Patents (Amendment) (EU Exit) Regulations 2018

Lord Warner Excerpts

Wednesday 6th February 2019 Lords Chamber

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

My Lords, as with the previous instrument, this was the subject of a wide-ranging debate in Grand Committee on 14 January. Again, I wrote to noble Lords who spoke in that debate to respond to the points raised, and also placed a copy of my six and a half-page letter in the Library. Since the Grand Committee debate, I have held further helpful and constructive meetings with the BioIndustry Association and the ABPI. Let me make it clear that I value those regular contacts and the insight that they bring on behalf of this important industry. I will continue to have discussions with representatives from industry and hear their perspectives as we move forward. As Life Sciences Minister within the department, my door is always open.

In my discussions with the life sciences sector, it has made clear the value and importance of supplementary protection certificates—SPCs—to the industry, and its concerns about the potential for those valuable IP rights to be affected by a no-deal exit. I hear and understand that. The only intention of this instrument is to fix what would break and to do so in a way that preserves the current operation of the law. We are considered to have one of the strongest IP systems in the world and the Government remain fully committed to maintaining that position. That is why we are preserving the status quo so far as possible in a no-deal exit. It is right that we continue to prepare for a no-deal scenario as long as that remains a possible outcome.

One issue raised in Grand Committee, and addressed in my letter, dealt with the approach taken to consultation on this instrument. In my meetings with industry bodies, we had discussions on this point and on why the usual wide engagement by the IPO was not possible on this occasion. The withdrawal Act established the policy direction which this instrument follows: to preserve the existing law at the point of exit and maintain the status quo as far as possible, ensuring a smooth transition for business. As the Government’s consultation principles make clear, a consultation on a policy which is not changing would not be of benefit. Nevertheless, the IPO wanted to ensure that the drafting of the instrument achieved its aims, by getting external views. Therefore, it was decided, consistent with the constraints in place, to carry out a confidential technical review of the drafting. In addition to providing valuable feedback on the drafting, the participants also raised wider concerns, including on the issue of the SPC term.

The recent engagement with industry bodies also touched on this issue, which was raised in Grand Committee by the noble Lord, Lord Warner. As I reassured them in those discussions, the sole objective of this instrument is to fix parts of the retained law that would otherwise break upon exit. Therefore, the changes being made simply ensure that an SPC which is granted the day after exit would be given exactly the same term of protection as it would if granted the day before exit. Without such intervention, term would have to be calculated without any reference to authorisations granted in the UK. Innovators have expressed the view that this intervention should be to rely solely on a granted UK authorisation to calculate term. This would give a longer period of protection if the product comes to the UK later than the EEA. As I set out in my letter, this has the potential to tip the balance between the interests in this area at a time when maintaining the status quo is critical.

I fully understand that innovators have concerns about wider potential effects of a no-deal exit on the regulatory environment; that has come through strongly in my recent discussions. These are legitimate concerns which must be carefully explored, and it is entirely correct that they are raised. Pharmaceutical innovation is a vital part of the UK economy; the companies which research and develop new drugs are some of our most important and valuable, and we benefit greatly from their work. If we end up in a no-deal situation, I am keen to start immediately exploring these issues with innovators and all other interests, and to make progress as early as possible after a no-deal exit.

In conclusion, by preserving the status quo as far as possible in a no-deal exit, I hope that the Government’s aim is clear—to maintain the UK’s highly regarded IP framework and the important protection that it provides. I beg to move.

[Lord Warner (CB)]

My Lords, I raised several concerns about this SI in Grand Committee, as the Minister recognised. As he knows, these were the result of briefings from the BIA and the ABPI, with which I am glad to say he has had further meetings. However, since his meetings both these organisations have provided me with further briefing about their continuing concerns.

Before turning to these concerns, I will briefly place them in the wider context of the damage done by Brexit—and the Government’s conduct of it—to our highly successful life sciences industry. This damage could make Nissan and Sunderland look like small beer if we are not careful. From the Prime Minister down, the Government have shown a poor appreciation of the damage being done to this sector: the loss of the EU medicines regulator from the UK; the loss of investment opportunities in the UK; the missed opportunities for collaborative international joint research, development projects and clinical trials; the drain from the UK of talented overseas scientists; and the likely loss of a growing amount of our own homegrown scientific talent.

