Case C-681/16, Pfizer Ireland – Specific Mechanism suppresses drug circulation

The internal market in pharmaceuticals can be partitioned by EU law. For example, the EU’s ‘Specific Mechanism’ will sometimes allow patent holders to stop the import of drugs into the ‘old’ Member States from the ‘new’ Member States, where prices are markedly lower. In this case, the drug company patent holder Pfizer wants to stop cheap imports of a psoriasis and arthritis drug from entering into Germany – and to that end, it has invoked the Specific Mechanism. In contrast, the importer contends that the Specific Mechanism does not apply; consequently, the EU principle of the free movement of goods should be allowed to operate.

Background
The price of a specific pharmaceutical drug can vary greatly between Member States. Consequently, some companies specialise in buying drugs in some Member States where the prices are lower, and then selling them on in other Member States where the drugs are much more expensive. These companies are ‘parallel importers’. However, their commercial activity is circumscribed by various planks of EU law.

In this case, the parallel importer is the German branch of a Danish pharmaceutical company. It has been buying up doses of an arthritis/psoriasis treatment made by Pfizer that were being sold in various ‘new’ Member States. It has then been selling these on to companies in Germany.

Pfizer discovered the German imports in April 2015 and believed that what the German branch of the Danish company was doing infringed its rights in EU law. In essence, this was because Pfizer had a Supplementary Protection Certificate for Germany that covered a psoriasis and arthritis drug, whose active ingredient was Etanercept.

The German branch of the Danish company was not persuaded by Pfizer’s legal argument. It pointed out that Pfizer’s Supplementary Protection Certificate had expired in Germany on 1 February 2015, so it was irrelevant that Pfizer was discovering imported doses of Pfizer stock in the April of that year.

Pfizer hauled the German branch of the Danish company before the judges in the German town of Düsseldorf.

At the Landgericht Düsseldorf
According to Pfizer, the fact that its German SPC had officially expired was legally irrelevant. The reason for the irrelevance was because of a much more important, discrete piece of EU legislation known as the ‘Specific Mechanism’.

This ‘Specific Mechanism’ is found in Chapter 2 of Annex IV to the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded (OJ 2003 L236/33) (‘the 2003 Act of Accession’).

Chapter 2 of Annex IV to the 2003 Act of Accession, entitled ‘Company law’, is worded as follows:

Specific Mechanism
With regard to the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovenia or Slovakia, the holder, or his beneficiary, of a patent or supplementary protection certificate for a pharmaceutical product filed in a Member State at a time when such protection could not be obtained in one of the abovementioned new Member States for that product, may rely on the rights granted by that patent or supplementary protection certificate (‘SPC’) in order to prevent the import and marketing of that product in the Member State or States where the product in question enjoys patent protection or supplementary protection, even if the product was put on the market in that new Member State for the first time by him or with his consent.
Any person intending to import or market a pharmaceutical product covered by the above paragraph in a Member State where the product enjoys patent or supplementary protection shall demonstrate to the competent authorities in the application regarding that import that one month’s prior notification has been given to the holder or beneficiary of such protection (‘the Specific Mechanism’).

In light of both the wording of the Specific Mechanism, and the fact that the imported products originated in the new Member States, Pfizer believed that there had been no exhaustion of its right to stop imports of its Etanercept product.

In turn, the German branch of the Danish company denied the legal relevance of the Specific Mechanism. The reason was simple. When Pfizer had applied for the SPC in Germany it was already possible to obtain a similar protection in those ‘new’ Member States but it had chosen not to do so. The Specific Mechanism therefore did not apply.

Even if it were wrong on that point, then the Specific Mechanism was an exception to the main EU law principle of free movement so any exceptions had to be interpreted narrowly. This point had already been made by the CJEU in Case C-539/13, Merck Canada when it had said:

25 However, the Specific Mechanism provides for a specific derogation from that principle. It is the Court’s well established case-law that provisions in an Act of Accession which permit exceptions to or derogations from rules laid down by the Treaties must be interpreted restrictively with reference to the Treaty provisions in question and must be limited to what is absolutely necessary to attain the objective pursued (judgment in Apostolides, C‑420/07, EU:C:2009:271, paragraph 35 and the case-law cited). As the Advocate General observed at point 18 of his Opinion, the Specific Mechanism seeks to achieve a balance between effective protection of patent or SPC rights and the free movement of goods.

The judges in Civil Chamber 4b decided to make a preliminary reference to the CJEU. They wondered whether the importer’s argument was right. For as Pfizer had acknowledged, it might well have been possible for it to have obtained an SPC but it believed that it could not have obtained the basic patent in those countries.

That said, the importer had pointed out that by the time the basic patent had been published in Germany, the accession states had already introduced legislation enabling applications for basic patents and so Pfizer could well have obtained corresponding patent protection in a number of countries.

Faced with those arguments, the German court decided to ask two questions about the correct interpretation of the Specific Mechanism.

