Table of Contents 1Introduction 2Background of the intervention 2.1 Description of the SPC system 2.2 Description of the intervention logic and objectives of the SPC 2.3 Mapping of relevant stakeholders 2.4 Baseline and points of comparison 3Implementation / state of Play 4Method 4.1 Methodology and sources of information 4.2 Limitations and robustness of findings 5Analysis and answers to the evaluation questions 5.1 Effectiveness 5.1.1 Objective 1: Encouraging global innovation in new products for EU patients and consumers of PPPs 5.1.2 Objective 2: Attracting R&D to the EU and preventing delocalisation 5.1.3 Objective 3: Promoting a uniform SPC system in the EU 5.1.3.1 SPC grant and enforcement procedures across the EU 5.1.3.2 Transparency: publication of SPC-related information across EU Member States

5.1.3.3 Bolar exemption: implementation differs across the EU 5.2 Efficiency 5.2.1 Impact of the SPC system on the availability, accessibility and affordability of medicines 5.2.2 Cost of a fragmented SPC system 5.2.3 Impact of suboptimal transparency 5.3 Relevance 5.3.1 The COVID-19 pandemic and EU recovery 5.4 Coherence 5.5 EU added value 6Conclusions 6.1 Effectiveness 6.2 Efficiency 6.3 Relevance 6.4 Coherence 63 6.5 EU added value Annex 1: Procedural information Annex 2: Stakeholder consultations Annex 3: Methods and analytical models Annex 4: Costs and Benefits analysis of prolonged exclusivity due to SPC Annex 5: Evolution of the approval of new active ingredients

Annex 6: Level of SPC application and renewal fees Annex 7: SPC Workload at National Patent Offices Annex 8: The questions per each of the five evaluation criteria Annex 9: SWOT tables: the EU as a location of R&D investment in the pharmaceutical and PPPs sectors Annex 10: Pharmaceutical incentives in the EU Annex 11: EU industrial Ecosystems and EU Recovery Glossary Term/Acronym Meaning/Definition Accessibility The extent to which a medicine is authorised, marketed and reimbursed in an EU Member State, and therefore may be actually used by a patient. Affordability The extent to which patients are able to make out-of-pocket payments on health care, or able to make co-payments in some form (affordability at micro level), and the extent to which public funding of the health care sector raised through premia or taxes is sustainable (affordability at macro level). Availability The extent to which a medicine exists (to treat a certain condition) and has been authorised (in an EU Member State or centrally in the EU), without necessarily being marketed. API Active pharmaceutical ingredient. This is the component of a medicine or plant protection product (e.g. a pesticide) that produces its effects. Biopharmaceuticals or biologics Biosimilar medicine or biosimilar A biosimilar is a biological medicine highly similar to another already approved biological medicine. Biosimilars are approved according to the same standards of pharmaceutical quality, safety and efficacy that apply to all biological medicines. Biotechnology (short: biotech) Technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for a specific use. Bolar exemption The Bolar exemption makes it possible to conduct the testing required to obtain regulatory approval for the generic/biosimilar to take place during the patent/supplementary-protection-certificate (SPC) protection period of the reference medicine. The rationale for this exemption is to allow for the swift introduction of generic medicines shortly after the expiry of the patent/SPC term of the original product. Otherwise, in the absence of a Bolar exemption, tests for regulatory approval of generic medicines could only be conducted after patent/SPC expiry of the reference medicine, which would delay their market entry by months or even years. The EU Bolar exemption is laid down in Article 10(6) of Directive 2001/83/EC and Article 41 of Regulation (EU) 2019/6 (formerly Article 13(6) of Directive 2001/82/EC). Data protection (See entry below on ‘market protection’) Period of protection (of 8 years) during which pre-clinical and clinical data and data from clinical trials handed in to the authorities by one company cannot be referenced by another company in their regulatory filings. EMA European Medicines Agency Effective protection period The period that elapses from the time a product obtains a marketing authorisation until the last measure of protection (e.g. SPC, market protection, patents) on it expires. FDA US Food and Drug Administration Generic medicines (‘generics’) A generic medicinal product is a copy of an original non-biologic ‘reference medicinal product’ whose intellectual property rights (IPR) and market protection has lapsed or expired. The generic medicine is usually manufactured by a different company. Generics have the same qualitative and quantitative composition in active substances and the same pharmaceutical form as the reference medicinal products. Manufacturer of generics and biosimilars This term includes manufacturers of generics and/or biosimilars as well as manufacturers of APIs corresponding to those generics/biosimilars. Marketing Authorisation (MA) The approval to market a medicine in one, several or all Member States. Marketing Authorisation application An application made to a European regulatory authority for approval to market a medicine within the European Union. Market protection The period of protection during which generics, or biosimilars, cannot be placed on the market (typically 10 years from the marketing authorisation). Originators or innovators The companies which develop new medicines or active ingredients. They are typically the SPC holders, but are increasingly becoming leaders in the production and commercialisation of biosimilars. Paediatric rewards and Paediatric Regulation (**) The Paediatric Regulation (**) has governed the development and authorisation of medicines for paediatric use since entering into force in 2007. Its objective is to improve the health of children in Europe by addressing the low level of research and development in medicines for children. The Regulation sets up a system of obligations, rewards and incentives to encourage clinical research and development in medicines for children. (**) Regulation (EC) No 1901/2006 of the European Parliament and of the Council of 12 December 2006 on medicinal products for paediatric use and amending Regulation (EEC) No 1768/92, Directive 2001/20/EC, Directive 2001/83/EC and Regulation (EC) No 726/2004 (Text with EEA relevance) Personalised medicine A medical treatment using analysis of individuals’ phenotypes and genotypes (e.g. molecular profiling, medical imaging, lifestyle data) to: (i) tailor the right therapeutic strategy for the right person at the right time; (ii) determine a person’s predisposition to disease; or (iii) deliver timely and targeted prevention. PPP Plant protection product (e.g. a pesticide). R&D / R&I Research and development / Research and innovation SPC A supplementary protection certificate is a sui generis intellectual property right that extends by up to 5 years the effect of a patent in a Member State (with an extra 6 months possibly added for SPCs for medicinal products, if a paediatric investigation plan is conducted). SPCs apply to human medicinal produts, or to plant protection products, subject to regulatory authorisation. SPC manufacturing waiver An exception to the rights conferred by SPCs for medicinal products, as set out by Regulation (EU) 2019/933. This exception allows – under specific conditions: (i) the manufacturing of a product protected by an SPC in order to export the product outside the EU; or (ii) the storing of a product protected by an SPC before placing it on the EU market after SPC expiry. TRIPS Agreement of the World Trade Organization (WTO) on Trade-Related Aspects of Intellectual Property Rights. Unitary patent (NOTE: Unitary patents were not yet in force at the date of publication of this staff working document) Unmet medical need 1Introduction The present Commission staff working document provides an ex-post evaluation of Regulation (EC) No 469/2009 of the European Parliament and of the Council (codified version) and Regulation (EC) No 1610/96 of the European Parliament and of the Council, on supplementary protection certificates (SPCs) for medicinal products (pharmaceuticals) and plant protection products (PPPs, e.g. pesticides) respectively (hereafter mostly referred in the text as “SPC Regulations”). The evaluation assesses whether the main objectives of these two SPC Regulations (see Section 2.2 below) have been achieved. The following criteria are taken into account by the evaluation: effectiveness, efficiency, relevance and added value of the EU intervention. The evaluation also reviews both the internal coherence of the SPC Regulations and their external coherence with: (i) the regulatory incentives enshrined in EU pharmaceutical legislation (including orphan incentives and paediatric rewards); (ii) the applicable patent framework in the EU; and (iii) the EU’s international commitments. The Health Council conclusions of June 2016 called upon the Commission to engage in a wider review of incentives in the pharmaceutical sector. The Council invited the Commission to conduct an evidence-based analysis of the impact of EU pharmaceutical incentives on the innovation, availability and accessibility of medicinal products. Among those incentives, the Council considered that particular attention should be given to SPCs for medicinal products and the Bolar exemption (which applies to pharmaceutical patents and SPCs). The Commission published an inception impact assessment in February 2017, announcing a back-to-back evaluation and impact assessment of all relevant provisions and options for modernising the SPC Regulations. In October 2017, the Commission launched a 12-week online public consultation (see Annex 2). Several studies on SPC protection have been contracted or conducted within the European Commission since 2015 (see Section 4.1 below). The SPC for medicinal products is an incentive for pharmaceutical research, which plays a decisive role in the continuing improvement of public health. In view of Council conclusions mentioned above, this evaluation includes and assessment of the impact of the SPC on the availability (e.g. supply shortages and deferred or missed market launches of innovative medicines) and accessibility (e.g. launch of generic medicinal products and biosimilars) of medicinal products in the EU. This is the first evaluation of the SPC Regulations. It covers the period from 1992 to October 2020 and considers all EU Member States during that period. It also takes into account recent case-law from the Court of Justice of the European Union (CJEU) and changes in the pharmaceutical and agrochemical sectors of the EU’s main trading partners (see Section 5.1.2 for details). This evaluation does not assess the narrow exemption (‘SPC manufacturing waiver’) introduced by Regulation (EU) 933/2019 of the European Parliament and of the Council, that is too recent to measure any impact and will be the subject of specific future evaluations. This evaluation takes place as part of the IP action plan and of the pharmaceutical strategy for Europe. It goes alongside the evaluation of the legislation on medicines for children and rare diseases. 2Background of the intervention 2.1Description of the SPC system

