Dormant and unmonopolisable therapies: what’s the
matter?
In a 1981 study
entitled ‘Patent-Term Extension and the Pharmaceutical Industry’, the US
Congress observed that, ‘although all patented inventions receive protection for the same amount of time, the effective patent terms for the inventions vary’, as they depend on the amount of time elapsed between patent filing and effective commercialization. In relation to pharmaceutical products and medical devices, the study argued that the effective patent term is reduced, due to premarketing and premanufacturing R&D, subject to compulsory regulations. In 2003,B.
Lehman, President of the International
Intellectual Property Institute, made similar remarks, and
disputed the efficiency of current mechanisms of extension of patent terms,
which ‘do not equal the time lost in ability to market’ and impose, upon the
patent owner, restrictions which allow generic manufacturer to use the product
for testing and developing the generic alternative while the patent is still in
effect.
A group of highly distinguished scholars (Budish, Roin
and Williams) recently showed
that the fixed patent term distortion, among US cancer patients diagnosed in
2003, resulted in around 890,000 lost life-years, with an estimated social
value of US $ 89 billion per year. They highlighted some findings which may
inspire future policy changes: (1) the number of clinical trials is inversely
proportional to the patient survival time, which shows that drugs with long
clinical trials, hence with a short effective patent term, are less likely to
be developed than drugs with a short lag between development and
commercialization, (2) patents affect the level and composition of
R&D investments, (3) increases in R&D positively translate into
improvements in patient health, and (4) the use of valid surrogate endpoints effectively
increased R&D investments, reducing commercialization lags and improving
patients’ health. In particular, the use of surrogate endpoints was seen as a
plausible solution to reduce the commercialization lag, and to reinforce patent
protection, without modifying its duration.
However, the insufficient length of the patent term
for new medicines (discussed in a debate hosted by The Wall Street Journal here)
is not the only potential obstacle to their development. D. Baker, co-director
of the Center for Economic and Policy Research, suggested (here)
that other issues affect the protection offered by the patent system to
pharmaceutical R&D, including (a) ‘excessive marketing expenses, as firms
seek to pursue the monopoly profits associated with patent protection - data
from the industry suggests that marketing costs are currently comparable to the
amount of money spent on research’, (b) investments in duplicative drugs, which
involve two thirds of the overall research spending, and (c) insufficient
disclosure of information.
Professor B. Roin, in
his article
on ‘Unpatentable Drugs and the Standards of Patentability’, focused, instead, on
the requisites of novelty and non-obviousness, arguing that their application
in the context of pharmaceutical cases may prevent the patentability, and thus
discourage the development, of socially valuable drugs.
With regard to novelty, the author noted that ‘in the pharmaceutical
industry, […] new drugs can cease to be ”novel” inventions long before they
have undergone the clinical trials needed to establish their medicinal value
and thus can become unpatentable before the public ever gains access to them’. In
other words, the link between disclosure and innovation, in this specific
field, could be particularly weak, as the mere theoretical possibility of a
therapeutical use of a chemical compound does not usually allow the
pharmaceutical company to establish its safety and efficacy, which will be
determined only at the end of clinical trials. The article refers to the
analgesic drug Ultracet as a prime example of the distortions introduced by the
novelty requirement: the idea of combining the two drugs of which Ultracet is
composed was briefly mentioned in a 1972 publication, but physicians only began
prescribing the combination after a company established its safety and efficacy
in 2001, receiving FDA approval to market what turned out to be an unpatentable
drug. According to Roin, unpatentability for lack of novelty may derive from accidental
disclosure or preliminary disclosure of a compound erroneously deemed
ineffective, or whose therapeutical value is not demonstrated: these situations
explain why ‘82% of universities with large medical-research programs were
unable to patent at least one of their life-science inventions during the
previous year and 71% of [them] were unable to find a commercial partner to
develop one or more of their life-science inventions’. The doctrine of inherent
anticipation (particularly after Schering
Co. v Geneva Pharmaceuticals Inc. et Al., commented here -
see also, in the UK, Merrell Dow v H N
Norton & Co), may lead to similar distortions.
