Introduction

The United States–Mexico–Canada Agreement (USMCA) is a comprehensive free trade agreement that entered into force on 1 July 2020. It updated and replaced the 1994 North American Free Trade Agreement (NAFTA). Chapter 20 of USMCA contains rules to protect and enforce intellectual property (IP) rights.

IP provisions of USMCA, particularly on patent and regulatory protections, were considered problematic by some members of the US Congress and stakeholders after USMCA was initially signed by the three countries in 2018, so these provisions underwent changes. After negotiations between Congress and the US Trade Representative, the United States, Canada and Mexico agreed to a protocol of amendment that changed some of the original USMCA’s IP provisions. The final USMCA incorporated the changes made by the protocol and, accordingly, Mexico committed to a series of obligations aimed at strengthening IP protection, some of which are particularly relevant within the pharmaceutical industry.

With this in mind, the Federal Law for the Protection of Industrial Property (FLPIP) was enacted on 1 July 2020 and entered into force on 5 November 2020. The FLPIP was intended to harmonise and adapt the Mexican legal IP framework to the obligations undertaken by Mexico precisely under USMCA, which came into effect on the same date.

Nevertheless, as described in this article, Mexico has not fully implemented several of the IP provisions of USMCA, which raises concerns as the sunset review of the agreement approaches. These obligations refer to patent term adjustments, regulatory data protection and the linkage system for patents.

On the bright side, it is important to point out that in Mexico, international treaties like USMCA have a higher legal status than federal laws but are below the Constitution. This means that, once the Mexican Senate ratifies a treaty, its provisions become binding and therefore some provisions of international treaties can be directly applicable without needing further domestic legislation, although its enforceability is usually challenging and requires litigation.

Focusing on the IP provisions under USMCA that are particularly relevant to the pharmaceutical industry, this article discusses key areas for the pharmaceutical industry where Mexico’s implementation remains pending or incomplete.

Article 20.44 – Patent term adjustment for unreasonable granting authority delays

Until recently, patent term extensions or compensations of any kind were not available under any circumstances in Mexican law, no matter how long the prosecution of a patent application was. Traditionally, the term of a Mexican patent was 20 years counted from the filing date in Mexico, or 20 years counted from the international application filing date in the case of Patent Cooperation Treaty applications.

One of several changes in the FLPIP concerns patent term adjustments, relating to compensation for delays of the Mexican Patent Office (IMPI) in patent prosecution. A new chapter (articles 126–136) describing the Supplementary Certificate (SC) was included, establishing the administrative procedure and the conditions for its grant.

The SC is not limited to the field of life sciences, but due to the complex nature of technologies within this industry, particularly in the case of biotechnology patents, delay during prosecution of patents related to this technical area is common.

The inclusion of the SC aimed to incorporate article 20.44 of USMCA into local law. Article 20.44.3 of USMCA states that ‘if there are unreasonable delays in a Party’s issuance of a patent, that Party shall provide the means to, and at the request of the patent owner shall, adjust the term of the patent to compensate for those delays’.

However, the SC in Mexico consists of very specific limitations and conditions that could be contrary to the USMCA provisions.

According to the FLPIP, if patent prosecution lasts more than five years from the filing date in Mexico to the granting date of the patent, along with the payment of the granting fees (and only then) it would be possible to request for the SC, which is not going to be longer than five years and will provide one supplementary protection day per two days of unreasonable delay. The IMPI will evaluate the request and issue the supplementary certificate if the delay is indeed deemed as ‘unreasonable’ and directly attributable to IMPI. The time that elapses between the filing date and the compliance with the formal examination, any delays caused by the applicant, administrative or judicial delays out of the control of IMPI, and force majeure delays will be considered as ‘reasonable delays’.

When incorporating article 20.44 into the FLPIP, it was decided that the patent owner was not going to be duly compensated in Mexico, as per two days of unreasonable delay only one day of supplementary protection would be granted. There is no information whatsoever in the USMCA that leads to this arbitrary decision. From our point of view, the purpose of article 20.44 was to properly compensate for any unreasonable delay, as article 20.44.3 clearly says that per request of a patent owner, a party shall adjust the term of the patent to compensate for unreasonable delays. The fairest scenario should be one day of supplementary protection per one day of unreasonable delay.

In addition to the above, on 14 October 2020, derived from a case handled by our firm, the Mexican Supreme Court of Justice (MSCJ) issued an important precedent, which opened the opportunity to compensate life-term patents before the entrance of the new law, due to unjustified delays during patent prosecution. Moreover, this decision makes it clear that delays must be compensated in a fair manner. The decision by the MSCJ declared 17 effective years of patent validity. Any time less than 17 years is compensable. The interpretation of 17 years provides substantial relevance considering that the MSCJ made a systematic interpretation of article 1709, section 12 of NAFTA, as well as article 23 of the former Industrial Property Law and finally of the 1996 and 2016 guidelines, concluding that patents should not be valid for less than 17 years. This precedent might apply to all patent applications filed before 1 July 2020, which prosecution lasted more than three years from their filing date. The MSCJ criteria should be analysed and tested on a case-by-case basis.