An SPC is a sui generis intellectual property right that can extend by up to five years the protection conferred by a patent (“the basic patent”), but only with respect to the medicinal product, or plant protection product (PPP), that is covered by the related marketing authorisation. SPC protection for medicinal products was first introduced in the EU in 1992 through Council Regulation (EEC) No 1768/92 and is currently governed by Regulation (EC) No 469/2009 of the European Parliament and of the Council (codified version). In 1996, SPC protection for PPPs was established by Regulation (EC) No 1610/96 of the European Parliament and of the Council. SPC protection aims at offsetting the loss of effective patent protection due to the length of the necessary testing, clinical/field trials and marketing authorisation procedures, thereby providing the pharmaceutical and PPP industries with incentives to innovate. As shown in Figure 1 below, an SPC takes effect at the end of the term of the basic patent, and is granted for a period equal to the period which elapsed between the date on which the application for a basic patent was filed and the date of the grant of the first authorisation to place the patented product on the market in the EU, reduced by five years, and with a maximum duration of five years. Some patented products may thus not be eligible for SPC protection at all, i.e. if the marketing authorisation was obtained in less than 5 years after the filing of the application for the basic patent; some may enjoy SPC protection having the full duration of 5 years; while others enjoy SPC protection of a shorter duration. The average duration of SPCs for medicinal products granted in the EU amounts to 3.5 years. Figure 1: Duration of the SPC Following the request of the holder of an SPC for medicinal products, the duration of the SPC can be extended once by six months in the case where Article 36 of Regulation (EC) No 1901/2006 of the European Parliament and of the Council of 12 December 2006 on medicinal products for paediatric use applies (namely that all the measures included in an agreed paediatric investigation plan are complied with, the protected product is authorised in all Member States and relevant information on the results of studies is included in product information). Since an SPC ‘confer[s] the same rights as conferred by the basic patent’ (Articles 5 of the SPC Regulations), the exclusivity resulting from the basic patent is extended and enables its holder to prevent competitors from practicing the invention (e.g. manufacturing, offering for sale or storing generic products) in those Member States in which an SPC has been granted. Some exemptions to the SPC rights for medicinal products apply, such as the Bolar exemption and the SPC manufacturing waiver. The Bolar exemption allows generics to be manufactured during the patent and SPC term for clinical trials purposes. The SPC manufacturing waiver allows, under certain conditions, generics to be manufactured during the SPC term for export or storing purposes. As analysed in Section 5.1.3, the existing SPC system requires the filing of an SPC application in each of the EU Member States where SPC protection is sought. Each of the Member States concerned has to examine and publish the application and eventually grant or refuse the SPC. These nationally granted SPCs are enforced in national courts. In the absence of a unitary SPC title, this situation will remain the case even with the future introduction of the unitary patent system, with the exception that the currently nationally granted SPC might be centrally enforced before the future Unified Patent Court (‘UPC’) for the participating Member States (having ratified the UPC Agreement). Section 3 below provides statistics on the use of the SPC in the EU. Further to patents and SPCs, EU legislation provides pharmaceutical innovators with additional types of incentives and rewards such as data exclusivity and market protection (see glossary), orphan incentives and paediatric rewards. Annex 10 provides for graphics (source Copenhagen Economics (CE) study) on the related legislation (and its chronological introduction), duration and interaction of the EU constellation of incentives and rewards for human medicinal products. Veterinary medicinal products can enjoy periods of protection of the technical documentation on quality, safety and efficacy originally submitted with a view to obtaining a marketing authorisation. Innovators in the field of PPPs can also enjoy periods of regulatory data protection or exclusive use to safety and efficacy data in the registration dossier necessary for marketing authorisation of chemical plant protection products. 2.2Description of the intervention logic and objectives of the SPC The following graphic depicts the intervention logic for the EU SPC legislation when the SPC system was established, including the objectives sought by the SPC protection. The first objective of the SPC system is to encourage R&D in new active ingredients of medicines and PPPs at worldwide level (i.e. the location of the R&D is not relevant) so that it could result in more availability of those products for EU patients and consumers of PPPs. External factors such as incentives and rewards in the EU pharmaceutical and PPPs legislations can contribute to additional investments and jobs in innovation and therefore to the availability of more active ingredients. The second objective is about attracting R&D centres and jobs to the EU and preventing R&D delocalisation outside the EU, which was especially relevant in the 1990s considering the ‘competition’ of certain third countries that had introduced SPC-like legislation (e.g. ‘patent term extensions’). The third objective is about promoting a homogenous SPC system in the EU. This would in particular prevent the heterogeneous development of national laws that would hamper the free movement of medicinal products and PPPs within the internal market.

The 2017 inception impact assessment for optimising the Internal Market's industrial property legal framework relating to supplementary protection certificates (SPC) identified unintended results that the SPC legislation brought for the EU-based manufacturers of generic and biosimilar medicines, namely the loss of export markets (third countries) and of day-1 entry onto EU Member State markets. The lawmakers had not anticipated in 1992 this negative impact of the SPC on the competitiveness of EU-based generics/biosimilars manufacturers. The impact assessment related to Regulation (EU) 2019/933 on the SPC manufacturing waiver analyses in detail those unintended results. 2.3Mapping of relevant stakeholders The following stakeholders have been consulted by the Commission through an online general public consultation (see Annex 2): -Group I: General public, which can be users of medicines and PPPs. -Group II: Innovative companies or originators, which apply for and enforce SPC protection. Originators are typically universities, start-ups, SMEs and large companies conducting research to develop new products (as opposed to generics manufacturers below). -Group III: Companies dealing with generic medicines and generic PPPs, including producers of active pharmaceutical ingredients (APIs). They need to know the status and scope of SPCs across the EU to conduct their businesses. They can make use of flexibilities such as the Bolar exemption and the SPC manufacturing waiver. -Group IV: EU large consumers/purchasers of PPPs or medicines; health professionals and associations; health or price-setting authorities, including ministries of health; and patients associations, which are interested in the availability and accessibility of innovative products. -Group V: National authorities such as the IP offices and courts of EU Member States, which respectively grant and enforce SPCs; IP agents and attorneys who deal with the registration, monitoring and enforcement of SPCs. -Group VI: industry/trade authorities, which monitor and manage incentives for industrial investments and trade. A total of 231 replies were provided to the Commission online consultation: 43 replies from the general public (Group I above), 71 from originators industry/associations (Group II), 63 from generics and biosimilars industry/associations (Group III), 15 from health authorities/doctors/patients groups (mostly from national organisations dealing with health insurance/reimbursement/health technology assessment, from a doctors’ organisation, and 2 from patients’ associations) (Group IV), 34 from patent offices/practitioners (Group V), and 5 from industry/trade authorities (Group VI). In addition, the Max Planck Institute conducted a number of surveys among stakeholders in the Groups II, III and V above as part of the study on the legal aspects of the SPC contracted by the Commission (see Section 4.1). 2.4Baseline and points of comparison In the 1990s, the Commission did not conduct a formal impact assessment for the SPC Regulations as it was not yet part of the procedure for adopting a proposal until 2004. Therefore, the baseline has been reconstructed as far as possible based on available data, including by reference to the explanatory memorandum. In Section 5, the analysis of the evolution of investments in innovation and job creation will be mostly benchmarked against the situation of the SPC system in the EU in 1992 (for medicines) and 1996 (for PPPs) when the SPC Regulations were adopted (the ‘base scenario’). As of the adoption of those regulations, concerned patent holders had certainty that they could obtain SPC protection in the EU. In 1990, when the Commission proposed legislation on the SPC for medicinal products, the USA and Japan had, since 1984 and 1988 respectively, started providing patent term restoration for pharmaceutical roducts on their national markets also for a maximum period of 5 years. In a counterfactual scenario, if the SPC Regulations had not been adopted at EU level, similar measures might have been introduced in most EU Member States through national legislation (in 1991, France and Italy had adopted national SPC legislations) likely in a non-uniform way. 3Implementation / state of Play The SPC Regulations have been implemented by all EU Member States (EU MS) (see Mejer study (2017)). No infringement actions against EU MS have been brought in relation to their implementation. In all EU MS, national IP offices have been entrusted with examining SPC applications and granting SPCs. National courts deal with their enforcement but also with appeals against refusals to grant or challenges to the validity of SPCs. National courts are also responsible for referrals to the CJEU on the interpretation of the SPC Regulations. Since the entry into force of the SPC Regulations, the use of SPC protection has been steadily increasing. The average number of SPC applications in EU MS, combining both pharmaceutical and PPP SPCs, remained at the level of 30 applications annually between 1996 (year of adoption of the SPC Regulation on PPPs) and 2004, and then shifted to about 50 applications annually (see Mejer study (2017) for more details). The highest number of SPC filings has been recorded in the biggest markets (Germany, France, Italy and UK). Kyle study (2017) shows that the share of new medicinal products (i.e. active ingredients for the purpose of the SPC) obtaining an SPC in at least one Member State increased from 75% in the early 1990s to 86% to 2017. More than 20,000 SPC applications have been filed in the EU since the entry into force of the SPC Regulations. Many more SPCs are applied and granted for medicinal products than for PPPs. For example, according to the Kyle study (2017), 197 plant protection SPC applications were lapsed, in force, or pending in 2015 in Germany, compared to 1,257 for medicinal products.

