Obtaining evidence on the planned launch of generic products subject to price reimbursement

13 December 2017

Dr. Bálint Halász, Dr. Bettina Kövecses

It is common practice that patentees obtain evidence directly from the price and reimbursement authority on the planned launch date of a generic product by requesting disclosure of the application for price reimbursement. This information may be used in preliminary injunction proceedings as evidence of imminent threat of patent infringement.

Price reimbursement rules in Hungary

The aim of the Hungarian state is clearly to force competing pharmaceutical manufacturers to review their prices from time to time in order to keep price levels low (meaning that the cost to the state is kept to a minimum).

In relation to certain types of products, the Hungarian National Health and Insurance Fund (NHIF) establishes a reference price for all reimbursed products and publishes such price on its website on a quarterly or 6 month basis. The application of a reference price gains real importance once more than one product is granted reimbursement and these are categorised into the same so called 'fixed groups'.

The NHIF may establish fixed groups of pharmaceutical products when the products have the same active ingredient or the same therapeutic effect as the reference product.

When a new product eligible for inclusion into a fixed group is granted reimbursement and is marketed, the NHIF initiates a review of the price reimbursement . This means that the NHIF informs the marketing authorization holders and distributors of products in the fixed group of the initiation to the review the price reimbursement. Such notification states that the marketing authorization holders and distributors are free to vary (by typically lowering) the prices of their products from 20 February / May / August / November of each year.

This procedure clearly results in the mass reduction of the reference price for the price reimbursement where a cheaper generic product has entered the market. By this mechanism the NHIF forces the marketing authorization holders and distributors to lower their prices in order to stay in the reimbursement scheme. Lowering the price of a product is a crucial strategic question for originator pharmaceutical companies, where loss of the whole market could be at stake.

Seeking preliminary measures against generic products entering the reimbursement scheme

To avoid the possibility of such a review and possible forced decrease or dropout of the scheme, especially when the review is based on a potentially infringing generic product, patent holders are keen to prevent not only the market launch but also the granting of price reimbursement for a potentially infringing product, typically by filing for a preliminary injunction.

This is a very hard nut to crack and requires correct timing and meticulous collection of evidence, particularly in relation to the expected market launch of a generic product.

In Hungary, according to Art 35 (2) b) of the Patent Act , a preliminary injunction request can be based on either actual patent infringement or an activity that represents an imminent threat of infringement.

There is a great deal of case law available detailing the activities that may reach the threshold for imminent threat of infringement, although it is still hard to predict the court's approach as each case will depend on the circumstances. Both in trademark and patent matters the crucial task is to substantiate that market launch is 'really' imminent. There are decisions suggesting that certain preparatory activities are considered as infringement (such as offering for sale), while other decisions put the bar rather high and requests are refused by the court with reasoning that showing imminent threat requires evidence that a patent or trademark holder can never have access to or knowledge of. Nevertheless when interpreting the meaning of 'imminent' the court tends to use a temporal approach, i.e. the sooner the activity is expected to happen, the more imminent the treat is.

In the case of price reimbursed products, the Hungarian Drug Economy Act sets out the exclusion of a pharmaceutical product from the reimbursement scheme if the product has not been distributed on the market for more than 6 months. This would logically mean that the generic product is expected to be marketed within 6 months (at the latest) once reimbursement is granted. One would expect that the court considers such 6 months' timeframe – provided that the respective patent does not expire by the end of this period – as imminent threat of infringement and accept this circumstance for granting a preliminary injunction.

In a recent decision, the Metropolitan Court expressed that an application for, and the grant of, a price reimbursement was not considered an imminent threat of patent infringement , as price reimbursement is not a necessary precondition for marketing a pharmaceutical product, therefore the fact that an application has been submitted or has granted, in itself, does not at all support granting a preliminary injunction.

It is clear that from a practical point of view, the application for, or granting of, price reimbursement for generic products is necessarily seen by patent holders as an activity triggering imminent threat of infringement and prediction of upcoming market launch. However in order to demonstrate that a price reimbursement request or even its grant is not only a theoretical but an actual imminent threat taken into account all circumstances of the case, it is crucial to obtain the right evidence, especially on the planned date of market launch. It is important to note that a recent decision of the Metropolitan Court clearly established that an imminent threat can only be realized by activities that are expressly listed in Article 19 of the Patent Act, i.e. manufacture, use, marketing, offering to market, storage and importing for such purposes, etc. This means that showing activities preparing for imminent market launch are necessary factors to prove in a preliminary injunction application.

File inspection and data disclosure by the reimbursement authority

According to the practice of the NHIF, it is possible to access certain data of a price reimbursement application filed by a competitor. The reimbursement application has a predetermined form and content prescribed by Annex 6/a of the Reimbursement Decree , and contains a mandatory field on the planned date of market launch.

Contrary to the practice of the Hungarian pharmaceutical regulator, the National Institute of Pharmacy and Nutrition, where file inspection or data disclosure is practically impossible for third parties, the NHIF allows limited access to certain data indicated on the reimbursement request, including the planned date of market launch.

According to Article 5 (4) and 68 (3) of Act 140 of 2004 on Administrative Proceedings, third parties are free to submit file inspection requests but are only provided access to restricted or confidential data if it is necessary for enforcement of their rights. The NHIF considers that although the date of the market launch might qualify as a business secret of the applicant, where the patent holder proves that disclosure of such data is necessary for the enforcement of its patent rights, the NHIF allows the inspection of the redacted files and provides a copy of the redacted application. So the patent holder can simply file a short written request stating its legal interests in obtaining this data and file it with the NHIF.

In order to balance the interests of both parties – before allowing access to the application – the NHIF duly notifies the applicant of the price reimbursement in writing, informing of the inspection request itself, the details of the requestor and sets out a deadline for any objections. It is important to note that NHIF is consistent in granting access to the market launch date even if an objection is received from the price reimbursement applicant.

To sum up, a patentee can rely on its competitor’s statements made in a price reimbursement application filed with the NHIF in preliminary injunction proceedings. By having access to commercial information of an allegedly infringing product before it is granted price reimbursement, the patent holder is able to make better strategic decisions on the timing of enforcement and has the option to adjust its own marketing and commercial approach accordingly. One downside of such file inspection is that the alleged infringer will become aware that it might be facing an enforcement action in the near future.

A note to take away for generic companies: this is an alert to adjust strategies in order to reduce the risk that patent holders rely on generic company statements within the reimbursement application to convince the infringement court that a planned market launch qualifies as an imminent threat of infringement.

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