Experience in the United States (US) shows how ill-advised the Draft Guideline on Implementation of Patent Linkage for Pharmaceutical Products published in April by the National Pharmaceutical Regulatory Agency (NPRA) will be for Malaysia. While the stated rationale for the guideline is Malaysia’s obligation under Article 18.53 of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the guideline proposes many elements that go well beyond what CPTPP requires.

NPRA proposes a system linking the marketing approval of a generic product to the patent status, a patent linkage system that originated from the US and exported to other countries through bilateral pressure and trade agreements. This system transforms the role of the medicines regulatory authority from assessing the quality, safety, and efficacy of medicines for marketing approval into acting as a patent enforcement gatekeeper for private intellectual property rights.

NPRA’s draft guideline has many features similar to the US linkage system. NPRA’s draft guideline requires patent listing for new products registered; a generic company intending to market a generic equivalent has to notify the patent holder if its patent is invalid or will not be infringed, allowing the patent holder 45 days to initiate legal action against the generic company and which consequently leads up to one year automatic suspension of the assessment process for the registration of the generic pharmaceutical product.

In the US, a similar patent linkage system has become a tool for originator companies to engage in a range of anti-competitive practices aimed at delaying generic entry, at significant cost to taxpayers, public healthcare systems, and patients’ timely access to affordable medicines.

Malaysia would do well to learn from the experience of the US before adopting a system that risks producing similar outcomes.

In the US, originator companies are required to list their patents in the US Food and Drug Adminstration’s Orange Book (Approved Drug Products with Therapeutic Equivalence Evaluations). These cover the active ingredient (drug substance), formulation/ composition, or approved methods of use. Patents that should not be listed include process/ manufacturing patents, packaging, metabolites, intermediates, and certain device patents that do not claim the drug substance, according to regulations and guidance of the US Food and Drug Administration (FDA).

Despite these clear rules, many pharmaceutical companies have exploited the system by listing ineligible patents, knowing that such listings can trigger suspension and delay the marketing approval process for generic products.

The US Federal Trade Commission (FTC), an agency to protect consumers and competition considers improper patent listing to be anti-competitive and has initiated actions against multiple companies. In 2023, the FTC issued a policy statement on improper listing of ineligible pharmaceutical patents.  At that time FTC chair Lina M Khan said: “Improper patent listings in the Orange Book illegitimately delay or lock out generic manufacturers from entering the market, depriving Americans of access to lower-cost medicines and drug products. The FTC is making clear that improper Orange Book listings may be an unfair method of competition in violation of the FTC Act. We won’t hesitate to use all our tools to combat illegal practices that are inflating the price of health care, including medicines.”

Since then, FTC has expanded its “junk patent listing” enforcement and disputed a total of 600 illegal patent listings across many different brand-name products. 

Malaysia should recognise that patent listing is far from a straightforward administrative exercise. Even outside the US, patent listing systems have been subject to abuse, strategic manipulation and extensive legal disputes, including involving the Ministry of Health.

Patent holders in the US have been incentivised by the patent listing system, notification, and automatic stay provisions to file a steady stream of weak or frivolous evergreening patents to confuse and deter generic producers. This problem would be amplified in Malaysia because of likely differences in the listing of relevant patents from the patent holder and the generic applicant, as there is no provision in the guideline to deal with it. Each new patent listing could extend the de facto time of monopoly control, further delaying generic competition.

Generics companies, even in the lucrative US market, have been deterred from seeking early registration of medicines because of the predictable high costs of patent infringement litigation. Importantly for Malaysia, its domestic producers will also be deterred, which undermines Malaysia’s interest in developing its own domestic pharmaceutical manufacturing capacity and security of supply.

Experience from the 30-month regulatory stay in the US suggest that the proposed 12 month stay in the NPRA Draft Guideline, although shorter, will incentivise patent holders to file infringement actions, even if its legal action has no merit. Triggering the regulatory stay is hugely profitable for the patent holder as it can continue to engage in monopoly pricing to maximise profits. And even if the patent holder does not win the legal action, they suffer no adverse consequences in terms of paying compensation for lost profits to generics or reimbursing the higher prices paid by public and private payers.

Pay-to-delay settlements

The US linkage system has encouraged collusive pay-for-delay settlements and could do the same in Malaysia. Patent holders pay-off generic companies to give up claims of patent invalidity or non-infringement, and delay generic entry, so that they maintain market monopoly.

One of the FTC’s top priorities in recent years has been to oppose pay-for-delay practices that more and more branded drug manufacturers have been using to stifle competition from lower-cost generic medicines. According to an FTC study, these anticompetitive deals cost consumers and taxpayers US$3.5 billion (RM13.9 billion) in higher drug costs every year.

The Draft Guideline is on a slippery slope. Multinational pharmaceuticals will not be satisfied with what is offered in the Draft Guideline.  They and their developed country governments will always come back for more, both to Malaysia directly and in future trade agreements. One can already see through their comments on the Draft Guideline that Big Pharma companies want expansion of the proposed linkage system to cover biologics, a longer notification period to initiate legal action and for regulatory suspension to delay or deter generic competition.

Malaysia beware

Most countries, including the entire European Union, do not recognise linkage systems for they do not consider it to be the responsibility or expertise of the medicine regulatory agency to venture into patent-related matters. Patent infringements are private disputes between the parties concerned and Malaysia’s Patents Act already provides legal remedies to the patent holder to address imminent infringements.

To avoid all the anti-competitive harms experienced in the US, Malaysia should withdraw the Draft Guideline and implement a system that simply publishes notice of pending registrations of medicines shortly prior to the grant of marketing approval. This is sufficient to comply with the CPTPP. 

Brook K Baker is professor emeritus at Northeastern University, School of Law, Boston, United States. He is also a senior policy analyst of the Health Global Access Project.