Exclusivity for Biologic Products Under the USMCA: What Is Changing, and What Happens Next?

Joshua Ney, PhD, JD, is a shareholder in Brinks Gilson & Lione’s Ann Arbor office. Ney represents pharmaceutical clients in patent litigation and prosecution matters, which includes counseling clients on the interplay between regulatory and patent strategy. His experience spans a range of pharmaceutical modalities and therapeutic applications.
August 14, 2019
Negotiations between Congress and the Trump administration over ratification and implementation of the United States–Mexico–Canada Agreement (USMCA) have picked up speed in recent weeks. The USMCA was signed on November 30, 2018, ostensibly as a replacement for the original North American Free Trade Agreement (NAFTA). In addition to its much-discussed provisions relating to automotive manufacturing and agricultural market access, the USMCA includes extensive intellectual property standards. One such provision requires the Parties to provide at least 10 years of “effective market protection” for new biologic products.1 This article discusses that provision, how it would change existing law, and what effects it might have.

The “effective market protection” requirement relates to regulatory exclusivity for innovator biologic products in relation to follow-on biologic products, such as US biosimilars. “Regulatory exclusivity” is a form of exclusivity provided by regulatory authorities responsible for reviewing applications to market pharmaceutical products and is largely independent of patent coverage. Regulatory exclusivity generally exists in 2 forms: Data exclusivity refers to a minimum period of time during which the regulatory authority cannot accept a follow-on drug application that relies on the safety and effectiveness data of the reference innovator product, while marketing exclusivity refers to a minimum period of time during which the regulatory authority cannot approve such a follow-on application.

The biologic product exclusivity provision of the USMCA is a marketing exclusivity provision. Specifically, Article 20.49.1 of the USMCA requires the parties to “provide effective market protection through the implementation of Article 20.48.1…for a period of at least [10] years from the date of first marketing approval of that product in that Party.” Article 20.48.1 is a more general regulatory exclusivity provision and requires that the Party “shall not permit third persons…to market” the follow-on product for the specified time period.2 Thus, Article 20.49.1, when read in light of Article 20.48.1, is understood as providing a 10-year period of marketing exclusivity.

What Would Change?
The USMCA regulatory exclusivity provisions would strengthen the regulatory exclusivity provisions of the original NAFTA for biologic products. Article 1711 of NAFTA requires the Parties to provide a “reasonable period”—normally 5 years—of data exclusivity for pharmaceutical products that utilize new chemical entities, but it does not include a provision specific to biologics.

In the United States, the regulatory exclusivity provisions of the Biologics Price Competition and Innovation Act (BPCIA) already provide for a longer exclusivity period than required by the USMCA. The BPCIA provides 4 years of data exclusivity and 12 years of marketing exclusivity for reference biologic products.It has been argued that the USMCA would expand the scope of products subject to the BPCIA’s exclusivity provisions. The definition of “biologic product” under the BPCIA specifically excludes “chemically synthesized polypeptides,”4 and therefore such drugs are not subject to the BPCIA’s exclusivity provision. The USMCA provision does not include this exception and arguably would require an expansion to the scope of products currently eligible for exclusivity under the BPCIA. However, a list of proposed legislative changes submitted to Congress by the Trump administration on January 29, 2019 to implement the USMCA did not include any proposed changes to the BPCIA or its exclusivity provision. 

The USMCA would require stronger marketing exclusivity protections for reference biologic products in Canada and Mexico. Canada’s Food and Drug Regulations currently provide only 6 years of data exclusivity and 8 years of marketing exclusivity.5 Mexico’s Industrial Property Law does not provide for a specific period of regulatory exclusivity, except to state that information regarding safety and efficacy of pharmaceutical products “shall be protected under the terms of the international treaties to which Mexico is party.”6

What Effect Would the USMCA Have?
Reactions to the exclusivity provision of the USMCA, and predictions regarding its likely effects, have been mixed. The Pharmaceutical Research and Manufacturers Association (PhRMA), a trade group representing innovator pharmaceutical companies, describes the provision as an “important step” that “improv[es] critical intellectual property (IP) protections” and “will help to usher in the next generation of medical treatments and cures.” By contrast, the Association for Accessible Medicines (AAM), a trade association representing generic and biosimilar drug companies, predicts that the provision would “decrease prescription drug competition, inevitably leading to increased drug prices in the United States.” But what effect would the USMCA actually have?

