Recently, the Russian pharma market has seen a number of changes related to intellectual property. Mr. Dmitry Zaitsev, General Director of Pharmstandard JSC, commented on the outcomes in his interview for the 'Russian Newspaper' .

Why is the pharma industry extremely sensitive to intellectual property protection issues?

Dmitry Zaitsev: There are certain grounds for this. The strategy Pharma-2030 defines our country’s course with the priorities of pharmaceutical independence and national security and targets for the coming five years. Meanwhile, serious investment activities are possible in a stable and predictable environment only, first of all, as concerns patent protection of investments. It is not by chance that as many as three points of the strategy’s Action Plan are devoted to enhancement of the government control over patents. Just two years have passed since the strategy approval, but the market situation forces the state to make new decisions.

What do you mean?

Dmitry Zaitsev: Traditionally, the industry identifies three principal areas of patenting challenges: in the first place, breach of patents, secondly, repeated patenting (or everlasting renewal of patent protection), and thirdly, use of a patented solution without the rightholder’s consent, pursuant to an authorized public agency’s resolution.

It should be noted that in the last years the state represented by its federal executive bodies has been very responsible in addressing these issues. Patent breaches have always been typical of the pharma market, and lengthy court proceedings have been the key problem for investors. The proceedings may have lasted for several years, and a law breaker has continued using a patent illegally during this period. For this reason, a special point was included into Pharma-2030 Action Plan – a request concerning possible protective measures in case of obvious breaches, such as patents for an active substance (primary patents), to the RF Supreme Court.

Another way to implement the public policy was a series of resolutions by FAS of Russia at the end of the last year. Obvious primary patent breaches represent unfair competition in regard to both a patented product manufacturer and other market participants as they create inequality between those that keep to patent rights and those that breach them. FAS of Russia resolves adequately in terms of timing. A breaker must pay a penalty to the federal budget in the amount of all revenues generated from the breach. This is a powerful argument to consider consequences before launching a product on to the market in breach of a patent.

Therefore, our federal authorities have demonstrated their clear attitude to patent breaches. Of course, this is a positive step.

As concerns evergreening of patents, our public agencies, the RF Ministry of Economic Development in particular, have also tended to tighten the government policy. The point on further assessment of advisability to limit patenting of technical solutions that do not make a material contribution to the pharma sector development was listed in Pharma-2030 Action Plan, too. We expect that the agencies involved, together with the market participants, making part of the Interdepartmental Working Group will find additional mechanisms to restrict evergreening of patents as early as this year.

The third topical issue is the use of patents without the rightholder’s consent, pursuant to a competent public agency’s resolution. Good progress in regulating this area sensitive for investors has been visible either. Here I mean establishment of the Subcommittee on the Use of Inventions, Utility Models and Industrial Designs to Ensure Economic Security at the Government Committee on Economic Development and Integration. Its work has definitely shown a balanced approach to issuing or non-issuing an authorization for use of an invention without the rightholder’s consent. The detailed regulation and, more importantly, enforcement practices help the market participants feel more certain – the rightholders still operating on the Russian market can be reassured in their position, irregardless of the sanctions imposed. Those that have withdrawn or have plans to withdraw from the market understand inevitability of compulsory licensing.

However, this year the pharma market has manifested a new challenge which may have a negative impact on the effective patent system.

What are these manifestations?

Dmitry Zaitsev: The Government (by Resolution No. 380) provided for a binding-on-all procedure in decision-making on the patent use without the rightholder’s consent. Nonetheless, some market players have opened the opportunity to apply to court for a compulsory licensing under Article 1362, the RF Civil Code, proving insufficient use of a patent by its rightholder or relying on their dependent patents for filing a claim. This helps obtain a compulsory licensing award bypassing the Government Subcommittee. So, to get the right to use one and the same patent, it is possible nowadays to follow different procedures, either through the Government Subcommittee or through a court ruling. The second way has appeared to be much easier.

What is bad about it?

Dmitry Zaitsev: The Government Subcommittee implements the state policy on patents in the pharma industry in its decision-making, while courts do not have this opportunity for currently there is no regulatory base covering the RF Civil Code provisions in respect to the definitions of ‘the insufficient use of a patent’ and ‘the material technical achievement of a dependent patent’. Courts have to interpret general provisions of the Civil Code and make their own judgments.

Compulsory licensing claims may be divided into three categories. The first one consists of claims against patent holders that have not registered an original pharmaceutical product in Russia at all. Claims against patent holders that have registered, but have not launched it into civil circulation in our country fall within the second category. The third one is comprised of claims against patent holders that continue supplying original pharmaceutical products to the RF territory.

It is obvious that these situations require different approaches. They must be regulated in the way applicable to issuing authorizations for use of a patent without the rightholder’s consent by the Government Subcommittee. In this case, courts would have grounds to rule taking the public policy into account.

Why cannot courts elaborate their approaches without such regulation?

Dmitry Zaitsev: Investors need stability and predictability of business conditions, a clear and understandable mechanism to ensure their rights. Any regulatory gaps create legal uncertainty and threaten strategic projects. For instance, GENERIUM as part of our group of companies and the international corporation Sanofi have signed a cooperation agreement on arranging for the full-cycle production of insulin glargine 300 U/ml. As a result, the domestic manufacturer has obtained a voluntary Russian license for the foreign partner’s patent and has prepared for investing into construction of a new production site. We are sure that this international project will improve availability of the innovative therapy for patients with diabetes mellitus and serve an example of mutually beneficial cooperation between and development of both Russian and foreign innovative pharma companies.

However, we cannot be completely sure of the project future and develop manufacturing, even having the necessary biotechnology competencies, because of a compulsory licensing claim filed with respect to Sanofi patent. If a court ruling on the compulsory license issue takes place, the project implementation will be unpredictable under the threat. The situation may be the same for other large investment projects aimed at the technological breakthrough in the Russian pharmaceutical industry. All regulatory mechanisms for compulsory licensing must be transparent and easily understandable. The experience of applying compulsory licensing abroad has proved that it brings considerable risks of a decrease in investments. To illustrate, Canada had widely practiced compulsory licensing for 23 years (1969 through 1992), and negative consequences had overweighed positive ones. Therefore, the country refused applying this mechanism completely in 1993.

In view of the especially important nature of the matter, the pharma market must have detailed and clear grounds for compulsory licensing through court proceedings. Such grounds must be based on the same public approaches as those applicable to obtaining the right for patent use through the Government Subcommittee. Adoption of appropriate laws and regulations will support courts in making justified awards.

How realistic is this?

Dmitry Zaitsev: We really hope that this issue critical for the pharma sector will be resolved in 2025, and on our part, we as experts are ready to take an active part in the related discussions.