To this litany of casual vandalism the Government have now added a statutory instrument which, if it were used in the case of our exiting the EU with no deal, would reduce the protection of exclusive intellectual property. The problem is caused by the SI’s approach to supplementary protection certificates—SPCs—which are a key part of the intellectual property protection framework for pharmaceutical research. SPCs are intended to give a period of exclusivity from inherent risks in the development of new pharmaceutical products. But the industry’s trade bodies—both the BIA and the ABPI—are convinced that, in the real world that they occupy, the SPCs as structured in this SI are fundamentally flawed.

In their view—the exact opposite of the Minister’s—this flaw reduces the period of exclusivity for drugs authorised in the UK, because the start of the period for exclusivity in the UK is backdated to a drug’s earlier authorisation in the EU. They are losing a bit of their exclusivity period. The chief executive of the ABPI put this extremely well:

“Britain is internationally renowned for its strong IP framework and this has made it an attractive home for investment from all industrial sectors, including pharmaceuticals. We’re concerned that these measures are a step backwards and seriously undermine the strong life sciences sector that we’ve worked so hard to build over the past 70 years”.


These views are shared by the BIA.

The problem has arisen in large part from the Government’s failure to consult properly on these regulations at the outset—as has been shown to be the case in other no-deal SIs, as we have already discussed. I drew the Minister’s attention in Grand Committee to the inadequacies of that consultation process, and I am pleased to see that he seems to have accepted some of that and tried to rectify matters through proper discussion with the ABPI and the BIA. I congratulate him on taking that particular initiative.

I think that the Minister will be pleased to know that I do not intend to bang on further about past misdemeanours. Instead, I ask him to give the industry two clear-cut assurances about the future conduct of the Government. First, I would like to hear it from him, on the record, that the Government recommit to the UK’s status as a world leader in safeguarding intellectual property and commit to make no further erosions of the UK intellectual property framework; and, secondly, that the Government commit to a specific review of the intellectual property legislation being introduced through statutory instruments as part of the no-deal Brexit planning. The reason for that second one is, frankly, that the industry is very sceptical about whether the Government will just drop these proposals if there is a deal. Ministers in the Government need to understand that they have lost a lot of the confidence of this sector. The time has come for them to start to rebuild that confidence in an industry which is vital for this country’s future.

[Lord Clement-Jones (LD)]

My Lords, the noble Lord, Lord Warner, has expressed the impact on the life sciences industry extremely effectively and eloquently, and I do not wish to repeat anything of what he said. Quite apart from the damning quote from the chief executive, Mike Thompson, the key sentence that I saw in the ABPI’s briefing was:

“The signal the Government has sent to global pharmaceutical companies large and small is that the UK will be less committed to IP protection after Brexit than it has been to date”.


For a major industry to consider that seems extremely damning.

As the noble Lord, Lord Warner, pointed out, the Minister said that it is correct to raise these issues and he is keen to start exploring them, so there is some intention now to have some consultation post the SI rather than proper consultation before it. I think we are looking forward to hearing a bit more of a concrete proposal from the Minister with regard to what precisely is planned.

The Minister’s six and a half-page letter, as we must now call it, dealt with the question of participation in the unified patent court, as set out in the White Paper last autumn. I made the point in Committee that if the UP convention is ratified by Germany and comes into force ahead of our exit date, the UK will need to work out how to remain a member of the UPC or withdraw from the systems, which could have significant impacts on business. In that context, I questioned in Committee whether the UK will have to acknowledge the supremacy of EU law and the ECJ as part of the signing up process. In his letter, the Minister advises that,

“when ruling on domestic cases, UK courts will not be bound to follow decisions of the UPC, or rulings of the European Court of Justice applied by the UPC”.

The last time we discussed this SI, I brandished a 39-page opinion on the subject, so I am rather baffled by the advice that the IPO and the Minister have received in those circumstances, if we have signed up to the unified patent court agreement. I would very much like to hear a bit more clarification on that subject from the Minister.

--- Later in debate ---

[Lord Adonis (Lab)]

My Lords, I want to follow the remarks of the noble Lord, Lord Warner. It is deeply unsatisfactory that the only way we can know the interests of those most intimately affected is if an individual Member of your Lordships’ House relates conversations that they have had to this House. In Grand Committee, the noble Lord, Lord Warner, told us about conversations that he had had but which had not been published because there had been no formal consultation.