Based on the approval dates of existing innovator biologic products, follow-ons to a given innovator biologic product would be eligible for approval around the same time in all 3 countries under the USMCA. Approvals of innovator biologic products have tended to occur around the same time in all 3 countries, with approval in Canada and Mexico generally occurring slightly after approval in the United States. For example, of the 34 biologic products first approved in both the United States and Canada since 2015, 28 were approved within 12 months in the 2 countries, and 32 were approved within 24 months. Similarly, of the 10 biologic products first approved in both the United States and Mexico since 2015, 5 were approved within 12 months in the 2 countries, and all 10 were approved within 24 months. Under the 10-year exclusivity provision mandated by the USMCA, in combination with the current 12-year exclusivity period in the United States, follow-ons to a given biologic product also would become eligible for approval around the same time in the countries where the innovator product is approved.7

The effects of the USMCA provision on the incentives for innovator and follow-on biologic product development are more difficult to predict. The 10-year exclusivity provision of the USMCA is consistent with, or slightly shorter than, the marketing exclusivity provisions already in place in several of the world’s largest markets for biologic drugs. For example, as noted above, the BPCIA already provides for 12 years of marketing exclusivity in the United States.3 The European Medicines Agency provides 10 years of marketing exclusivity, which can be extended to 11 years if the marketing authorization holder of the innovator product obtains authorization for 1 or more new therapeutic indications that are held to bring a significant clinical benefit in comparison with existing therapies.8 In Japan, applications for approval of follow-on drug products generally cannot be filed until more than 8 years after the approval of the innovator product, which generally provides a de facto marketing exclusivity of more than 10 years when combined with the review time for the follow-on product.9 Accordingly, the extension of the exclusivity periods in Canada and Mexico mandated by the USMCA may have a modest effect on the incentives for developing innovator and follow-on biologic products globally, except to the extent that the agreement would limit Congress’s ability to reduce the BPCIA exclusivity period in the future.

What Comes Next?
By its terms, the USMCA cannot take effect until it is ratified internally by all 3 parties.10 Mexico became the first of the 3 countries to ratify the USMCA on June 19, 2019. Canada has also taken steps toward ratifying the agreement. In the United States, ratification is less certain, and the 10-year exclusivity provision for biologic drugs stands as one of the potential impediments to ratification.

US ratification of trade agreements like the USMCA typically occurs in accordance with the procedure laid out in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA). Under the TPA,11 the president has the responsibility to submit a draft implementing bill to Congress. Senior members of the Trump administration, including US Trade Representative Robert Lighthizer and White House National Economic Council Director Larry Kudlow, have signaled that the White House will not submit the bill to Congress until House Speaker Nancy Pelosi, D-California, gives the “green light” that the bill will be brought for a vote.

Members of Congress, including members of the Democratic majority in the House of Representatives, have raised several concerns about the USMCA. These concerns include the agreement’s handling of certain labor and environmental issues, as well as the regulatory exclusivity provision for biologic drugs. On July 11, 2019, over 100 Democratic members of Congress sent an open letter to Lighthizer, expressing concern that the 10-year exclusivity provision in the existing USMCA would “limit Congress’ ability to adjust the biologics exclusivity period” and therefore “limit access to medicines.”

To date, no changes to the treaty have been made in response to these concerns. As the political negotiations over ratification of the USMCA play out, the exclusivity provisions of the original NAFTA remain in effect.

1. USMCA, Article 20.49.1. ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/20_Intellectual_Property_Rights.pdf.
2. USMCA, Article 20.48.1(a). ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/20_Intellectual_Property_Rights.pdf.
3. 42 U.S.C. 262(k)(7). govinfo.gov/app/details/USCODE-2010-title42/USCODE-2010-title42-chap6A-subchapII-partF-subpart1-sec262.
4. 42 U.S.C. § 262(i)(1). govinfo.gov/app/details/USCODE-2010-title42/USCODE-2010-title42-chap6A-subchapII-partF-subpart1-sec262.
5. Canadian Food and Drug Regulations, Section C.08.004.1(3).
6. Mexico Industrial Property Law, Article 86 bis.
7. Assuming that the United States retains its current 12-year marketing exclusivity period (42 U.S.C. 262(k)(7)(A)), US biosimilar products could become eligible for approval slightly after their Canadian and Mexican counterparts. govinfo.gov/app/details/USCODE-2010-title42/USCODE-2010-title42-chap6A-subchapII-partF-subpart1-sec262.
8. Directive 2001/83/EC, as amended by Directive 2004/27/EC, Article 10.1. ec.europa.eu/health/sites/health/files/files/eudralex/vol-1/dir_2004_27/dir_2004_27_en.pdf.  
9. Applications for generic drugs cannot be submitted until the completion of reexamination (Japan Pharmaceutical Manufacturers Association, Pharmaceutical Administration and Regulations in Japan, Section 3.16, (2019)), which generally occurs 8 years after approval for drugs containing new active ingredients (Japan Pharmaceutical Manufacturers Association, Pharmaceutical Administration and Regulations in Japan, Section 6.1). www.jpma.or.jp/english/parj/pdf/2019.pdf.
10. USMCA, Protocol. ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/USMCA_Protocol.pdf.
11. TPA, Section 106(a)(1)(E) (19 U.S.C. § 4205(a)(1)(E)). congress.gov/bill/114th-congress/senate-bill/995/text.


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