The New EU “Pharma Package”: The “Bolar” exemption – A comparison of Commission/Parliament/Council positions

In this sixth alert in our weekly series on the EU Pharma Package, we focus on the proposals of the European Commission, European Parliament and Council of the EU for another topic with a highly debated scope and with diverging interpretations across EU Member States: the “Bolar” exemption.

History and purpose of the Bolar exemption

The Bolar exemption is a typical example of where the pharma regulatory framework and patent law intersect. Although it is included in pharma legislation, it is regarded as a “safe harbor” in patent law – mechanisms that permit certain activities that would otherwise constitute patent infringement. Other examples of such “safe harbors” include the SPC manufacturing waiver for export and stockpiling as well as the research exemption.

The Bolar exemption provides for a patent (and SPC) exemption for generic and biosimilar companies when performing certain activities in preparation of a medicinal product launch. It is therefore an essential provision that enables the generic and biosimilar industry to facilitate a day-one launch following expiry of the originator medicine’s IP.

The fundamental question is what research and other activities can a pharmaceutical company already undertake in the EU before the expiry of any relevant patents in order to prepare for market launch?

Interpretation issues with the current Bolar exemption

The current wording of the Bolar exemption, as set out in Article 10(6) of Directive 2001/83/EC, reads as follows: “Conducting the necessary studies and trials with a view to the application of paragraphs 1, 2, 3 and 4 [related to generic and biosimilar medicinal products] and the consequential practical requirements shall not be regarded as contrary to patent rights or to supplementary protection certificates for medicinal products”.

The main difficulty with applying this exemption is that it is currently set out in a directive, which is a legal instrument that requires transposition into the national laws of each Member State. Moreover, the provision provides only for “minimum harmonization” and patent systems in general are not uniform across the EU. This means different Member States can set their own rules for patent infringement safe harbors, which may go beyond the wording of Article 10(6).

Furthermore, it was suggested to make a list of both the types of studies and trials as well as the “consequential practical requirements” that could benefit from the Bolar exemption. However, this idea was unfortunately abandoned somewhere along the way. These concepts therefore remain undefined and have had to be clarified via case law and the national transposition laws of the Member States.

Consequently, the ambiguous wording of this provision has led to diverging interpretations between Member States, with some (e.g., the Netherlands) adopting a more restrictive approach than others (e.g. France and Italy), primarily with respect to:

1. the material scope: which preparatory acts can a pharma company undertake before a patent expires without infringing the patent? Are for instance pricing and reimbursement (P&R) applications or health technology assessments (HTA) leading to a recommendation to prescribe, covered?
2. the personal scope: does it apply only to generic and biosimilar products, or also to originator products? Can third-party API manufacturers also rely on the exemption?
3. the territorial scope: does it apply only for marketing authorizations (MAs) in the EU (whether EU-wide or at national Member State level) or also to MAs in a third country?

Proposals for the Bolar exemption in the Pharma Package

In the Pharma Package, the Bolar exemption remains included in the proposed Directive, which means it will still need to be transposed into national law. However, recital 63 emphasizes that the aim is to “clarify its scope in order to ensure a harmonised application in all Member States, both in terms of beneficiaries and in terms of activities covered.” This should hopefully improve the consistency of its interpretation and application across the EU.

All three EU institutions have recognized the need to further clarify and expand the scope of the Bolar exemption. However, some discrepancies remain in their respective proposals for Article 85 of the proposed Directive in the Pharma Package:

1. Material scope – which preparatory acts are covered

The Commission's wording focused primarily on the studies, trials and other activities conducted to generate data for the application phase but extends this to various administrative procedures: not only applying for an MA or a variation thereof, but also applying for an HTA or for P&R. “Other activities” may include the submission of the MA application and the offer, manufacture, sale, supply, storage, import, use and purchase of patented medicinal products or processes to the extent they are exclusively conducted for the aforementioned purposes. This focus on the application phase is fairly similar to the current wording in Article 10(6) of Directive 2001/83/EC and could maintain uncertainty regarding any activities conducted during the remainder of such administrative procedures, for instance, phase IV (post-MA grant) studies.