That though, was not the end matter. The judges were uncertain what to do with Pfizer’s argument that it was possible to extend the validity of the SPC to gain an extra period of protection running from 1 February to 1 August 2015 – Pfizer was running this argument to drain the importer’s legal argument of ‘exhaustion’ of any force.

Pfizer could run the argument because the relevant German authority had issued an SPC for paediatric use; accordingly, the certificate expired not on the 1st of February but on the 1st of August.

However, Pfizer’s argument ran into legal difficulties. Although the paediatric use Regulation allowed a six month extension, that Regulation did not refer to Articles 4, 5, and 6 of the SPC Regulation. Furthermore, whereas the Acts of Accession only made a distinction between the basic patent and the SPC, they made absolutely no distinction for paediatric medicines. Nor was such a distinction even to be found in the much later 2011 Act of Accession for Croatia. There was recent Danish case law but that only complicated the matter.

The German judges wondered whether the solution was to take as the starting point the aim and scope of the rules. Thus, the Specific Mechanism was intended to prevail over the free movement of goods, just like the rules that had given rise to the SPC. In that context, the rules for creating SPCs, and paediatric extensions were comparable and complemented each other. Consequently, it might be possible to bring paediatric extensions within the scope of the rules for SPCs, which were indeed expressly mentioned in the first Specific Mechanism. A further argument in favour of doing this would be that EU law would then provide a stimulus for improving the health of children, which should not be undermined by parallel imports.

However, the German judges were aware that such an approach would seem to contradict the CJEU’s view in Merck Canada that the Act of Accession and Specific Mechanism was an exception to the free movement of goods, which had to be interpreted narrowly.

Nevertheless, the German judges would ask two further questions of the CJEU about paediatric use extension.

Questions Referred
According to the website of the UK’s IPO, the Landgericht Düsseldorf has asked:

1. Can the holder of a supplementary protection certificate that was issued to it for the Federal Republic of Germany rely on the specific mechanism to prevent the importation of products into the Federal Republic of Germany from the accession States the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovenia, Slovakia, Bulgaria, Romania … and Croatia (Annex IV to the 2003 Act of Accession, OJ 2003 L 236, p. 797, as amended in OJ 2004 L 126, p. 4, for Estonia, Latvia, Lithuania, Poland, Slovenia, Hungary, Slovakia, the Czech Republic; Part I of Annex V to the 2005 Act of Accession, OJ 2005 L 157, p. 268, for Romania and Bulgaria; Annex IV to the 2011 Act of Accession, OJ 2012 L 112, p. 60, for Croatia) if the supplementary protection certificate was applied for in the Federal Republic of Germany at a point in time at which the laws for obtaining such a supplementary protection certificate already existed in the respective accession States but could not be applied for by, or issued to, the holder of the supplementary protection certificate issued for the Federal Republic of Germany because the basic patent required for the issuing of the supplementary protection certificate did not exist in the accession State?

2. Does it make any difference to the answer to Question 1 if it was merely at the time of the filing of the application for the basic patent issued for the Federal Republic of Germany that such protection through a basic patent could not be obtained in the accession State but, by the time of publication of the application on which the basic patent issued for the Federal Republic of Germany was based, it could be so obtained?

3. Can the holder of a supplementary protection certificate that was issued to it for the Federal Republic of Germany rely on the specific mechanism to prevent the importation of products into the Federal Republic of Germany from the accession States the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovenia, Slovakia, Bulgaria, Romania… and Croatia if those products are imported after the expiry of the term of the supplementary protection certificate stipulated in the original decision to grant the patent but before the expiry of the six-month extension of the term of the supplementary protection certificate that was granted to it on the basis of Regulation (EC) No 1901/2006 of the European Parliament and of the Council of 12 December 2006 on medicinal products for paediatric use and amending Regulation (EEC) No 1768/92, Directive 2001/20/EC, Directive 2001/83/EC and Regulation (EC) No 726/2004?

4. Does it make any difference to the answer to Question 3, in the case of Croatia, that, on account of the accession of Croatia in 2013, the specific mechanism did not come into force until after the entry into force of Regulation (EC) No 1901/2006 of the European Parliament and of the Council of 12 December 2006 on medicinal products for paediatric use and amending Regulation (EEC) No 1768/92, Directive 2001/20/EC, Directive 2001/83/EC and Regulation (EC) No 726/2004 on 26 January 2007 – unlike in the other Member States which acceded prior to 26 January 2007, namely the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovenia, Slovakia, Bulgaria [and] Romania?

 

Comment
There are several SPC preliminary references either already in the CJEU’s ‘In-Tray’ or winging there way to Luxembourg in the post; see further, Case C-557/16, Astellas Pharma – measuring the data exclusivity period on a marketing authorisation.

There is also a ‘parallel importer’ preliminary reference about the potential application of trade mark law in order to artificially partition the internal market; see further, Case C-642/16, Junek Europ-Vertrieb – can its sticky label stop the artificial partitioning of the internal market?