Unintended Consequences: How Introducing a Manufacturing and Export Exemption to Supplementary Protection Certificates Would Weaken Global Standards of IP Protection and Result in Direct Losses to Europe's Research-Based Biopharmaceutical Industry

Abstract

Background: In October 2015 the European Commission (EC) released its report Upgrading the Single Market: More Opportunities for People and Business, which includes a stated intention to explore an option for implementing a Supplementary Protection Certificate (SPC) manufacturing and export exemption, expected to boost economic growth and job creation within the generics and biosimilars industry. However, such an exemption’s impact on the innovative research-based biopharmaceutical industry and on the international level of intellectual property (IP) protection remains in question.

Methodology: Using evidence from the existing literature, a sample of 30 top-selling drugs, and France and Sweden as the primary source for SPC status within the EU we construct an econometric model and estimate potential annual losses to the global and the European innovative research-based biopharmaceutical industries.

Results: This study finds that implementation of an EU-wide SPC manufacturing and export exemption would potentially result in annual losses ranging between USD2.675 billion and up to USD5.35 billion to the global innovative biopharmaceutical industry, with approximately USD1.34 billion to USD2.27 billion of these attributed to the European innovative biopharmaceutical industry. Translating these losses to current levels of biopharmaceutical sector employment and R&D investment the effect of the introduction of an EU-wide SPC manufacturing and export exemption could be between 4,500-7,700 direct job losses (with an additional 19,000-32,000 indirect job losses) and a decrease of between EUR215 million to EUR364 million in R&D investment.

Conclusion: In light of these findings, we conclude that a manufacturing and export exemption is likely to have a detrimental effect on the European research-based biopharmaceutical industry and is unlikely to provide a significant and sustained positive economic impact on the European generics industry.

Keywords: SPC, Supplementary Protection Certificate, European Commission, Upgrading the Single Market, manufacturing and export exemption, intellectual property protection