The approval of a drug does not mark the end of its development – research and development continues. New forms of administration that promote patient compliance or more stable formulations that cause fewer side effects may be developed, or the drug might be made available for the treatment of additional indications or patient populations (eg, children). New drugs and the continued development of existing ones fulfil an important role for the public and are therefore incentivised.
In the pharmaceutical field, these incentives apply at various levels. Patent law grants an exclusive right to use the invention – for example, a new method of administration, a new formulation or a new treatment option. Corresponding patents are termed ‘second medical use patents’.
A second medical use invention does not put a stop to research required for commercialising the drug for a new use. Pharmaceutical manufacturers must apply for an extension of their existing marketing authorisation and demonstrate the safety and efficacy of their drug with respect to the new or additional use. Typically, pharmaceutical companies are required to submit comprehensive test data, particularly from clinical trials. Generating this kind of data may require extensive research and testing efforts over time and at substantial cost and risk. Regulatory data protection comes into play at this level of development. Under the regulatory data protection rules, data that must be collected and made available to the regulatory authority for obtaining a marketing authorisation (including an extension for new use) is protected from being relied on by third parties. For the duration of protection, generic companies cannot refer to the protected data of the original product for the authorisation of their generics and therefore cannot obtain simplified approval.
The term of regulatory data protection varies in different jurisdictions and may depend on the significance of the new use. In Switzerland, while data for a medicinal product containing a new active substance is protected for 10 years, regulatory data protection for new indications, modes of administration, dosage forms, dosages or new target populations is granted for three years. This term may be extended to 10 years if the new use is expected to bring a significant clinical benefit in comparison with existing therapies and if it is backed up by extensive clinical trials.
As with second medical use patents, a situation may arise where regulatory data protection has expired for certain uses but is still in place for new uses. For example, towards the end of a general regulatory data protection term, a pharmaceutical company may obtain a marketing authorisation extension for a new use and additional regulatory data protection for this use of, for example, a further 10 years. A generic may be authorised via simplified procedures for non-protected uses but not for the new use. It will therefore be authorised with a ‘skinny label’ that does not include the new use. Nevertheless, due to mechanisms that are well known and have been discussed widely in the context of second medical use patents, such a skinny-labelled generic is likely to be sold for the carved-out use that is still subject to regulatory data protection.
This chapter explores whether remedies are available to pharmaceutical companies that have invested in the development of new uses to enforce exclusive rights that regulatory data protection is intended to safeguard.
Regulatory data protection
Legal situation in Switzerland
Regulatory data protection was introduced into the Therapeutic Product Act to protect the investments required to develop and test the safety and efficacy of a new drug or new indication. Regulatory data protection is therefore part of a larger bundle of measures to promote the research and development of pharmaceuticals.
In 2019, the act was amended to reinforce this aim. In general, regulatory data protection is three years for data submitted when applying for a marketing authorisation extension. A 10-year protection period for second medical use might be granted on request provided that the new indication is expected to bring significant clinical benefit compared to existing therapies. Regulatory data protection on paediatric data is 10 years by default, provided that no document protection exists for another medicinal product with the same active substance for the same specific paediatric use.
Basis for legal protection
The international legal basis for regulatory data protection lies in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). Article 39(1) of the TRIPs agreement assigns the protection of undisclosed information to unfair competition law. When drafting this provision, the contracting states were particularly concerned about the protection of undisclosed information transmitted to authorities during the approval process of medicinal products. Approval procedures for generic medicinal products in which the manufacturers can obtain simplified approval were among the situations highlighted in the provision.
In Switzerland, the Federal Administrative Court confirmed that regulatory data protection serves to prevent unfair competition and that it protects the economic effort made to develop and test new drugs. The European Court of Justice (ECJ) also recognised that the use of data and documents subject to Article 39(3) of TRIPs may constitute unfair competition (MSD Animal Health, C-178/18 P, 22 January 2020, paragraph 80).
It is reasonable to conclude that the provisions on regulatory data protection established in member states of the TRIPs agreement are based on the understanding that the exploitation of data submitted within the process of obtaining a marketing authorisation (ie, free riding on that data) could amount to an act of unfair competition.
Failure to enforce regulatory data protection would endanger the expected competitive result through lacking R&D incentives. The importance of keeping these incentives strong was stressed in the recent amendment to the Therapeutic Product Act. Apparently, the incentive was not sufficient to foster research with paediatric patients without the extended protection.
The second medical use problem
When patent protection for a second medical use is still in place, a generic manufacturer must apply for a restricted marketing authorisation with a summary of product characteristics and patient information that contains no reference to the indication under patent protection (skinny labelling). The same applies in situations when regulatory data protection concerning the second medical use is still in place.
The problem with this solution is that it does not effectively prevent the skinny labelled generic from being sold and administered for the protected use (known as ‘cross-label use’). In general, doctors do not note the indication on the prescription and do not usually prescribe a drug by its tradename but by the international non-proprietary name of its active substance. A doctor may even prescribe a generic drug for a non-authorised indication because they simply equate the generic with the originator drug. This perception is sometimes reinforced by generic manufacturers’ advertising, wherein generics are promoted as exactly that: generics of an originator product. Not knowing the prescribed use, pharmacists are also not typically positioned to verify whether they may substitute the original product with the generic. In cases of doubt, they will dispense the generic, which they are invited to do by law.