The non-obviousness requirement prevents the
patentability of drugs whose therapeutic properties are reasonably foreseen, but
incurs in the same issue, as the predictability of therapeutic efficacy remains
highly speculative until clinical trials are under way. This requirement, according
to Roin, ‘denies patent protection to inventions because they seem likely to
work while ignoring the question of whether a patent is needed to motivate that
invention’s development’ [although this conclusion, in Merpel’s view, conflates
the aim of the non-obviousness requirement, with that of the patent itself].
The conclusion drawn by the article is that the
inadequacy of the novelty and non-obviousness requirements to distinguish
between drugs which deserve patent protection, and me-too drugs which yield
little social value, prevents the development of valuable drugs, as
pharmaceutical companies regularly, and repeatedly, assess the patentability of
a candidate compound before proceeding with its development. ‘The social costs
of losing such drugs’, in the author’s view, ‘likely far outweigh any benefits
to the public from faster access to inexpensive generics of the unpatentable drugs
that actually reach the market’. Possible solutions include a patent reform,
which could create an exception in the novelty and non-obviousness standards for
drugs in the preclinical stage, direct government funding, or FDA-administered
exclusivity periods. Roin focused on the latter solution, and argued that
lengthening the period of exclusivity to somewhere between ten and fourteen
years, would ‘eliminate the distortions arising from the novelty and non-obviousness
requirements’.
Roin’s arguments were partly disputed by K.
Outterson (here),
who criticized the Ultracet example and observed that companies may be willing
to take the risk of proceeding with the development of a drug with weak patent
protection or in the public domain, resorting to method-of-use, formulation, or
combination patents, or simply relying on their brands’ strength. Outterson recommended
a re-evaluation of the possible use of direct government funding to deal with
the issue, and suggested charging generic manufacturers with a fee payable to
the company who did all the R&D, including the clinical trials and
regulatory approval phases. In the UK and US, there is some evidence of direct
public funding aimed at supporting research on abandoned compounds, as the UK
Medical Research Council and the National Health Institute are both financing
similar initiatives (more here).
In a recently published paper, M.
Morgan argued that market exclusivity could be a more flexible substitute of
patents in the biologics industry, which shares many of the characteristics of
the pharmaceutical sector. Savva summarizes Morgan’s findings as follows: (1)
‘FDA-administered exclusivity has the benefit of reducing the barriers caused
by upstream “patent thickets” on basic research’, (2) rent dissipation ‘can be
prevented by allocating “clinical exclusivity” once a product is ready for
clinical trials, and (3) ‘until that stage, the cultural norms of science
(which favor early publication of breakthrough research at the “pre-competitive”
stage) combined with trade secret protection (until a drug candidate is ready
for clinical development), can provide adequate incentives for development of
unpatentable drugs’.
Our Katfriend also explains how the current regimes of
“regulatory exclusivity” work and why they need to be improved:
It may be
argued that current “regulatory exclusivity” regimes - e.g. data exclusivity for
new drugs (5 or 12 years in the US for pharmaceuticals or biologics, respectively, and 10 years in EU) and new indications (3 years in US
and 1 year in EU) and "market" exclusivity for Orphan Drugs (7 years
in the US and 10 years in the EU) - provide adequate incentives for
"dormant therapies" in absence of patent protection. However, data
exclusivity only protects clinical trial data which does not prevent another
competitor from conducting their own trials (at no risk of failure), which may be likely if there is a lucrative market.
Also, Orphan Drug exclusivity only applies to rare diseases (affecting less than 200,000 people in the US and fewer than 5 people per 10,000 in the EU) [and is] shorter than average patent protection (12 years). Further, commentators have noted that drug companies have been known to "game" the Orphan Drug legislation by seeking approval for a drug in a small patient sub-population while generating "blockbuster" revenues through "off-label" use for broader indications (see Kesselheim and Armstrong). Gleevec/Glivec is an example of such a drug.
In the US, the MODDERN Cures Act,
which died in subcommittee during the 112th Congress, but is due to be
resubmitted in the 113th, aims to address some of the concerns
raised by dormant therapies. The draft’s preamble clarifies the issue:
(7) In addition, there is reason to believe that
potential treatments with tremendous value to patients are never developed or
are discontinued during research and development due to insufficiencies in the
intellectual property system.
