By Bruno Henggi, Interpharma, Switzerland

The protection of intellectual property is the backbone of the research-based pharmaceutical industry. The most research-intensive sector of the economy is particularly dependent on being able to sustain financing for research and development (R&D) by means of effective intellectual property rights. However, until recently Switzerland has fared more poorly in this area than is commonly thought. The revision of the Therapeutic Products Act, which has entered into force on 1 January 2019 offers an opportunity for Switzerland to make up lost ground.

When news of the Therapeutic Products Act was released in November 2012, almost four years had passed since the last major political dispute over intellectual property. In December 2008, the Swiss Parliament ended a decade of intense and polarised dispute with the decision in favour of a new exhaustion regime in patent law. Switzerland opened itself up to unilateral regional exhaustion in the European Economic Area (EEA), but maintained its national exhaustion on goods with prices fixed by the government. Once again, the Swiss Parliament had demonstrated an understanding of the importance and needs of Switzerland as a centre of research by confirming the national exhaustion of patents on medicines.

However, the forthcoming revision of the Therapeutic Products Act would no longer simply defend territory in the realm of intellectual property and prevent poor legislation, but rather implement a positive agenda, introduce new research incentives, and strengthen Switzerland’s competitiveness and growth.

Voluntary harmonisation

The pathway for preparing the legislation was set in the administration. From the late 1980s and early 1990s, the Swiss Federal Council sought to ensure harmonisation of the Swiss and European Community law. The assumption was that the competitiveness of Switzerland as a R&D centre was heavily dependent on compatibility with the laws of other European countries. Unhindered access by Swiss companies to the EU market was clearly one of the key goals shared by politicians and businesses.

Since the 1990s, the pharmaceutical and medical technology industry have been steadily increasing exports, value, and employment, and has become one of the main pillars of prosperity. With the debt and currency crises in the EU and the US, however, the continuation of this success story was in no way assured. A policy of harmonising the framework conditions, in particular with the EU, and voluntary harmonisation alone could not secure the attractiveness of Switzerland. On the contrary, these conditions alone threatened the viability of Switzerland as a business centre. What was required was a more ambitious regional economic policy with the goal of improvement with respect to the competition.

IPR agenda of the research-based pharmaceutical industry

When drafting the Therapeutic Products Act (HMG), the aim of the legislature was not only to describe the health monitoring task of therapeutic product control, but also to state that the Act was intended to create attractive conditions for pharmaceutical research in Switzerland.

Overall, Switzerland has a solid healthcare system, a world-class pharmaceutical industry, considerable medical technology, a strong footprint in R&D, and the country benefits from health tourism. For its future competitiveness, however, the Swiss healthcare industry needed a policy consistent with international standards and oriented towards improvement. Europe can no longer serve as a reference point for a policy of voluntary harmonisation. Indeed, many European countries focus on short-term budget restructuring instead of quality improvement.

Switzerland has a long tradition of clinical research and the availability of excellent university clinics. However, a set of factors had contributed to a decline in clinical trials, the number of which had fallen significantly over recent years. This development arose due to several reasons, including a marketing approval condition that the clinical trials must be conducted in the respective country, for example, in China or Russia. Lengthy approval procedures in Switzerland have also had negative impacts. Of course, reversal of the decline in the number of clinical trials could not be accomplished with a single measure, but required a programme of targeted improvements.

Intellectual property was a missing piece of the puzzle. The revision of the Therapeutic Products Act provided an excellent platform for the improvement of research incentives. Switzerland, a country nourished by the raw material of knowledge, surprisingly fell behind in this field compared to other important locations for pharmaceutical research.

The following concerns in relation to the Health Act were considered:

• Switzerland has pursued research on orphan diseases as a freeloader. While the United States had already established market exclusivity for orphan drugs with the Orphan Drug Act of 1983, and the EU followed suit in 2000, still no comparable legislation in Switzerland provided research incentives for orphan drugs.
• Research has determined that a single substance can be effective in completely different clinical situations. However, only few were willing to invest in high-risk research, especially if the drug had been on the market for some time and the patent protection period was nearing its end or expired. A measure to provide full proprietary protection for new indications of already approved active substances would therefore have been strongly beneficial for Swiss medical research as well as for Switzerland as a location for research centres. Switzerland had the opportunity to steal a march on its rivals as research centre locations.
• Until 2008, Article 14(3) of the HMG specified that Swissmedic (the Swiss Agency for Therapeutic Products) would not approve a medicinal product as long as the original product was still under patent protection. The Institute had fought against this provision, which it viewed as an irrelevant task in the task portfolio. As a result, the obligation was removed, without an alternative for the superseded HMG provision. It became burdensome for patent holders to closely monitor whether marketing approval decisions for second applicants affected their rights. To address this issue, a publication solution which would require Swissmedic to publish the receipt of market approval applications was under discussion. Indeed, it would create the necessary transparency and legal certainty for both innovators and generic manufacturers and, in particular, would give the rights holders the opportunity to take action before their IP rights were infringed.