By 2016, more than 40 medicinal products had been granted an SPC extension by the national patent offices in one or more Member States, resulting in over 500 national extensions. 4Method 4.1Methodology and sources of information A legal analysis of the SPC legislation has been conducted in-house and through several external studies, especially the Max Planck Institute study on the legal aspects of the SPC system (see Annex 3 on studies). This study analysed in detailed each of the provisions of the SPC Regulations, and was based on desk research and surveys to stakeholders (SPC holders and generics manufacturers and associations, IP attorneys, patent offices and judges), which were based on highly technical and detailed questionnaires. In the context of that study, two workshops with stakeholders were organised. Economic analyses of the SPC system have also been conducted both in-house (e.g. Mejer study (2017)) and through external studies like the Copenhagen Economics study (see Annex 3 on studies), which analyses the economics of the SPC and other EU pharmaceutical incentives and how they interact. The latter also included several case studies. The Commission conducted an online public consultation on the SPC system and the EU Bolar exemption from 12 October 2017 to 4 January 2018 (hereinafter Commission consultation). Its outcomes are summarised in document SWD(2018)242 (see Annex 2). 4.2Limitations and robustness of findings 5Analysis and answers to the evaluation questions

5.1Effectiveness The effectiveness analysis considers how successful the SPC Regulations have been in achieving their three objectives. 5.1.1Objective 1: Encouraging global innovation in new products for EU patients and consumers of PPPs The main aim of the SPC system is to promote the development of new active ingredients in the pharmaceutical and PPP sectors (not incremental innovation such as repurposing of known active ingredients for new treatments, new formulations, new dosages of existing medicines, or combining existing active ingredients with non-active ingredients). As explained in the intervention logic, this first objective will be evaluated disregarding the geographical location of the R&D. It would be sufficient that the SPC contributes to worldwide research in new active ingredients as long as EU patients and farmers can benefit from that global research (induced by EU and non-EU countries) through the availability of more products (i.e. more registration of active pharmaceutical and PPP ingredients in the EU). Conversely, the second objective (attracting R&D to the EU and preventing R&D delocalisation outside the EU), analysed in Section 5.1.2, has a geographical focus on the EU. -Question 1: Has worldwide innovation in new active ingredients increased since the introduction of the SPC system? Pharmaceutical sector The pharmaceutical industry remains a leading industrial sector in R&D investment. Figure 2 below shows the development since 1975 of business expenditure on R&D for the pharmaceutical industry in the US, Japan, Canada, Australia and 10 EU Member States. Figure 2 also shows, as a benchmark, the development of R&D expenditure in the whole manufacturing sector. The two vertical dotted lines indicate the dates on which SPC systems were introduced in the USA (in 1984) and in the EU (in 1992). Figure 2: Development of R&D investment in the pharmaceutical industry and manufacturing industry in general (Source: OECD ANBERD database) Figure 2 shows that the pharmaceutical industry has devoted significantly more resources to R&D investment since the mid-1980s than the aggregated manufacturing sector. Moreover, unlike other industries, the pharmaceutical industry continued to accelerate its investment in R&D in the first half of the 1990s. However, not all this worldwide pharmaceutical investment in R&D is necessarily devoted to the development of new active ingredients, the subject-matter of SPC protection. For example, a part of this R&D investment may be devoted to finding additional therapeutic uses for existing active ingredients. Therefore, to further ascertain the effectiveness of this first objective, the evaluation analysed the evolution of approvals of new active ingredients (this also helps in analysing the efficiency of the SPC). As discussed in Section 4.2 above, the evaluation takes the annual approvals of ‘novel drugs’ by the Center for Drug Evaluation and Research of the US FDA as a proxy for the generation of ‘new active ingredients’ at world level. It can be observed that the increasing investment in R&D was accompanied by more approvals of new active ingredients over several decades as observed in Figure 3 and Figure 4 , , especially during the last decade (see detailed analysis in Annex 5). However, there was a decline in approvals of novel medicines in the first decade of the 2000s following the approvals spiked in the late 90s in the context of the Prescription Drug User Fee Act (PDUFA) of 1992. PDUFA introduced measures for the FDA to eliminate the backlog of un-reviewed applications within 24 months of the establishment of an user fee program. An OECD study and many others discuss that the efficiency of pharmaceutical R&D has been declining (Eroom’s law in pharmaceutical R&D) in recent decades (with a stable trend in the past decade) due to several interrelated factors. The OECD study explains that this phenomenon can also be found in other sectors, including the PPP sector, and implies that ideas/treatments that are ‘easy’ to find are developed and exploited first. Then, as the stock of knowledge increases, new ideas/treatments become harder to find or inventions and output can only be sustained or increased by large increases in research effort that offset declining productivity. In pharmaceuticals, this is apparent in an ever-increasing back catalogue of effective drugs, and a shift towards more complex conditions that has increased the complexity of clinical trials and failure rates. Another hypothesis is that more stringent requirements to gain marketing authorisation have also increased the costs of clinical trials. On the other hand, declines in productivity are also driven by rising R&D costs. A similar patterm of the historical approvals of novel drugs observed in the US FDA data in recent decades can be also observed in data for approvals of new human and veterinary active substances at the European Medicines Agency (see Figure 5 ), and in the evolution observed by the Kyle study of 2019 for the period between 1990 and 2015 at global level (see Figure 6 ). Specifically for biologicals, the figures below show a positive trend in the generation of new active ingredients since the emergence of biotechnology in the 1980s.

PPP sector A specialised study by consultants Phillips McDougall in 2013 reported that annual industry expenditure on crop protection R&D worldwide more than doubled from USD 3.06 billion to USD 6.71 billion between 1995 and 2012. A Phillips McDougall survey in 2016 of 11 companies reported annual, total, agrochemical-industry-R&D expenditure of USD 2.6 billion in 2014 and USD 3.2 billion in 2019. A subsequent 2019 study by Phillips McDougall AgriService highlights that investment in R&D in PPPs remains high compared to other industrial sectors. Major companies (many of them EU-headquartered) invested around 10% of their annual sales in R&D over the last 50 years. The study also states that the total number of active PPP ingredients available globally has been increasing for decades, from 400 at the beginning of the 1990s to 600 at the beginning of the 2010s. However, unlike in the pharmaceutical sector, the annual number of new active ingredients introduced for conventional crop protection has declined in recent decades in global markets according to Phillips McDougell database and analysis ( Figure 7 ). According to a study by Deloitte, this global decline is due to two main factors, set out in the bullet points below. -Longer product-development cycles and escalating costs: the average development period for a new PPP has increased from 8.3 years in 1995 to 11.3 years in 2010-2014. This has increased the overall R&D costs for a new PPP from USD 152 million in 1995 to USD 286 million in 2010-2014. -Increasing stringency of regulatory requirements: this hampers the further development of innovative technologies and the use of some types of crop-protection agents like glyphosate. This global trend of decreasing numbers of new active ingredients can also be observed at EU level. The 2013 study by Phillips McDougall points to a decline in investment in R&D for new PPPs that is specific to the European market (with fewer new active substances being registered in the EU). They conclude that there are three possible reasons for this: (i) the maturity of demand in the EU (compared with other world regions like Asia); (ii) increasingly stringent data requirements for regulation; and (iii) the non-acceptance of genetically modified seeds in the EU. The study concludes that this leaves European farmers with fewer new technologies to drive agricultural production than their competitors in other regions of the world. According to the 2013 study by Phillips McDougall, the number of companies worldwide involved in R&D of new active ingredients for PPPs has halved, from 35 companies in 1995 to 18 in 2012. This has arguably affected competition in new product areas.

-Question 2: Was the observed increase in investment in research on new active ingredients induced by the SPC system? The data above and the perception of innovators (discussed below) suggest that the SPC framework supported global investment in R&D of new active ingredients in the pharmaceutical and PPP sectors in recent decades. However, it is challenging to measure the precise contribution made by the SPC framework to the increase in global R&D efforts, and specifically to R&D with the potential to generate new active ingredients in the EU. This is because other factors can also have a significant positive or negative influence (see Table 1 below and Annex 9). Quantifying the impact of intellectual property rights on innovation in any field of technology is a well-known challenge and the SPC framework is no exception in this respect. Observing Figure 3 and Figure 4 above, and given the time necessary to develop a new medicine, the surge in US approvals of novel medicines observed between 1994 and 1999 (from around 20 in 1994 to over 50 in 1999) could have been positively influenced by the adoption in 1984 of the US Medicine Price Competition and Patent Restoration Act (Hatch-Waxman Act). This legislation introduced US patent-term extensions (the US version of the EU’s SPCs) along with other measures (e.g. a five-year period of data exclusivity, and the establishment of the ‘Orange Book’ where the US FDA publishes the patents that originators believe cover their approved medicines). South Korea and Japan introduced patent-term extensions in 1987 and 1988 respectively. Table 1 below shows factors that: (i) help increase or hamper global R&D investment in the pharmaceutical and PPP sectors, and (ii) have arisen in parallel to the introduction of SPC protection in the EU. Negative factors may have encouraged investment in incremental innovation, such as the repurposing of known active ingredients and increasing reliance on follow-on patent protection such as secondary-medical-use patents. Factors that positively influence investment in global R&D for new active substances Factors that have a negative impact on investment in global R&D and new active substances -IP protection in the EU and other countries -Regulatory incentives such as data and market protection, orphan incentives and paediatric rewards -Growing global demand for pharmaceuticals (over EUR 1 tn annual expenditure with over 6% annual growth) and greater expenditure on medicines -New technologies that have untapped new treatment opportunities (e.g. biotech) -Increasing public and private funding in pharma. This is facilitated by IP rights like the SPC, as IP rights can be used as loan/funding collateral and facilitate licensing and outsourcing -Increasingly stricter regulatory requirements, including post-approval requirements. These are especially discouraging for the PPP sector. They may have encouraged: (i) investment in incremental innovation like the repurposing of known active ingredients; and (ii) increasing reliance on follow-on patent protection such as secondary-medical-use patents (see the pharmaceutical-sector inquiry launched by the European Commission in 2008). -High cost of new techniques to develop new substances -Mergers of leading companies Stakeholders’ perception of the impact of SPCs on innovation The Commission’s public consultation asked innovators (see Section 2.3 above) some questions about the role of the SPC system in their own innovation-related decisions. Their answers (71 respondents) appear to reflect the SPC’s positive impact as detailed below. However, it can also be observed that many of the respondents did not answer some questions. Thus, question 6 asked: For innovative products or potential innovative products, does the possibility of getting EU SPC protection play a role when your company/organisation is deciding on the following investments? (i) in R&D (excluding clinical/field trials) and (ii) in clinical trials (medicinal products), or field trials (for plant protection products). In their answer to Question 6(i), only 4 out of 71 innovators answered ‘No’, with 32 reporting that SPC protection had a positive effect. However, 45% of innovators (32 out of 71) did not provide a reply. In their answer to Question 6(ii), only 1 out of 71 answered ‘No’, with 33 reporting that SPC protection had a positive effect. However, 45% of innovators (32 out of 71) did not provide a reply. The Commission public consultation also surveyed other stakeholders (see Section 2.3 above). Here, the Commission asked patients, farmers, health practitioners and health-related authorities how they perceived the progress made in the last two decades in the EU for investments in pharmaceutical innovation and PPPs in general. In their answers, 10 out of 15 stakeholders reported a positive trend, with 2 reporting a stable trend, and only 1 reporting a negative trend. These questions were also included in the questionnaire addressed to industry players, innovators and trade authorities, who replied as follows (only 5 replies were received, which is a limited sample): 2 out of 5 reported a positive trend, with 1 reporting a stable trend, and 1 reporting a negative trend. The Commission public consultation did not address specific questions on innovation to makers of generics as these companies are not expected to invest in new active ingredients. However, the issue of generics was addressed in the Allensbach survey for the Max Planck Institute (MPI) study contracted by the Commission, discussed in the following paragraph. Further surveys show that SPC protection appears to be highly coveted by innovators, including SMEs. The Allensbach survey (Question 26) found that 80% of respondents agreed/strongly agreed with the statement that the current SPC regime fosters investment in R&D activities, with only 15% of respondents disagreeing or strongly disagreeing. Around 65% of respondents from the generics industry agreed/strongly agreed with that statement. The Allensbach survey also found that more than two thirds of all industry respondents agreed or strongly agreed with the statement: ‘the current SPC Regulations act as an incentive to develop more products for which a longer time is needed until a marketing authorisation is obtained’, while 19% of the respondents disagreed or strongly disagreed. However, not all researches supports the claim that the SPC Regulations made a critical difference. Research conducted by Médecins Sans Frontières that focused on three best-selling medicines concluded that the internationally accepted patent term of 20 years would have been sufficient to recoup the R&D investments related to those three medicines, claiming that the assumed general need for SPCs is incorrect, at least for some medicines. In this regard, it is accepted that the time needed to recoup investments for developing a particular medicinal product may depend on several factors and be shorter for some medicines, e.g. blockbusters. Annex 4 makes calculations in this regard for a large sample of medicines. In the veterinary sector, innovators consider any existing incentive, including the SPC, as necessary for investment in innovation, especially given the challenges described in the impact assessment accompanying the Commission proposal on Regulation (EU) 2019/6 on veterinary medicinal products. 5.1.2Objective 2: Attracting R&D to the EU and preventing delocalisation Another objective of the SPC Regulations prominently claimed by the legislators was to promote R&D activity within the EU, and consequently to prevent the delocalisation of research centres and related jobs to non-EU countries.

