IP Views

The Bolar Exception: Roots and Introduction to the Philippine Patent Systemt

July 13, 2009

by: K. P. Ambrocio

Health care that is widely accessible to a developing nation’s growing population is one of the most significant social issues that government policy makers face worldwide. Drug prices in the Philippines have long been considered among the highest in Asia, and locally-owned pharmaceutical companies find it difficult to compete with multinational corporations, who enforce restrictive provisions found in the patent law to protect their patent rights.

When considering how public health issues can affect patent rights, the TRIPs Agreement forms the starting point. Article 8(1) establishes that member states may “adopt measures necessary to protect public health and nutrition.” In consonance, Article 30 provides “Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of a patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third-parties.”

One of the more famous limitations placed on exclusive patent rights by current public health measures is what is commonly referred to as the “Bolar Exception.” Defined in practical terms, the Bolar Exception allows experimental use by generic drug makers so that they can obtain market authorisation while the patent is still in force, and be ready to launch the moment the patent duration runs out.

The “Bolar Exception” derives its name from the famous US Court of Appeals decision Roche Products Inc. vs. Bolar Pharmaceutical Co., (733 F.2d 858.) Bolar, a generic drug manufacturer, used a patented chemical before its patent term expiration, in experiments to determine if its generic product was bioequivalent to Roche’s Valium. Bolar argued that its use of the patented product was not infringement under the experimental use exception to the patent law.

The Court of Appeals for the Federal Circuit, however, rejected Bolar’s contention, holding that the experimental use exception did not apply because Bolar intended to sell its generic product in competition with Roche’s Valium after patent expiration and, therefore, Bolar’s experiments had a business purpose.

Bolar likewise argued that public policy in favor of availability of generic drugs immediately following patent expiration justified the experimental use of the patented chemical because denying such use would extend Roche’s monopoly beyond the date of patent expiration. The court rejected this argument, stating that such policy decisions should be made by congress.

Seemingly as a reaction to the holding of this case, the U.S. Congress eventually passed a law permitting use of patented products in experiments for the purpose of obtaining FDA approval, informally known as the "Hatch-Waxman Act," which established the modern system for FDA approval of generic drugs. In US patent law, the research exemption or safe harbour exemption is an exemption to the rights conferred by patents, that holds special relevance for drugs. According to this exemption, performing research and tests preparatory to regulatory approval does not constitute infringement. This exemption allows generic manufacturers to prepare generic drugs well in advance of the patent expiration.

Recently, in Merck KGaA v. Integra Lifesciences I, Ltd. 545 U.S. 193 (2005), the United States Supreme Court held that the use of patented compounds in preclinical studies is protected under 35 U.S.C §271(e)(1) if there is a reasonable basis to believe that the compound tested could be the subject of an FDA submission and if the experiments will produce the types of information relevant to an Investigational New Drug or New Drug Application.

The same public health issues reverberate internationally. The European Union in fact, has a Community-wide exception. In some countries, such as France and Germany, the exception is not limited to obtaining marketing approval for a generic, but also includes approval on innovative drugs. The Bolar Exception in Indian law is interesting in that it makes no distinction between commerical and non-commerical experimentation. Lately, China’s National People’s Congress is considering amendments to the country’s patent law that would introduce a Bolar Exception.

In the Philippines, we recently passed our own version of the Bolar Exception. Republic Act 9502, An Act Providing for Cheaper and Quality Medicines, provides in part:

“72.4. In the case of drugs and medicines, where the act includes testing, using, making or selling the invention including any data related thereto, solely for purposes reasonably related to the development and submission of information and issuance of approvals by government regulatory agencies required under any law of the Philippines or of another country that regulates the manufacture, construction, use or sale of any product: Provided, That, in order to protect the data submitted by the original patent holder from unfair commercial use provided in Article 39.3 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), the Intellectual Property Office, in consultation with the appropriate government agencies, shall issue the appropriate rules and regulations necessary therein not later than one hundred twenty (120) days after the enactment of this law.”

R.A. 9502, otherwise known as the Cheaper Medicines Act, expressly amends the Generics Act of 1988, the Pharmacy Law, and the Intellectual Property Code of the Philippines. The new law now allows local generic companies to start studying and testing generic equivalents of patented drugs before the expiration of the patent. This will also allow pharmaceutical companies to start the production and sale of a generic drug upon expiration of the patent.

Under the old law, this preparation could only be done after the patent has expired. The whole process of obtaining approval for the drug, takes roughly about three years, effectively delaying the introduction of the generic in the market. In this manner, therefore, a patent-holder’s monoply in local commerce over the drug, and any of its equivalents, were inadvertently extended by this period, outside the duration guaranteed the patent-holder by the law.

The introduction of the Bolar Exception does away with the artificial delay created by the old law and consequently makes it easier for local generic drug makers to springboard onto the market as soon as patents on rival products expire.

Framers of the Bolar Exception anticipate that it will impact the local pharmaceutical industry in much the same way that it did upon its adoption in the U.S., Japan, Canada, Israel, and Thailand, i.e., that local prices of medicine will drop significantly. It operates with the conviction that the solution to skyrocketing prices of medicine lies in market forces themselves – essentially, that by increasing competition from the local industry, pharmaceutical companies will offer a more reasonably priced healthcare regime.

Though it levels the playing field between local and international pharmaceutical companies, labelling the Bolar Exception as an “intrusion” and “limitation” on patent rights may be undeserved. The Bolar Exception, after all, takes away none of the rights that the law affords the patent-holder. At the same time, an unjustly extended monopoly is addressed, empowering the local industry. Possibly, the controversial Bolar Exception, rather than inciting further conflict, is actually the remedy where these competing interests have finally found common ground.

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