Insights

In a bill recently presented to the Parliament, the Swedish Government proposes extensive changes to the current refund system which are intended to take effect on 1 October 2002. The major new features are as follows.

All pricing and refund matters will be entrusted to a newly created Government agency, the "Pharmaceuticals Benefits Board" (Läkemedels-förmånsnämnden), rather than the National Social Insurance Board. Instead of automatically becoming refundable as soon as its price has been set, a medicine will in future be refundable if it satisfies certain qualitative criteria, i.e. whether the cost of using the product in question is "reasonable from the medical, humanitarian and socio-economic viewpoints, and whether there is already an equivalent medicine on the market which is "considerably more suitable". The Board also has power to disqualify a product on its own initiative. No major change is envisaged in the price determination procedure – the Board will set the refund price following an application by the manufacturer/importer, submission of data to support the requested price and eventual negotiations with the Board.

One major innovation is the introduction of mandatory substitution by the dispensing pharmacy of the least expensive generic equivalent available, unless the prescribing physician has, on medical grounds, expressly indicated otherwise on the prescription. (Currently, only substitution of a lower-price parallel import is possible.) The patient may avoid substitution by paying the price difference. The body competent to determine equivalence is the Medical Products Agency.

In future prescriptions must include a code indicating the prescriber’s clinic, practice etc. In addition, these codes may, with other prescription data, be provided to the authorities responsible for healthcare, i.e. the county councils This will make it possible to survey the prescription patterns of individual clinics and general practitioners.

No change is proposed regarding medical devices, which, with limited exceptions, will continue to be made available free of charge. cb

In addition to the new Swiss Law on Therapeutic Products which came into force on January 1, 2002, a new ordinance on clinical trials has taken effect. It expressly permits sponsors not based in Switzerland to conduct local clinical trials, provided that they designate a local agent who will guarantee their obligations towards trial subjects, i.e. provide compensation for any ill effects arising from the clinical trial. In addition, the sponsor must allow trial subjects to institute claims directly against the local agent. Thus trial subjects will be able to take legal action before the Swiss courts.

Most sponsors will fulfil their obligation to provide compensation by taking out insurance, which will have to cover the contractual and non-contractual liability of the sponsor and the investigator. However, the sponsor may revert to the investigator in cases where the investigator or other persons are liable.

If the sponsor's insurance company is based in Switzerland, the local agent may take over the role of that company. Otherwise, the sponsor must find another agent to fulfil this task. This may be an individual such as a trustee, or a legal entity. The sponsor must guarantee the local agent full indemnification and support if a trial subject claims damages for adverse effects.

Although these new requirements are justified from the point of view of trial subjects, and claims by trial subjects are likely to be rare, the requirements will place additional burdens on the parties involved. They include the need for an additional contract between the sponsor and his agent, a declaration by the sponsor and his agent according to Article 7 of the clinical trials ordinance and an amendment to the information given to patients. The authorities are still discussing whether trial subjects should be given the contact details of the sponsor's agent automatically, or whether they should only be informed of the possibility of bringing claims directly against an agent in Switzerland.

To sum up, the fact that in future sponsors of clinical trials will no longer have to be based in Switzerland is positive. However, such sponsors will have to designate a local agent, and will be directly liable if a trial subject wishes to claim damages. These requirements entail an additional contract and other documents. There may be further implications which are not clearly mentioned in the ordinance and have not yet been fully cleared by the health authorities. cb

A – Common problems faced by the pharmaceutical industry in relation to marketing of generics

It is well known that drugs are invented, developed and traded by the pharmaceutical industry. Before a drug can be sold and accomplish its ultimate purpose – to heal – millions of hours of investigation and millions of euros of investment are required. It is the pharmaceutical industry which bears most, if not all, of those costs.

The industry invests in drugs that prolong life or make it easier and more bearable for everyone. This involves a constant battle where there will never be final victory, and hence a permanent need to seek new solutions, which continuously demand enormous investment, both financial and human. The average citizen, however, is often unaware of the role which the pharmaceutical industry plays in modern society and the enormous resources that it channels every day into research and development. Equally, the average citizen forgets the impact that all this investment will have on the cost structure and hence the price of drugs. Innovative drugs take years of research to develop, and this obviously has an impact on prices.