-Question 3: Have more pharmaceutical and PPP investments and jobs in R&D been brought to the EU since the introduction of the SPC? How have those investments developed in other trading partners of the EU? Pharmaceutical sector In 1992, pharmaceutical R&D and manufacturing was essentially located in the US, Western Europe and Japan. Today, R&D and manufacturing for pharmaceuticals and PPPs are global phenomena, with increasing global competition to attract investment. Despite this increasing global competition, the EU pharmaceutical industry remains a leading sector in R&D investment. The innovative pharmaceutical industry alone invests over €37 billion in research in Europe, the highest proportion of all industrial sectors, with 795,000 direct jobs and a €110 billion trade surplus (2019). According to Eurostat, the pharmaceutical-manufacturing sector (NACE Division 21) in the 27 Member States of the EU ( EU27 ) is characterised by a small number of very large, capital-intensive enterprises.. According to the EFPIA, the average annual growth rate of pharmaceutical R&D within the EU was 4.6% from 2000 to 2015. Figure 8 and 9 below depict a significant and sustained increase in pharmaceutical R&D in the EU since the introduction of the SPC for pharmaceutical products. Figure 10 shows growth in European employment in pharmaceutical R&D since the introduction of the SPC protection. On the development of investment in pharmaceutical R&D, US-based investment in pharmaceutical R&D clearly outperforms that of the rest of the world (See Figure 9 ). The EU is the second largest base for R&D investment at global level, with China increasingly closing the gap. A study by Grabowski and Wang (2006) found that the EU maintained a leading position in the generation of NCEs from 1982 to 2003 ( Figure 11 , after which time the USA caught up and is now in the leadIndeed, more recently, 83% of the new medicines approved by the US FDA between 2017 and 2018 originated in the USA. Spending on pharmaceutical R&D in China grew at an average annual rate of 21.5% between 2008 and 2015. China does not provide for SPC protection, but it benefits from large State-driven investments in R&D and from foreign R&D investment attracted by its immense and growing demand for medicines. On employment trends, the CE study noted that, although employment within pharmaceutical R&D within the EU increased by 49% between 1990 and 2015, overall employment within the pharmaceutical sector did not increase between 2006 and 2014. Moreover, employment in R&D between 2010 and 2015 in the EU decreased ( Figure 10 ).

For the veterinary sector, the impact assessment accompanying Regulation (EU) No 2019/6 on veterinary medicinal products provides a detailed account of the sector’s current circumstances and the challenges in developing medicines for veterinary use. It noted that the sector directly supports 50 000 jobs in Europe and over 100 manufacturers. PPP sector The EU PPP industry remains a global leader in R&D and manufacturing, with the emergence of new players in Asia where demand and the industry are growing steadily. In 2012, Asia overtook Europe as the largest market worldwide for PPPs. In 2018, European countries exported USD 17.6 billion of pesticides (48.2% of global exports – noting that this figure includes Switzerland, which was the origin of 0.8% of the global exports). In second place, Asia exported USD 12.3 billion (33.7% of global exports), with China alone exporting USD 5.3 billion. In third place was the US, with USD 4.2 billion in exports. Following a wave of mergers among the major companies in this sector, two German companies remain among the now reduced number of major global groups. -Question 4: To what extent did the SPC Regulations increase investments in pharmaceutical and PPP innovation in the EU? Measuring the role of the SPC in the overall increase of R&D efforts by the pharmaceutical and PPP sectors within the EU. This is because several factors influence the geographical distribution of R&D activities. Many of these factors are as powerful now as they were in 1992, but others have emerged since then. The difficulty of measuring the role of the SPC in this area is reflected in the response to the Commission public consultation. Over 60% of the 71 innovators that participated in the Commission public consultation did not reply to Question 9, which inquired about the most relevant drivers ‘that affect your decisions on the geographical location/allocation of investments in innovation’. Although 9 respondents reported that the availability of SPC-type protection was among the most relevant drivers, those that did reply to the question mostly reported other factors. These replies referred to: (I)the availability of regulatory data protection (2 respondents); (II)the availability of good health infrastructure (e.g. modern hospitals) (5 respondents); (III)the proximity of research universities (4 respondents); (IV)the proximity of an effective regulatory agency (3 respondents); (V)the availability of public/private funding for their activities (2 respondents); (VI)labour costs (1 respondent); (VII)access to high-skilled labour (10 respondents); (VIII)ease of recruiting patients or accessing treatment groups (4 respondents); (IX)a large market (in terms of potential sales in the country where you decide to invest) (2 respondents); (X)taxation (1 respondent); (XI)proximity to the place where the clinical trials (or filed trials) for the product were carried out (1 respondent); (XII)the possibility of getting ‘good manufacturing practices’ from the US FDA and/or EMA for the factories based in that country (1 respondent).

The Commission public consultation also asked innovators whether the ‘prospective product’s eligibility for SPC protection has ever been a decisive factor in its development (i.e. without an SPC you would have discarded it despite having already invested in part of its development)?’. 33 innovators responded positively to this question, confirming that eligibility for SPC protection was decisive in their product’s development. There was then a follow-on question: ‘Was the prospective product being developed (or did most of its development take place) in the EU?’. Of the 33 innovators who responded positively to the earlier question 51% (i.e. 17 out of 33) replied ‘Yes’ to the follow-on question and only 1 replied ‘No’. The European Biopharmaceutical Enterprises (EBE), which represents the interests of biopharmaceutical companies in Europe (60% of its members are SMEs), reported to the Commission as part of the SPC public consultation. Its report said that any legal uncertainty around SPCs had the potential to deter investment, postpone development decisions and undermine Europe’s reputation as a safe haven for research and development. The EBE said that any uncertainty would particularly impact EU-based pharmaceutical SMEs and start-ups, which have fewer resources to undergo lengthy development pathways for their products (they rely on the prospect of getting patent protection and a subsequent SPC). Specifically, for the veterinary sector, the impact assessment accompanying the proposal for Regulation (EU) No 2019/6 on veterinary medicinal products points out several factors that influence decisions on the geographical localisation of R&D. These factors are strongly influenced by market forces (e.g. a massive increase in demand for animal-origin food and companion animals in Asia) and regulatory approaches outside the EU. According to the CE study, companies geographically allocate their R&D activities not only on the basis of IP rights but also according to a number of other criteria, such as the availability of a qualified labour force, good health infrastructure, easy recruitment of patients for trials, research universities, public private partnerships, tax schemes, R&D subsidies, high spending on pharmaceuticals or PPP, etc. For many of those factors (some of which fall under national competences in the EU) the USA clearly outperforms the EU (e.g. the USA has higher expenditure on medicines and greater funding available for start-ups through their whole cycle of development). The MPI and Kyle studies also recall that companies conducting their R&D activities outside the EU can benefit from the IP protection available in the EU and in non-EU jurisdictions. Kyle study (2017) finds that almost 44% of SPC applicants are US-based companies, with Japanese and Swiss-based applicants accounting for 7% and 6%, respectively. Overall, these figures reflect the geographical distribution of R&D. Replies to Question 26a of the Allensbach survey for the MPI study show that 36% of stakeholders agreed that the SPC Regulations prevented the relocation of research centres outside the EU and 34% disagreed. There was a large division between originator and generics companies on this question, as 57% of originator companies agreed that the SPC Regulations prevented the relocation of research facilities outside the EU, whereas only 19% of generics companies shared this opinion. In 2019, the EFPIA launched a survey of 18 of its corporate members, as part of the PwC study on the influence of IP incentives (SPCs, regulatory data protection, orphan market exclusivity, and paediatric rewards) on their investments in the EU. Respondents identified IP incentives, followed by quicker market access, as the leading factors influencing their R&D investment decisions. The survey concluded that phasing out existing IP incentives in the EU over a period of 5 years would have a negative impact on their European operations and on EU research-based investment activity in particular. Half of the respondents stated that this scenario would lead to a reduction in their R&D and commercial footprints of more than 25%, and that they would seek opportunities in other regions. For the PPP sector, the discussion earlier on in this report raised the possibility that other factors external to the SPC have offset the positive effect of the SPC in supporting investment in R&D and in new active ingredients in the EU. These other factors include the maturity of the EU market and the increasingly strict regulatory environment in the EU. Based on the studies and consultations mentioned above, Annex 9 analyses the strengthens and weaknesses of the EU as a location for R&D investment in the pharmaceutical and PPP sectors. 5.1.3Objective 3: Promoting a uniform SPC system in the EU The third objective of the SPC Regulations was to introduce a uniform SPC system at EU level, thereby preventing the uneven development of national laws that would have created obstacles to the free movement of medicinal products and PPPs within the single market. The lawmakers expected that the SPC Regulations would provide for SPCs granted under the same conditions by each Member State at the request of the holder of a national or European patent relating to a product for which a marketing authorisation had been granted. -Question 5: Are the SPC grant, enforcement and publication procedures/outcomes uniform across the EU? 5.1.3.1SPC grant and enforcement procedures across the EU Respondents to the Commission public consultation (2017) broadly supported (detailed data in Section 5.5 below) the regulation of SPCs at EU level. However, stakeholders claim – and studies and surveys suggest – that the following differences in practices related to the SPC grant and enforcement procedures across Member States have resulted in a fragmentation of the SPC framework: (1)differences in granting procedures across EU Member States; (2)differences in the availability/training of SPC examiners; (3)differences in the length of the examination; (4)conflicting outcomes of the examinations across EU Member States; (5)conflicting outcomes in court proceedings. (1)Differences in granting procedures across EU Member States