(8) It is in the public interest to address the
hurdles that may be precluding new treatments from reaching patients and to
remove the disincentives for the development of therapies for these unmet
needs.
The Act defines ‘dormant therapies’ as those that meet
unmet medical needs and have prospectively insufficient patent protection. The
first requisite essentially implies that the drug to be investigated should address
‘a need for drugs or biological products for the treatment of one or more
life-threatening or other serious diseases or conditions for which no therapy
exists’, or guarantee improved effects on serious outcomes already treatable
through other therapies. The second requisite is fulfilled if patent protection,
for a period of 14 years from the date of first approval, is not reasonably
anticipated to ‘provide an adequate scope of protection to prevent the approval
of products that would rely upon or reference the dormant therapy, in an
application filed under section 505(b)(2) or 505(j) of the Federal Food, Drug,and Cosmetic Act, or section 351(k) of the Public Health Service Act’, or to
provide patent protection under the patents, or applications, filed by the
sponsor. The request for designation lists the related patents owned by the
sponsor, who must agree to waive their enforcement after the end of the
exclusivity period, and certifies the prospectively insufficient patent
protection. The designation is conceded if all the above requisites are met,
provided that the sponsor effectively intends to file an application for
approval of the drug with the FDA.
'unmonopolisable...'
Under Section 202, a ‘dormant therapy’ enjoys a
15-year protection period of FDA-administered exclusivity [‘originally data
exclusivity’, explains Savva, ‘but replaced with patent-like market exclusivity
in the amended version due to be resubmitted to Congress’], beginning from the
date of FDA approval of the new drug, with a corresponding extension of the
patent term. As the designation would confer a new, strong protection for a
significant period of time, devoid of any restrictions due to R&D efforts,
the amended version of the Act contains provisions aimed at preventing races to
regulatory approval (by establishing clinical exclusivity), and at verifying
the continued development of the new drug (through ‘development
certifications’).
The MODDERN Cures Act appears to be a significant step
in the right direction. Savva explains that, although there is the theoretical
risk that a competitor may obtain exclusivity over a drug initially developed
and investigated by another company, a situation which could discourage the
disclosure of information in the public domain, ‘the fact that most companies
are incentivized to file patent specifications early with broad claims (subject
to potential utility and sufficiency issues) [makes it] unlikely that the Bill
would result in any significant change in the disclosure of information or
filing practices, although it may discourage “defensive” publications’. This
legislation would thus provide the necessary reward for companies who invest in
the development of socially valuable drugs, shifting the focus away from the
rigid requirements of novelty and non-obviousness, and the distortions induced
by insufficient patent protection.
This Kat is of the view that the issues
highlighted above, and the reduced efficiency of the patent system in promoting
important research investments in the pharmaceutical sector, is certainly worth
investigating, as the social benefits that may derive from the
commercialization of ‘dormant and unmonopolisable therapies’ should not be
wasted. There are, however, some further concerns and doubts that he briefly
summarizes as follows:
the lack of data on
specific R&D expenditure, and the profits made through sales of the
developed drug at premium prices, prevents a more fair evaluation of the
possible solutions to the issues examined, as proposals focus on guaranteeing
an exclusivity period similar to that afforded by patents in other industries,
on the unproved assumption that this may effectively address the industry’s
concern [which is possible, and perhaps even plausible, but not easy to
demonstrate];
based on the data
available, there appears to be extreme variability in R&D expenditure (with
the cost of each drug varying between US $ 500 million and more than US $ 2,000
million, according to this
study) and profitability, with some drugs reportedly generating profits
sufficient to recoup not only their research costs, but also those of less
successful drugs (as demonstrated by the so-called ‘patent cliff’, and by a study
which found that, for new chemical entities introduced between 1988 and 1992,
the top 10% of drugs accounted for 56% of the overall sales of all the NCEs); if
this variability was confronted, once again, with a rigid solution, it may
result in issues of over-protection and, more importantly, under-protection,
potentially compensated through extremely high market prices, which may
critically inflate the 'deadweight loss' effect;
the idea of using
administrative periods of exclusivity is certainly more reasonable than tampering
