Under the patent-approval linkage regime of the Korean Pharmaceutical Affairs Act (“KPAA”), if a drug manufacturer receives market approval (“MA”) for a brand drug, the drug manufacturer may register the patent(s) covering the brand drug at the Ministry of Food and Drug Safety (“MFDS”). Further, under this regime, a generic drug maker who files an application for MA for a generic drug in reliance on the safety and efficacy data of the brand drug has the obligation to notify the patentee/MA holder of the brand drug of its filing of the application. Upon notification of the application for generic approval, the patentee of the brand drug may file with MFDS a request for suspension of any marketing activities for the generic drug, within forty-five (45) days from the receipt of the notification, with the prerequisite of bringing a patent infringement action.

The generic company’s notification obligation is exempted, however, if the application for generic MA is filed under the condition that the generic drug will not be marketed until the patent registered at the MFDS (hereinafter, “listed patent”) expires. In such a case, if a generic drug maker with MA, in violation of the non-marketing commitment, markets its generic drug before the listed patent expires, the Minister of MFDS may revoke the MA under Article 76(1)(vter) of the old KPAA (before the revision dated December 11, 2018, as Law No. 15891) (“relevant provision”). 

In its recent decision, the Seoul Administrative Court upheld the MFDS’ administrative disposition of revoking the MA of a generic drug on the ground that the generic drug was marketed on, or shortly before, the expiration date of the listed patent concerned. The Court found that marketing activities related to the generic drug on the day of, or one day prior to, the expiration date of the brand drug patent was in violation of the condition of granting MA--the commitment not to market the generic drug until the patent expires (Seoul Administrative Court Case No. 2020 Guhap 69236 rendered on July 8, 2021).

▶Background of the Case

The patent at issue covering the brand drug was to expire on November 7, 2018 and was registered at the MFDS under the linkage regime. The plaintiff, a generic manufacturer, obtained an MA for its generic version of the brand drug on August 29, 2018, under the condition that it would not market the generic drug until the listed patent expired. The plaintiff shipped the generic drug to pharmaceutical wholesalers and drug stores on November 6 and 7, 2018, for the purpose of selling the generic drug to customers the very next day after the patent expired. The total amount of the drug delivered was thirty-five (35) boxes.

After discovering that the generic drug had been dispatched to the wholesalers prior to the expiration of the patent, the Minister of MFDS revoked the generic MA on June 30, 2020, to be effective as of July 14, 2020.

▶Court Decision 

In an action brought by the generic manufacturer seeking to have the Minister’s decision overturned, the plaintiff mainly asserted that the act of dispatching the generic drug on, or one day prior to, the expiration date of the listed patent did not qualify as an “act of marketing” of the drug, but was as an “act of preparation for marketing.” The plaintiff’s activity was rooted in the generic industry’s customary practice of distributing generic drugs to medical institutions or drug stores shortly before the relevant patent expired, such that the generic drugs may be prescribed and sold as soon as the patent expired.

The Court, however, found that the plaintiff’s act constituted “an act of marketing” as stipulated in the relevant provision of the KPAA, and was not “an act of preparation for marketing,” for the following reasons:

First, in light of the overall tenor and legislative intent of the KPAA, it is deemed proper to interpret that “marketing”, within the purview of the statute, includes both the retail of a drug to consumers by a pharmacist and wholesale of a drug to drug stores or pharmaceutical wholesalers by a manufacturer.

Considering the normal sequence of selling a drug by way of receiving an order, manufacturing the drug, and delivering the drug, the series of procedures constituting a sale of a generic drug were consummated at the time of dispatching the drug.

The relevant provision of the KPAA was enacted for imposing sanctions against acts of marketing that may likely constitute infringement of a listed patent. Given that the delivery of the generic drug was made on, and one day prior to, the expiration date of the patent, the series of sales procedures including the receipt of an order and manufacture of the drug must have been carried out well before the expiration date. Accordingly, the patentee may have suffered loss due to a reduced demand for the brand drug caused by a customer’s ordering of the generic drug during the term of the patent. Therefore, there is a need to regulate the plaintiff’s act as a marketing activity.

Even if the amount of the sales was relatively small, it does not justify or support the plaintiff’s argument that the severity of the sanction under the relevant provision of the KPAA far exceeded the extent of loss that was actually incurred by the patent infringement or the plaintiff’s premature marketing activity.

Based on the above reasoning, the Court upheld the Minister's revocation of the generic MA.

▶Significance of the Decision

At the time when the plaintiff’s generic MA was revoked by the MFDS, like dispositions were made to several other generic MAs for other drugs, sending a shockwave felt through the entire generic drug industry. The MFDS’ disposition of revoking generic MAs owing to the generic companies’ premature marketing of generic drugs in breach of the condition of MA, and the Administrative Court’s affirmation thereof, sounded an alarm to their previous practice of distributing patent-infringing drugs to wholesalers shortly before the expiration of a patent in order to have their generic drugs ready for sale as soon as the patent expired.