Category: Pharma

Categories
Copyright Patent Law Pharma

USPTO-DOJ Workshop on Promoting Innovation in the Life Science Sector: Day One Recap

The following post comes from Colin Kreutzer, a 2E at Scalia Law and a Research Assistant at CPIP.

night view of Washington, D.C.By Colin Kreutzer

This past fall, the United States Patent and Trademark Office (USPTO) hosted a joint workshop with the Department of Justice (DOJ) entitled Promoting Innovation in the Life Sciences Sector and Supporting Pro-Competitive Collaborations: The Role of Intellectual Property. Nyeemah Grazier and Brian Yeh (USPTO Office of Policy and International Affairs (OPIA)) emceed the day’s events, which focused on the impact of patents and copyrights on collaboration and innovation in the life sciences sector. The goal was to promote dialogue between members of the innovation and legal communities working in the life sciences sector to combat the COVID-19 pandemic. Video of day one of the workshop is available here, and our summary of day two is available here.

Opening Remarks

In his opening remarks, Andrei Iancu (USPTO Director and Under Secretary of Commerce for Intellectual Property ) discussed the main purpose of the workshop—to find ways of accelerating American innovation in the life sciences. “Our goal is to enhance collaboration among innovative companies and researchers to solve one of the most vexing health problems we have faced as a country in the past century.” He highlighted the ongoing collaboration between the USPTO and DOJ as “truly innovative.”

Director Iancu also emphasized the positive impact of the patent system on our economy and quality of life throughout American history. He cited the discovery and development of insulin treatments as an example of how innovations have alleviated suffering and helped treat diseases. As an economic example, he noted the massive biopharmaceutical company Amgen, whose co-founder Dr. Marvin Caruthers had once told him that patents are so critical to life sciences development that, without them, the U.S. “would not have a serious biotechnology industry.” Finally, Director Iancu pointed out a number of pandemic-era efforts that the USPTO has undertaken to keep innovation moving forward.

Session I: The role of patents in research and development of therapeutics, diagnostics, and vaccines, particularly during pandemics

In the first session of the day, Ms. Genia Long (Senior Advisor, Analysis Group) gave a presentation on the relationship between patents and innovation, and the value of innovation in improving the diagnostic and therapeutic arena of public health.

Ms. Long explained that technological innovation is a key determinant of economic and public health progress. Disease and morbidity rates have consistently declined over the last thirty years for many serious illnesses such as heart disease, cancer, HIV, and hepatitis. Much of the overall increase in life expectancy in the United States is attributable to pharmaceutical developments. These sorts of improvements are expected to continue into the future, so long as we continue to incentivize and support development in cutting-edge technologies such as gene and cell therapies.

Ms. Long built on Director Iancu’s comments about the core reason that patents are essential in drug development. The cost of developing a drug is extremely high, while the cost of copying a successful drug is very low. Without granting pharmaceutical companies a limited period of exclusivity in which their costs may be recovered, those massive R&D investments are guaranteed to be a losing bet. Realizing this in advance, of course, companies would choose not to make such investments in the first place. And we would have to do without many of the life-enhancing treatments that we now enjoy.

Ms. Long also discussed the importance of collaboration between all government actors who play a role in this innovation ecosystem. In addition to the patenting process, FDA approval takes a large part of the time and money in bringing a drug to market. The Hatch-Waxman Act provided a patent restoration period, adding time to the end of a patent life to compensate for time lost while seeking approval. But the market exclusivity period has remained steady at about 12 to 13 years. Meanwhile, patent challenges from generic drug makers have increased dramatically. Collaboration is important because pharmaceutical patents are “embedded within a larger and somewhat complex system of rules and incentives which act together to yield market results.”

Session II: Update on USPTO guidance on patentability of life science inventions

Next, Ali R. Salimi (Senior Legal Advisor, Office of Patent Legal Administration (OPLA), USPTO) gave an overview of the most recent USPTO guidance to examiners on disclosure and subject matter eligibility analysis.

Mr. Salimi first discussed the rather convoluted history of patent eligibility under 35 U.S.C. § 101. In brief, the Supreme Court has developed a set of judicial exceptions to the four statutory categories of patent-eligible subject matter: process, machine, manufacture, and composition of matter. The Court views these exceptions as necessary to prevent the basic tools of scientific and technical work from becoming inaccessible. As currently written, those exceptions are laws of nature, natural phenomena, and abstract ideas.

Mr. Salimi outlined the 2012-2014 decisions in Mayo v. Prometheus, AMP v. Myriad Genetics, and Alice Corp. v. CLS Bank, as well as the responses by the USPTO in updating its guidance to examiners. The final result was the 2019 updated patent eligibility guidance (PEG) version of the Alice-Mayo test.

The current form of the test is given in a flow chart shown at 42:50 of the video presentation. Step One of the test asks whether the claim is directed to a statutory category. If so, Step Two then asks if a judicial exception renders the claim ineligible—if the claim does recite a judicial exception, it will still satisfy §101 so long as it integrates the exception into a practical application and recites “additional elements that amount to significantly more” than the exception.

Mr. Salimi finished by briefly discussing the three disclosure requirements under § 112: written description (whether the disclosure demonstrates that the inventor actually had possession of the invention), enablement (whether the description enables a person of ordinary skill to make and use the invention), and best mode (whether the inventor knows and discloses the best mode of carrying out the invention).

Overall, he says the 2019 PEG has been well received by both examiners and practitioners, and it has done much to further the goals of clarity and certainty in patent prosecution.

Session III: Life science patents in practice

In this session, two speakers shared their own experiences with how the patent system protects inventions in the life sciences, promotes innovation and facilitates collaboration in life sciences.

David E. Korn (VP of Intellectual Property and Law at PhRMA) spoke first. As a representative of a trade association of leading biotech firms, he elaborated on the concerns about recovering large investments made in the prior remarks of Director Iancu and Ms. Long.

Mr. Korn explained that not only is the drug development process lengthy and costly, but it is also uncertain. Discovery of an active compound is just the beginning. It is followed by initial laboratory and animal testing. If successful, the developer may file an Investigational New Drug (IND) application and begin phase I and phase II clinical trials. This is followed by larger and longer phase III trials involving thousands of patients. If that is successful, the developer may file a new drug application (NDA) to the FDA and seek approval. Only after this process is the drug ready, and drugs can fail at every step along the way. Mr. Korn said the cost of developing a successful drug can be as much as $2.6 billion when accounting for unsuccessful candidates. He likened the process to a rocket mission in which “everything needs to work perfectly at each stage.”

Moreover, Mr. Korn continued, R&D doesn’t stop after FDA approval. There is ongoing research into new forms, new indications, methods of delivery, and multiple therapies. All of these innovations require additional investment and further FDA approval. He credited a number of laws with supporting pharma innovation and collaboration, including the Hatch-Waxman Act, the Orphan Drug Act, and the Bayh-Dole Act.

Next, Dr. Gaby Longsworth (Director, Sterne Kessler Goldstein & Fox) discussed life sciences patents from the perspective of a practicing patent attorney. Patents do more than allow drug developers to recoup their investments. By offering an alternative to holding information as a trade secret, they allow for more open collaboration and licensing in order to “build a common innovation instead of battling it out in litigation.” Patents can also be sold or used as collateral for a bank loan, providing research incentives and support to smaller companies.

First, Dr. Longsworth gave an overview of the three main forms of small molecule drug applications under the Federal Food, Drug, and Cosmetic Act. An NDA can be filed under § 505(b)(1) for new drug compounds, as well as new formulations or indications of an existing drug. A second type is found under § 505(b)(2), known as the paper NDA, for modifications of previously approved drugs based on safety and effectiveness data of the prior drug. Finally, there is the Abbreviated NDA (ANDA) under § 505(j). This is a duplicate application used by generic manufacturers, and it relies on studies provided in the NDA for the original drug.

Next, Dr. Longsworth discussed the general protection strategies of drug innovators. One goal is to build a strong blocking patent. She explained the importance of understanding the different types of patents available when drafting the application in order to obtain claims that will not be easily designed around. Another goal is to create a patent thicket to deter competition. It can become very difficult and expensive for generic competitors to file an ANDA when there are many patents to analyze, and it becomes more difficult for competing innovators to mount successful attacks at the Patent Trial and Appeal Board.