with the novelty and non-obviousness requirements, which do not serve the scope
of rewarding inventors for their innovations, but merely restrict the target of
patent law;
public funding in the pharmaceutical
sector is certainly needed to promote the development of drugs for both rare
and endemic diseases, and could be necessary to stimulate further research on
compounds which already translated into successful drugs; more generally, there
should be some recognition for the composite structure of pharmaceutical
R&D, which frequently involves many subjects in its various stages (for
example, Universities which disclose the basic compound, and companies which investigate
its property and therapeutic efficacy, and conduct clinical trials), calling
for public co-funding as a primary drive for basic research;
'unmonopolisable
therapies', an issue which usually remains in the shadow of 'dormant
therapies', warrants a cautious approach, as it may be difficult to identify
the innovations which really deserve an exclusivity-based protection; further, the
development of diets, dietary supplements, lifestyle interventions, surgical
methods, “natural” remedies, and many complementary and alternative medicines is
frequently the result of the work of individuals or restricted groups, which
may be more sensitive to better research funding (i.e. increased "push"
incentives) and recognition than to patent-like protection (Savva notes that the latter provides limited incentives for 'unmonopolisable therapies', as monopoly prices cannot be enforced, and suggests that examples of alternative "pull" incentive could comprise prize-based models such as
the Health Impact Fund, Advance Market Commitments, priority review vouchers,
wildcard patent extensions, prizes for clinical trials, etc.);
it is necessary to
ensure that legislative intervention, such as the MODDERN Cures Act, contain
provisions that (1) address the risk of races to approval and rent dissipation,
(2) ensure that ‘dormant therapies’ do not turn into ‘hibernated therapies’
[Kat-invented description, which points to the possibility that companies could
slow their research efforts after obtaining the designation, knowing that the
exclusivity period starts from the regulatory approval - Savva argues that the use of development certifications should be sufficient to minimize the issue], or into the equivalent
of ‘submarine patents’, and (3) prevent reliance upon designation as ‘dormant
therapies’ from generating a shift towards the development of drugs with high
profitability (for which ‘the clock is ticking’, as they do not fulfill the
requisites for extended protection), over those that meet urgent and unmet
medical needs (for which the clock begins ticking only after approval);
finally, these issues
suggest that, although not welcome by the industry, an administrative
authority, equipped with the power to investigate these issues through access
to real numbers, and to review the correct use of the system, would not only
guarantee that the rights of inventors and patients are rightly balanced, but
would ultimately represent a safe way for the industry to make its voice heard,
when, despite the high costs of the marketed drugs, the risk of insufficient
reward is real.
How can you help?
Savva, who is currently analyzing these issues for his
thesis, would be happy to hear what the IPKat readers have to say, so do feel
free to share your views below. Further, if you know of any examples of ‘dormant’
or ‘unmonopolisable’ therapies and are willing to participate in a confidential
survey, you will certainly be rewarded with Savva’s gratitude if you could write
directly to him here.
Finally, our Katfriend is also interested in comments on the use of 'patent evergreening' techniques (e.g. patenting derivatives, metabolites, selection inventions, new formulations or combinations with the same active ingredient, new uses, methods of administration or methods of manufacture) to rescue 'dormant therapies':
For example, if a compound does not have regulatory approval, a method of use patent will still provide adequate market protection against generic competition which cannot obtain approval for any other indication - this is the likely strategy of various "drug repurposing" companies, which try and find new indications for failed drugs which may have passed "safety" testing (in Phase I of clinical trials) but failed in Phase II and/or III (efficacy). Various commentators have noted that such "secondary" or "second generation" patents (which do not cover the drug compound itself) are weaker and more susceptible to obviousness challenges (according to two studies here and here). However, drug repurposing companies may still be willing to take a drug to market on a "secondary patent" due to lower costs of development for repurposed drugs which have already passed pre-clinical and phase I testing. Arguably, there would be no incentives to develop potentially safe and effective drugs which had not undergone such testing (or drugs which cannot even obtain such "secondary patents" due to obviousness).
The
IPKat is sure that his readers were just waiting for this occasion to showcase
their knowledge and helpfulness.