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Israeli Knesset Backs Law Boosting Local Generic Pharma’s Global Edge

The Israeli Parliament (the Knesset) has voted, in a first reading, in favor of a proposed amendment to the Israeli Patents Law (1967) that aims to increase the global competitive advantage of Israeli generic pharmaceutical companies.

Generally, the term of patents is limited to 20 years. In the case of pharmaceuticals, other than for the purpose of research and development, only the patentee or an authorized licensee can manufacture and market the pharmaceutical during the patent protection term. So long as the patent is in force, a generic company is barred from manufacturing or marketing a competing (generic) version of the pharmaceutical. Upon expiry of the patent, generic companies are free to manufacture or market generic alternatives to the pharmaceutical that benefited from patent protection to that date.

20 years may seem like a long stretch of time. However, given the stringent regulatory requirements that necessitate carrying out large and extensive clinical studies, the development of a new pharmaceutical inherently involves huge investments of hundreds of millions of dollars and takes an average of 12 to 15 years from the initial discovery until receipt of a marketing authorization (and, at times, after even more). Thus, many pharmaceuticals would only reach the market close to the expiry of the 20- years term of the patent. The remaining patent life may then be insufficient to ensure a return on the investment and to compensate for the large risks involved in drug development.

Many countries around the world have created legal frameworks that permit, under certain circumstances, an extension of the patent life beyond the 20-years term of up to 5 additional years. At the same time, such frameworks also permit generic companies to carry out the necessary actions to obtain regulatory approval for the generic substitute of the pharmaceutical, such that the generic company will be ready to manufacture it upon expiry of the patent. A similar legal arrangement also exists in Israel and allows these generic manufacturers to request a patent term extension (PTE; defined in the Israel Patents Law as an “extension order”). However, there are several unique characteristics to the Israeli legal framework that relate, for example, to the manner of how the PTE term is calculated.

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Additionally, whereas the permitted scope of generic companies in most countries is limited to development for the purpose of obtaining regulatory approval in the same country where the company is based, in Israel, the scope of activity that will not be regarded as patent infringement has been extended. This encompasses development efforts for the purpose of obtaining regulatory approval also in countries other than Israel, e.g., the United State, that allow development of the generic pharmaceutical during the term of the patent in such countries (including its extension). It should be emphasized that according to the existing legal arrangement in Israel, which is similar in this regard to most countries, throughout the patent life, including the extended term, generic manufacturers are barred from stockpiling the drug, thus delaying the marketing of their generic version of the pharmaceutical immediately following the patent’s expiration. The meaning of this is that additional time will pass from the patent’s expiration until onset of marketing of the generic substitute by the generic company.

The proposed amendment, titled – “Increasing the Competitiveness of the Israeli Economy” – aims to extend the scope of activity that will not be regarded as patent infringement during the extended term. First, it provides that during the extended term, the local production for the purpose of marketing in other countries, and any other necessary actions required to this end, will be permitted during the extended term. Additionally, it also allows the manufacturer to commence local marketing efforts in Israel during the six months preceding the expiry of the extended term. In other words, Israeli generic drugmakers can now, among others, stockpile drugs for both local and international marketing before the expiry of the patent so as to begin marketing once it actually expires.

For the proposed amendment to pass into law, it will need to follow a legislative process that may be lengthy (discussions in the Knesset’s Constitution, Law, and Justice Committee and then second and third readings in the Knesset), which is now disrupted by the current political situation in the country. As the name of the amendment implies, should it indeed pass into law, it may significantly increase the competitiveness of Israeli generic pharmaceutical manufacturers in the global pharma market, at the expense of some diminution of the patent rights by the original innovator companies. This amendment is expected to generate objections by several international bodies, such as the U.S. Chamber of Commerce and the OECD, which have stated previously that Israel does not provide adequate intellectual property protection over patented drugs.


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