Selected Favorable Pharmaceutical Intellectual Property Provisions of the USMCA
October 15, 2018
After more than a year of negotiations, the U.S., Mexico, and Canada recently concluded the United States-Mexico-Canada Agreement (USMCA). The USMCA, when it takes effect, will replace the North American Free Trade Agreement (NAFTA). Until then, the current NAFTA rules and regulations remain in place. Many commentators generally expect the USCMA to take effect in early 2019. Thus, companies should become familiar now with the USMCA's provisions, including provisions that beneficially change the pharmaceutical patent and regulatory landscapes.
The USMCA differs from NAFTA in many ways, including the contents of USMCA Chapter 20, titled "Intellectual Property Rights." Chapter 20 contains provisions that are pharmaceutical patent friendly and provisions that increase regulatory exclusivities in certain jurisdictions. We introduce three selected provisions in this alert.
USMCA Chapter 20
No Unreasonable Patent Granting Delays
The USMCA requires that best efforts be made to "process patent applications in an efficient and timely manner, with a view to avoiding unreasonable or unnecessary delays."1 The USMCA defines an unreasonable delay as including a delay "in the issuance of a patent of more than five years from the date of filing of the application in the territory of the party," or "three years after a request for examination of the application has been made, whichever is greater."2 These provisions should encourage the timely granting of patents. They may also effect patent licensing provisions.
For example, licenses often contain "suspension clauses" which suspend running royalty payments in a territory if the only intellectual property protecting the licensed product or service in the territory is a patent application that has been pending for more than seven years. As a result of the new USMCA intellectual property provisions, licensees may consider adjusting their suspension clauses to take effect, e.g., after five years from the filing of a patent application.
Definition of a Biologic
The USMCA defines a biologic, at minimum, as a product that is produced using biotechnology processes and that is, or alternatively contains, a virus, therapeutic serum, toxin, vaccine, blood, blood component or derivative, allergenic product, protein, or analogous product, for use in human beings for the prevention, treatment, or cure of a disease or condition.3
The U.S. has generally, where appropriate, treated cellular products (e.g., CAR-T cells) as biologics, even though these are not specifically called out in the definition of a biological product.4 Under the USMCA, these cellular products should also be biologics because, using CAR-T cells as an example, CAR-T cells are produced using a biotechnology process, contain a protein, and are for use in human beings for treatment of a disease (e.g., cancer).
It is worth noting that the at minimum proviso defines the minimum scope of what constitutes a biologic, and that individual countries may expand this definition at their discretion.
Regulatory Exclusivity for a Biologic
The USMCA requires, with respect to the first marketing approval of a new pharmaceutical product that is or contains a biologic, that effective market protection be provided "for a period of at least 10 years from the date of first marketing approval of that product"5
In the U.S., biologics receive 12 years of exclusivity under the Biologics Price Competition and Innovation Act of 2009. This will not be changed under the USMCA because the "at least 10 years" language sets a floor, not a ceiling, on biologics regulatory protection. In comparison, biologics currently receive eight years of regulatory exclusivity in Canada and five years in Mexico. The USMCA will, therefore, add years of regulatory exclusivity for biologics first approved in Canada and Mexico.
This increase in biologic regulatory exclusivities, while being generally welcome by pharmaceutical companies, will be a boon to start-up companies who may not be able to afford to seek patent protection in Mexico and/or Canada.
In addition to the above-described provisions, the USMCA contains other important pharmaceutically favorable provisions including: notice provisions, patent term adjustment and extension provisions, regulatory exclusivity provisions for small molecules, and regulatory protection provisions for agricultural chemicals products. Companies should become familiar with these provisions and prepare to incorporate them into life cycle management strategies upon ratification of the USMCA.
Charles Andres contributed to the preparation of this WSGR alert.