Boosting Switzerland as a centre of pharmaceutical R&D

The message from the major centre-right parties regarding the government proposals and placing Switzerland as a research centre location was clear. CVP, FDP, and SVP, representing 5 out of 7 members of the national government, wanted to build more ambitious policies, going beyond the voluntary harmonisation with the EU. The proposals presented by the Swiss Federal Council were judged to be inadequate to strengthen innovation incentives for the manufacturing industry and to improve Switzerland's position as a centre for pharmaceutical research. All three parties called for a thorough revision of the legislation.

The objective of positioning Switzerland as a research and innovation centre fell on fertile ground in Parliament.  Ten years of data exclusivity period for new indications of known active substances was adopted by a vote of 130 to 56. The Swiss Parliament was also sympathetic to the provisions on publication market approval applications, which were intended to enable innovators readily to obtain an overview of market developments and, if necessary, resolve disputes before generic launch.

Only the topic of market exclusivity for orphan drugs was controversial. Although Parliament wished to promote such medicines, it took the view that all preparations, whether those approved by the FDA or the EMA, should be available to patients in Switzerland. As a compromise, a term of 15 years’ data exclusivity for orphan drugs was established. This differs from the EU regulation, which offers a ten-year market exclusivity period for orphan drugs.

Finally, following the EU example, the Swiss legislator also decided to provide for an additional 6-month paediatric extension of proprietary protections, by either extending the term of a pending or granted SPC or by way of a new paediatric certificate, which is linked directly to the term of the basic patent. These amendments to the Swiss Patent Act and Patent Ordinance are based on a revision of the Therapeutic Products Act, mandating the need to carry out appropriate clinical trials in the paediatric population.

New indications – going beyond the EU standard

If a company in the EU develops a new indication for an approved active substance when that company is not the same one that received the initial authorisation for the active substance, then 10 years of proprietary protection will be granted. The provision adopted by the Swiss Parliament is the same as that for the EU, with 10 years of protection if the new indication comes from another company. It however goes further if the new indication comes from the same company that had received the initial authorisation. The EU will grant only one year in this latter case, which is inadequate to serve as an incentive. Since often no or inadequate patent protection exists for new or further developments of an already approved active substance, a sufficiently long period of proprietary protection represents the only realistic incentive for the company. No second applicant can access the data during the protection period. The new provision takes this situation into account, and postulates ten-year proprietary protection for a new indication, which will require a complete regulatory dossier and an investment of hundreds of millions of Swiss francs.

Lessons for Europe?

While the European Union seems to be backtracking on its commitment to strong IP framework, by adopting policies like the SPC manufacturing waiver, its competitors go in the opposite direction. Switzerland used to learn from the EU’s high IP standards, but is now setting up its own, more ambitious agenda to foster and strengthen pharmaceutical research and development. It should be remembered that according to the European and Global Innovation Index, Switzerland is both European and world champion in innovation. Before taking decisions that risk undermining the IP framework too promptly, the EU should perhaps look at countries like Switzerland that increase incentives to innovate with a view of reinforcing the global competitiveness of Switzerland as a research centre and of the Swiss pharmaceutical industry.

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New IP provisions in Switzerland as of 1 Jan. 2019

Swiss Federal Act on Medicines and Medical Devices

(Therapeutic Products Act, HMG)

Art. 11b Proprietary protection in special cases

¹ Submission for a medicinal product with one or more known active substances, documentation on new indications, routes of administration, pharmaceutical forms or dosages, or for its application to a new target species shall be protected for a period of three years.

² For a new indication, the period of protection is set by the Institute to 10 years upon request if significant clinical benefit can be expected versus existing therapies and the indication is supported by extensive clinical trials.

³ Upon request, the Institute shall grant a ten-year proprietary protection period for a medicinal product specifically and exclusively for paediatric use in accordance with the paediatric investigation plan unless proprietary protection exists for another medicinal product authorised by the Institute with the same active substance for the same specific paediatric application.

⁴ In the case of an important medicinal product for an orphan disease, the Institute shall upon request grant a fifteen-year proprietary protection period.

Art. 67

⁹ As soon as it has received an application for authorisation of a medicinal product, the Institute shall publish the indication, the active ingredients of said medicinal product, as well as the name and address of the applicant, provided that this publication does not conflict with secrecy interests that warrant protection.

Patent Act

Section 2:

Extension of the period of supplementary protection certificates for medicinal products

 Art. 140n

¹ The Swiss Institute of Intellectual Property (IIP) shall extend the period of protection (Article 140e) by six months if the authorisation (Article 9 HMG) of a medicinal product with the product:

² The protection period of a certificate can only be extended once.

Section 2a:

Paediatric supplementary protection certificates for medicinal products

Art. 140t

¹ The IIP shall grant a paediatric supplementary protection certificate (paediatric certificate) for an active substance or an active substance composition of a medicinal product with a term of six months from the expiration of the maximum period of validity of the patent if the authorisation (Article 9 HMG) of a medicinal product with the product:

² A paediatric certificate will only be issued if there is no extant supplementary protection certificate in accordance with Article 140a(1).

³ Article 140b(1) shall apply mutatis mutandis.

⁴ The protection period of a paediatric certificate can only be extended once.