Intellectual Property Protection
Single Trademark Policy
The European Commission (EC), supported by the European Medicines Evaluation Agency (EMEA), has taken the position that only a single trademark will be approved for use in connection with each product for which marketing authorization is granted under the centralized procedure. Therefore, applicants should submit a trademark which is valid throughout the Community.
As a result, the process of approval under the centralized procedure would hinge on the clearance of a single trademark throughout the Community, a factor which has no relationship to the safety, effectiveness or quality of a product. In effect, a fourth hurdle to marketing has been imposed and products undergoing the centralized procedure would be discriminated against, as no equivalent obstacle to approval would be raised under the decentralized or national procedures.
PhRMA strongly disagrees with the position taken with respect to a single trademark, and has drawn attention to the fact that there is no basis in Community law to support such a requirement. Instead, there is reason to conclude that such a requirement would, in fact, run counter to Community law and decisions taken by the Council of Ministers and the European Parliament. It may also violate the trademark section of the Trade Related Intellectual Property (TRIPS) provisions of the World Trade Agreement.
The Commission position is also inconsistent with policies on trademarks enunciated by the Council and the European Court of Justice (ECJ). The Community Trademark Regulation does not preclude multiple Community trademarks for the same product, and it preserves the right to seek separate national registrations rather than a Community registration. The ECJ has recognized that producers of medicinal products may have legitimate reasons to use different trademarks for the same product in different Member States. When there is evidence that multiple trademarks have been used to create obstacles to free movement of goods, the court will permit parallel imports that would otherwise infringe national trademarks.
Parallel Trade - Exhaustion of Rights
In 1981, the European Court of Justice (ECJ) issued a controversial interpretation of the doctrine of exhaustion of patent rights. The ECJ stated that if a product was placed on a market in a Member State where patent protection was not recognized, then the patent holder by that act would exhaust its patent rights with respect to that product in all other Member States. This decision was recognized as inherently unfair in that it penalized the innovator and rewarded the copier in such cases. However, the ECJ upheld the 1981 ruling in the Merck Primecrown case in 1996.
Recently, under the UK Presidency, the EU Internal Market Council in its Conclusions on the Single Market in Pharmaceuticals (May 1998) stated that "the development of the single market requires Member States to take account of European Union dimensions and that ways need to be found within the Treaty to address the question of the price differentials between Member States and the issue of parallel trade in this sub-sector."
In keeping with the Council's instructions, the Commission in its Communication on the Single Market in Pharmaceuticals [Com (98) 588 final (Nov. 25, 1998)], stated that Member States when controlling their public health expenditures are expected to adopt measures that do not distort the operation of the market leading to a reduction in the competitiveness of this sector in a global context."
The EU policy of testing for quality at point-of-entry into the EU each batch of pharmaceuticals imported from the US poses a significant non-tariff barrier to trade. No equivalent barrier exists to the import of pharmaceuticals from the EU into the US. The testing obligation is costly and time consuming, and this delays market access and increases market costs - and this places US-based pharmaceutical manufacturers at a distinct competitive disadvantage.
Furthermore, other countries are following the EU lead and are adopting similar batch testing at the border requirements for pharmaceutical imports, as is evident from the recent notification to the World Trade Organization by the Government of Switzerland.
Border testing poses immediate practical concerns to all US-based drug manufacturers exporting to the EU, and is particularly damaging to US-based vaccine manufacturers. In the case of vaccines, improperly conducted testing and inherent false positive results in mandated testing can prompt a second battery of tests, further adding to cost and further delaying market access.
Despite expectations, the recently concluded Mutual Recognition Agreement (MRA) with the EU offers no relief to the U.S. pharmaceutical industry. The MRA did not suspend such testing, nor will it in the foreseeable future. The batch testing may cease by December 2002, at the conclusion of the MRA equivalency determination phase -- but only if both parties complete and agree to their respective equivalency determination findings. Yet, there is no guarantee that the deadline for concluding the equivalency determinations will be met or that agreement on findings will be reached. If not, then U.S. pharmaceutical exports will continue to be subjected to this EU barrier to trade well into the next decade or even longer.
Potential Exports/Foreign Sales
Trademark: The immediate impact of the policy is to force companies to pay a registration fee of Ecu 140,000 for each application, including duplicate applications for a second trademark. And these files will require no additional evaluation whatsoever. It is not possible to provide a reliable estimate of the potential market effect for PhRMA member companies in the European Union if their costly high tech and biotech products are denied approval under the current policy.
Parallel Trade: PhRMA members estimate that parallel exports from Spain alone could be as much as $800 million. There are no absolute data on the current impact of parallel trade, however.
Border testing: The immediate impact of this practice is to force each U.S. pharmaceutical exporter to pay on the average $2 million annually for the EU border testing. The testing burden also ensures significant market access delays of up to 4 or more months for a U.S.-based vaccine manufacturer. A typical potency test for vaccines can take up to two months to complete. If re-testing is required due to the inherent likelihood of a technical rejection of a given batch, then a further delay in market entry of an additional 2 or more months must be factored. Finally, the EU testing not only leads to significant costs and delays to market entry, it also substantially reduces shelf life - hence the marketing and patent life - of U.S.-made medicinal products in the EU marketplace. For example, a U.S.-made vaccine can lose nearly a full year of marketing life in the EU due to this unnecessary trade barrier - 4 or more months of testing plus the 4 or more months of shortened shelf life.