delivers a level of protection which is seen as one of the most generous in the world. In addition, under the protocol, authorisations granted under EU law continue to have effect in part of the UK. It therefore makes sense for the term calculation to take that into account.

The noble Baroness, Lady Bowles, and the noble Lord, Lord Stevenson, asked what would happen if UK SPC law diverges in future from EU law. UK SPCs will continue to be granted according to UK domestic law. The protocol does not require EU SPC law to be followed in Northern Ireland. The SPC will remain a single IP right which may provide protection in Great Britain, Northern Ireland or across the UK. Any divergence would not lead to different outcomes in different parts of the United Kingdom.

The noble Baroness, Lady Bowles, took us back to our discussion earlier this week on the internal market Bill, asking whether this would have any implications for IP. This is a reserved area of policy that applies UK-wide, so the internal market Bill is not expected to have a significant effect where the market access principles set out in the Bill apply to goods and services.

The noble Baroness, Lady Bowles, asked whether SPCs will restrict the trade of medicines and agrochemicals within Northern Ireland and Great Britain. We expect that the majority of SPC applicants will want marketing authorisation across the UK for their innovative goods, so most SPCs in the future will take effect across the whole of the UK, as they do now. Although small numbers of SPCs may provide protection in only part of the UK, the right itself will not introduce a barrier to the movement of goods. Marketing authorisations will be needed to put medicines or agrochemicals on the Great Britain and Northern Ireland markets. The SPC changes simply reflect the marketing authorisations which exist for Great Britain and Northern Ireland.

The noble Baronesses, Lady Wheatcroft and Lady Bowles, asked why the SPC is not enforceable in the whole of the UK. It is because it is not right to give an enforceable right if the medicine has not been authorised; that is how the bargain of the SPC system currently works.

Finally, the noble Lord, Lord Stevenson, asked about the regulatory system and the effect of the Northern Ireland protocol. The very final version will be available in the Library, as I said earlier, and we shall make sure that he receives a copy for his bedtime reading. I hope that he will enjoy benefiting from discussing that in the future.

To remain world leading on IP we must be at the forefront of understanding how advances in technology affect the IP framework—whether that is personalised medicines, artificial intelligence, efforts to achieve net zero or something as yet unknown and still over the horizon. We must continue to lead on international discussions on these issues and more, so that the global IP system works effectively for British businesses.

With that, I think I have answered all the queries that were put to me, so I commend these regulations to the House.

Motion agreed.