Generics offer an alternative possibility which also represents lower prices and costs for both the ordinary citizen and the State. Generics currently play an important role on the pharmaceutical market but they also pose two major problems: sufficient patent protection, to enable the industry to recoup part of its investment, and adequate control of quality.

Generics also tend to focus attention exclusively on the price of drugs, making it easy for the general public to forget that over the years the pharmaceutical industry has probably been the major sponsor of ongoing medical training and clinical research, as well as helping to develop the present high-tech industry. The European pharmaceutical industry represents around 29% of the worldwide market and employs around 520,000 people. The huge investments made by the pharmaceutical industry are not yet acknowledged by society in general, and it seems likely that increased use of generics will indirectly aggravate this situation.

Traditionally Portugal has a strong attachment to using "original", i.e. brand drugs, and 10 years ago not a single company was operating with generics in the country. The introduction and production of generics were authorised in Portugal by Decree-Law nº 81/90 of 12 March 1990, which regulated the production, authorisation, introduction on the pharmaceutical market and distribution of, and State contributions to, generic drugs.

According to a recent study ordered by the European Commission on OECD generics policy, the Portuguese are, with other Southern Europeans, among the lowest users of generics (about 3% of all prescribed drugs in Portugal). On the other hand, Northern European countries such as Germany, Denmark or Finland use a lot of generic products (around 30% of drugs prescribed). According to INFARMED (the Institute for Pharmacies and Drugs), generics represent 0.052% of the whole pharmaceutical market in Portugal. INFARMED ensures the pharmaceutical quality of generic drugs in Portugal during the approval process and through its activities of inspection and control.

The Portuguese Minister of Health, Dr. Correia de Campos, has set out to achieve a 5% market share for generics in 2003. This is considered an ambitious target, bearing in mind that in January 2002 sales of generics represented only 0.26% of the market. Assuming that the price of generics is 35% lower than the price of brand drugs, the increase will represent a saving of €42 million, divided between consumers (€24 million) and the State (€18 million relating to National Health Serviuce - "NHS" - costs). The Portuguese Government has also developed a "National Plan for the Promotion of Generics" which will cost €700,000, and various initiatives for the promotion and circulation of information regarding generics are taking place throughout the country.

Portugal has a very serious problem with controlling health system costs, so its generous welcome of generics is not particularly surprising. Drugs are the second largest item in the Ministry of Health’s annual budget. The main issue that needs to be dealt with is the prescription of these drugs and the creation of incentives to develop this market. In Portugal, patients have access to drugs through various State contribution systems and the social security authorities. The main goal of the country’s current healthcare policy is therefore to obtain safer, higher quality and effective drugs to which patients have easy access whatever their income or social situation. In this context, one of the most important immediate goals is to achieve a more favourable cost/benefit ratio on all drugs, in part by promoting the use of generics. These goals are expressed in Law 14/2000 of 8 August 2000 on measures for the rationalisation of the national healthcare service’s policy on drugs.

In short, healthcare costs are constantly increasing everywhere in Europe, leading to great concern regarding better use of available resources and equitable distribution of these insufficient resources. Generics may have an important role here, as they are cheaper than more recent and innovative drugs. The declared policy is that increasing the promotion of generic drugs will reduce pharmaceutical costs for the State. However, the Portuguese Pharmaceutical Bar has already stated that generics will not miraculously solve the financial problems of the Portuguese healthcare system.

When considering the regulation of generics in Portugal, it is important to bear in mind the Portuguese Constitution’s references to health matters. Article 64º-1 in the chapter on "Direitos e Deveres Sociais" (Social Rights and Obligations), establishes a general right to health protection. Article 64º-3 specifies how this protection will be provided, i.e.

This law lays down several measures to pursue these goals, including the following:

Drugs to which the State makes a contribution under the NHS must be prescribed with an indication of the international common denomination of their active substances, or by their generic name followed by the dosage and pharmaceutical form.