Under Article 10(5) of Regulations 469/2009 and 1610/96, Member States may allow the national authority (the national patent office (NPO)) to grant SPCs without verifying that the substantive conditions laid down in paragraphs (c) and (d) of Article 3 (i.e. the requirements that (c) the product has not already been the subject of a certificate, and (d) the marketing authorisation is the first authorisation to place the product on the market as a medicinal or plant-protection product) are met. This has led NPOs to implement different SPC-granting procedures. The MPI study (2018) provides details on the different practices across EU Member States. In addition, non–examining Member States have produced more grants of SPC, leading to examining Member States referring questions to the CJEU when they wish to refuse an SPC but note that there have been grants elsewhere. The substantive conditions most concerned have been the scope of the patent, but also difficulties to abide by the CJEU’s case law on determining which is the first marketing authorisation in the EU. The generics manufacturers that responded to the Commission public consultation (2017) mostly (76.19%) supported an SPC-granting procedure that includes a full substantive examination. In this regard, according to a survey conducted as part of the MPI study, most NPOs require an examination of all four substantive requirements stipulated in Article 3 of Regulation 469/2009. Two NPOs examine only Articles 3(a) and 3(b). Four NPOs replied that they did not examine compliance with the requirement under Article 3(d). However, both the increasing complexity of the state of the art (e.g. the emergence of biotechnology) and the evolution of CJEU case-law have made the examination of SPC applications technically more complex. According to the survey conducted by MPI, some NPOs have declared this growing complexity of the examination to be challenging, especially for NPOs with less administrative resources. However, Member States have a duty to abide by the CJEU’s case law. On the role of third parties in the grant procedure, it is noted that the SPC Regulations rule out opposition proceedings. Nevertheless, one Member State has implemented opposition proceedings for SPCs. Furthermore, most NPOs (at least 20) allow the submission of third-party observations, although this is not allowed by at least two NPOs . As analysed in Section 5.1.3.2, there are also differences in the information published by the various NPOs. (2)Differences in the availability/training of SPC examiners The MPI study found that around 8 NPOs had SPC examiners with only a relevant technical qualification and 8 NPOs had examiners with a relevant technical qualification and legal training. In a few NPOs, technical examiners cooperate with the legal department in examining SPC applications. (3)Differences in the length of the examination Some stakeholders consulted as part of the MPI study (Question 62 of the Allensbach survey to stakeholders) confirmed that there were significant differences in the length of examination (which can sometimes take more than a year), and expressed their wish for uniform timing and deadlines. Others have criticised the rules in some EU Member States that impose deadlines within the granting procedures. Both originators and generics companies highlighted the importance of a quick decision on a product’s eligibility for an SPC. These differences between the procedures in different countries may even be detrimental to the accessibility of generic products. This is because generics makers must have early certainty about the extent to which a product may still be protected by SPCs after a certain patent expires (across the EU), in order to make corresponding business and manufacturing plans. The next point (4) shows data on the backlog of SPC applications across EU Member States. (4)Conflicting outcomes of the examinations across EU Member States In the Commission public consultation, 56.34% of innovator respondents indicated that authorities in different EU countries had taken different decisions on SPC applications for one (or more) of their products. Only 12.68% reported that this had not happened to them. In this regard, 53.97% of generic-maker respondents (and 6 out of 13 SME generic-maker respondents) indicated that authorities in different EU countries had taken different decisions on SPC applications impacting one (or more) of their generics products. Only 14.29% of generic-maker respondents reported that this had not happened to them. The CE study shows that the system is highly fragmented. In particular, it shows that the share of rejected and pending SPC applications differ to a large degree between EU Member States. Figure 12 below, from the 2015 report Latest News on Medicinal Product SPCs in Europe by Alice de Pastors, depicts the ratios of pending and rejected SPCs for each EU Member State: Figure 12: Ratios of pending and rejected SPC applications in the European Economic Area (CE study and Alice de Pastors) The differences in refusal rates across Member States suggest that there is scope for divergent decisions on the outcomes of SPC applications. The Mejer study (2017) analyses the outcomes of SPC applications filed between 2004 and 2014 for 706 products. It finds that, for 26% of the products, an SPC was granted in one Member State but rejected or withdrawn in another Member State. Furthermore, the same study found that, in 24% of the cases, SPC expiry dates differ across Member States due to differences in reporting – or interpretation – of the first marketing authorisation date. According to the Kyle study (2017), there are substantial differences across Member States in the number of SPC applications and the probability of receiving an SPC grant. Since SPC applications may have diﬀerent outcomes in diﬀerent countries, eﬀorts to harmonise SPCs across Member States, either through the creation of a unitary SPC or through improved information sharing, would reduce variations in the IP landscape and the uncertainty for generic entrants. According to the MPI study, inconsistencies and ambiguities resulting from the CJEU’s interpretation of central provisions in the SPC Regulations make it difficult for NPOs to adapt their own practices to the criteria set by case-law without causing divergences in relation to either their own previous practices, or the practices of other offices. The CE study also shows that there are often different outcomes across EU Member States for SPC applications for the same product, i.e. in some Member States an SPC is granted while in others the application is rejected. Similar findings emerged from the Allensbach survey (Question 26). This fragmentation and its detrimental effects explain why 88% of respondents to the Allensbach survey (both originators and generics companies) expected a positive impact if ‘the procedures for granting SPCs were harmonised within the EU’ (Question 59).

(5)Conflicting outcomes of court proceedings The replies by makers of generics to the Commission public consultation show that 44.44% of generic-maker respondents (and 5 out of 13 SME generic-maker respondents) observed different EU countries making conflicting court decisions related to SPCs that affected one of their generics products. For example, the validity of a generic-maker’s SPC was upheld by courts in some EU countries but revoked by courts in other EU countries. Some EU country courts concluded that the generic-maker’s products had infringed an SPC while others did not. Originators were also asked the same question. 38.03% of originators saw courts in different EU countries take different decisions on the SPC for one of their products. For example, the validity of an originator’s SPC was upheld by courts in some EU countries but revoked by courts in others, or some EU country courts concluded that an originator’s SPC had been infringed while courts in other EU countries did not reach that conclusion. In addition, 33.33% of generic-maker respondents reported that they had conducted multiple defences in a patent/SPC infringement case in multiple jurisdictions (i.e. defences taking place in several EU Member States). The Commission public consultation shows that 56.34% of the innovators and 61.76% of respondents in group V (i.e. NPOs, judges and IP attorneys) were not satisfied with the length of proceedings for enforcing SPCs, saying that the length of proceedings depended on the EU country. 5.1.3.2Transparency: publication of SPC-related information across EU Member States The generics manufacturers that responded to the 2017 Commission public consultation said that the transparency of the current SPC system was not optimal. For example, some respondents indicated that the information published by public authorities was not always comprehensive or up-to-date, and 84.13% of generic-maker respondents (and 11 out of 13 SME generics respondents) stated that access to private databases monitoring SPC status can be costly. Medicines for Europe, the association of generics manufacturers, gave the following response to Question 9 of the Commission’s public consultation (Question 9 asked how well the original objectives of the SPC Regulations still corresponded to the needs within the EU): From the generics point of view, transparency of SPC granting procedures is of utmost importance. In fact, when applicable, this guarantees possible third party observations or oppositions. […] Lack of transparency and of harmonisation brings legal uncertainty. Any possible future SPC system should make sure this is duly considered in order to ensure transparency and predictability for the whole pharma industry […]. The above response by generics manufacturers was echoed in the response to the Allensbach survey (Question 26), where over 80% of the generics companies agreed that ‘when it comes to examining SPC applications, the practice and procedures of the national offices in the EU Member States differ significantly in terms of predictability, transparency and quality of the rights granted’. Article 11 of Regulations 469/2009 and 1610/96, which relates to the publication of granted and rejected SPC applications, is not implemented uniformly across EU Member States. According to the MPI study (2018), this impairs the transparency of the SPC system for stakeholders (the degree of transparency was also considered suboptimal in the public consultation). The Commission also launched a survey among NPOs in early 2020 to obtain details on their transparency practices. Based on this survey, the following different practices across NPOs have been identified. -Most NPOs provide an online searchable database, although the search criteria are very variable (in two Member States, the only search criterion that can be used is the SPC number). -Publishing SPC-related information takes varying amounts of time, ranging from a few days to several months, and even more than a year in specific situations. -Only a slight majority of NPOs (14 out of 27) publish SPC-related information in English in addition to their official languages. -Only about half of NPOs make the documents in a file for a given SPC application accessible online (e.g. in PDF format). However, the other NPOs usually allow file inspection and/or are able to provide copies. -Only a slight majority of NPOs (15) provide the European Patent Office (EPO) with detailed information on SPCs (which the EPO then publishes). -When asked which source they would consider to be the most suitable for providing centralised access to SPC information, 7 NPOs mentioned the EPO databases (possibly with improvements), 4 did not express any preference, and 14 mentioned a new centralised website. The above facts are mirrored by the results of the Allensbach survey (Question 26b) for the MPI study: 62% of the respondents (48% of originator respondents and 83% of the generic-maker respondents) to this survey agreed or strongly agreed that the examining practice and procedures of the NPOs differed significantly in the predictability, transparency and quality of the rights granted (26% of the respondents disagreed). This was also confirmed in a Technopolis study commissioned by the Dutch government (2018). From this evidence it may be concluded that there is a lack of transparency in SPC-related information. In particular, there is a lack of cross-border transparency, i.e. convenient access to relevant information on all SPCs applied for in respect of the same product in various Member States. Such information relates not only to the filing, examination, granting and maintenance of SPCs, but also to the notification system for the SPC manufacturing waiver introduced in 2019 (Regulation 933/2019), which also has a cross-border dimension. No evidence is available on the SPC manufacturing waiver, since Regulation (EU) No 933/2019 has only been in force since July 2019. This lack of transparency in general – and of cross-border transparency in particular – potentially affects both SPC holders and third parties such as generics manufacturers (as further explained in Section 5.2.3 below). 5.1.3.3Bolar exemption: implementation differs across the EU