Panel Discussion I: Are changes to U.S. patent law needed to better support innovation in life sciences and the development of COVID-19 solutions?

After hearing several presentations on the effect of economic incentives on innovation, a panel discussion addressed the question of whether changes are needed to improve innovation, collaboration, or access to medicines. Moderated by Director Iancu, the panel featured: The Honorable Paul R. Michel (Chief Judge, U.S. Court of Appeals for the Federal Circuit (CAFC) (Ret.)), Steven Caltrider (VP and General Patent Counsel, Eli Lilly & Co.), Karin Hessler (Assistant General Counsel, Association for Accessible Medicines (AAM)), Arti Rai (Elvin R. Latty Professor of Law and Director, Center for Innovation Policy, Duke University School of Law), Corey Salsberg (VP, Global Head IP Affairs, Novartis), Hans Sauer (Deputy General Counsel and VP, Biotechnology Innovation Organization), and Hiba Zarour (Head of IP Department, Hikma Pharmaceuticals).

Judge Michel noted the problems with uncertainty in § 101 eligibility of patent claims, which he referred to as a “systemic failure” of the courts. If businesses and venture capitalists cannot reliably predict whether a claim will survive § 101, there is less appetite for investment in R&D, less commercialization, and ultimately fewer new medicines. He credited the 2019 USPTO guidance as an improvement but lamented that the Federal Circuit had not gone along with it. The best hope for clarity would not come from the courts, he said, but through new legislation.

Mr. Salsberg noted that from a medical standpoint, the two most important elements for getting through the pandemic are innovation and collaboration. He said the patent system is the reason we entered this pandemic with “libraries of millions of novel compounds that are ready to test right now.” Likewise, it is why we have the tools to sort through these compounds and identify those that can help with COVID-19.

Speaking for generic manufacturers, Ms. Zarour argued that innovation is not solely dependent upon IP protection: “Innovation will happen.” And while previous speakers had argued that it increases innovation, she cited a study from the Swiss Federal Institute of Intellectual Property that found an upper limit on the benefits of patent protection. At a certain point, the stifling effects of IP protection outweigh the benefits of incentivizing investments. She proposed a solution in which the initial patent for a drug would grant the inventor a period of exclusivity (e.g., 15 years) but subsequent or ancillary patents to the same drug would go into a pool that could be voluntarily licensed. This would strike a balance between the need for innovation with the need for access, and it could prevent the “evergreening” of drug patents.

Ms. Hessler also advocated for such a balance. She agreed that strong innovation incentives are responsible for the thousands of COVID-19 compounds that are already in late-stage clinical trials. At the same time, she used an example previously cited by Dr. Longsworth—a 1,000-patent thicket for a biologic manufacturing process—to argue that excessive protection can unduly impede medical access. She mentioned a proposal to cap the number of patents that can be inserted into the biologics patent dance as being a potential solution.

Ms. Hessler also said that settlement of patent litigation is becoming increasingly difficult due to “a patchwork of inconsistent regulations” and disagreement between state and federal laws. Legal settlements can expedite access of generic and biosimilar drugs by over a decade. Mr. Caltrider agreed that the settlement issue is of great importance, and that states such as California are creating laws that interfere with the federal world of patents.

Mr. Sauer said that collaboration is important in biotech because many companies in that field are small. Licensing and technology transfer are critical to the proper function of our biotech ecosystem. The small innovators must have a secure means of profitably transferring their technology to the larger manufacturers who are better equipped to fully develop and deliver the product to the public.

Mr. Caltrider pointed out that the USPTO has remained open for business since the very beginning of the COVID pandemic. Touching on the initiatives that Director Iancu had mentioned in the opening remarks, he praised the certainty and reliability of our patent system as essential to keep “the machinery working” to promote collaboration and innovation.

Prof. Rai pointed to a recent DOJ business review letter which declined to raise antitrust issues over a collaboration between large manufacturers of monoclonal antibodies. She said that from a COVID perspective, the patent system has been doing great. But she echoed Judge Michel’s remarks about § 101, calling the situation a “mess that needs to be fixed.” Finally, she described a forthcoming study on biologics litigation and a proposal regarding manufacturing process patents that are filed after FDA approval.

Session IV: Copyright and innovation in the life sciences

The final sessions of the day shifted to the role of copyright law in the life sciences. Session IV include three short presentations from: Michael W. Carroll (Professor of Law and Faculty Director, Program on Information Justice and Intellectual Property (PIJIP), American University Washington College of Law (WCL)), Mark Seeley (Consultant, SciPubLaw LLC and Adjunct Faculty, Suffolk University Law School), and Bhamati Viswanathan (Affiliate Professor, Emerson College).

Ms. Viswanathan began with a brief overview of copyright law and the balancing act it performs. Most people think of copyrights in terms of music and literature, but it can also protect software, databases, and other compilations of information. Like the patent system, one goal of copyright law is to promote innovations and investment in copyrightable works. And like patents, there exists an issue of balancing the incentive of ownership rights with access to those works. In the scientific community, copyright law seeks to balance the tendency for sharing and collaboration with the rights of the creators of original works.

Mr. Seely discussed two areas of scientific interest that are protected by copyright: scientific journals and searchable data repositories. He says that scientific knowledge is most valuable “when it is organized, standardized, updated, and indexed.” Publishers of scientific data are a crucial component of the current effort against COVID-19 because they provide useable data about known drugs, potential reactions, and other adverse events. By combining “published content, patents, with tactical mining capabilities and analytics,” these works support the pipeline of new treatments.

Prof. Carroll talked about the manner of distributing research outputs within the copyright system. The internet age has brought opportunities for vast dissemination of information. The challenge presented by open access movements has been in finding ways to utilize the internet’s potential while still protecting the IP rights of authors. Open access promotes innovation because it increases exposure of publications to readers beyond those within the narrow discipline from which the publications come, sparking new ideas in an interdisciplinary environment. It also provides information to under-resourced readers in low-income areas or developing nations. Prof. Carroll presented the standardized copyright licenses he helped develop with the Creative Commons organization, which allow authors to choose the particular terms and conditions under which their works are reused or distributed.

Panel Discussion II: Copyright discussion: Enhancing access to life science: How copyright can create incentives or barriers to building data or information pools, and related licensing

Session IV led immediately to a panel discussion by the presenters. Moderator Susan Allen (Attorney-Advisor, OPIA, USPTO) led a discussion of the role of copyright in disseminating information and supporting licensing models.

COVID-19 has resulted in many publishers voluntarily releasing relevant copyrighted information. Asked how this would affect publishing systems long term, Mr. Seeley was doubtful of any major impact. But he noted that downloads of information were much higher due to this change. If society decides, after the fact, that the emergency release was highly beneficial, it could impact future decisions about information sharing.

Prof. Carroll took the increase as an affirmation that open access systems are helping to fill an unmet need. He added that the pandemic has accelerated another trend towards the growth of pre-print servers—publication vehicles for preliminary results and yet unreviewed materials—but noted the growing pains associated with a public that is not accustomed to this type of early information sharing: “clinically actionable unreviewed results that then make it into the media can actually be harmful.”

Asked what role the government can play in supporting copyrights and information sharing, each panelist weighed in. Mr. Seeley said it’s important that governments do more than mandate certain types of publication and sharing—it should be coupled with funding to help make it happen. Prof. Carroll pointed to the recommendations he and others presented as part of the National Academies of Science, Engineering, and Medicine. He echoed Mr. Seely’s call for better funding of information infrastructure such as repositories, as well as better standardization. Ms. Viswanathan voiced support for initiatives like the Open Science Policy Platform (OSPP) and said she would like to see more empirical research on the impact that it has on business models of various stakeholders.

Closing Remarks

In closing, Mr. Yeh thanked the participants and encouraged all to tune in for day two of the conference, which would “explore different ways to expedite the development and use of therapeutics, diagnostics, and vaccines through competition, collaboration, and licensing.”

Categories
Patents Pharma

IP Scholars Question the Legality and Wisdom of Joint AG Proposal to Seize Remdesivir Patents

The following post comes from Colin Kreutzer, a 2E at Scalia Law and a Research Assistant at CPIP.

dictionary entry for the word "innovate"By Colin Kreutzer

While the vaccines are starting to roll out in the fight against COVID-19, the precise timelines for when they will be widely available continue to be uncertain. But we do have treatments currently available under Emergency Use Authorization authority that have been shown to blunt the impact of the coronavirus and reduce the length of hospital stays. The first one these was Gilead Sciences’ antiviral drug, remdesivir. In July, after an initial period in which Gilead donated its production supply, the company announced a price of $390 per vial, or $2,340 for an estimated 5-day course. While the price is lower than what many analysts were expecting, not everyone was happy about it.