When dispensing drugs, pharmacists and their qualified assistants are required to inform the patient of the existence of any generic drug or similar brand drug which benefits from NHS contributions, and which drug has the lowest price.

The final choice lies with the patient, and must be stated on the prescription, with the signature of both the pharmacist or his qualified assistant, and the patient.

To rationalise State contributions and subsidies, the Ministry of Health must carry out a systematic revaluation of the drugs in question at least every three years.

Drugs which the NHS considers to be of doubtful therapeutic efficiency or too expensive will no longer qualify for contributions if a therapeutic alternative exists, taking into consideration the cost/benefit ratio.

The Government will adopt the necessary measures for the promotion, disclosure, prescription and use of generic drugs.

The Government will disclose the quality of generic drugs according to the applicable international regulations on this matter.

The Government will take measures to control advertising of drugs on mass media, so as to limit pressure on health professionals and consumers.

The applicable legislation, Decree-Law 242/2000 amending Decree-Law 72/91 regulating the authorisation or introduction on the market, manufacturing and trading of, and State contributions to, drugs for human use, defines generic drugs as drugs which fulfil all the following criteria:

a.) their bioequivalence to a reference drug has been demonstrated by approval of bioavailability studies;

a.1) "essentially similar drugs" are drugs with the same qualitative/ quantitative composition, under the same pharmaceutical form, as the reference drug;

a.2) "reference drugs" are drugs whose active substance was authorised and commercialised for the first time in the market based on complete documentation, including the results of chemical, biological, pharmaceutical, pharmacological, toxicological and clinical tests;

b.) the industrial property rights relative to their respective active substances or manufacturing process have already expired;

c.) they do not claim to have therapeutic applications different. from those of the already approved reference drug.

Under Article 21º, 1 and 2, of Decree-Law 72/91, generic drugs are identified:

-by the DCI (designation approved or adopted by the World Health Organisation for active substances of drugs, according to defined rules, that may not be subject to registration of the brand or name, according to a list approved by the WHO) of the active substances; plus

- the name of the holder of the marketing authorisation (Autorização de Introdução no Mercado) for their active substances; plus

- the dosage; plus

- the pharmaceutical form; plus

- the monogram "MG"(Medicamento Genérico – Generic Drug) on the drug’s outer packaging.

When there is no DCI, the drug is identified by the generic name.

For the prescription of generic drugs, Article 21.3 of Decree-Law 72/91 requires generics to be prescribed using the DCI of the active substances, followed by dosage and pharmaceutical form. If the doctor wishes, he may add the name of the holder of the marketing authorisation. Law 14/2000 specifies that when the name of the holder of the market authorisation is indicated, it must follow all the other items listed above.

Article 21.4 of Decree-Law 72/91 regulates the distribution of generics. If the doctor prescribes the drug by DCI and chooses to indicate the name of the market authorisation holder, the pharmacist is obliged to dispense the drug indicated by the doctor and may not substitute an alternative. However, if the doctor only indicates the DCI of the active substance or the generic name, and not the name of the holder of the marketing authorisation, the pharmacist should dispense the lowest price generic equivalent which he has in stock.

The introduction of generic drugs on the market is subject to the same rules and procedures as for other drugs, i.e. their quality, efficiency and safety must be demonstrated. The applicable law is Article 20 of Decree-Law 72/91 as amended by Decree-Law 242/2000 and Law 84/2001 of 3 August 2001. The requirement to demonstrate the bioequivalence of a generic drug to a reference drug through bioavalilability tests is regulated by Decree-Law 249/93 of 9 July 1993 and by EU Guidelines dated 26 July 2001. Decree-Law 249/93 already applied earlier EU Guidelines on this matter. The demonstration of bioequivalence may be dispensed with in certain specific cases.

