Legal Commentary

“Health insurance funds are condoning patent infringement”

Interview with Christian Stallberg: Effectively enforcing second medical use claims is difficult. In Germany, this is because of the complex interplay between pharmaceutical, medical and patent law. The partner from Düsseldorf law firm Novacos explains.

8 June 2021 by Konstanze Konstanze (Journalist)

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JUVE Patent: What are the major regulatory challenges for originators when it comes to enforcing a second medical use claim in Germany?
Christian Stallberg: Firstly, pharmaceutical law has special characteristics. As a rule, when a generic manufacturer wants to have a generic product approved, it refers to the originator’s reference product. Pharmaceutical law stipulates that the generic manufacturer automatically receives all indications of the original product. In other words, any second medical use claims that a patent may still protect. But if this principle were to be adhered to, the patent would make marketing impossible.

There are therefore special regulations that allow the generic manufacturer to dispense with patent-protected second medical use claims in the approval. This is often referred to as “skinny labelling”. In the past, it was not entirely clear whether the indication was only ‘concealed’ in the text of the summary of product characteristics, or was not actually part of the approval. The CJEU ruling in the pregabalin case has since clarified this. Generic companies are then granted a restricted approval, meaning that a generic drug is only approved for the indications that are no longer patent-protected and not for the second medical use claim.

Christian Stallberg

Do the regulations also prevent off-label use?
In principle, the generic drug may only be sold for the indications for which it is approved. Selling or advertising the second medical use claim would be prohibited under pharmaceutical law. If a doctor prescribes a drug outside the approved field of application, however, this is permissible under medical law. But the medical practitioner must clearly explain to the patient why he or she is not prescribing the drug approved for the treatment. There must be a medical justification for this.

In addition, health insurance funds are only actually allowed to pay for the medicines approved for the prescribed indication, unless there is no approved alternative. However, in the case of second medical use claims, this does not serve as a justification, because there is always an original product approved for the patent-protected indication.

So why is enforcement failing in practice?
The problem lies in what’s known as the aut idem mechanism. Under social law, pharmacies in Germany are obliged to dispense a generic drug if there is a discount agreement with the patient’s health insurance, or if the original drug is not one of the four cheapest medicines with the active substance. The latter is rarely the case. The substitution obligation applies regardless of whether the generic drug is approved for all indications of the original.

The prescribing doctor can only prevent substitution by prescribing the original drug and marking on the prescription that the pharmacy is not allowed to dispense a generic drug. But this is the exception rather than the rule, because SHI-accredited doctors are also subject to the efficiency principle. Often, they do not dare to prescribe the more expensive original for fear of being held liable for overspending by the health insurance funds.

Why aren’t health insurance companies in the crossfire more, since their practice supports off-label use?
The mechanism described means that the responsibilities of the individual players are concealed. In the end, no one wants to be responsible. The doctor leaves the choice of drug up to the pharmacy, the pharmacist must adhere to his or her discount agreements or social law, and the health insurance funds point to the doctors and pharmacists as responsible. All this promotes off-label use, through which an originator loses market share even for indications that are actually still patent-protected.

“The responsibilities of the individual players are concealed. In the end, no one wants to be responsible”

From my point of view, health insurance companies are the main players, and they exert a controlling influence on doctors and pharmacies, especially through discount agreements. This tendering practice has already led to public procurement disputes between originators and health insurance funds. However, I do not know of any case where manufacturers have taken action against health insurance companies for patent infringement. But, in my view, this would be highly likely if the health insurance company put an active substance with a patent-protected second medical use claim out to tender and awarded the contract to a generic manufacturer. Given the foreseeable consequences of such a discount agreement, they are condoning patent infringement.

But I understand the reluctance of originators to take action against health insurance companies. After all, they have to continue working with them while the generic manufacturers are the competition.

What can generic companies do to avoid patent infringement?
According to Düsseldorf Higher Regional Court’s ruling in the fulvestrant case, generic companies cannot simply close their eyes to the mechanisms of the statutory health insurance system. It held that patent infringement can even exist if there is no “purposeful preparation”. In other words if, for example, the protected indication itself is not listed in the package insert and the summary of product characteristics, but the generic manufacturer makes use of other circumstances.

But proving this in infringement proceedings is difficult. How can it be done?
Patent infringement may exist, for example, if a generic manufacturer takes part in a health insurance company’s tender for a discount agreement that does not differentiate according to the individual fields of application. This is because, if the pharmaceutical company is awarded the discount agreement for its generic product, the imitation product would automatically be dispensed in the pharmacy.

At the same time, the generic manufacturer would have to proactively inform doctors – for example via product advertising – that its drug may not be used for certain second medical use claim-protected indications. The company cannot assume that everyone in the healthcare industry is aware of the patent-related restrictions. On the contrary, those in doctors’ surgeries, hospitals and pharmacies usually assume that a generic drug is approved for all the same indications as the original product. This is the normal case.

How can originators best secure their claim?
Ideally, the indication for which the originator applies for approval is worded in exactly the same way as the use protected in the patent application. But this is not always the case. Patent law asks for inventive step, whereas the law on product approval demands clinical trials proving the safety and efficacy of a product in a field of application. This perspective is not congruent. Clinical trials usually only happen once patent protection is in place. Thus, it may be the case that the wording of the indication in the approval differs from the patented use.

Does the same apply to biologics?
For pharmaceutical products manufactured using biotechnology (“biologics”), the aut idem regulation does not apply in principle. This means that the original product must not be substituted by biosimilars. Given the economic importance of the biologics market, however, the legislator has stipulated that the aut idem mechanism will also apply from summer 2022. The details are still being worked out. But in view of the political resistance, I’m not sure it will happen in the end.

What should the legislator do?
The easiest solution would be for the legislator to change the aut idem regulation. What is missing is a reference in Section 129 of the Fifth Book of the Social Security Code that makes it clear that pharmacies may not substitute a product for a generic if the indication is still protected by a second medical use claim.

Do these regulatory issues play such a significant role in other countries?
Yes, but the details differ from country to country. This is because, among other things, social laws in Europe are not harmonised. The EU Commission cannot therefore oblige social insurance agencies such as health insurance funds to pay, or not pay, for a certain medicine.

The easiest solution would be for the legislator to change the aut idem regulation

Since the healthcare sector involves high costs, no member state wants to hand over authority to the EU. Large countries like Germany or France in particular have no interest in small EU states having a say in whether or not a drug has a strong benefit for a certain illness. This is currently evident in the discussions surrounding a gradual harmonisation of the assessment procedures for pharmaceuticals.

On the other hand, it of course makes no sense that pharmaceutical companies must fulfil different requirements in terms of trials in each EU member state for health insurance funds to cover the costs. Ultimately – as for drug approvals – no different standards can apply, per se. Either a drug has a medical (additional) use, or it does not.

Do you think the chances of EU-wide harmonisation are poor?
Yes, the chances are small. In the end, there will probably only be agreement on voluntary standardisations or generous powers of deviation for the EU member states. That would not make a big impact.

This interview was conducted by Konstanze Richter