Players in the European generic drug industry must feel like they are caught between a rock and a hard place. European generic companies cannot develop generic versions of brand-name products still enjoying patent protection. And manufacturers of active pharmaceutical ingredients (APIs) believe they are being undermined by excessive regulations.

In the U.S., because of the Hatch-Waxman Act, development of generic versions of drugs that are still protected by patent is not considered illegal. Because no such exemption to patent law exists in Europe, work on a generic version cannot begin until after the brand-name product's patent protection expires. However, the extent of the prohibition varies from country to country, according to Enrico T. Polastro, a vice president and senior industry analyst at Arthur D. Little Benelux.

In Denmark, Norway, and Spain, everything is forbidden during the patent protection period, Polastro explains. In Belgium, Ireland, Sweden, and the U.K., development work is allowed as long as physical samples are not created or supplied. And in Italy, France, Germany, and Switzerland, limited development is possible, but it is unclear what activities are allowed. To be on the safe side, Stada Arzneimittel, one of the leading generic drug companies in Germany, has a policy of developing products only in countries where no patents will be infringed, a spokesman says.

Because it takes up to six years to develop a manufacturing process, acquire data for registration, and get approval from European authorities, the patent environment in Europe effectively grants the brand-name product additional years of market exclusivity.

Increasingly, European companies are working around this barrier to bring generic versions to market in a timely manner. Guy Villax, chief executive officer of API manufacturer Hovione, explains how.

Although not registered in the U.S., roxithromicine is an important antibiotic in Europe and in Japan. The brand-name product--Rulid, from Aventis--lost patent protection in Germany in 2001. Hovione saw this coming early on, and in 1986, it invested in manufacturing capacity in Macau, where it developed and validated an alternative process, Villax says.

Formulations, validation batches, and stability studies were carried out in two other non-European Union locations. Bioequivalence studies were done in the U.S., Canada, and Poland, and the product was registered in Sweden. When the patent expired, a generic version was ready. "None of the work was done in Germany. It would have been too late," Villax says.

A network of international partners or facilities outside Europe have become necessary to get around the quagmire of national patent laws. Some of the favorite places for development work are Iceland, Malta, Turkey, Eastern European countries, and even the U.S. South Africa is a destination for bioequivalence studies. New Zealand is popular for dossier preparation and registration. And Sweden is well known for expeditious handling of registration applications. The stream of activities away from Europe represents a steady erosion of the skills needed to develop generic products in Europe, Villax says.

"Europe is the cradle of both chemistry and of pharmacy. It stands today as the powerhouse of pharmaceutical fine chemicals. And yet its future is grim," write Villax and Edgar Alexandre, a manager at Hovione, in a paper to be presented next month at a conference in Ireland. The patent situation is one reason. A slew of EU legislation that is tying the hands of API manufacturers is another.

A case in point is the Integrated Pollution & Prevention Control Directive (IPPC), which sets rules for the licensing of industrial installations. According to Villax, the directive requires fine chemicals companies to define parameters that are like moving targets in the industry, such as what technologies and raw materials will be used and what products will be manufactured.

"We hardly know with more than 33% probability what products might be produced in a facility within a five-year horizon. IPPC, however, requires us to state our forecast as written statements and to apply for authorizations if reality is to vary from the submitted plans. ... Often also, the data are confidential and belong to our customers," Villax and Alexandre write.

While not disputing the directive's intent--to control the environmental impact of industrial activities--Villax and Alexandre nevertheless argue that API manufacturers merit an exemption in the absence of guidelines similar to those developed by the International Conference on Harmonization regarding pharmaceutical activities. API manufacturers already are very highly regulated by numerous bodies and are far ahead in developing and implementing environmentally friendly processes, they say. If the EU continues to lump the European pharmaceutical fine chemicals industry with others that have had long histories of sorry environmental records, it surely would be legislating the industry to death, they suggest.

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