All EU Member States have transposed in their national legislation at least the minimum standard of the Bolar exemption as laid down in Article 10(6) of Directive 2001/83/EC and Article 41 of Regulation (EU) 2019/6 (formerly Article 13(6) of Directive 2001/82/EC) . According to the MPI study, in 2018, there are differences in implementation between Member States, which points to incoherence in application of the Bolar provision and can create issues in the internal market. Namely, 5 EU Member States had implemented the Bolar exemption with a narrower scope in comparison with the other 23 that had opted for a broader scope (e.g. covering activities for developing innovative medicinal products and/or for obtaining market authorisation outside of the EU) . The Agreement on a Unified Patent Court (UPC) also includes a provision on the Bolar exemption, which refers to the above-mentioned EU legislation. There is no Bolar exemption applicable to patents and SPCs on PPPs. 5.2Efficiency Assessing the efficiency criterion requires: (i) looking into the costs and benefits of the SPC Regulations for different stakeholders; (ii) identifying what factors are driving these costs/benefits; and (iii) identifying how these factors relate to the SPC Regulations. As mentioned above in section 5.1.1, the benefits of the SPC system are mostly associated with its role in supporting innovation. To quantify these benefits, the evaluation looked into the increase of annual sales for innovators, and the effect of this increase in reducing the risk of not breaking even (i.e. the risk that the additional sales do not compensate for the upfront expenditure in R&D). More innovation is expected to results in the availability of: innovative medicines and new pesticides; more jobs; more industrial and trade activities; and ultimately better health/crops. In terms of costs, this evaluation looks mainly at three sets of costs, set out below (see summary tables 4 and 6 below). (1)Costs related to a delay in the market entry of generics. (2)Costs related to the fragmentation of the SPC system, with granting and enforcement procedures conducted at national level. (3)Costs related to the suboptimal transparency of the SPC system, which is made worse by both different publication practices across NPOs and the lack of a central up-to-date repository. 5.2.1Impact of the SPC system on the availability, accessibility and affordability of medicines The analysis below focuses on medicinal products, but it is also likely to be valid for the PPP sector. However, two major differences must be taken into account. Firstly, consumers of PPPs pay for these products ‘out of their own pockets’, i.e. there is no social security or public budget supporting the acquisition of PPPs. This is also the case for veterinary medicines. Secondly, there is no Bolar exemption or SPC manufacturing waiver available for companies dealing with generic PPPs. -Question 6: What is the impact of the SPC on the availability, accessibility and affordability of medicines? (I)More innovation The SPC is expected to support innovators in recouping their investments through additional exclusive sales. This would support additional investment in innovation, which benefits society as a whole (i.e. by contributing to greater availability of medicines). Bearing in mind that the SPC extend on average by 2.5 years the exclusive sales of SPC-protected medicines beyond the regulatory data and market protection (CE study), the cost-benefit analysis of Annex 4 calculates the additional sales that the SPC can add to SPC-protected medicines during the 12.5 years following the market launch in the EU, and concludes that SPC protection adds 13% to the turnover during the first 12.5 years after market launch in the EU when compared to scenario without SPC protection (see also table 2 below). For the analysed sample of 232 active pharmaceutical ingredients (APIs), this additional 13% to the turnover amounts to EUR 37 billion (constant 2018) being transferred from public bodies to innovators. This amount would suffice to cover the cost of R&D for between 39 and 62 new treatments. As profitability is skewed, half of this impact comes from the top 10% best-selling APIs and markets for these products are shown to be “contestable” (i.e. subject to generics or biosimilars entry when protection expires) Table 2: Evolution of sales during the regulatory market protection (setting the level of sales in the second year equal to 100 monetary units) Years since EMA authorisation Estimated Annual Growth Rate Annual Sales Cumulative Sales 2 100 100 3 92% 192 292 4 40% 267 559 5 23% 329 888 6 10% 362 1250 7 5% 379 1629 8 2% 385 2014 9 3% 395 2409 10 0% 396 2804 Note: DG GROW CET calculations. Annual growth rates for sale years 2-10 are estimated using regression (4.1). The level of annual sales is approximated by putting a value of 100 for sales in second year.