The most interesting aspect of generic drugs is the price. Decree-Law 242/2000 amends the original wording of Article 23 of Decree-Law 72/91, which now requires the price regime for generic drugs to approved by a joint Administrative Rule of the Ministers of Economy and Health. Administrative Rule 577/2001 of 7 September 2001 lays down that the retail sale price of generic products must be at least 35% less than the price of an equal dosage of the reference drug in the same pharmaceutical form.

Another interesting aspect of generic drugs is the State contribution. The State bears part of the cost of drugs in the context of its constitutional duty to provide all citizens with healthcare, regardless of their economic situation. Decree-Law 205/2000 of 1 September 2000 amending Decree-Law 118/92 of 25 June 1992 regulating the State contribution to the price of drugs prescribed patients under the NHS and beneficiaries of the General Directorate for protection of public administration employees and agents, introduced a 10% increase in the State contribution to the price of generic drugs. Thus State contributions to generic drugs are as follows:

1) Type A drugs: 100%;

2) Type B drugs: 80%;

3) Type C drugs: 50%;

4) Type D drugs: 30%.

Generic drugs have been an "aspirin" for the debilitated healthcare systems of many OECD countries. Portugal has been promoting them for twelve years, but without much success, since only about 1% of drugs consumed are generics, compared to an average use of 15% in the rest of Europe. Nevertheless, the trend is to increase the market share of these drugs.

However, while generics are being used to keep healthcare costs down, they risk harming relations between patients and doctors, not only because they are being promoted mainly for economic reasons, but also because it is very difficult to be sure that healthcare professionals have reliable means to decide which is the best drug to prescribe: one they have trusted for years or a cheaper generic product. cb

The Greek Ministerial Decision which concerns the method of determining the prices of medicinal products provides:

"In order to verify the prices of medicinal products, sale prices in the European countries where the medicinal product is marketed are investigated and the lowest sale price to the wholesaler is taken, with the addition of import expenses and obligatory discounts."

The law authorising the competent Minister to issue this decision provides:

The wording of this provision indicates that the competent Minister is not authorised to issue a regulation determining the prices of medicinal products solely on the basis of the lowest European price; he should take at least two prices into consideration, one of which should be the price in the country of origin. An application for annulment of the Ministerial Decision was therefore filed, and the Council of State (High Administrative Court) annulled the Decision in November 2001. However, a month later the Minister published a price bulletin for medicinal products which was based on the annulled system using the lowest price in Europe. This illegally issued administrative decision has been appealed to the Council of State, and a ruling is expected later this year.

In the meantime, the Parliament has voted a retroactive amendment to the law authorising the Minister to issue Decisions concerning the prices of medicinal products, according to which the prices of pharmaceuticals will be approved on condition that they do not exceed the lowest European price. The words "and the price in the country of origin" have been deleted from the approved text. This retroactive provision is an attempt by the Greek authorities to ratify a Ministerial Decision which has already been annulled by the Council of State, a procedure that is obviously unconstitutional as judged by various recent orders of the above Court. A lengthy legal confrontation between the Industry and the pricing authority therefore seems likely, which will hopefully in the end persuade the Minister to abandon illegal actions and start negotiations. cb

Héctor Jausás and Margot Subirats, Esquires, Jausás, Nadal & Vidal de Llobatera Advocats

After long and difficult discussions, the Spanish Ministry of Health and Consumption and the Pharmaceutical Industry (Farmaindustria) reached an agreement as of November, 2001 with a view to restricting expenditure on medicines and guaranteeing the stability of the sector, and thus avoiding the taking of unilateral decisions by the health authorities. A parallel agreement was concluded with the General Board of Pharmacists Official Associations (Consejo General de Colegios Oficiales de Farmacéuticos).

Under the terms of the first of these agreements, the pharmaceutical industry has agreed to finance a fund intended for research projects in the health field. It has also been agreed to establish new homogeneous groups within the reference price system and to carry out an annual revision of those prices.