In an August joint letter to HHS Secretary Alex Azar, thirty-four state Attorneys General urged him to do what they contend would resolve a problem of access to the drug: use the “march-in rights” provision of the Bayh-Dole Act to seize Gilead’s patent and license it to generic manufacturers. The response to this proposal from many IP experts can be roughly divided into three main points: (1) it is not legal; (2) it is not effective; and (3) it is dangerously unwise.

What Is Bayh-Dole?

The Bayh-Dole Act of 1980 was a watershed event in the growth of the American pharmaceutical industry. It allowed companies and universities to retain the IP rights to inventions that were developed using government-funded research. The goal was to improve the efficiency with which innovations were brought to market and to encourage investment and collaboration between government, university, and private researchers. Previously, many research developments never saw the light of day due to lack of commercialization, and likely many other inventions were never born in the first place. Bayh-Dole is widely regarded as a success story on both sides of the aisle.

What Are March-In Rights?

Since the aim of the law is to spur innovation and development, the march-in rights provision was included to counteract patent owners who “hold out” or fail to commercialize their inventions. Under very limited circumstances, it allows the government to “march in” and force the owners to license their patent on reasonable terms to a third party. Just how limited are those circumstances? So far, the 40-year-old provision has been used exactly zero times. It stands to reason that valuable products don’t need to be forced into the market, and many modern treatments–for cancer, diabetes and hepatitis­, among others–have been invented and commercialized under Bayh-Dole collaborations without any intervention.

It Is Not Legal

Notably absent from the list of Bayh-Dole creations is remdesivir. The law only applies to inventions that are “conceived or actually reduced to practice in the performance of work under a funding agreement,” i.e., things that were invented with government help. It does not apply to every case in which a drug maker has worked alongside a government agency at one stage or another. The AG letter cites $30 million in NIH-funded work on remdesivir. It claims that this funding exposes the drug to the march-in provision. The letter also makes a general appeal to our sense of fairness—the public paid for this, and so it rightly belongs to all of us.

As noted by Stephen Ezell of the Information Technology and Innovation Foundation (ITIF), the total government expenditure is actually closer to $70 million. That number includes additional work performed with USAMRIID, the U.S. Army Medical Research Institute of Infectious Diseases. Both projects took place in 2014. The Army study was investigating Gilead’s library of antiviral compounds for effective Ebola treatments. Remdesivir’s compound gave positive results, but other treatments proved better. The NIH project was a clinical trial to explore whether remdesivir could be used against coronaviruses as a general class. Again, it showed promise. But the relevant coronaviruses at the time (SARS and MERS) did not spread widely enough to make larger studies feasible. The NIH study might have enabled Gilead to home in so quickly on remdesivir as a COVID-19 treatment, and in that sense, it would have played a crucial role. But that is not the same thing as having a hand in the actual invention of the drug.

Critically, under both studies, the drug had already been invented by Gilead. Regarding the NIH work, a HHS spokeswoman told STAT that the department does not consider the march-in rights to apply. And as pointed out by Scalia Law Professor Adam Mossoff, Army lawyers have stated that their contributions did “not qualify USAMRIID as a joint inventor of the compound.” Even if they were joint inventors, the NIH has stated that “the extraordinary remedy of march-in is not an appropriate means of controlling prices.”

As CPIP Executive Director Sean O’Connor explains at The Hill, even if inventorship could be established, march-in rights would still not be legal in this case: “[m]arch-in rights under Bayh-Dole’s Section 203 only authorize the government to grant new licenses if the original funding recipient fails to take steps to bring the invention to the market (achieve ‘practical application’) or reasonably satisfy health or safety needs.”

And yet, while it pales in comparison to the over $1 billion that Gilead expects to spend this year on remdesivir, $70 million sounds like a lot of tax dollars. CPIP Senior Scholar Kristen Osenga argues that proponents of marching in “mislead the public, specifically regarding remdesivir and, more generally and dangerously, regarding government support of scientific research.” She urges people to understand that government collaborations are a great deal for the public, and among the most efficient ways that the government spends our money: “The Milken Institute estimates that the long-term boost to total economic output could be as high as $3.20 for every dollar the NIH invests in biopharmaceutical research. Even conservative estimates peg the value of the NIH at $1.70 of economic activity per dollar spent. If only all government spending were so productive.”

It Is Not Effective

The preceding section alone answers the question of whether Bayh-Dole is a legal means of seizing Gilead’s property rights. Clearly, though, it does not quiet the sentiment felt by many that something else needs to be done. In addition to the price tag, the AG letter speaks of a “dangerously low supply” of the drug. But the letter supports that claim with a dubious comparison of Gilead’s expected production output to every single confirmed case of COVID-19 in the country. It should be clear on its face that this is not a valid manner of determining how many patients would actually benefit from remdesivir. It would have been more appropriate to say that future demand is uncertain. Because of course, supply is only one half of the equation. Demand can vary greatly depending on whether we cooperate as a society to contain this virus.

Gilead has, in fact, licensed the drug to third parties in order to increase supply. Currently, its own production will remain domestic. But Joseph Allen at IPWatchdog notes that in addition to ramping up its own capacity, Gilead has deals with drug makers in Egypt, India, and Pakistan to provide supplies internationally. Mr. Allen is also is a former congressional staffer who worked on the Act with its namesake, Senator Birch Bayh (D-Ind.). He adds that, because march-in seizure is a hostile measure, it would involve a drawn-out legal battle. This would render the process far too slow to be effective in a pandemic.

It Is Dangerously Unwise

Far from being proof in support of the AGs’ position, Gilead’s work with NIH is a clear example of how damaging it would be to abuse the march-in rights provision. We desperately want these types of collaborations to continue. And if companies believe that doing so would expose them to the seizure of their IP, they will act accordingly.

Our intellectual property system provides the necessary incentives for companies to invest massive amounts of money and bring new lifesaving drugs to the world. We even allow patents for new uses of existing drugs. As CPIP Senior Fellow for Life Sciences Chris Holman points out, the next great cure might be hiding in your medicine cabinet. But without incentivizing the R&D expenditures that bring us these wonderful inventions, we may never realize it.

It is hard to worry about the future when the present appears so bleak, but it is critically important to understand why it is dangerous to weaken the incentives that have given us so many lifesaving developments. Even if exercising march-in rights were legal, and even if it could somehow increase production, it is necessary to consider the long-term implications. Taking away a company’s rights and forcing it to sell at close to the cost of production may help with the current situation, but it will likely decimate future research. Who would want to spend billions of dollars on R&D without the knowledge that they can obtain IP rights that will have a predictable value? We should ensure that companies remain strongly incentivized to research new treatments that benefit us all.

Categories
Patents Pharma

Professor Joanna Shepherd Explains Pharmaceutical Product Hopping in New CPIP Policy Brief

pharmaceuticalsCPIP has published a new policy brief by Joanna M. Shepherd, Vice Dean and Thomas Simmons Professor of Law at Emory University School of Law. The brief, entitled The Legal and Industry Framework of Pharmaceutical Product Hopping and Considerations for Future Legislation, discusses the practice of so-called “product hopping,” where a pharmaceutical company turns its focus to newer versions of its existing drugs. The newer versions, which may include extended-release formulations, different dosages, and the like, can be protected by new patents if they independently meet the patentability requirements, including novelty, nonobviousness, and utility. However, these newer versions may not be covered by a state’s automatic substitution laws since there are no generics yet available. Those laws only apply when generic versions are on the market.

Prof. Shepherd explains that the product hopping phenomenon is incentivized by the legal and industry framework in which pharmaceutical companies operate. Indeed, the current system allows generic drug companies to free ride on the extensive research, development, approval, and marketing costs borne by the branded drug companies, and the latter are thus motivated to create new and innovative drugs that will further benefit consumers. Despite these benefits, some suggest that we need legislative changes to rein in product hopping, and some even argue that the practice itself violates the antitrust laws. Prof. Shepherd looks at the existing case law on the antitrust issue—a total of two cases at the federal appellate level—to find points of agreement, and she uses that synthesis to suggest considerations for future legislative efforts to balance the needs of consumers and producers. Finally, Prof. Shepherd warns that any legislation aimed at product hopping should be cautious so as not to ultimately harm consumers, reduce innovation, and increase health care spending.