The Council’s and Parliament’s proposals have helpfully clarified the Commission’s wording and explicitly extended it not just to the application but also to the actual obtaining of an MA, conducting of an HTA, obtaining of P&R approval and complying with subsequent practical requirements associated with any of the aforementioned activities. The list of “other activities” remains the same but it is unfortunate that the Council and Parliament introduce another – this time undefined – concept of “subsequent practical requirements”, which is again similar to the current wording in Article 10(6) of Directive 2001/83/EC.

In addition, the Council’s proposal extends the Bolar exemption to include participation in procurement tenders to the extent that this does not entail the actual sale or offering for sale of the product while still under protection. This means that generic, (bio)hybrid and biosimilar manufacturers can submit their bids while there is still IP protection for the originator drug as long as the actual supply after the tender is awarded, occurs after the IP expiry.

However, there are some concerns being raised as to whether this new material scope of the Bolar exemption, in particular the participation in procurement tenders, is fully compliant with the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights of 15 April 1994 (TRIPS Agreement), to which both the EU and the individual Member States are obliged to adhere to. Article 30 of the TRIPS Agreement permits exceptions to the exclusive rights conferred by a patent “provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably produce the legitimate interests of the patent owner, taking account of the legitimate interest of third parties”.

The key question here is at which point are companies considered to venture into “commercialization” territory prior to patent expiry, which has traditionally been the criterion (activities of a regulatory versus a commercial nature) to determine whether the Bolar exemption would apply. Can participation in a procurement tender by its nature be considered as already making an offer for sale – regardless of the Council’s caveat “to the extent that this does not entail the actual sale or offering for sale” which would in such case be a moot addition? Generic and biosimilar companies strongly advocate that they should be allowed to participate in public tenders even during the period of patent protection. They maintain that excluding generics from such tenders risks granting the patent holder an unjustified extension of their monopoly, as it could prevent timely market entry of generics immediately after patent expiry. This issue is particularly pressing because many patents covering pharmaceuticals may be weak or of questionable validity. Some patent holders engage in strategic practices, such as filing multiple divisional patents, to prolong uncertainty around patent protection.

The explicit inclusion of certain activities which were previously contested in some Member States, within the scope of the Bolar exemption, will likely also impact preliminary injunction success rates and so-called launches at risk. Preliminary injunctions are typically granted in the event of either an actual patent infringement or a threat of an imminent infringement. Activities such as P&R applications, or participation in tenders have in the past often been viewed as sufficient proof of a threat of an imminent infringement. By explicitly including such activities in the legislative text, these would then fall within the safe harbor of the Bolar exemption and could arguably no longer serve as a trigger for preliminary injunction proceedings.

2. Personal scope – which beneficiaries are covered

All three EU institutions agree that the Bolar exemption covers the aforementioned “other activities”, including when these are performed by third-party suppliers and service providers. This explicit inclusion of third-party API suppliers in the new Pharma Package will provide legal certainty and comfort to the industry.

Regarding whether the Bolar exemption also extends to originator products, the Commission's proposal is explicit in limiting it to generic, (bio)hybrid and biosimilar products. However, the Parliament removed this limitation in its entirety, simply stating “obtaining an MA and subsequent variations”, and the Council notably added an "in particular of" before the reference to generic, (bio)hybrid and biosimilar products – which could be interpreted as making the wording non-exhaustive. The recitals in both the Parliament’s and Council’s proposals further add to the confusion as they refer only to the facilitation of the day-one market entry for generic, (bio)hybrid and biosimilar products. In addition, recital 64 in the Parliament’s proposal also states “contributing to the timely market entry of medicinal products, in particular the market entry of generics and biosimilars on day one of loss of the patent or SPC protection”.

As the aim is to avoid further inconsistent application and legal uncertainty regarding the scope of the Bolar exemption, the Council’s proposal is arguably not the best option and the wording of the provision and the recitals should not imply any contradictions. Instead, it should be made explicit whether originator products can rely on the Bolar exemption.

3. Territorial scope – the MAs of which countries are covered

The current Bolar exemption under article 10(6) of Directive 2001/83/EC does not extend to trials and studies conducted in Member States to support applications for MAs in third countries outside the EU, as the wording specifically refers to applications of “paragraphs 1, 2, 3 and 4” of article 10 of Directive 2001/83/EC, i.e. applications within the EU.