In the absence of appropriate measures, the regulatory data protection is undermined: a skinny-labelled generic is almost certainly also sold and administered for uses that are still under regulatory data protection and are exclusively reserved to the originator. Generic manufacturers benefit from the data generated by the originators as if they were eligible to refer to the documents protected by regulatory data protection, which is something that the legislature intended to exclude.
Second medical use in patent law
In patent law, the second medical use problem has been subject to considerable scrutiny in numerous publications. There seems to be a growing view that the distributor of a skinny-labelled drug product should be held liable as an infringer if the use of that product for the patented indication is reasonably foreseeable and the distributor fails to take appropriate measures to prevent such use. Swiss doctrine derives this understanding from the danger theorem that is well accepted in general tort law, according to which the person who creates danger is liable for the resulting damage, provided that the realisation of the danger was foreseeable and the actions required to avoid it were reasonable. Owing to the prescribing, dispensing and reimbursement practices summarised above, a distributor of a skinny-labelled medicament could hardly take the position that cross-label use was not foreseeable. Consequently, the distributor is obliged to take measures beyond skinny labelling to prevent cross-label use.
Case law in other countries (eg, Germany and the United Kingdom) also seems to be moving in this direction.
Law against unfair competition
The law against unfair competition is applicable to behaviour objectively capable of influencing competition or the functioning of the market. It seeks to identify any conduct or business practice that is deceptive or otherwise contrary to the principle of good faith. The law against unfair competition does not safeguard general moral standards but tackles the abuse of a lack of transparency and information deficits that distort competition, as well as free riding. While it is possible to define the general requirements that characterise an act of unfair competition, it is impossible to exhaustively identify and list such acts. Doctrine and practice therefore form case groups.
This approach is also found in the Act Against Unfair Competition. The act consists of a general clause (Article 2) and special clauses (Articles 3 to 8). Article 2 thereby serves as an independently applicable general clause. It states: “Unfair and unlawful is any conduct or business behaviour that is deceptive or otherwise contrary to the principle of good faith and affects the relationship between competitors or between suppliers and customers.” It is to be examined as a catch-all provision if the requirements of the special clauses are not met. However, considerations that have been made in the course of doctrine and practice in the context of developing the special clauses may also be considered when subsuming conduct under Article 2.
When a distributor benefits from cross-label sales of a generic for uses that are still the reserve of the originator, it is not covered directly by one of the special clauses in the Act Against Unfair Competition. The question therefore is whether and under what circumstances behaviour of this kind may qualify as an act of unfair competition pursuant to the general clause of Article 2.
Regulatory data protection and free riding under Swiss law
The free-rider issue can be assigned to the broader group of ‘protection against imitation’ and the specific subset concerning protection from exploitation. In order to meet the unfair competition threshold of the law, special circumstances establishing unfairness must accompany an act of exploitation of another party’s work results. For the problem at hand, several arguments could be decisive under Swiss law.
First, the provisions on regulatory data protection reflect the legislature’s understanding that the exploitation of still protected registration documents constitutes unfair competition (ie, a violation of Article 2).
Second, by accepting cross-label use, the generic manufacturer accepts a violation of a marketing authorisation restriction that serves to protect competition. Since the Act Against Unfair Competition seeks to protect competition, it prohibits the violation of provisions or guidelines that aim to protect competition. In general, to receive licences such as marketing authorisations, an applicant must show compliance with these provisions. Licence holders breach Article 2 when they violate licence conditions that serve to protect competition or other provisions that aim to provide an incentive or reward (eg, marketing authorisations). Submitting data on efficacy and safety is a necessary precondition for being granted a marketing authorisation. By not submitting this data and not qualifying for simplified approval, while simultaneously also failing to prevent the not admitted, carved-out use, the generic manufacturer de facto assumes a market position as if it were eligible for simplified approval. This free riding violates the preconditions for obtaining a marketing authorisation and impairs the incentive and reward function of the regulatory data protection.
Third, exploiting another party’s work results, without reasonable effort, is the subject of Article 5(c) of the Act Against Unfair Competition. While the provision tackles reproduction by computer, and is therefore not applicable to the present case, elaboration on the principle of reasonable effort can still be consulted when analysing other cases in which a work result is borrowed. In order to assess whether a reasonable effort has been made, the effort applied in obtaining the work result must be compared with the effort applied for reproduction. The provision is dedicated to applying measures that allow an appropriate amortisation of the production costs. Free riding on data under regulatory data protection requires no effort by the generic manufacturer. In addition, it torpedoes the ratio legis of protecting investments in research and development in order to allow amortisation of the production costs. By failing to take reasonable measures to prevent cross-label use, a generic manufacturer contravenes Article 2 of the Act Against Unfair Competition.
The problem and the facts of these cases are analogous to the issue of infringement of second medical use patents by generic drugs: generic manufacturers benefit from sales of their generics for uses that are still reserved for the originator. Yet, unlike patent protection, regulatory data protection does not generally prevent approval of the generic for the corresponding use but renders the generic manufacturer ineligible for simplified application. To obtain the same marketing authorisation as the originator, a generic manufacturer would have to collect the protected data itself. Failure to provide this data results in a limited authorisation with a skinny label summary of product characteristics. This restriction is, however, insufficient to respect an originator’s regulatory data protection. In order not to risk violating unfair competition law, a generic manufacturer must take reasonable measures to prevent cross-label use.