In 1998, Amendment 3 to the Patents Law (1967) (popularly referred to as the “Teva amendment”), was published. The amendment dealt in two ways with the protection and exclusivity period for patents, which begins on the date a patent request is filed and, under Section 52 of the law, continues for 20 years.
On the one hand, ethical drug manufacturers, who have spent years developing their drugs, are entitled to request and obtain a ruling from the Israel Patent Office extending the patent term for a particular medicament listed in the Israel Registry of Drugs for up to five years, with certain restrictions. One of the material restrictions is that the total period of protection (under the basic patent and the extension ruling combined) ends no later than fourteen years from the date on which the first marketing license is granted in a “member state.” A “member state” is defined as either a member state in the Union for the Protection of Industrial Property (created by the Paris Convention for the Protection of Industrial Property - 1883), and/or a member state in the World Trade Organization.
On the other hand, the amendment enabled the generic drug industry, which makes drugs that are identical substitutes for drugs whose patent protection has expired, to begin preparations for producing generic drugs during the patent protection period. These preparations include conducting trials for the purpose of obtaining a license for generic drugs to enable the commencement of marketing immediately following the patent protection period.
One of the main justifications for this amendment, as stated in the preamble to Amendment 3, was to prevent a situation that frequently arises in the drug industry, in which the patent owner obtains an additional defacto exclusivity period beyond the patent period. This additional exclusivity period is the result of patent restrictions on competing manufacturers (generic drug producers) denying them the legal right to commence with trials and preparation of the data package required for obtaining a license before the end of the patent period. Such preparations take on the average about three years thus a defacto 3 year extension for a given ethical medicament.
Israel thereby joined a long list of countries, including Japan, Germany, and the US, in which generic drug developers are permitted to conduct preparations for obtaining a license during the patent protection of the ethical drug.
Despite the attempt in the Patents Law amendment to provide for the economic interests of both the generic and ethical drug industries, the amendment contains many flaws, which give rise to varying legal interpretations by the parties each of which havng it’s own financial interests at stake. The clear economic consequences of this dispute over interpretation have become sharper because of the cyclical nature of the patents market, particularly now since, over the next few years, many patents are due to expire, creating great potential for generic companies to increase their share of the pharmaceutical market.
The Wyeth decision
One of the disputed issues discussed during the handling of objections to requests for patent extensions, is the authority of the Patent Office under the 1998 Amendment to issue extension orders for medicaments that were listed in the Israel Register of Drugs before the amendment came into force.
In December 2003, Wyeth applied for a patent term extension of a patent describing a drug registered in the Israel Register of Drugs about two years before the amendment came into force. The Deputy Commissioner of Patents decided, in favor of Dexcel and Teva, who opposed Wyeth’s request for extension, thus rejecting Wyeth’s extension application.
In his decision the Deputy Commissioner of Patents concluded that the basis of the amendment was the legislator’s intention primarily to eliminate the disadvantage suffered by the Israeli generic industry vis-à-vis its competitors in other countries that permitted clinical trials for licensing purposes during the patent protection period. The Deputy Commissioner further ruled that the transitional provisions to the amendment should be interpreted to give a certain advantage to generic companies and therefore a patent protecting a product that was registered more than 60 days before the amendment came into force, could not be extended.
The Deputy Commissioner further ruled that this interpretation to the transitional provisions did not impair Wyeth’s proprietary rights, since the issue discussed in this legal dispute was not whether Wyeth was eligible to a patent term extension before the amendment was enacted, but rather whether any medical product that was registered before the amendment is entitled to a patent term extension. Consequently, no basis existed for the claim that the transitional provisions harmed Wyeth’s right to equality with other patents owners whose licenses for protected products were granted after the amendment was enacted, or within the 60 days preceding that date.