The Minister said that he has met relevant stakeholders. We are grateful for that. I hope that, in his reply, he will clarify the issue about the duration of SPCs, particularly for the benefit of those of us who do not follow the detail of what is at stake. I take the noble Lord, Lord Warner, to be saying that a substantive change in the duration of SPCs will take place as a result of these regulations and that this will have a major impact on the industry concerned because of the protection of intellectual property. So this is not, as we have been told all along, a technical issue about rolling over existing regulations. It is a substantive change. This has never been clearly brought out in our proceedings.

[Lord Warner]

Just to be clear, the industry is saying that, because of the way in which the Government have drafted this SI, the period of exclusivity will be less than it would have been in the past. So there is a material change in the financial benefit through the period of protection that was previously given. The industry is worried not just about that aspect but about the signal it gives about whether the Government are going to move away from a gold-standard intellectual property framework. They are worried that this is the first step in this particular direction.

[Lord Adonis]

I understand the significant point that the noble Lord makes.

None of this came out in the Explanatory Memorandum’s summary of the non-existent consultation and secret discussions that took place. The only reason this has come before your Lordships is because of the successive conversations which the noble Lord, Lord Warner, has had with the industry. His point seems entirely reasonable. The industry is concerned as to what this means for the wider protection of intellectual property and the big impact it might have on investment in a crucial national industry. This is not a technical issue; it is fundamental. We were not alerted—in any part of the process leading to these regulations coming before the House—about any of these issues.

The Minister said that, since the Grand Committee debate, he has conducted discussions with industry representatives. We should be grateful that, by calling attention to the lack of consultation, this encouraged the Government to engage in more formal consultation after the instrument was laid. In my day, good government involved consulting about instruments before they were laid, not afterwards. The noble Lord, Lord Warner, and I were in the ancien régime when there was Cabinet Office guidance on 12 weeks’ consultation and publication of consultation results to which the Government gave reasonable responses. In this national emergency, all this no longer applies.

I should be grateful if the Minister could bring out precisely—because it is important that we have it in Hansard—what is the substantive change in respect of SPCs and what is in fact at stake in terms of the lesser protection that will be available for crucial intellectual property in the industry. It is still not clear to me from the remarks of the noble Lord, Lord Warner, but since he is doing such a good job of responding to the debate, he may be able to tell us the scale of the impact that this is likely to have. Are we talking about minor changes, because it is calculating differences in dates at which patents were granted, as I understand it, and whether European and UK patents are granted at different times under the new regime? I should be grateful if the Minister could say more and clarify more.

The other significant point about the regulations is that the consultation was not just secret, in the way I set out in my earlier remarks, but in his introductory remarks the Minister did not address the point made by the noble Lord, Lord Warner: that there is still profound dissatisfaction in the industry. All the Minister told us in his rather—if he will forgive me for saying so—bland opening remarks was that he had met industry representatives. He did not say anything about the content of those discussions or what representations were made to him. We only know about the content of those representations because of the remarks of the noble Lord, Lord Warner. I deduced from his remarks that those representatives are profoundly dissatisfied, think that this will be a diminution of the protection of intellectual property in the industry, are worried about the cavalier way in which this has been done and think it might have a big impact on future investment. These are substantial matters. As I said, in the normal course of events, they would lead us seriously to question what is effectively a proposed change in the law.

If we had a proper legislative process, we would be moving amendments and might require formal consultation to take place. It is deeply unsatisfactory that these big concerns are dribbling out only because of the activity of a few noble Lords independently consulting industry stakeholders and pressing the Government to give us some indication of what they have said, while the Government shield behind a claim that these are technical changes, which is denied by the industry. For the Government to say that the consultations that have taken place are necessarily secret is totally unsatisfactory for such changes.

--- Later in debate ---

[Lord Henley]

My Lords, first, I repeat that we do not want to move away from the gold standard of IP that we have. Secondly, I make it quite clear that I regularly meet the two organisations referred to, the BIA and the Association of the British Pharmaceutical Industry. The chief executives of both those organisations sit on our Life Sciences Industrial Strategy Implementation Board, so I see them both regularly. I hope that we have a very good relationship and that full and frank discussion is always possible between me and them and between them and the department more generally.