None of the proposals of the EU institutions is very clear on this point. Only for HTAs do the proposals explicitly refer to the related EU Regulation (2021/2282), which could imply that – for reasons of consistency – this limitation to the EU also applies to the other activities.

As this has been a point of debate in the past and some jurisdictions have a broad Bolar exemption covering ex-EU MA applications (such as Germany), this should preferably be dealt with in the new legal text.

The Bolar exemption and its “link” with patent linkage

In the past, the Commission has defined “patent linkage” as “the practice of linking the granting of MA, the pricing and reimbursement status, or any regulatory approval for a generic medicinal product to the status of a patent (application) for the originator reference product”. Through patent linkage, the lawfulness of placing a product on the market pursuant to an MA or another approval is linked to the status of patents and the question of whether the product is said to infringe the patent rights of another product, which requires a determination through litigation. Unlike in the US, the unlawful and anti-competitive nature of patent linkage in the EU has been confirmed time and again by the Commission, as it has the potential to systematically delay generic/biosimilar market entry and increase the amount of costly and unjustified patent litigations.

Although there is certainly interplay between the pharma regulatory framework and patent law – as evidenced by the Bolar exemption – under EU law, regulatory authorities are not competent to consider patent protection and the validity and infringement of an originator’s patents when approving an MA or granting P&R status. This is a competence of the courts.

Only the Parliament's proposal includes an explicit Article 85a on the banning of patent linkage: “1. Member States shall consider the procedures and decisions referred to in Article 85 as regulatory or administrative procedures which, as such, are independent from the enforcement of intellectual property rights. 2. The protection of intellectual property rights shall not be a valid ground to refuse, suspend, delay, withdraw or revoke decisions referred to in Article 85”.

The Council’s proposal includes this only indirectly via the recitals and the Commission's proposal is silent on this.

Conclusion

All three EU institutions have proposed several broadenings of the Bolar exemption with respect to its material and personal scope, with the Council having the most extensive proposal. The territorial scope on the other hand does not appear to be dealt with explicitly.

The expansion of the personal scope to include third-party API suppliers and potentially originator products has received support from both the generic/biosimilar and originator representative associations (Medicines for Europe and EFPIA, respectively).

The material scope, however, remains a delicate topic, given its potential impact on preliminary injunction proceedings. While the new material scope – especially the Council’s proposal which includes tender participation – is welcomed by generic and biosimilar manufacturers, EFPIA advocates limiting the Bolar exemption to activities strictly related to seeking regulatory approval and not covering activities venturing into pre-commercialization territory.

The Bolar exemption was introduced to provide a safe harbor for the development and approval of generics and biosimilars and allow for all the (regulatory) preparations to be made for a day-one launch and immediate competition upon IP expiry. To achieve harmonization and legal certainty, there are still several points within the Bolar exemption wording of the Pharma Package which can and should be improved (such as the phrases “subsequent practical requirements” and “in particular”). The trilogues will hopefully bring some much-needed clarity in this respect.

Finally, it is imperative that the new Bolar exemption included in Article 85 of the proposed Directive is transposed and applied in a uniform way across the EU. If not, we are back to square one. An additional difficulty here is the application of the Bolar exemption before national courts (for national or European patents) or the Unified Patent Court (UPC) for unitary patents. The Unified Patent Court Agreement (UPCA) sets out sets out how the UPC will apply patent rules in determining disputes between contracting parties concerning unitary patents. Article 27(d) of the UPCA refers to the Bolar exemption, stating that “The rights conferred by a patent shall not extend to any of the following: […] (d) the acts allowed pursuant to […] Article 10(6) of Directive 2001/83/EC [including any amendments]”. Consequently, if the Pharma Package is adopted this reference will automatically change to the new provision. The UPC will apply the scope of the Bolar exemption as phrased in the Pharma Package. If the Member States do not transpose and apply the Bolar exemption in a fully harmonized way, there could potentially be different Bolar exemptions applying to patent disputes about products sold in the same Member State, depending on whether a national patent or a unitary patent is at issue before a national court or the UPC, respectively.