The amendment to the Patents Law sponsored by Minister of Justice Gideon Sa’ar still has some way to go, and there will be a battle over it in the pharmaceuticals industry, but last week the amendment reached a significant stage when the Knesset passed it on first reading.
The dispute over the amendment is chiefly between the original drug industry (the ethical companies) and the generic drug makers. There is also the public interest in promoting competition in the drug industry and bringing down prices.
Today, when a drug company registers a patent, it receives exclusivity for twenty years. After this period, exclusivity can be extended for a further five years. During the extension, generic drug makers may prepare a generic copy of the drug in question, but may not produce or market it. This means that even when the market for the drug is opened up to competition at the end of 25 years, the generic version will not be on sale immediately.
The amendment is designed to change this situation in two respects: sales in Israel, and sales overseas. At the local level, the generic drug companies will be allowed to produce and sell a generic version of the patented drug in the final six months of the exclusivity period, and to deliver it as soon as the period ends. The Ministry of Justice says that the bill is intended "to enable pharmaceutical companies in Israel to produce generic drugs more efficiently and faster than they can today, which will lead to a wider range of generic drugs at low prices and improve competition." Lower prices are expected to lead to expansion of the range of drugs available in the basket of drugs in the public health system, and to save public funds.
On the international level, the change is dramatic. In the last five years of the exclusivity period, Israeli companies will be able to produce and sell generic versions of drugs overseas, in countries in which there is no patent protection.
A battle is taking place over the bill between its promoters, the Manufacturers Association of Israel, and Teva and other companies on one side, and the original drug companies, the multi-national companies operating in Israel represented by Pharma Israel, on the other. "The main aim of the amendment is to strengthen the drug industry in Israel. It’s important for drug manufacturers that have offices in Israel and in Europe," says Ron Tomer, who is president of the Manufacturers Association of Israel and co-CEO of Unipharm, which produces generic drugs.
According to Tomer, generic versions bring down the price of drugs by 50-70% on average in the first year, and after three to five years by 80-90%. "Every day that a generic drug comes out earlier means a drop in prices and a saving to public funds, and increases the availability of the drug. First and foremost, the beneficiaries are the consumers," he says, adding, "The minister of justice backed the amendment, realizing that it boosts competition. He understood that Israeli citizens are faced by monopoly companies."
Lawyers specializing in this area explain that the amendment’s significance is mainly in its international aspect. Adv. Tal Band, managing partner at S. Horowitz & Co. and an expert on intellectual property who represents the Manufacturers Association, says, "The greatest significance of the change lies in the fact that the European Union changed the law three years ago. While European drug companies can sell generic drugs around the world during the extension period, anyone producing generic drugs in Israel cannot. The generic drugs produced in Israel are mainly for export and less for the local market, and so it’s important to bring Israeli law into line." Band points out that the first aim mentioned in the preamble to the bill is to improve the competitiveness of the Israeli generic drug companies versus the foreign generics companies.
"The big drama is allowing the generics companies to produce for marketing outside of Israel before the end of the exclusivity period. The amendment enables them to compete against other generics companies, and improves their financial position in international competition," says Adv. Asa Kling, a lawyer and patent attorney, who heads the intellectual property practice at Naschitz, Brandes, Amir & Co., and who was formerly Director of the Israel Patent Office and Commissioner of Patents, Trademarks and Designs.
Kling adds that if the amendment passes in its existing form, it will represent "a significant shift in the balance - the amendment goes to the core of the generics industry." Kling expresses doubt, however, that the amendment will remain as currently drafted, because of the multiplicity of interests and the campaign by the original drugs companies.
As mentioned, opposition to the amendment to the Patents Law is led by Pharma Israel, which represents nineteen multinational companies that produce original drugs and are active in Israel. The significance for these companies, among which are Pfizer, Merck, AstraZeneca and Sanofi, of shortening the period of exclusivity under patents, is considerable financial loss, after they have invested billions in developing each drug.
In the view of Pharma Israel, the demand that conditions for the Israeli companies should be brought into line with those enjoyed by foreign companies in overseas markets ignores the difference between the state of affairs in Europe and that in Israel, among other things in the duration of the patent extension. In Israel, the period is generally shorter than in Europe, and the amendment will widen the gap. In addition, the procedure for registering a drug in Israel takes longer than in Europe, and is dependent on registration overseas.
Pharma Israel’s position is that the amendment could delay the arrival of new drugs in Israel. It points to research according to which the European arrangement could mean the loss of thousands of jobs, and has led to a decline in investment in research and development of €215-363 million.
Pharma Israel CEO Kobi Tzoref warns of a worsening in the waiting period for registering new drugs, when dozens of drugs wait nearly two years for registration. He says that the amendment shortens the period of patent protection. "This is liable to harm severely the incentive to give the Israel public access to innovative drugs," he says. "Only a few days ago the court called on the legislature to improve the protection afforded by extension of the validity of patents on drugs, because the current arrangement harms the companies."
"Perhaps we won’t be ranked with the US and Europe"
Tzoref claims that Israeli lawmakers have been misled. "They took a directive from abroad and reproduced it as is, omitting all the protections that exist in Europe for innovation and for the public interest. The amendment to the law will reduce the scope of protection given by extensions to the validity of patents in Israel, so that perhaps it will no longer pay to bring drugs here immediately after FDA approval.
"If until now efforts were made to bring drugs to Israel as soon as approval was received from the FDA and from its European counterpart, the amendment to the law will widen the existing gap. It could be that we’ll no longer be ranked with the US and Europe, but will receive drugs with a delay of three to four years. This would cause severe harm to the public. The State of Israel, which flies the flag of innovation in technology and biotech, and invests large resources in these areas, needs to find a way of preserving its advantage as an environment that protects the principles of intellectual property."
Adv. Liad Whatstein, who represents most of the international pharma companies that invest in pharmaceuticals research, adds that Israel gives limited protection in comparison with what is regarded as the norm for patent extensions. "A country like Israel, with an economy based on technological innovation, cannot afford to give to innovation patent protection that does not meet international standards."
Published by Globes, Israel business news - en.globes.co.il - on August 25, 2022.
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