The Executive Summary and Conclusion are copied below:

***

Executive Summary

Ensuring that Americans can afford health-improving and life-saving drugs should be a top priority for policymakers. However, efforts to reduce drug prices must be made carefully so as not to jeopardize the innovation that creates those critical drugs in the first place.

Recently, in the name of reducing drug prices, the makers of innovative drugs have become targets of antitrust suits alleging that their business practices constitute anticompetitive behavior. One such practice is sometimes called “product hopping.” This is the act of shifting a customer base from an older drug to a newer one with a longer remaining patent life. A generic drug maker is still free to sell the generic version of the older drug once its patent expires, but product hopping prevents the generic drug maker from benefitting from state laws that automatically substitute generic drugs at the pharmacy counter. Because product hopping makes it more difficult for generics to “free ride” on the manufacturers’ efforts, many have argued that the practice is anticompetitive.

Case law in this area is sparse, and there is a troubling uncertainty in the industry about what practices will, and should, trigger an antitrust violation. Current legislative proposals attempt to limit or prohibit the two basic forms of product hopping: the “hard switch,” in which the older drug is pulled from the market and replaced with its newer counterpart; and the “soft switch,” in which the older drug remains for sale, but all marketing efforts are shifted to the new drug.

The purpose of this policy brief is to address broad and vague language within those proposals that run counter to their stated goals and to advocate for clear and reasonable standards for assessing when a business’s activities should be deemed anticompetitive. As discussed further below, language that is too broad in scope could cover normal business practices that should not fall under antitrust law. Vague language would introduce legal uncertainty into the equation and weigh heavily on drug developers’ investment decisions, leading to fewer innovative treatments and higher levels of overall national health care spending.

This brief contains four parts. First, I will discuss the legal and industry framework that incentivizes product hopping. Second, I will discuss the current state of product-hopping case law as laid out in New York v. Actavis and Mylan Pharmaceuticals v. Warner Chilcott. Third, I will present considerations for future product-hopping legislation. The guiding principles for determining anticompetitive practices should be: (1) whether a hard switch eliminates consumer choice with no offsetting consumer benefit; and (2) whether a soft switch includes conduct that significantly interferes with consumer choice to the point at which it is effectively eliminated, with no offsetting consumer benefit. Fourth, I will discuss the potential consequences of legislation that is written too broadly or vaguely.

***

Conclusion

All parties generally agree upon the importance of maintaining choice in the pharmaceutical market. But we must bear in mind that true choice is promoted not only by a competitive marketplace of sellers but also by the continual introduction of new and better treatments. Any new legislation must strike a balance that allows for a free and open market without stifling innovation in medicine. And any new antitrust law should be focused on preventing anticompetitive behavior from all sides, rather than preserving or reinforcing the regulatory advantages to which generic drug makers have grown accustomed. Above all, the law must be clear and unambiguous, so that those who are responsible for bringing innovative medicines to the world are not hampered by the inefficiencies of regulatory uncertainty.

***

To read the policy brief, please click here.

Categories
Antitrust Biotech Patents Pharma

Recent Developments in the Life Sciences: The Continuing Assault on Innovation by Antitrust Plaintiffs in Lantus

By Erika Lietzan

dictionary entry for the word "innovate"In February, the U.S. Court of Appeals for the First Circuit held, in a direct purchaser antitrust action, that an innovative pharmaceutical company marketing an injectable drug product had “improperly listed” in FDA’s Orange Book a patent claiming a mechanism used in the drug’s delivery device. As I explain below, the ruling creates the specter of antitrust liability for steps taken in good faith to comply with a complex regulatory framework that overlaps in part with patent law. I explain below how the ruling puts biopharmaceutical innovators in a tough spot.

First, the legal framework.

Federal law requires each company that submits a new drug application to identify the patents that claim the drug or a method of using the drug (if a claim of patent infringement could reasonably be asserted against someone who made, used, or sold the drug without a license). The application cannot be approved, if the company fails to submit the required information on a patent that satisfies the listing standard. (See section 505(d)(6) of the drug statute, here.) FDA publishes the patent numbers and expiration dates in the “Orange Book,” which takes the form of a PDF and electronic database.

Federal law also requires a generic drug applicant to take a position with respect to every patent that claims the drug or a method of using the drug — effectively, every patent listed in the Orange Book. For every unexpired patent, the generic applicant has two choices, which dictate when its application can be approved. (There’s a third option for a patent claiming a method of using the drug, which isn’t relevant here.)

It can choose to wait for patent expiry, which means filing a “paragraph 3 certification.” In this scenario, FDA cannot approve its generic drug for market entry until expiry of the patent.

Or it can say that it plans to market right away, because its product doesn’t infringe the patent or because it thinks the patent invalid, which means filing a “paragraph 4 certification.” In this scenario, it must notify the innovator (and patent owner, if different). (I’ll just say “innovator,” going forward.) As far as this patent is concerned, FDA can approve the generic drug for market entry as soon as its review is complete and assuming the generic drug is otherwise approvable with one important exception. If the patent was listed before the generic drug company submitted its application, and if the innovator files a patent infringement suit within 45 days of receiving notice, then final approval of the generic application is stayed for 30 months or until a district court ruling in the generic company’s favor (whichever happens first). The paragraph 4 certification is considered an act of infringement, which creates federal court jurisdiction.

The patent listing mechanism is intended to facilitate litigation of patent issues before market entry, which both industries wanted. The generic companies wanted a way to litigate these issues before launching, for example, because doing so avoids the risk of damages (for more information, see my article on the history and political economy of the legislation). The scheme encourages generic companies to participate by offering 180-day exclusivity in the market for the first to file a (true) generic application with paragraph 4 certification, and it encourages innovators to participate by offering the 30-month stay that makes it possible for the patent to be litigated before the generic drug launches.

These rules apply to companies that file true generic applications, for exact copies of the innovator’s drug. And with one exception they also apply to companies that file a different type kind of abbreviated application known as a 505(b)(2) application. The distinction between the types of application isn’t critical here. The one exception is that companies filing 505(b)(2) applications with paragraph 4 certifications aren’t eligible for 180-day exclusivity.

Second, applying the framework to combination products in particular.

The listing standard — “any patent which claims the drug for which the applicant submitted the application or which claims a method of using such” — has proved vexing to interpret.

In 1994, FDA published its first regulation interpreting this provision, stating that it meant “drug substance (ingredient) patents, drug product (formulation and composition) patents, and method of use patents,” but not “process patents.” But there have been questions about a variety of patent types over the years, and in 2003 — responding in part to requests for elaboration — the agency revised its regulations to provide more details about what it required to be listed and what was not to be listed.

At issue here: what to do with combination products. These products combine two regulated components, such as a device and a drug. Two discrete products packaged together for use together are, together, considered a “combination product.” But the phrase also means a single finished product that comprises two regulated components — thus a drug and device produced as a single entity. Combination products thus include prefilled drug delivery devices — such as a prefilled drug syringe, an auto-injector, or an metered dose inhaler (see here).

The question is whether the statute requires companies to list patents associated with the device component of these products.

FDA considered this in the 2003 rulemaking. The final regulation is 21 C.F.R. § 314.53, but the agency’s explanation of the regulation in the Federal Register — which has the formal status of an “advisory opinion” — is just as important.

The agency decided that “patents claiming a package or container must not be submitted.” Packaging and containers are “distinct from the drug product.”

Several commenters also argued that patents claiming devices that are “integral” to the drug product or require approval should be listed. FDA offered what it labeled as a “response.” The agency didn’t write that these patents “should” be listed, or that they “should not” be listed. Instead it said that a “drug product” is the drug in its “finished dosage form” — meaning the form administered to patients. And, it added, the current list of “dosage forms for approved products” — which appears in an appendix to the Orange Book — includes “aerosols, capsules, metered sprays, gels, and pre-filled drug delivery systems.” Elsewhere it wrote that a patent claiming the finished dosage form “must be submitted for listing.”

Now, the litigation and First Circuit ruling.