The agreement concluded with the General Board of Pharmacists Official Associations deals with pharmacies’ margins and the discounts applying to the National Health System. It also lays down measures to consolidate the use of generic medicines and implement electronic prescriptions. cb

Ian S. Forrester, Q.C., White & Case LL.P. incorporating Forrester & Sutton, Brussels, Belgium

A number of actions are currently pending before the European Courts of Justice and First Instance, as well as German courts, concerning the methods of collecting pharmaceutical sales data in Germany. The question at issue is whether the format used for the collection and presentation of the data, which divides Germany into a number of geographic zones, is eligible for copyright protection. Copyright may extend beyond literary and artistic creations to protect utilitarian works such as maps or lists. EU law grants copyright protection to methods of collecting information and storing it in a database when the database structure is original. However, in these cases, while one party claims copyright over the structure in question, and alleges that others have infringed that copyright, its opponents argue that the structure is in fact an industry standard and therefore ineligible for copyright protection. It is also suggested that the company’s attempt to assert copyright over the structure amounts to abuse of a dominant position, contrary to Article 82 of the EC Treaty.

IMS Health, a worldwide information gatherer, supplies pharmaceutical producers in many countries with information about sales of pharmaceuticals by wholesalers to pharmacies.  How this information is presented varies from one country to another, but standard industry formats are needed to ensure the data is usable and is useful. The data must be broken down into independent geographical areas. In Germany IMS collects data using an industry standard which divides the map of Germany into 1860 zones, each of which contains several pharmacies. The frontiers of each zone always correspond to postal codes. Sometimes one zone contains only one postal code, sometimes several postal codes. The use of these zones ensures that Germany’s strict laws on data privacy are respected, since if sales data were always broken down according to individual postal codes, it would be possible in rural areas to identify how much trade a particular pharmacist did.

IMS developed the zones, which it calls "bricks", in cooperation with the industry, using the knowledge of the pharmaceutical companies' local sales staff. The companies which took part in the process understood that the end-product would be for the general benefit of the industry. Players in the German health care industries also use the zones when gathering, reporting or analysing market data. Thus any company wishing to compete with IMS in the German market for the collection and provision of pharmaceuticals sales data would inevitably have to present its data in the "bricks" format. The opponents of IMS argue that the format has become an industry standard which they should be entitled to use. However, in IMS’s view it enjoys copyright over the "bricks" structure, and it has brought actions for copyright infringement before the German courts to prevent rival information gatherers from presenting competing German market data in a manner corresponding to the same geographic zones. IMS is not claiming copyright over the data which it collects (all data collection companies harvest their raw information independently), but only over the method of sorting and presenting it on a geographic basis. Essentially, what the German courts have been asked to decide is whether use of the geographical delineation of the map of Germany according to the industry norm, for the presentation to customers of commercial data, qualifies for such copyright protection; and, if it does, whether IMS can use it to keep competitors out of the market by refusing to license it to them. (In the UK, where data is collected using a structure based on postcodes, IMS has granted competitors a royalty-free perpetual licence to use the structure). The German courts have referred to the European Court of Justice for advice, but some proceedings in Germany proceed pending the Court’s ruling.

IMS’s claim of copyright over the data presentation structure is based on the German legislation implementing the EU Database Directive(1). The Directive grants copyright protection to "databases, which, by reason of the selection or arrangement of their contents, constitute the author’s own intellectual creation." This language was directed specifically against German legal practice, in order to prevent the German Supreme Court from applying the higher standards which had pertained under previous German copyright law, when protection was only available for a "personal intellectual creation" with a certain "level of creativity." The "level of creativity" is a concept specific to German copyright law and a similar general criterion is not common in the laws of other European states. Indeed, it has been suggested that the criterion does not protect the ability of an average creator. However, when the Database Directive was implemented, the German standard was lowered, since tests as to the qualitative or aesthetic merits of a work could no longer be applied. As the German doctrine put it, the principles of so-called "small-coin protection" had to be applied when considering whether a database was eligible for protection.

