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July 29, 2019

Recent Important Decisions on Regulatory Requirements for Parallel Trade in the EU

Advisory

Ordinarily, medicinal products can only be placed on the market in the EU if they have a valid marketing authorisation in the relevant Member State. However, within the EEA (28 EU Member States, plus Iceland, Liechtenstein and Norway), the principle of free movement of goods applies, meaning that, subject to exceptions such as the imposition of proportionate restrictions to protect public health, Member States cannot erect barriers to free movement of goods once they are lawfully on the EEA market. IP rights are another relevant factor, but such rights are not covered in this article. Therefore, once a product has lawfully been placed on the market in the EU, it is possible for third parties to move that product between Member States, subject to certain requirements. This is known as parallel trade.

Requirements for Parallel Trade

The Court of Justice of the European Union (CJEU) has stated that the requirement to have a marketing authorisation to place medicinal products on the market is subject to exceptions, and national competent authorities would be obstructing parallel trade without proper and proportionate justification, if they required parallel traders of certain products to satisfy the same requirements as those necessary for a full marketing authorisation. Therefore, a simplified approval procedure applies where an authorised product that is lawfully on the market in one Member State is imported into another Member State, provided the imported product is identical or sufficiently similar to an authorised Reference Product in the Member State of destination.

The reason for allowing this form of simplified procedure is that if the products concerned are essentially the same, the information required to ensure public health is protected is already available to the competent authorities of the Member State of destination by virtue of the first marketing authorisation for the Reference Product in that Member State. There is, therefore, no need to repeat this process for the imported product. The theory that is applied is that, in these circumstances, the parallel traded product enters the country of destination under the "umbrella" of the existing marketing authorisation for the Reference Product. The question that has given rise to much case law in the European Court is in what circumstances can the import be treated as sufficiently similar so full assessment is not needed in the country of import?

Early case law of the CJEU on this issue concerned identical products placed on the market by the same company or companies within the same corporate group. The fact that the products had a "common origin" created an assumption of conformity in respect of the two products and this was viewed as necessary to allow the imported product to rely upon the authorisation of the Reference Product and justify import without further particulars being required.

In Smith & Nephew, however, the imported product and the Reference Product were manufactured by different legal entities, albeit under a licence granted by the same licensor. This was considered by the CJEU to be akin to having a common origin, and so the products were deemed "sufficiently similar" for the purposes of parallel importation, provided they had the same formulation and the same therapeutic effect.

In Rhône-Poulenc, the CJEU clarified the requirement for "same formulation", and determined that products will be considered as "sufficiently similar" if their active ingredients and therapeutic effects are the same, even if the excipients are different and, therefore, the formulations of each cannot be said to be the same.

As such, a parallel import licence can normally be granted if it can be shown that the imported product and the domestic Reference Product have the same formulation (although they may have different excipients) and the same active substance, and have the same therapeutic effect.

Reference and Generic Products

In 2004, the requirement of "common origin" of the imported product and the Reference Product was surprisingly and controversially removed or at least downgraded as a requirement in Kohlpharma, when the CJEU stated that failure to establish a common origin of the products does not necessarily preclude the grant of a parallel import licence. The CJEU stated that the imported and Reference Product in the country of destination do not have to be identical, but could be "substantially identical/essentially similar", as long as there are no safety concerns. "Essential similarity" was a prerequisite for approval of generics before legislative changes in 2004. Now the definition of generic medicinal product in Article 10 of Directive 2001/83/EC contains the same concept.

This decision creates a tension with the regulatory framework for grant of copy (generic) marketing authorisations because it implied that, for instance, a generic product could be placed on the market in a single country, and the generic authorisation holder would not need to obtain an authorisation in any other Member State, but could simply parallel import the product into those other markets, by showing it was "substantially identical" to the Reference Product on the market in those countries. It would, of course, be able to demonstrate such similarity as a result of being approved as a generic of that Reference Product. This decision also conflicted with case law on parallel trade in other similarly regulated product fields, such as plant protection products, where case law indicated that the criterion of common origin remained important to justify a simplified procedure.

