Data Exclusivity: Further Protection for Pharmaceuticals

by Jonathan de Ridder

What is data exclusivity?

Regulatory agencies such as the Australian Therapeutic Goods Administration and the US Food and Drug Administration require pharmaceutical companies to submit extensive data establishing the safety and efficacy of a new drug before approving it for sale. This data arises out of many years of research and clinical trials and is very expensive for the originator of the drug to produce.

Data exclusivity laws typically provide that, for a specified period (5 years in Australia), the regulatory agency must not, without the originator's consent, access the orginator's data when considering an application from a generic competitor seeking approval to sell an equivalent, competing product.

Generic competitors are rarely willing to pay to produce their own data, and the originator is unlikely to consent to its data being used. Therefore, a data exclusivity period effectively amounts to a monopoly period for the originator.

In the absence of a data exclusivity period, generic drugs or drugs produced under compulsory licences could be introduced onto the market on the basis of bioequivalence tests.

International obligations in relation to data exclusivity

The most important international agreement dealing with the use of data submitted for regulatory approval is the World Trade Organisation's Agreement on Trade Related aspects of Intellectual Property rights (TRIPS). Article 39.3 of TRIPS obliges countries to protect against unfair commercial use of confidential data on new chemical entities submitted by companies to obtain approval for marketing new drugs from a regulatory agency.

Article 39.3 is important because TRIPS obligations are linked to the trade advantages which flow from WTO membership. A WTO member who fails to comply with TRIPS may lose those trade advantages. This creates a powerful economic incentive to comply. Consequently, almost all WTO member states have enacted legislation in response to TRIPS.

This does not mean that all WTO member states have enacted data exclusivity laws as described. This is because Article 39.3 allows considerable discretion as to what member states must do. It does not specify a minimum term of protection. More importantly, it is not clear whether the phrase "unfair commercial use" includes use of the originator's data by the regulatory agency to assess applications by generic competitors. This has been argued not to amount to "unfair commercial use" so long as the regulatory agency does not disclose the data to the generic competitor. Under this interpretation, Article 39.3 does not require data exclusivity. On the other hand, the research-based pharmaceutical industry, the United States Trade Representative and others have argued strenuously that Article 39.3 does require data exclusivity.

Data exclusivity in Australia
In Australia, the Therapeutic Goods Amendment Act 1998 (Cth) (the Act) established a 5 year data exclusivity period for new products containing pharmaceutical actives approved after 17 April 1998. The data exclusivity period begins on the date of marketing approval.

The Act provides data exclusivity in relation to therapeutic goods which contain a "new active component". This is defined as a substance having a therapeutic effect. The Explanatory Memorandum to the Act states that "substance" may include "a biological product or compound". This suggests that the data exclusivity period applies to biotechnology products requiring TGA approval.

Data exclusivity is only provided in relation to new active components which have never been included in the Australian Register of Therapeutic Goods. Therefore, data exclusivity is not provided for new uses or new formulations of existing compounds.

Data exclusivity laws around the world

United States – up to 5 years
In 1984 the US became the first country to enact data exclusivity legislation. The Drug Price Competition and Patent Term Restoration Act, commonly known as the "Hatch-Waxman Act", actually relaxed the level of protection afforded to testing data in the US. Previously, testing data submitted to regulatory agencies had received indefinite protection as trade secrets.

Under the Hatch-Waxman Act, applications for approval of new drugs receive 5 years of data exclusivity. Applications for the approval of new indications for an existing drug receive 3 years of data exclusivity.

European Union – 6 to 10 years
In the EU, the period of data exclusivity is 10 years from date of first approval in the European Community for EU registrations and 6 to 10 years for national registrations. The 6 to 10 year range for national registrations reflects differences between the national regulatory regimes of the EU members. The EU is considering harmonising protection to 10 years for all national registrations.

New Zealand – 5 years
New Zealand implemented Article 39.3 of TRIPS via the Medicines Amendment Act 1994 (NZ), effective as from 1 January 1995. Generally, the protection period is 5 years. There is no data exclusivity period for data relating to new uses or formulations of old active ingredients.

Japan – 4 to 10 years
In Japan, the data exclusivity period varies from 4 years (for medicinal products with new indications, formulations, dosages, or compositions with related prescriptions) to 6 years (for drugs containing a new chemical entity or medicinal composition, or requiring a new route of administration) to 10 years (for orphan drugs or new drugs requiring pharmaco-epidemiological study).

China – 6 years
Under Article 35 of the Implementing Regulations of the Drug Administration Law of 4 August 2002, China provides 6 years of data exclusivity as from the date of marketing approval.

The practical effect of data exclusivity laws

The patent system remains the primary mechanism for stimulating and rewarding pharmaceutical innovations.

Patents, as a general rule, last for 20 years, and the time taken for a new pharmaceutical to go from patent application to regulatory approval is usually less than 15 years. Many patent systems, including Australia's, allow for the extension of the patent term for new pharmaceuticals which have taken considerable time to obtain regulatory approval. A patent term extension extends the life of a patent by up to 5 years, so a five year data exclusivity period will usually expire before the patent monopoly.

Accordingly, a data exclusivity period will only extend the originator's monopoly where the drug has taken an unusually long time to be approved. In practice, data exclusivity laws will have a practical effect in a limited number of situations. A study by IMS Health on the effect of data exclusivity laws in the EU concluded that "very few high-selling drugs gain further marketing monopoly from the provision afforded by data exclusivity post European approval." This was especially so where the patent term had been extended via an EU supplementary protection certificate (SPC). Drugs gaining significantly from data exclusivity were usually those which were unable to get an SPC or those which took an exceptionally long time to gain regulatory approval.

Among the notable exceptions was Aventis' drug leflunomide (ARAVA™), for rheumatoid arthritis. Leflunomide took an unusually long time to develop and thus had limited effective patent life left at launch. Even though Aventis received an SPC for leflunomide, by the end of the extended patent term the market monopoly period was far less than average. Aventis' market monopoly was extended a further five years as a result of data exclusivity. IMS Health concluded that "[w]ithout this data exclusivity period, on commercial grounds this innovative drug may never have reached the market."


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