However, the Database Directive specifically lays down that the protection it confers is subject to the competition rules. In exceptional cases, a dominant company may be prevented under EU competition law from using its intellectual property rights in such a way as to create a monopoly on an adjoining market. As it happens, IMS is overwhelmingly dominant in the German pharmaceutical data market, and the Commission received a number of complaints from would-be competitors of IMS in Germany, and others, that the company’s assertion of copyright over the brick structure was blocking them from entering the market. If they could not present data in the brick structure format, they would be unable to market their data. However, even an alternative format would almost inevitably be based in some way on the brick structure, since the brick structure essentially derives from German postcodes; and thus it too would encroach upon the alleged copyright. More importantly, customers declined to adopt a scheme other than the one they had agreed with IMS as constituting the industry standard. The Commission took these complaints so seriously that in July 2001 it took the very unusual step of issuing an interim decision requiring IMS to negotiate with its competitors on a licence allowing them to use the "bricks" structure to present or collect their data, in return for payment of a royalty to IMS. On one view of the matter, IMS was undergoing a major encroachment on its IP rights. On another, the Commission was requiring IMS to do in Germany what it was already doing in the UK.

IMS appealed this decision to the Court of First Instance, and won a suspension. Interestingly, the President of the Court of First Instance based his ruling partly on Article 295 of the Treaty, which reads:

However, Article 295 only applies to intellectual property rights that have not yet been the subject of EU harmonisation. Protection of the content and structure of databases has been harmonised by the Database Directive, and since IMS relies exclusively on the Directive to claim copyright over its data format, it is arguable that Article 295 does not apply at all; it certainly does not lead to a presumption that in case of doubt, no obligations may be imposed on the owner of an intellectual property right. As noted above, the case law of the Court of Justice enables the competition rules to be invoked to attack allegedly dominant undertakings which refuse to license their intellectual property rights, and this possibility is specifically admitted in the Database Directive.

The President of the Court of First Instance did not rule on whether IMS was abusing its dominant position by asserting copyright to exclude competitors; he merely weighed the relative impact on all those concerned if the Commission’s July 3 decision took immediate effect. The Commission is continuing to investigate IMS’s behaviour in Germany and elsewhere. The data collection war is far from over. cb

 Footnotes

1) Directive 96/9 on the legal protection of databases, OJ ﴾1996﴿L 77/20.

Editors:

Austria: Schönherr Rechtsanwälte, Tuchlauben 17, P.O. Box 41, A-1014 Vienna;

Belgium: White & Case LL.P. incorporating Forrester & Sutton, 62, rue de la Loi, B-1040 Brussels;

Denmark: Jonas Bruun, Bredgade 38, DK-1260 Copenhagen K;

Finland: Castrén & Snellman, Attorneys at Law, Erottajankatu 5A, FIN-00130 Helsinki;

France: Alain Bensoussan, Avocats, 194 bis, rue garibaldi, F-69428 LYON cedex 03;

Germany: Ehlers, Ehlers & Partner, Rechtsanwaltssocietät, Widenmayerstrasse 29, D-80538 Munich;

Greece: M. & P. Bernitsas Law Offices, 5, Lykavittou Street, GR-106 72 Athens;

Hungary: S.B.G.&K. PATENT AND LAW OFFICES, Andrássy ÚT 113, H-1062 Budapest, Mailing address: P.O. Box 360, H-1369

Italy: Avvocati Associati Franzosi Dal Negro Pensato Setti, Via Brera 5, I-20121 Milan;

Netherlands: Stibbe, Strawinskylaan 2001, NL-1077 ZZ Amsterdam;

Norway: Advokatfirmaet Haavind Vislie DA, Raadhusgaten 27, P.O. Box 359, N-0101 Oslo;

Portugal: Carlos de Sousa e Brito & Associados Advogados, Rua Castilho, ◦712◦ Dto., P-1250-068 Lisbon;

Spain: Jausàs, Nadal & Vidal de Llobatera, Advocats, Avda. Diagonal, 407 bis, E-08008 Barcelona;

Sweden: RydinCarlsten, Advokatbyra AB, Norrmalmstorg 1, P.O. Box 1766, SE-11187 Stockholm;

Switzerland: Bratschi Emch & Partner, Advokaturbureau, Bollwerk 15, P.O. Box 5576, CH-3001 Bern;