As a result of the EU directive, the EU's generics market, which is currently worth only 10 per cent of the total €70 billion European pharmaceutical market, is set to skyrocket.
According to US figures, $50 billion (€42.7 billion) worth of branded drugs are due to lose patent exclusivity over the next five years.
In the next year alone, $11 billion in drug sales are expected to lose patent, with generic alternatives becoming available for at least 15 branded drugs.
Until now US generics companies have had a major head-start in launching generics onto the market - a process that can take up to six years.
The landmark "Bolar provision" eliminates the patent infringement risk that EU generics companies previously faced if conducting studies, tests or trials on a generic version of a drug before the brand-name product's patent protection expired.
The exemption will finally allow European generics companies to compete on an even playing field with the US, where a similar exemption has been in place for the past 20 years as part of what is known as the Hatch-Waxman Act.
"Conducting the necessary tests and trials with a view to application of a generic medicinal product shall not be regarded as contrary to patent rights or to supplementary protection certificates for those medicinal products," the exemption states.
The "Bola provision" has been broadly welcomed by European generics manufacturers - many who have previously had to shift manufacturing to non-EU countries with Bolar-type provisions in order to bring generic versions to market in a timely manner.
Not surprisingly, however, the legislation change, which came into effect on 30 October 2005, has been widely opposed by research pharmaceutical companies, who are set to suffer significant losses to their market share.
The "bolar provision" was a small part of a comprehensive reform of the current EU pharmaceutical legislation proposed by the European Commission in July 2001.
Agreement on the draft regulation and the directives was reached between the European Council, Commission and Parliament on 18 December 2003, and the Council adopted them in March 2004.
Now that the new EU directive is in place it should help to establish a balance between the needs of patent holders to gain maximum profit from their products and the needs of generics companies to conduct early-stage research and development.
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