Sanofi-Aventis holds the approved marketing application for Lantus (insulin glargine recombinant), a long-acting human insulin analog used in treating diabetes. At first the company sold Lantus in multiple dose vials and in cartridges for use with a (separate) insulin delivery device. In 2007, however, FDA approved a supplemental application for sale of Lantus in a single-patient-use prefilled injector pen.

Sanofi has listed several patents in connection with Lantus. In connection with the prefilled pen, the company listed U.S. Patent No. 8,556,864 (drive mechanisms suitable for use in drug delivery devices), which issued in October 2013 and expires in March 2024. The parties agree that the ’864 patent claims the drive mechanism used in the Lantus pens, and FDA would not have approved the prefilled pens without a showing that the pen (including the drive mechanism) ensures patients safely receive accurate doses. But — and this turned out to be critical in the end — the patent doesn’t mention insulin glargine. Nevertheless, according to the agency, an insulin injector pen is a prefilled drug delivery system. And this makes it a dosage form. And patents claiming dosage forms must be listed.

In 2013, Eli Lilly submitted a 505(b)(2) application for a copy of Lantus, which it planned to market as Basaglar. It included a paragraph 4 certification to the ’864 patent and to various other patents as well. Sanofi brought suit. The case settled on the morning trial was scheduled to begin, with Lilly agreeing to pay for a license to launch in December 2016, seven years before patent expiry.

The plaintiffs in this antitrust litigation are drug wholesalers. They claim, among other things, that Sanofi improperly listed the ’864 patent. (As far as I can tell, Lilly didn’t raise the issue.) The district court dismissed their first amended complaint, pointing out that FDA has interpreted “drug products” to include “prefilled drug delivery systems” and that patents claiming drug products must be listed. The plaintiffs amended their complaint, but the district court dismissed again on largely the same grounds. Under a “reasonable interpretation” of the agency’s regulations, Sanofi had to submit the patent for listing. So, it couldn’t have been improper conduct to list the patent.

The First Circuit’s ruling came as a shock. In a unanimous decision, Judge Kayatta wrote that Sanofi had improperly listed the patent. He reasoned as follows. First, the statute and regulations call for listing of patents that claim the drug, and the patent doesn’t even mention the drug. Second, in 2003 FDA didn’t adopt the proposal that devices “integral” to the product should be listed. Instead, the agency said that companies should list patents that claim the finished dosage form. And this patent doesn’t, the court wrote; it claims a device that can be combined with other components to produce the finished dosage form.

Finally, the implications.

The innovative pharmaceutical industry has asked FDA repeatedly since 2003 — at least four times, including in citizen petitions — to clarify whether patents directed to drug delivery systems are supposed to be listed, if they don’t recite the drug’s active ingredient or formulation. The agency never answered these requests.

Although FDA’s failure to respond has been frustrating, it is my understanding that most companies — consulting with patent and regulatory counsel — have concluded these patents should be listed and that, in fact, they list them, and FDA publishes them. I have always thought this was the best reading of what FDA wrote in 2003. At the very least, it is a reasonable reading of what FDA wrote. It is deeply concerning that the First Circuit now purports to answer this question for the agency — no, these patents do not satisfy the listing standard — in litigation to which FDA was not a party and could not explain its interpretation of the statute or its expectations.

The decision is also fundamentally hostile to pharmaceutical innovators. The Hatch-Waxman scheme — statute, regulations, guidance, and precedent — is complex, and figuring out how it applies in any particular situation can be tricky. There are other unresolved listing issues, which companies and their counsel work through in good faith. The lesson here seems to be that an innovator trying to navigate uncertainty about the listing requirements does so at its peril.

On the one hand, failing to list a patent that satisfies the criteria has serious consequences. Listing is not voluntary; the statute requires it. The company must declare (“under penalty of perjury”) that its patent submission is “accurate and complete.” The patent submission form reminds the company that “a willfully and knowingly false statement is a criminal offense” under 18 U.S.C. § 1001. (And at least in theory, FDA would reject an application that lacked the required patent information, though I don’t know if this has ever happened or if it would happen.) Most importantly, failing to list a patent means there is no paragraph 4 certification, and thus no artificial act of infringement, and no opportunity to enforce the patent before generic market launch. Failing to list also passes up the benefit of the 30-month stay. And there may be concern that failure to list a patent is some sort of admission against the innovator’s interests in litigation.

On the other hand, listing a patent that doesn’t satisfy the criteria attracts antitrust scrutiny, presumably because the listing places an administrative burden on generic applicants and might trigger a stay of approval. And this case shows that a hostile court may disagree with the company’s reading of the statute, regulations, Federal Register, and precedent. Even if a company adopts what appears to many to be a reasonable interpretation of the patent listing requirements, a court might interpret the listing requirements on its own — without the benefits of FDA’s views — and force the company into expensive and time-consuming antitrust litigation. Indeed, two bloggers recently praised the decision, recommending that generic companies “examine the Orange Book listings,” as they may contain a “rich vein” for antitrust claims.

To be sure, as the court wrote, Sanofi can try to show, on remand, that its submission was “the result of a reasonable, good-faith attempt to comply with the Hatch-Waxman scheme.” This would provide a defense to any liability under the Sherman Act for “antitrust injury caused by” the submission. But the burden has shifted to the company, and much of the language in the court’s opinion suggests that this will be an uphill battle. (E.g., “The statute and regulations clearly require that only patents that claim the drug for which the NDA is submitted should be listed in the Orange Book. The ’864 patent … does not fit the bill.”)

A postscript from the administrative law side of the table.

Consider a counterfactual.

As a preliminary matter, recall that FDA’s regulations require companies to list patents on drug products. These regulations also state that the phrase “drug product” refers to a drug in its “finished dosage form.” FDA has said, for years, that a patent claiming a finished dosage form “must be submitted for listing.” Finally, it has listed prefilled drug delivery systems as a type of “dosage form” in the Orange Book.

Now suppose that FDA had responded to the industry requests for clarification and stated definitively — given what I just wrote — that a patent claiming any component of a prefilled syringe must be listed? In my view, this would be a defensible position for the agency to have taken, given the statute, the regulations, and what it has written to date.

What would have happened if this hypothetical FDA decision had gone to the First Circuit for review, in a totally different kind of lawsuit? Would the First Circuit really conclude that the agency’s interpretation of the statute was unreasonable or impermissible (Chevron)? Would it really conclude that the agency’s interpretation of its regulation was “plainly erroneous or inconsistent with the regulation” (Auer)? And if we think that the courts would (or should) defer to FDA in this hypothetical case, how can Sanofi’s decision possibly have been unreasonable?

In the end, the First Circuit’s ruling contains a troubling lesson for pharmaceutical innovators. When navigating uncertainty about a patent’s status under the patent listing requirements, even if it seems reasonable to conclude that FDA would require listing and even if the agency won’t answer the question, listing the patent in good faith creates a serious risk of facing antitrust litigation. The alternative, equally unappealing, is to relinquish the opportunity to enforce the patent before generic market entry, which conflicts with the purpose and design of the Hatch-Waxman Amendments and undermines the value of the patent.

Categories
Copyright Innovation Patents Pharma

IP Industries Step Up in This Time of Crisis

the word "inspiration" typed on a typewriterThe global COVID-19 pandemic has challenged multiple aspects of modern society in a short time. Health and public safety, education, commerce, research, arts, and even basic government functions have had to change dramatically in the space of a couple months. Some good news in all this is the response of many companies in the intellectual property (IP) industries: they are stepping up to make sure crucial information and materials are available to speed research and development (R&D) towards vaccines, therapeutics, and medical devices. This blog post gives a sampling of the current initiatives facilitating the best innovative work the world has to offer.

Bio-pharmaceutical companies

Bio-pharmaceutical (bio-pharma) companies have been leading the charge, collaborating with academic and government partners to advance vaccine and therapy candidates on a fast track. While there have been isolated stories of some IP-related issues for rapid deployment and use of medical devices such as ventilators, the overall message is clear that research, development, and deployment have not been hindered by IP rightsholders. In fact, problems for distribution of medicines, personal protective equipment, and medical devices have little to do with IP rights but rather with hoarding and nationalistic impulses by governments.

Examples of rapid response are abundant. In February, the Department of Health and Human Services and its Biomedical Advanced Research and Development Authority (BARDA) partnered with the Janssen Research & Development unit of Johnson & Johnson to investigate a promising vaccine candidate. Janssen also committed to invest in the scale-up of production and manufacturing capacities to produce the vaccine candidate if it succeeds through clinical trials. By mid-March, 50 drugs that might fight the virus had been identified by collaborations of hundreds of scientists. Research continues apace and 80 clinical trials are proceeding, some on fast track status including a potential vaccine.