Article 20.46 – patent term adjustment for unreasonable curtailment

Under USMCA, a patent term adjustment must be available to compensate the patent owner for unreasonable curtailment of the effective patent term because of the marketing approval process, ensuring that pharmaceutical companies receive a full patent term despite administrative delays.

Article 20.46 states the following:

1. Each Party shall make best efforts to process applications for marketing approval of pharmaceutical products in an efficient and timely manner, with a view to avoiding unreasonable or unnecessary delays.
2. With respect to a pharmaceutical product that is subject to a patent, each Party shall make available an adjustment of the patent term to compensate the patent owner for unreasonable curtailment of the effective patent term as a result of the marketing approval process.
3. For greater certainty, in implementing the obligations of this Article, each Party may provide for conditions and limitations, provided that the Party continues to give effect to this Article.
4. With the objective of avoiding unreasonable curtailment of the effective patent term, a Party may adopt or maintain procedures that expedite the processing of marketing approval applications.

According to the corresponding footnotes, a party may alternatively make a period of additional sui generis protection available to compensate for unreasonable curtailment of the effective patent term as a result of the marketing approval process.

This obligation has a transitional period of 4.5 years, according to article 20.89.3, and therefore is not expected to be available until 1 January 2025. However, time flies and Mexico has been slow to adopt the necessary legislative and regulatory changes to implement this kind of patent term adjustment. There is no public evidence that Mexican authorities are taking the necessary steps to properly comply with this obligation.

Further, this delay could have significant consequences for the pharmaceutical industry, potentially undermining the value of patents and reducing incentives for innovation.

Article 20.48 – protection of undisclosed test or other data

Pharmaceuticals are subject to a regulatory approval process that most other products do not undergo before they can be marketed. Patent holders, typically brand-name drug companies, must submit clinical data to regulatory authorities (eg, the FDA in the US or COFEPRIS in Mexico) to demonstrate a drug’s safety and effectiveness. A follow-on pharmaceutical, such as a generic drug or biosimilar (biocomparable in Mexico), can obtain approval via an abbreviated process by referencing the brand-name drug’s clinical data.

To balance competition with innovation, the USMCA, like its predecessor NAFTA, establishes periods of exclusivity that limit the regulatory authority’s ability to approve follow-on pharmaceuticals under certain circumstances, while upholding the principles of the WTO Doha Declaration on TRIPS and Public Health, to protect public health.

Regulatory exclusivity prevents authorities from approving a generic drug or biosimilar or from allowing a competing firm to use the reference product’s data for a specific period. In this regard, stakeholders debated USMCA’s approach to incentivising innovation for new medicines while ensuring affordable access through the market entry of generics. Regulatory exclusivity for biologic drugs (those made from living organisms) was particularly contentious during the USMCA negotiations. During this exclusivity period, regulatory authorities cannot approve a generic or biosimilar version of a drug, regardless of patent status.

The original USMCA required at least 10 years of protection for biologics, but this provision was removed in the final version, which provides a five-year exclusivity period for new chemical-based drugs, like NAFTA. The original USMCA also proposed a three-year exclusivity period for new formulations of existing drugs, but this was eliminated in the final agreement.

The final version of article 20.48 requires each party to protect undisclosed tests or other data submitted to regulatory authorities for the marketing approval of new pharmaceutical products, particularly those containing a new chemical entity, for a minimum of five years. This exclusivity period prevents third parties from relying on the data to market a competing product. Also, the data submitted for regulatory approval must be protected against unfair commercial use. This means that the data cannot be disclosed or used without the permission of the person or entity that submitted it, except in cases where it is necessary to protect the public. During the period of data exclusivity, regulatory authorities cannot rely on the submitted data to approve generic versions or biosimilars.

Besides this, article 20.51 states that if a product is subject to a marketing approval system pursuant to article 20.48 and is covered by a patent in a party’s territory, the party must maintain the protection period specified under article 20.48, even if the patent protection ends before the specified period of protection expires.

Therefore, according to the above, the Mexican government must provide regulatory data protection and, therefore, not to grant marketing authorisations to generics or biosimilars within a period of at least five years from the date of marketing approval of the innovative reference product in Mexico. Like article 20.46, this obligation has a transitional period of five years according to article 20.89.3, and therefore is not expected to be available until 1 July 2025.

Nevertheless, in Mexico, there is currently no specific regulation that provides protection of clinical data to balance the market conditions between innovators and generics. There remains an urgent need to create or modify the corresponding legal provisions to clarify and organise the terms, effects and purposes of the protection of clinical data in Mexico, especially for biologics and other types of pharmaceutical products (orphans, new formulations, new indications or paediatric use), promoting fair and loyal competition in the pharmaceutical market.

However, through directly enforcing NAFTA (and most recently USMCA) in Mexico, it has been possible to obtain at least five years of regulatory data protection through judicial procedures – for some biologics even more than five years.