Finally, the Deputy Commissioner of Patents ruled that any violation of equality was in due measure, taking into account other worthy economic, social, and national interests, in the expectation that the public would reap substantial benefit from the amendment, specifically the availability of important drugs earlier at substantially lower prices, while the public interest in encouraging drug manufacturers to invest in R&D for new drugs would not be compromised, because ethical drug manufacturers could be compensated by patent extensions for the prolonged licensing procedures and the expedited entry dates for of competing drugs into the market.
The international character of the dispute
The decision of the Deputy Commissioner dealt with only one aspect of the interpretive dispute concerning the third amendment to the Patents Law and illustrates the balance of forces between the two sides of the issue on the eve of the amendment.
The amendment was an attempt, albeit an unbalanced one, to deal with the opposing demands and interests of two sectors: the generic drug manufacturers, headed by Teva, and the ethical drug manufacturers, almost all of which are based outside of Israel The amendment as such was inadequate as a broad solution to the dispute between the opposing parties.
The interpretative problems created by the amendment along with the immediate and dramatic consequences of the dispute on the pockets and welfare of Israeli drug producers and consumers alike motivates each of the two sides to continue in its attempts to try and tilt the scales in its favor.
For example, the ethical drug companies assert that adequate protection for the longest possible term will encourage the registration and marketing of many more new drugs in the Israeli market, including innovative and life-saving drugs, and will enable those drugs to be included in the National List of Reimbursed Drugs. Additionally, proper protection will allegedly increase investment in Israeli-based R&D by the ethical drug companies themselves by over $200 million per year, thereby creating new jobs.
On the other hand, the generic companies say that it is a public interest of the highest importance to promote the marketing of generic drugs in Israel of in the shortest possible time. This will make drugs available to the Israeli public earlier at substantially lower prices.
It is important to realize that the intellectual property arena in Israel is not just a local one. In fact, many foreign companies register patents with the Israel Patent Office. As of 2000, only 30% of the patent applications filed in Israel were by Israelis. 50% originated in the US, and 10% in Germany.
The following are two of the reasons why foreign companies register patents in Israel:
- Registering a patent in Israel will enable a company to conduct legal proceedings that will potentially affect patents in other countries (for example, countries to which the Israeli generic drug industry exports drugs);
- Furthermore, since Israel is a member of the Patent Cooperation Treaty (PCT), including Israel in an international patent application is facilitated.
This is why the ongoing struggle to shape the statutory and legal elements of the Israeli patent market has far reaching international, commercial, and even political features. It is no wonder that the Israeli legislators find themselves in the middle of a complicated power struggle. The legislators are exposed to pressure exerted not only from Israeli pharmaceutical companies, but also from multinational pharmaceutical companies, as well as US political entities, and the European Union (EU).
The current balance of forces on the issue and international pressure being exerted on Israeli legislators can be seen in two legislative initiatives currently being formulated and described below.
Patents Law Amendment Extension of Term of Basic Patent)
The background to this latest bill for amendment to the Patents Law is the vague formulation of the 1998 amendment to the law, which led to the complicated legal disputes in the years since the amendment was passed discussed above, and the need for clarifications with respect to patent extension orders.
An examination of the bill and the critical clarifications it sets forth , indicates that the future ability of ethical drug companies to apply for and receive extension term rulings, which the previous third amendment restricted, will soon become even more restricted and conditional.
Firstly, in the new bill an additional condition renders it impossible for an ethical drug company to file an application to extend a patent term in Israel unless a similar application has been filed in another permitting state. A permitting state is defined as one that permits actions for obtaining a license before the patent term has expired. Furthermore, the Patent Office will not be able to grant an extension ruling unless the permitting state has already approved the application. Secondly, to remove any doubt, the amendment stipulates that the patent term extension will be equal to the shortest extension granted in another permitting state. Thirdly, the Patent Office no longer has the authority to extend the deadline for submitting a patent term extension application (the deadline is currently 60 days after a medicament has been registered).
It appears that acceptance of this amendment in its present form, will be indicative of further support to the claims of the generic drug companies.
Published by Globes [online] - www.globes.co.il - on February 3, 2005