[Lord Warner]

I just want to be clear to the Minister. What representatives of the industry are telling me in the letters and briefings they have sent is that they have interpreted the Government’s behaviour as meaning that they think that the Government is signalling that we are moving away from a gold standard of intellectual property protection.

The reason they say that is that, in this particular case, we will now have two regulators—when we come out of the EMEA, we will have a UK and an EU regulator for pharmaceutical products. I cannot put it any more clearly than this. They are saying that, if you apply for authorisation of a drug under the UK regulator, the period of exclusivity should start from the date of authorisation; it should start not from any authorisation that may have been given by the EU regulator at an earlier date for the drug to be introduced in the EU but from the authorisation when the drug is authorised in the UK. I do not think that I can be clearer than that. There is clearly a fundamental difference of view between the industry and the Government on this issue. No amount of fine words from the Minister is going to conceal that.

[Lord Henley]

My Lords, if the noble Lord, Lord Warner, will allow me, I was trying to say that, first, I want to continue discussions with them and we will do that. I do not believe that we are as far apart as the noble Lord is suggesting; nor do I believe that we are undermining the gold standard in IP that we wish it to achieve.

We do not want to do anything to undermine our large and successful pharmaceutical industry. It is one of the jewels in the crown, and has a turnover of £41.8 billion. I remind the noble Lord that it has seen a large amount of investment in research, particularly since 2016, and considerable new investment from abroad—again, since 2016. This is an industry that is flourishing and will continue to flourish. We believe that the level of investment within that industry that is supported by the SPC system, which ensures that British businesses are compensated for the period of patent loss protection while requesting market authorisation, is very important. Making sure that our law continues to work is therefore important.

The noble Lord, Lord Warner, says that there is a flaw in the SI: he says that there is a policy change. There was considerable debate on the issue in Committee. As I said previously, I do not share the view that there is a policy change here. This instrument keeps in place the existing calculation of SPC duration. At present, it is calculated from the first market authorisation in the EEA, which includes the UK. The instrument ensures that the exact position remains in place after exit and the calculation is the same. It is precisely this kind of deficiency that the withdrawal Act gave Ministers powers to affect.

The noble Lords, Lord Warner and Lord Adonis, then talked about the industry and said that it wants something different. The BIA and the other organisations representing pharmaceutical innovators would prefer the legislation to be changed so that the term of an SPC would be calculated based on only a UK market authorisation. They argue that the exit may lead to industry launching new pharmaceutical products later in the UK and that they may receive later market authorisation than in the rest of the EEA. That would give a period of SPC exclusivity for a longer period than under current laws. I can see why they argue that point: it is perfectly legitimate that they should do so. However, it would be a significant policy change, affecting the whole of the pharmaceutical industry and the NHS. I do not believe that it would meet the Government’s commitment to avoid a cliff edge for businesses by maintaining the status quo, which is what we are seeking to do, on exit day.

I turn now to the commitment that the noble Lord, Lord Warner, sought from me about whether we would commit to a review within two years. As I have already said, I am keen that we immediately start to consult with all those bodies concerned, and more widely—indeed, with everyone that noble Lords can think of—and explore the landscape after a no-deal exit, and also to look at what happens in other events, to make progress on the issues that concern them. As part of those discussions, I am very happy to talk about the timing and scope of any review of the SPC term. The Government have said that they will review the data and market exclusivity arrangements within two years of a no-deal exit—should there be such an exit, and again we have made it clear that we neither expect nor want a no-deal exit—in order to make sure that we remain competitive. I am sure that we can discuss with stakeholders how any review of SPCs would fit in with that work.

The noble Lord, Lord Clement-Jones, asked about unified patent court judgments in the UK. I can tell him that the UPC is an international court and is not part of the UK judicial system. Its judgments are therefore not binding but can be considered, as is the case with any other foreign judgments. That is obviously a matter for the courts.

The noble Lord, Lord Stevenson, also asked about the unified patent court. I can tell him that the unified patent court and the new British patent will commence shortly after Germany ratifies the UPC agreement, although obviously we have no control over what goes on in Germany. Germany’s ratification is currently on hold pending the outcome of a complaint against the UPC to its constitutional court. Finally, I can tell the noble Lord that the London building is indeed ready.