Thus, based mostly on judicial criteria, Mexico provides some level of data protection for both biologics and small molecules but does not properly meet the standards of USMCA. Mexico’s current policies provide weaker competitive protection compared to other jurisdictions, potentially impacting the timing of market entry.

Article 20.50 – measures relating to the marketing of certain pharmaceutical products

Article 20.50 of USMCA requires the establishment of a patent linkage system, which links the regulatory approval of generic drugs to the patent status of the reference product, preventing the approval of generics or biosimilars that infringe on existing patents.

Article 20.50 states that if a party allows individuals other than the original submitter to use previously approved safety and efficacy information for marketing a pharmaceutical product, it must establish a system to notify patent holders before such marketing begins. This notification must provide adequate time for patent holders to seek remedies for potential patent infringements. Additionally, the party must offer procedures for resolving patent disputes quickly, such as through judicial or administrative proceedings and provisional measures like preliminary injunctions. Furthermore, according to article 20.50, the party may also implement measures to reward successful claims of patent invalidity or non-infringement and ensure transparency by providing information about applicable patents and exclusivity periods for approved pharmaceutical products.

Notwithstanding the above, Annex 20-A provides an alternative to article 20.50, whereby Mexico may maintain a system other than judicial proceedings that prevents the issuance of marketing approval for a pharmaceutical product under patent unless the patent holder consents. This system is based on patent information provided to the marketing approval authority or direct coordination between this authority and the patent office.

If Mexico maintains this alternative system, it must ensure that during administrative proceedings affected parties are given reasonable notice about the initiation of proceedings, including details about the nature and legal basis of the action; that affected parties are allowed a reasonable opportunity to present their facts and arguments before a final decision is made, provided it is feasible given the nature of the proceedings and public interest; and the procedures must comply with Mexican law.

Although Mexico implemented a patent linkage system in 2003, it is not fully aligned with the standards set out in article 20.48 (or, alternatively, Annex 20-A). The current system has gaps, particularly in the management of patent information and the effectiveness of preventing the approval of infringing generics or biosimilars.

Under the current Mexican linkage system, IMPI publishes a semi-annual ‘Gazette for Medicines’, listing patents organised by the non-proprietary names of active ingredients. Patents listed are not linked to specific pharmaceutical products and may cover multiple active principles or be listed more than once. It is not easy to determine all potential patents that could be covering a pharmaceutical product, as intended by the USMCA – it usually requires a patent expert to perform a patent search and analysis.

Besides, the system includes patents for active principles and formulations but excludes process patents (as a matter of law) and use patents (as a matter of interpretation). Use patents must be listed by judicial orders, despite the fact that article 20.50 refers to the ‘approved method of use’, further supporting the inclusion of second medical uses in the linkage system. However, currently Mexico does not consider second-use patents as part of the system and IMPI rejects the listing of this kind of patents, which inclusion must be litigated.

Moreover, Mexico does not have a notification system and procedures (eg, judicial or administrative) to assert patent rights or to challenge a patent’s validity as an integral part of the linkage system as required by USMCA.

Related to the above, last year, COFEPRIS announced directly on its website an ‘opposition form’, which must be filled out and submitted before COFEPRIS for any person (patent holder, patent licensee or patent sublicensee) that considers themselves to be affected by the granting of a marketing authorisation of a generic or biosimilar.

However, the opposition form implemented by COFEPRIS does not comply with the USMCA notice obligation (whether article 20.50 or Annex 20-A), as it does not consist of proper notification to the patent holder of a relevant patent prior to the marketing of such a pharmaceutical product, and it does not provide adequate time and sufficient opportunity for the patent holder to seek available remedies since it provides only 10 working days from the publication of a weekly updated list of marketing authorisation applications. The opposition form puts all of the burden on the patent holder, who must monitor the weekly updated lists (which contain no technical relevant information about the pharmaceutical product) and then notify COFEPRIS about a possible affectation.

Thus, the pharmaceutical industry continues to advocate for a more robust and transparent linkage system to better protect patented drugs while promoting competition. A more effective linkage system is crucial for maintaining the integrity of pharmaceutical patents in Mexico.

Conclusion

As the 2026 sunset review of USMCA approaches, Mexico’s incomplete implementation of key IP obligations could become a flashpoint in the agreement’s evaluation. The review will assess the effectiveness of the agreement and could lead to its renewal, modification or termination. Mexico’s shortcomings, particularly in areas crucial to the pharmaceutical sector, are likely to draw heightened scrutiny from its trading partners, especially the United States. These deficiencies could trigger demands for more stringent enforcement or additional concessions from Mexico.

Although the enactment of FLPIP represents progress, significant challenges remain for the pharmaceutical industry in Mexico. The unresolved issues of patent term adjustments, regulatory data protection and the patent linkage system are critical concerns for pharmaceutical companies operating in or entering the Mexican market. Addressing these gaps is essential for maintaining Mexico’s attractiveness as a hub for pharmaceutical innovation and investment. A proactive approach to fulfilling these obligations will be vital in safeguarding Mexico’s position in the global pharmaceutical landscape.

Complete information about the Mexican Linkage system and Data Protection can be found here.