Beyond its core R&D, regulatory, manufacturing, and distribution mission, the bio-pharma industry is providing direct support to many places in need. This includes donations of medical supplies and personal protective equipment (PPE), existing treatments and medicines, and monetary and in-kind support.

At the same time, private incentives are more important than ever to get novel vaccines, drugs, and devices out to the world in safe, efficacious form and at scale. Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, has long recognized that exclusive licenses of IP to bio-pharma industry partners are necessary to get innovative vaccines and drugs to the public:

“We always need a pharmaceutical partner,” [Fauci] told CQ Roll Call in October 2017. “I can’t think of a vaccine, even one in which we’ve put substantial intellectual and resource input, that was brought to the goal line without a partnership with industry. So this is a very natural process that we’re doing right now.”

He argued that for vaccines like Zika, which might predominantly be used in low-income countries, drugmakers don’t see a lot of financial incentive to get involved, which is why the NIH needs to grant exclusive licenses. But he argued that the process hasn’t had an impact on vaccine affordability.

“I have not seen in my experience situations in which we were involved in the development of a vaccine, particularly for low- and middle-income countries that really needed it, where the pharmaceutical companies priced it out of their reach,” Fauci said.

Likewise, as noted innovation scholars Daniel J. Hemel and Lisa Larrimore Ouellette point out in a recent article, Innovation Policy Pluralism, multiple vectors of public and private incentives and resources work together to advance pioneering innovation. Even in countries with a national health or single payer system, the government health program does not manufacture vaccines, drugs, or devices. Instead, it relies on private firms that in turn work closely and well with public and academic researchers to identify pressing problems, locate relevant basic science advances, and then translate those into actual vaccines, therapies, or devices.

The myth of patients and the public “paying twice” for bio-pharma innovation arising from public-private partnerships is pernicious. It conflates the distinction between basic science research and drug or vaccine candidates, on the one hand, with compounds that can be produced at scale, distributed safely, and that have passed arduous clinical trials to demonstrate safety and efficacy. In the United States, private companies must foot the entire bill for these clinical trials, which run into hundreds of millions of dollars over three phases that enroll thousands of subjects. Simply stated, publicly funded research does not result in a substance or compound that can be manufactured and distributed as is with no further R&D or clinical trials.

A related myth is that governments should use compulsory licenses and similar mechanisms to bypass IP rights holders in an effort to speed research and delivery of drugs and vaccines—when they emerge—to the public at low to no cost. First, there are important distinctions between compulsory licenses, U.S. Bayh-Dole style march-in rights, and government use under statutory provisions like 28 USC 1498, which we have outlined here. But across all of them, IP rights holders must still be compensated at a fair market license rate. Thus, there are no “savings” of IP royalties that could lower the price of vaccines or drugs. This makes sense as we don’t force manufacturers to produce drugs or vaccines for free. Even the Defense Production Act merely directs production, it does not require manufacturers to produce goods for free.

Finally, even if patents could be disregarded, we should be careful about encouraging “open source” or amateur production of regulated devices like ventilators. While the FDA has authorized some limited modifications of approved ventilators to accommodate the exigencies of COVID-19, this does not create a free-for-all in which wholesale changes or entirely new designs of the device or its components can be used. We need to take care that these modifications or new designs are actually safe and efficacious. Thus, while innovation like that of famed inventor James Dyson is most welcome, it does not actually solve the immediate problem of a shortage of ventilators as national regulators must still test and approve these untested devices for medical use. And at any rate, Dyson is not offering their new ventilators for free, even as they are designed to be produced at lower costs and sell at a lower point price in the market.

Thus, we need the bio-pharma industry more than ever to get through this pandemic. Large established firms and nimble start-ups have the resources and expertise to innovate and produce vaccines, drugs, and devices that will pass regulatory muster for safety and efficacy. Now is not the time to attack the patent system and weaken incentives for full-steam-ahead bio-pharma and medical device R&D.

Scientific publishing

Similar to the bio-pharma companies, publishers have been leading the way in making crucial scientific and technological information widely available in order to help fight the global coronavirus pandemic. An open letter from Kelvin Droegemeier, Director of the White House Office of Science and Technology Policy (OSTP) and member of President Trump’s Coronavirus Task Force, issued the call to arms last month (for example, see here, here, and here). Joined by government science leaders from eleven other countries—Australia, Brazil, Canada, Germany, India, Italy, Japan, Republic of Korea, New Zealand, Singapore, and United Kingdom—the letter called for publishers to make all research and data related to the coronavirus available immediately to the public. Publishers were quick to respond positively to the letter, pointing out that many journals had already been opened up to the public in an effort to support the dissemination of important scientific research and data when it is needed the most.

In the letter, the government science leaders stated: “To assist efforts to contain and mitigate the rapidly evolving COVID-19 pandemic, basic science research and innovation will be vital to addressing this global crisis. Given the urgency of the situation, it is particularly important that scientists and the public can access research outcomes as soon as possible.” The leaders asked the publishers to voluntarily agree to make their coronavirus-related publications, and the data supporting them, immediately accessible in PubMed Central and other public repositories. PubMed Central refers to the digital archive of biomedical and life sciences journal literature at the U.S. National Institutes of Health’s National Library of Medicine. The leaders also requested that the information be made available in both human and machine-readable format to allow for text and data mining using artificial intelligence.

The same day that the government science leaders sent their letter, Maria Pallante, President and CEO of the Association of American Publishers (AAP), issued a statement noting that the organization and its members would be happy to continue doing their part in making the research and data available to the public:

Publishers purposefully and continuously contribute to the advancement of science and medicine by investing billions of dollars in producing and disseminating high-quality, peer-reviewed journal articles. In this urgent and serious environment, we are grateful to the many publishers who are doing their part to communicate valuable discoveries, analyses, and data as quickly as possible, including by making their copyrighted articles pertaining to the virus freely available for public use during this crisis, in both text and machine-readable formats. Many publishers – both commercial companies and nonprofit societies – have been doing so for weeks.

 

Likewise, Elsevier, which specializes in publishing global information on science and health, has taken the lead in ensuring that relevant scientific information is available to the public. Back in January, Elsevier set up its Novel Coronavirus Information Center, offering free health and medical research information on the coronavirus and COVID-19, the disease that is causes. The Information Center is updated daily with the latest research information, including links to nearly 20,000 peer-reviewed journal articles on its ScienceDirect platform that are curated by clinicians and other experts. The information is intended for use by practitioners, such as nurses and doctors, as well by patients and their families. In response to the letter from the government science leaders, Elsevier announced in a press release that same day that the information would be made available to PubMed Central and other publicly funded repositories, including in machine-readable format that could be used for full text and data mining.

Kumsal Bayazit, the CEO of Elsevier, also released a statement that day underscoring Elsevier’s continued leadership on this front and concluding:

In working with the White House to improve the discoverability and utility of this important body of knowledge, we are now making it available to PubMed Central and other publicly funded repositories such as the WHO COVID database for full text and data mining and without any limitations for as long as needed while the public health emergency is ongoing. Through this partnership we hope to help researchers to keep up with the rapidly growing body of literature and identify trends as countries around the world address this global health crisis.

 

Numerous other publishers have stepped up as well. Wiley announced that it “is making all current and future research content and data on the COVID-19 Resource Site available to PubMed Central” and “other publicly funded repositories, such as the World Health Organization (WHO) COVID-19 database and Wellcome Trust.” The Resource Site was set up by Wiley in February in order to ensure rapid, public access to COVID-19 research, and in response to the request of the government science leaders, Wiley is now inputting that information into PubMed Central and other publicly-accessible databases. Likewise, Springer Nature stated: “We have made available, for free, all relevant research we have published and continue to publish, [and] are strongly urging our authors submitting articles related to this emergency to share underlying datasets relating to the outbreak as rapidly and widely as possible.” Other publishers, such as American Chemical Society, PLOS, STM Publishing, IOP Publishing, Emerald Group Publishing, F1000 Research, and eLife Research, have committed themselves to the cause of making their coronavirus research and data available publicly.