More innovation is expected to bring about greater availability of medicines (innovative as well as subsequent generics or biosimilars), but the availability of medicines is also a function of the speed at which new treatments are approved in Europe. Once a medicine is developed, it must be approved by relevant national medicines agencies in the EU or centrally authorised via the European Medicines Agency (EMA). The SPC does not play a role in the initial approval process for SPC-protected products (the approval process must first be concluded before the SPC application can be filed) and it is not expected to play a role in the approval process for any competing innovative medicine. On the speed of entry of new active substances (i.e. accessibility of medicines resulting from new active substances), once a medicine is approved by the relevant medicines agency in the EU, generally it must also undergo pricing and reimbursement negotiation procedures with individual EU Member States (pricing and reimbursement of medicines is a national competence). The SPC is not expected to play a role in the duration of these pricing and reimbursement procedures for SPC-protected products or for any other competing innovative medicines. Other factors clearly play a role in determining the availability of innovative medicines. For example, a study by Kyle in 2019 (see Section 4.1) discusses how other factors external to the SPC, such as the establishment of the EMA, have helped speed up the entry of innovative medicines to the EUFurthermore, the CE study (2018) states that the presence of R&D activities within the EU promotes the timely launch of medicines. That study describes how pharmaceutical companies often strategically launch their products, EU Member States with large populations and high incomes benefit from more frequent and earlier new drug launches, as do Member States with fewer price controls. The EFPIA’s WAIT indicator shows how negotiation of pricing and reimbursement for both innovative and generic medicines defers the entry of approved medicines by hundreds of days on average in a number of EU Member States, including some of the most populated ones. The current fragmentation of the SPC system could hamper joint public-procurement initiatives by a group of EU Member States, for example if the SPC scope or duration varied across the Member States that intended to procure medicines jointly. In such procurement situations, fragmentation could thus also hamper market entry. (II)Prices and speed of entry of generics In general, as pharmaceutical exclusivities such as the SPC expire, generic medicinal products enter the market at a significantly lower price than the SPC-protected ‘reference’ product (generics are 50% cheaper on average) pushing down the price of the original product after generic uptake ,. The SPC, where it expires later than other EU-specific pharmaceutical protections, causes a delay in the entry of generics. Although this is an expected and assumed effect of the SPC that is tolerated to promote innovation, the SPC was also designed with targeted features to facilitate generics’ entry onto the market (i.e. the Bolar and manufacturing waiver exceptions). Section 5.2.2 discusses the adverse impact of the current fragmented SPC system on the generics industry (in terms of cost, predictability, etc.). Furthermore, as discussed below, the entry onto the market of generics can be negatively influenced by a lack of transparency in the SPC granting procedure and status (e.g. uncertainty about which products are protected by SPCs in various EU Member States and for how long). (III)Proportionality Although the SPC system delays the entry of generics, the effects of this delay are expected to be limited and proportionate when compared to the gains from increased innovation. As already indicated above (see details in Annex 4), SPC protection adds 13% to the total spending on SPC protected pharmaceuticals during the first 12.5 years after market launch in the EU. There is also clear evidence that patients benefit from new treatment that are SPC protected. Yet, by extending protection SPC may impact on accessibility. However, calculations in annex 4 show that the impact is limited to medicines with high profits. Thus, for 25 high profitable active pharmaceutical ingredients (APIs) that saw generics or biosimilars entry, 7.6% more patients could have been treated during 2.5 years in the absence of SPC protection (and if those APIs had been developed). below summarises the findings of the Commission’s cost-benefit analysis of the SPC system for pharmaceutical products (see Annex 4). As already indicated above (see details in Annex 4), SPC protection adds 13% to the total spending on SPC protected pharmaceuticals during the first 12.5 years after market launch in the EU. There is also clear evidence that patients benefit from new treatment that are SPC protected. Yet, by extending protection SPC may impact on accessibility. However, calculations in annex 4 show that the impact is limited to medicines with high profits. Thus, for 25 high profitable active pharmaceutical ingredients (APIs) that saw generics or biosimilars entry, 7.6% more patients could have been treated during 2.5 years in the absence of SPC protection (and if those APIs had been developed) . -The SPC system is limited in scope and SPC protection may not be the last protection to lapse SPC protection is available only for a limited number of patented medicines (although it is likely to concern a few products that account for a sizeable share of the pharmaceuticals consumed by health systems and patients). Although about 3 000 European patents are granted annually in the field of pharmaceuticals, only a few tens of SPC applications are filed every year in Germany (the EU Member State with the most filings). This is due to four main features of the SPC that restrict its eligibility and scope, which are set out below. (1)Only patents for new active substances not previously authorised are supposed to be SPC-eligible, i.e. only one SPC is expected to be granted per active substance. Recent CJEU jurisprudence (Santen SAS C‑673/18, Teva C-121/17 and Abraxis C-443/17) has helped mitigate concerns among generic companies triggered by previous CJEU decisions (especially the Neurim case C-130/11). These decisions could have: (i) altered the delicate balance struck by the SPC Regulations (‘one SPC per product’ rule); and thus (ii) led to a proliferation of unexpected SPCs and additional delays in the entry of generics . The CJEU has confirmed that new formulations (Abraxis C-443/17) and new indications (Santen SAS C-673/18) of active ingredients authorised in the past cannot be eligible for a new certificate based on a more recent marketing authorisation granted for that formulation or new indication. This is because the more recent marketing authorisation would not be the first marketing authorisation for the active ingredient concerned (i.e. the Abraxis case dealt with a new formulation of ‘old’ active ingredients, and the Santen case dealt with a new indication for ‘old’ ingredients. These cases have refined earlier case-law, such as Neurim, on those provisions of the SPC regulations which had provoked the most references). However, the principle of ‘one certificate per product’ might still not be completely settled in relation to combinations of products, as this principle was based on two pillars, Articles 3(c) and 3(d) of the SPC Regulations. Chapter 12 of the MPI study discusses in detail the potential ways to re-establish this principle (i.e. by correcting the teleological interpretation of Article 3(c)). (2)Where an SPC is granted for a certain product it may happen that another protection measure expires after the SPC (see Annex 10). A consequence of this is that SPC protection does not always have a decisive influence on the moment from which generics may be placed on the market, and thus on the accessibility and/or affordability of SPC-protected medicines, as other protection measures could apply. (3)SPC protection cannot prevent the market of competing medicines that are based on different active substances. It allows for competition by innovation. (4)Only active substances whose development time is more than 5 years are entitled to SPC protection. Development times that go beyond 10 years cannot be translated into an additional SPC term (i.e. the SPC term is capped at 5 years). The Commission’s findings, based on data from the Alice de Pastors database, suggest that 45% of the medicines faced a delay of more than 10 years between the filing of the application for a basic patent and the grant of the first marketing authorisation in the EU. This means that the effective protection period of these medicines was less than 15 years. This is consistent with the findings of the CE study (2018) and the Kyle study (2017) . The average duration of the SPC protection in the EU is 3.5 years. Furthermore, according to the CE study , in the period between 2010 and 2016 the SPC added on average 2.6 years of protection to products where the SPC was the last protection to expire.

-The average duration of the effective protection period of medicines is decreasing over time The Kyle study (2017) and CE study (2018) studies suggest that the development of new medicines is taking longer and becoming more complex . The CE study concludes that the importance of the SPC for the effective protection of medicinal products has increased over time, in a context where the average ‘effective protection period’ for medicinal products has been decreasing over time. Therefore, the role of SPCs in ensuring that research-based industry has market protection of sufficient length to permit recovery of investments appears to have become more important. -There are elements built into the SPC system that foster quicker market entry, such as the Bolar exemption and the SPC waiver The SPC has been designed and amended to minimise its expected adverse impact on the entry of generics. Firstly, the SPC is one of the few intellectual property rights the duration of which is not fixed but varies on a case-by-case basis, as explained above, according to each particular situation. In the field of pharmaceutical products, the SPC protection does not impede the development and registration of competing generics and biosimilars in the EU, because the EU Bolar exemption also applies to SPC protection. In this regard, the CE study states that the Bolar exemption has allowed generics manufacturers to better maintain their activities within the EU because it has allowed research on generics before the expiry of the protection. Until the recent introduction of Regulation (EU) No 2019/933 on an SPC manufacturing waiver, the SPC was causing unintended adverse effects for EU-based manufacturers of generics and biosimilars seeking: (i) to export to non-EU countries during the SPC term; or (ii) ‘day one’ entry onto the EU market . Thus, the recent legislation on the SPC manufacturing waiver is expected to also accelerate the market entry of generics and biosimilars in the EU. -Question 7: Is the maximum duration of the SPC appropriate ? There are several studies and stakeholders’ views on the duration of the SPC. The Commission’s cost-benefit analysis for medicinal SPCs in Annex 4 shows that, for a significant number of active ingredients, the SPC’s duration might not be enough to recover R&D investment. Indeed, using information on sales and costs, internal Commission calculations show how many medicinal products break even over 12.5 years (see Annex 4 for methodology) with and without SPC protection. The Commission concludes (see table 3 below) that the SPC might have helped increase the number of medicines that have reached break-even for their investments in R&D by 4 percentage points. Table 3: Percentage of SPC-protected medicines that break even (Source: Commission’s own calculations.) Level of medicine development expenditure With SPC Without SPC (low) 42% 38% (high) 32% 28% SPC holders claim that the development of new medicinal products has become lengthier and more expensive in recent decades . Associations representing SPC holders that replied to the Commission public consultation warned that a reduction in the term of SPC protection would have a direct negative impact on the ability of SMEs active in R&D and/or manufacturing original products to secure sufficient funding. Some studies argue that the duration of SPCs is in some cases too generous and even question the need for an SPC framework (as discussed in the analysis of Question 2 above in Section 5.1.1). The CE study (2018) points out that cutting the duration of the SPC would come at the expense of innovation, especially for product categories where: (i) the requirements for R&D efforts are particularly high; (ii) the diseases are particularly complex; or (iii) the affected stakeholders have limited advocacy power. However, the same study also highlighted that economic theory suggests that, given the competitive status of the market, SPC holders will charge the highest price possible for a longer period, and at the expense of public payers (impacting affordability). The 2018 CE study’s statistical modelling suggests a positive relationship between the IP protection period and the level of pharmaceutical R&D in general (i.e. not only on new active pharmaceutical ingredients). This study suggests that when medicinal products are granted a longer effective protection period in the markets where they are sold, pharmaceutical companies increase their innovation efforts. It also concludes that the global reach of medicinal products implies that a reduction of the IP protection period to pave the way for faster entry of generics would negatively affect investments in R&D, both within and outside the EU. However, the same study also noted that quantifying the value of the extra innovation (which might be linked to the incentives) is a challenging task.

Table 4: Cost - benefit analysis per stakeholder (Source: Commission own calculations, see Annex 4) Stakeholders Cost (in EUR) Benefits (in EUR) Result Innovators (SPC users) Patent & SPC Protection: Patent (EP): EUR 0.15 m SPC (4y): EUR 0.14 m Attorney: (NDA) Litigation (one case): EUR 0.05- 0.2 m SPC search & monitoring: (NDA) SPC protection adds 13% to the turnover during the first 12.5 years after market launch of a medicine in the EU. For 232 APIs in the sample this amount to a total of EUR 37 051 m. The cash flow increases as market potential (turnover) increases: Median: EUR 55 m Average: EUR 160 m Top 5% selling medicines in our sample: EUR 740 m Top 1%: EUR 1 063 m The profitability is skewed and half of this additional cash flow is due to the Top 10% of APIs of our sample (in terms of sales). Generics/biosimilar Litigation (one case): EUR 0.05- 0.2 m SPC search & monitoring: (NDA) Introduction of new products creates new markets for generic and biosimilar products. Legal profession Familiarisation with SPC rules and legal system, including cross-border Litigation (cost per case): EUR 0.1- 0.5 m Attorney fees for managing patents and SPC applications: (NDA) Public Authorities and Society Patent offices SPC application account for > 10% of the patent examination workload in small MS and < 1% in largest MS. Public health budgets SPC protection adds 13% to the total spending on SPC protected pharmaceuticals during the first 12.5 years after market launch in the EU. The new medicine launches have reduced years of life lost (YLL) before three different ages (85, 70, and 55) from 34% up to 42%. Furthermore, the introduction of a new cancer medicine in a country was associated with a decline in cancer mortality of 8% for men and 9% for women. Improved quality of life in respect of chronic diseases. Treatment foregone seems to be is limited to high profitable APIs only. For 25 high profitable APIs that saw generics entry, 7.6% more patients could be treated during 2.5 years if there was no SPC protection. Additional cash flow generated due to the SPC would suffice to cover the research and development costs of between 39 and 62 new treatments. Treatment foregone concerns high profitable APIs only. Note: See Annex 4 for details on the analysis of the impact on innovators (SPC holder) as well as calculations on treatment foregone. Additional sales due to SPC are in relation to counterfactual scenario of having no-SPC protection. See Annex 7 for the workload of national patent offices. 5.2.2Cost of a fragmented SPC system -Question 8: What are the costs to stakeholders of the fragmentation of the SPC system? Costs of fragmentation for SPC users (pharmaceutical and PPP originators) The SPC framework does not consist of a unitary title granted by a centralised agency and maintained in a single register. In the absence of a unitary SPC, innovators must pursue multiple national filing procedures and pay administrative fees in each EU Member State where they seek protection. Likewise, pending the start of operation of the Unified Patent Court (UPC), enforcement is conducted at national level only. This fragmentation causes legal uncertainty (as reported by 60 out of 71 innovators responding to the Commission consultation) because grant and litigation decisions can conflict across Member States (see Section 5.1.3). This fragmentation causes significant additional costs and red tape in getting SPC protection in the EU. For example, 60 out of 71 innovators responding to the Commission consultation agreed (10) or strongly agreed (50) that a unitary SPC would bring less red tape. This is also the conclusion of respondents to Question 62 of the Allensbach survey conducted as part of the MPI study (2018). Those respondents said that the lack of uniformity across Member States in the SPC-granting procedures – and the results of this lack of uniformity – constitute a serious administrative burden for SPC applicants, and especially for start-ups and SMEs. SPC protection is typically sought in 20 to 24 EU Member States (Kyle and Mejer studies of 2017). Annex 4 analyses additional costs for the SPC holders for patent and SPC protection in the current fragmented SPC system. It also analyses the cost of enforcing these rights. The cost of patent protection in all EU-27 countries is EUR 152 765, and for SPC protection it is 137 610. This is not including in-house and outsourced patent-lawyer fees (which can largely exceed the administrative fees). For litigation, parties might face a cost of between EUR 50 000 and EUR 250 000 per jurisdiction. This could adds up to a cost of approximately EUR 500 000 for patent and SPC protection (without attorney fees). This cost is relatively small (0.08%) when compared to the lowest overall cost of EUR 600 million for bringing a new medicine to the market, but it can still considerable for EU-based SMEs or universities. Application and renewal fees for SPCs vary greatly across EU Member States. Table 5 below shows the approximate average total cost of applying for an SPC in all EU-24 Member State, and the subsequent annual renewal fees. To these costs must also be added significant additional legal representation costs (outsourcing to specialised patent agents) to conduct the administrative proceedings in each Member State.