We are aware that competent authorities across the EU are interpreting this uncertainty in different ways, and that there have been a number of questions raised about the full implications of the Kohlpharma decision.

Case C-387/18, Delfarma

This issue has resurfaced in the CJEU in a recent case from Poland: Case C-387/18, Delfarma. This case related to national legislation in Poland that stated that it was a requirement for obtaining a parallel import licence to demonstrate that the imported and the domestic Reference Product were either both approved as Reference Products or both approved as generic medicinal products. This requirement would, for instance, avoid a generic medicinal product being imported into Poland where there was no existing generic medicinal product approved, perhaps because the protection period in Poland for the Reference Product had not yet expired.

In this case, Delfarma, a parallel trader, was denied a parallel trade licence to import Azithromycin 500mg into Poland from the UK. This was due to the fact that the product in Poland was granted on the basis of a full marketing authorisation application, while the product in the UK was authorised as a generic product, and therefore, the requirements of Polish law were not met.

Delfarma challenged this decision on the basis that the products were substantially the same despite being authorised under different legal bases and on the basis of different documentation, and argued that the additional requirement under Polish law was a restriction to the free movement goods. Indeed, it was shown in this case that the Polish authority did not examine the actual products, or their therapeutic effects, despite having availability to the relevant data from the UK competent authority, and having the ability to request additional information from this competent authority if considered necessary. The refusal of the parallel import licence was purely due to the fact that one product was a Reference Product while the other was a generic product.

Findings of the CJEU

The CJEU re-affirmed its interpretation, set out above, that the Member State of import must ensure that the imported medicine and the domestic Reference product, "without being totally identical", have been manufactured with the same formulation and using the same active substance, and have the same therapeutic effects; and that the medicine to be imported does not raise concerns from a quality, efficacy and safety point of view. If the Member State of import confirms that these criteria are satisfied, the imported product should be granted a parallel import licence on the basis of the existing national marketing authorisation. The CJEU stated that it was not relevant that the import and the domestic product were respectively a generic product and a Reference Product.

While the Polish government argued that without the national restriction in question, the parallel import procedure could be used to circumvent the marketing authorisation procedure, this was not accepted by the CJEU. The court stated that such a restriction was not necessary to protect the EU marketing authorisation procedure as both procedures were capable of establishing that the products in question met the criteria of safety, efficacy and quality. The court noted that Directive 2001/83/EC "does not apply" to parallel imported products, as the imported product must comply with the criteria set out above, and the competent authority of import is responsible for verifying that all of those requirements are complied with before issuing a parallel import licence.

Further, the court said that once a "plausible case" of similarity has been advanced by the parallel trader, the burden is upon the regulatory authority to check whether there are any differences between the products, if necessary by obtaining information from the competent authority in the country of export. The Polish government argued that a product might be a valid generic of the Reference Product in the country of export, but that did not mean it was a valid generic of the Reference Product in Poland (which we believe is correct when dealing with national authorisations approved outside a decentralised and mutual recognition procedure). It seemingly argued that the parallel trade procedures were premised on it being unnecessary to conduct detailed reviews, but the court clarified that the administrative burden, in terms of time and cost, could not be used to justify restrictions on free movement unless the amounts involved were unreasonably high.

It follows that the CJEU has confirmed that a parallel trader can import a generic product into a Member State in which that product does not have a marketing authorisation but can rely upon the existing authorisation for the Reference Product in the country of import. The company can, therefore, treat the generic product as having been placed on the market in the country of import, despite the lack of an equivalent generic authorisation in that country.

The view of the court that this does not have the potential to undermine the existing regulatory framework appears simplistic and the decision could have wide-reaching implications for parallel imports across the EU. It remains to be seen how national competent authorities will apply this decision in practice. The conflicting case law concerning the relevance of the "common origin" of both the Reference Product and the imported product is not discussed in the decision and, therefore, has not been resolved, but the decision certainly implies that "common origin" is no longer a critical consideration.

© Arnold & Porter Kaye Scholer LLP 2019 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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