It is not just scientific research that is being freely shared by publishers. Textbooks for students affected by the pandemic have been made available as well. Wiley recognized the need “to ensure instructors who need to teach remotely have the necessary tools to help their students,” and it opened up its online textbooks so that instructors “can receive free access for their students for the remainder of the Spring 2020 term.” Barnes & Noble announced that it was joining VitalSource and other leading publishers to provide free online textbooks for students at schools where it operates a campus bookstore. Michael P. Huseby, CEO and Chairman of Barnes & Noble Education, said: “Our top priority remains providing schools and students with solutions during this time of unprecedented disruption, while simultaneously protecting the health and safety of our employees and customers.” Other textbook publishers, including Cengage, Gale, Cambridge University Press, among many others, have done the same in order to make the transition to online learning as smooth as possible by ensuring that students have online access to the textbooks that they need.

Categories
Healthcare Pharma

The Tradeoffs Involved in New Drug Approval, Expanded Access, and Right to Try

The following post comes from CPIP Senior Fellow for Life Sciences Erika Lietzan, and it is cross-posted here from the Objective Intent blog with permission.

enlarged picture of a moleculeThis note explains some of the concepts swirling around in the media right now, relating to medicine approval. Much of what follows appears (or will appear) in an article on the U.S. “right to try” law, which I recently wrote with a colleague at the University of Bourgogne in Dijon, France. Some of the background discussion will be useful here.

Premarket Approval

A new medicine must be approved by FDA before it can be shipped in interstate commerce (effectively, before it can be sold commercially for use by patients). There are two pathways to market in the United States: a biologics license application for a biological drug and a new drug application for any other type of drug. FDA requires proof of safety and effectiveness, which takes the form of data from laboratory and animal (“preclinical” or “nonclinical”) testing as well as human (“clinical”) trials.

A variety of legal, scientific, and ethical considerations mean that developing the safety and effectiveness data for premarket approval of a medicine is iterative. That is, after trials in relevant animals show that it would be safe to begin testing in humans, the applicant begins with small safety tests (often in healthy volunteers) and moves gradually to larger and larger trials. During this time the medicine is considered “investigational” or “experimental.” And it can’t be introduced into interstate commerce.

The traditional approach involves three phases of testing.

  • Phase 1 trials entail the initial introduction of the investigational medicine in humans and focus on how the body reacts to the medicine — questions of absorption, distribution, metabolism, excretion, and side effects of increasing dose. These trials sometimes also generate early evidence of effectiveness, if the subjects are patients rather than healthy volunteers.
  • Phase 2 trials are usually controlled and assess the effectiveness of the medicine in patients, as well as common short-term side effects and risks. In a “controlled” trial, each subject is randomly assigned to one of two groups — one group receives the experimental medicine, and the other receives a “control” (typically either a placebo or a medicine that treats the condition) for comparison.
  • The pivotal trials proving statistically robust proof of effectiveness — phase 3 trials — often involve thousands of patients and clinical trial sites around the country or world.

The gold standard for proof of effectiveness is a prospective, randomized, controlled, double-blinded trial. Although randomized, controlled trials aren’t perfect, the design minimizes the potential for bias (which might happen, for example, if the patient or doctor knows who is receiving the test drug and who is receiving the control) as well as the problem of confounding variables. This form of evidence is superior to real world evidence and superior to personal experience and anecdotal information.

It’s possible for a trial to combine elements of phase 1 and 2, or phase 2 and 3 … there’s no law requiring companies to proceed through three discrete and sequential sets of trials. But the basic principle applies: you start small, you generate an adequate database in humans to characterize the drug’s safety profile, and you complete trials designed to support a statistically robust conclusion that the drug is effective (causes the result you observe).

The Tradeoff Involved

In theory, a new medicine must be shown safe and effective before it may be marketed. In reality, no medicine is perfectly safe or always effective in the patients for whom it is labeled. Patients are heterogeneous, and clinical responses vary. Side effects are inevitable; medicines are biologically active, and the relationship between a patient’s body and the chemical can be complex. As a result, when approving a new medicine for the market, the most a regulator can ask for is proof that the medicine’s benefits outweigh its risks for most people most of the time.

The challenge is that it is impossible to be certain about this. No premarket research and development program can generate complete information about a medicine’s clinical profile. Approval really means only that the medicine’s benefits outweigh its risks based on the data generated to date. Requiring premarket approval therefore always entails deciding when to make the call on benefit and risk — how much data must be generated before FDA makes this call.

This creates a tradeoff. On the one hand, while it is impossible to eliminate all uncertainty about the clinical profile of a proposed new medicine, more testing will always provide more certainty. On the other hand, testing delays the regulatory decision (and thus market entry), and requiring more testing delays the decision even longer. If the regulator still approves the medicine, the testing delayed access to a medicine that had a positive benefit-risk ratio the whole time. Patients who could have benefitted from the medicine had to wait. And if the medicine treated a serious or life-threatening disease, some patients — hundreds, thousands, or more — may have never had the chance to use the medicine. They may have died waiting.

How much information is enough for a decision on the risk-benefit profile of a new medicine depends on the relative weight given to two values — earlier (rather than later) release of new medicines to patients, on the one hand, and reduction of uncertainty about the effects of those medicines, on the other hand. Doctors, patients, regulators, and policymakers may disagree about the relative importance of avoiding errors (rejecting good medicines and approving bad medicines) and the cost of delay, just as they may disagree about the weight to be placed on particular benefits and particular risks.

Our legal framework give these calls to a regulator. A medicine may not be sold for use by a patient — even if the benefits exceed the risks from the perspective of the patient, even if avoiding delay is more important to the patient than knowing more about the drug — until a regulator agrees, based on its own assessment of benefits and risks. And it considers these at the population level, not the individual level.

Evolution in the Gatekeeping Model

Over the last half century, however, the regulatory gatekeeping model has evolved, as the broader relationship between the individual and state on matters of personal health has evolved. Our article explores this evolution in France and the United States, considering scientific developments, sociocultural changes, and broader legal pressures that contributed to the evolution. And we describe two innovations in the gatekeeping model: early decision mechanisms and early access mechanisms.

Earlier Decisions … e.g., Fast Track and Accelerated Approval

An early decision mechanism shifts the timing of the regulator’s benefit-risk judgment call to an earlier moment in time (and possibly an earlier moment in the process of generating evidence). Some early decision mechanisms are designed to accelerate premarket research and development, or regulatory review, with no change in the standard for approval. For example, in the United States, “fast track” designation entitles a company to more frequent meetings with FDA to discuss trial design and data needed for approval. It is available for a drug intended to treat a serious or life-threatening disease or condition, if it demonstrates the potential to address unmet medical needs for that disease or condition. Other early decision mechanisms permit approval on a different evidentiary basis. For example, U.S. law permits accelerated approval of a medicine intended for treatment of serious or life-threatening illness, based on data that do not show clinical benefit but rather are thought to predict it.

Earlier Access … Expanded Access

Early access mechanisms emerged during the worst years of the AIDS crisis and responded to the fact that better informed and newly empowered patients were willing to take greater risks in exchange for earlier access to new medicines. (But, to be clear, even before the AIDS crisis, FDA had permitted seriously ill patients access to experimental drugs.) Our article explores this history — in France and the United States — but I am just going to summarize current law here. Current law is reflected in the statutory provisions and regulation governing expanded access to investigational drugs and devices.

With expanded access, FDA still plays a gatekeeping role. Expanded access requires a showing that (1) the patient has a serious or immediately life-threatening disease or condition for which there is no comparable or satisfactory alternative therapy, (2) the potential benefit for the patient or patients justifies the potential risks, and the potential risks are not unreasonable in the context of the disease being treated, and (3) providing the drug will not interfere with clinical trials that could support marketing approval.

FDA will permit expanded access for individual patients as well as for groups of patients.

For an individual patient, the general criteria for expanded access must be satisfied, and (1) the treating doctor must determine that the probable risk to the patient from the drug is not greater than the probable risk from the disease, and (2) FDA must determine that the patient cannot obtain the drug any other way (for instance, by enrolling in a clinical trial). The agency ordinarily looks for completed phase 1 trials at doses similar to those proposed for the patient, together with preliminary evidence suggesting effectiveness. In some cases, however, FDA will permit a single patient access based on preclinical (animal) data or even mechanism of action.

In addition, the U.S. permits expanded access for groups of patients.