Table 5: Cost of SPC filing and renewal in EU-24 as of 2016 (Source: National patent offices’ websites; details in Annex 6) Application Fees (EUR) Renewal fees (EUR) 1st year 2nd year 3rd year 4th year 5th year EU-24 7 939 25 787 28 458 31 199 34 045 37 105 These costs are significant for SMEs, which have less financial resources, fewer in-house specialists, and limited geographical presence. In this regard, only one patent office in the EU told the Commission’s survey on transparency of the SPC system that it provided reduced administrative fees for SPCs to SMEs. Innovative SMEs play a significant role in the pharmaceutical sector. In 2009, the Commission’s pharmaceutical-sector inquiry reported that approximately 25% of molecules in clinical development were acquired from other companies, including SMEs. EMA statistics show that 44% (15 out of 34) of priority-medicine (PRIME) applications granted in 2017 came from SMEs. In a SPC system with 27 distinct jurisdictions, originators are likely to find it difficult to monitor the use of the SPC manufacturing waiver by generics manufacturers. Red tape and costs due to fragmentation reduce the positive impact of the SPC framework in encouraging innovation. For example, 52 out of 71 of the innovators responding to the Commission consultation reported that a unitary SPC, i.e. a less fragmented system, would make licensing activities easier. In both the Commission’s public consultation and the Allensbach survey (Question 69), a very large majority of the respondents across all categories favoured the creation of a unitary SPC. The CE study (2018) concludes that a scheme like a unitary SPC covering all EU Member States would increase spending on pharmaceutical R&D within Europe. The fact that the SPC extension reward is granted by independent NPOs makes it difficult for companies to predict whether they will be granted an SPC extension. In summary, the Commission consultation asked innovators about the advantages of a unitary SPC, i.e. a less fragmented SPC system. The originators (71) were asked if a unitary system would bring: -a boost to the value of their investments (57 out of 71 agreed or strongly agreed); -a reduction in red tape relating to litigation (60 out of 71 agreed or strongly agreed; 44 strongly agreed); -a reduction in red tape relating to registration (60 out of 71 agreed or strongly agreed; 50 strongly agreed); -increased legal certainty (60 out of 71 agreed or strongly agreed); -reduced maintenance costs (49 out of 71 agreed or strongly agreed; 45 strongly agreed); -easier licensing activities (52 out of 71 agreed or strongly agreed). Cost of fragmentation for manufacturers of generic medicines and PPPs The fragmentation of the SPC framework causes legal uncertainty for companies dealing with generic products (55 out of 63 makers of generics that responded to the Commission public consultation agreed or strongly agreed that a unitary SPC would bring more legal certainty). This is because SPC grant procedures must be monitored in multiple EU Member States (55 out of 63 generic-maker respondents to the consultation agreed or strongly agreed that a unitary SPC would reduce costs and red tape related to the monitoring of SPC-protected products, i.e. when conducting freedom-to-operate analyses, and enforcement can take place in multiple jurisdictions (56 out of 63 generic-maker respondents to the public consultation agreed or strongly agreed that a unitary SPC would reduce the cost of SPC-related litigation). Pharmaceuticals and biotechnology patents have the highest litigation intensity across all technical sectors (the sector sees 3 patent cases for every 1 000 patents filed in the aggregate EU-6 (Belgium, Germany, Spain, France, UK and the Netherlands)). In addition, 18% of pharmaceutical patent litigation cases are litigated across borders, which entails even higher costs (Helmers (2018)). The high costs of litigation directly influence generics makers, with some refraining from launching certain generics solely to avoid any risk of potential litigation that might result from divergent decisions rendered by national courts. Generics and biosimilars do not enjoy the same scope of Bolar exemption in all EU Member States. Moreover, they can face complex requirements for using the SPC manufacturing waiver (see glossary) if they need to perform cross-border activities (e.g. import of substances or cross-border outsourcing of activities).

As discussed in Section 5.1.3 above, the current fragmentation of the SPC system causes uncertainty in the business plans of makers of generics and biosimilars. For example, it causes uncertainty over whether and when they will be allowed to launch their products in the respective Member States. In summary, the Commission public consultation asked makers of generics about the advantages of a unitary SPC, i.e. a less fragmented system. 54 out of the 63 generic-maker respondents (including 10 out of 13 SME generic-maker respondents) to the Commission public consultation said they favoured the creation of a unitary SPC for the unitary patent (only 1 opposed). In addition, they were asked if a unitary SPC system would: -reduce costs and red tape for monitoring SPC-protected products (freedom to operate) (55 out of 63 agreed or strongly agreed); -reduce the cost of SPC-related litigation (56 out of 63 agreed or strongly agreed); -increase legal certainty (55 out of 63 agreed or strongly agreed); -make licensing easier (42 out of 63 agreed or strongly agreed). Costs of fragmentation for consumers, patients, and (indirectly) health authorities Fragmentation can have an adverse impact on the availability of innovative medicines, because the uncertainty and high cost of filing patent and SPC applications in multiple EU Member States can lead SPC holders to neglect protection in less attractive EU Member States’ markets. This can mean that they postpone launches of their innovative products in those markets (although a number of additional factors, such as national pricing and reimbursement decisions, may also play a significant role). The CE study sees potential in a unitary SPC to overcome this issue. Indeed, 11 out of the 15 respondents to the Commission consultation in the group of patients and consumers of SPC-protected products favoured the creation of a unitary SPC for the unitary patent (i.e. a less fragmented SPC system). An additional adverse impact is that the current SPC system can hamper the accessibility of medicines. This is because fragmentation and a lack of transparency on the status and scope of SPC protection across EU Member States cause delays in the entry of generics into the EU, especially in smaller national markets. Joint public-procurement initiatives by a group of EU Member States could be hampered if the SPC scope or duration varied across the participating Member States (see the opinion of stakeholders on this issue below). The Commission public consultation asked the stakeholders group (consisting of patients and consumers of SPC-protected products) about the advantages of a unitary SPC, i.e. a less fragmented system. They responded as follows: -a unitary SPC would reduce costs and red tape for monitoring SPC-protected products (freedom to operate) (10 out of 15 respondents gave 4 or 5 points on a scale of 5 (the maximum score) signalling they mostly agreed); -a unitary SPC would reduce the cost of SPC-related litigation (10 out of 15 respondents gave 4 or 5 points signalling they mostly agreed); -a unitary SPC would increase legal certainty (11 out of 15 respondents gave 4 or 5 points signalling they mostly agreed); -a unitary SPC would make joint procurement by a group of EU countries easier (6 out of 15 gave 4 or 5 points on the five-point scale, while 4 respondents gave 3 points on the 5-point scale). Costs of fragmentation for national patent offices and national courts In all EU Member States, national patent offices (NPOs) have been entrusted with examining and granting SPC applications, while national courts deal with enforcement . The NPOs charge fees that cover the costs of registration and maintenance of the SPC system. The SPC applications added little workload to the overall workload of patent examiners, especially in large patent offices, considering that on average only a few dozen SPC applications are filed every year. However, it can amount to more than 5% of the patent workload for the NPOs of smaller Member States (Annex 7 for details). In addition, for those NPOs conducting substantive examinations, the complexity of the examination has increased due to the increasing complexity of the state of the art and the CJEU jurisprudence. Many smaller offices seem to have insufficient administrative capacity to conduct substantive examination of the SPC applications. Since each national SPC system can be funded by administrative fees (e.g. SPC application and maintenance fees), the duplication of work does not neccesarily strain public finances. However, this cost is nevertheless borne by the users of the innovation system. 5.2.3Impact of suboptimal transparency Suboptimal transparency – and especially suboptimal cross-border transparency – is a major concern at several levels and for several stakeholders. In particular, the fact that the full file of an SPC application may not be available from certain NPOs (or not available rapidly, or only available in a national language), prevents other NPOs from analysing the reasoning (objections, etc.) of their peers. This hampers the ‘informal alignment’ of the various national decisions on identical SPC applications, and thus increases the risk of divergences in the scope of the resulting SPCs.

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