First, it permits widespread use. The ordinary standards for expanded access apply. If the medicine is intended to treat a serious disease or condition, FDA will look for data from phase 3 trials showing safety and effectiveness, but in some cases it will accept compelling data from phase 2 trials. If the medicine is intended to treat an immediately life-threatening disease, FDA will consider whether “the available scientific evidence, taken as a whole, provides a reasonable basis to conclude that the investigational drug may be effective for the expanded access use and would not expose patients to an unreasonable and significant risk of illness or injury.” This will “ordinarily consist of clinical data from phase 3 or phase 2 trials,” but it could comprise “more preliminary clinical evidence.”

Second, it permits use by “intermediate-size” groups. This is appropriate if patients cannot participate in the ongoing trials — because they do not meet enrollment criteria, because enrollment has ended, or even because the trial site is not geographically accessible. The agency’s regulations also describe use of this arrangement when a drug is not under development at all — for instance, because it is so rare that the sponsor cannot recruit patients for trials. For intermediate-size groups to enjoy early access, the ordinary standards for expanded access must be met. In addition, there must be (1) enough evidence of safety to justify a clinical trial at the same dose and duration in the same number of people, and (2) preliminary clinical evidence of effectiveness, or of a plausible pharmacologic effect, sufficient to make use a reasonable therapeutic option for the patients in question.

Right to Try

In 2018, the U.S. Congress passed a law that takes a different approach to the challenge of balancing the desire for robust data about new medicines, on the one hand, and the desire to allow individual patients access to incompletely tested but potentially beneficial compounds at their own discretion, on the other.

The new right-to-try law permits early access without a regulator’s involvement. Congress added a new section to the U.S. drug statute, which — when its terms are met — exempts certain drugs provided to certain patients from the gatekeeping provisions of that statute and from FDA’s regulations implementing those gatekeeping provisions. The patient in question must be diagnosed with a life-threatening disease or condition — generally meaning the likelihood of death is high unless the course of disease is interrupted. And the patient must have exhausted approved treatment options and must be unable to participate in a clinical trial involving the drug. The drug itself must be the subject of a pending marketing application or a clinical trial intended to form the primary basis of a claim of effectiveness in support of marketing approval, and it must have completed phase 1 trials. If these things are true, the drug may be provided to the patient.

The federal government does not play a role in determining whether these things are true. Neither the company nor the doctor seeks permission from FDA. If anyone plays a gatekeeping role, it is state-licensed doctors. Before the drug can be provided to the patient, a physician in good standing with the appropriate licensing board must determine that the patient has exhausted approved treatment options and cannot participate in a clinical trial. The right-to-try law specifies no actor to enforce the other two threshold eligibility requirements — that the patient’s disease is life-threatening and that the patient provided informed consent.

FDA’s role here is, at best, after the fact. The agency would have to learn of the procedure in the first instance and then, believing that the patient had not provided informed consent or did not suffer from a life-threatening disease, claim that the patient had not been eligible for right-to-try access. If true, the drug was not exempt from FDA’s gatekeeping authorities, and FDA could take enforcement action. But the agency will not learn about right-to-try treatments until the company’s annual summary of right-to-try uses, and the statute does not require identification of the investigators or patients. So these limitations may turn out to be a sham. To be fair, though, state law will usually impose its own informed consent obligation on treating doctors. And it may require that access proceed through the same kind of ethics review as FDA would have required.

Although the primary feature of the right-to-try law is its removal of FDA as a gatekeeper, the law also addresses two grounds on which companies supposedly decline to provide their medicines before approval. First, the law limits their liability exposure. A company faces no liability arising out of any act or omission with respect to medicine provided to patients under right-to-try. Second, the law limits FDA’s use of the data arising out of the patient’s use of the medicine. The agency cannot use a clinical outcome from right-to-try to delay approval of the medicine unless the sponsor requests that use or the agency finds that using the clinical outcome is critical to determining the medicine’s safety. (But it is not clear these are the real reasons companies decline to provide expanded access. Recent scholarship suggests that concerns about adverse regulatory outcomes and liability exposure would not have been well-founded.)

Comparing Expanded Access and Right-To-Try

The essence of the right-to-try law is elimination of the regulator’s role. Compassionate use under the right-to-try law is a matter for the company, doctor, and patient. FDA receives no information, has no review authority, and as a practical matter has no role. The right-to-try law also strips the agency of the authority to impose conditions on access. Ordinarily, even in expanded access situations, the sponsor of the trial (usually the drug company) notifies FDA of any serious and unexpected adverse reaction within 15 days. It also notifies investigators working with the drug. These rules do not apply. Nor do FDA’s rules relating to maintaining control of the investigational medicine or recordkeeping. And the agency has no power to call a halt to the process when patients are subject to unreasonable risk of injury or when the doctors lack the training and experience necessary to administer the drug. Only three FDA regulations relating to investigational medicines will apply: a regulation governing labeling, a regulation prohibiting promotion, and the regulation limiting how much the company can charge (only the direct costs of making the medicine available). And the agency will have to enforce these rules after the fact, when it receives the company’s annual summary.

Categories
Biotech Patents Pharma

“No Combination Drug Patents Act” Stalls, but Threats to Innovation Remain

superimposed images from a chemistry labBy Kevin Madigan & Sean O’Connor

This week, the Senate Judiciary Committee was to mark up a bill limiting patent eligibility for combination drug patents—new forms, uses, and administrations of FDA approved medicines. While the impetus was to curb so-called “evergreening” of drug patents, the effect would have been to stifle life-saving therapeutic innovations. Though the “No Combination Drug Patents Act”—reportedly to be introduced by Senator Lindsey Graham (R-SC)—was wisely withdrawn at the last minute, it’s likely not the last time that such a misconceived legislative effort will be introduced.

An Exaggerated Response to a Disputed Theory

The bill would have established a presumption of obviousness for drug or biologic patent applications whose invention was a new: dosing regimen, method of delivery, method of treatment, or formulation. While there was a rebuttal provision where the claim covered a new treatment for a new indication or “increase[d] . . . efficacy,” the latter was almost certain to introduce years of uncertainty and litigation. Further, the bill would have covered a broader class than true combination drug patents, in which one active ingredient is combined with another or with a non-drug.

Like many recent legislative efforts, the amendment sought to address a perceived lack of affordability of prescription drugs. After praising the America Invents Act of 2011 and subsequent Supreme Court rulings for strengthening the US patent system, the bill claimed that rising drug prices have outpaced “spending on research and development with respect to those drugs.” In addition to applauding Supreme Court decisions that have injected unquestionable uncertainty into patentable subject matter standards, the amendment went on to blame high drug prices on continually overstated issues related to advanced drug patents.

According to critics, combination drug patents have granted drug makers unearned and extended protection over existing drugs or biological products. But, quite simply, when properly issued by the USPTO under existing patentability standards, these are new patents for new products or processes.

Combination patents have been maligned as anticompetitive, resulting in a “thicket” of patents that impedes innovation through transaction costs and other inefficiencies. Unfortunately, notwithstanding a lack of empirical evidence validating the harm of follow-on innovation patents, patent thicket rhetoric is now being echoed by the media, the academy, courts, and policy makers in a fraught attempt to fix drug pricing.

Reports (see here, here, here, and here) from leading antitrust experts and intellectual property scholars have detailed the value of incremental innovation and challenged the notion that patent thickets are a true threat to competition and innovation. These studies have exposed patent thicket claims—much like the “troll” narrative that for years infected patent law debates—as an empty strawman theory, the repetition of which has led to undue confidence in its accuracy. The reality is that what critics point to as problematic cases of combination patents are in fact infrequent outliers, strategically highlighted to discount evidence of the value of new and innovative drug uses and administrations.

A similar claim by those promoting the patent thicket narrative is that combination patents extend exclusivity on a drug for years beyond an initial patent term, thereby blocking generic entry in the market. But if an underlying drug has gone off patent, no follow-on or combination patent will prevent a generic drug company from producing the underlying formulation—it’s only the new formulation, use, or administration that is protected.

Vague, Yet Oddly Familiar Standards

The language of the Graham amendment asserted that because “numerous” combination patents “contain obvious product developments,” a restructuring of 35 USC 103 is necessary to combat patent thickets and achieve optimal drug pricing. Suggesting that 103 obvious standards for advanced drug development should include a presumption that the covered claimed invention and the prior art to which it relates would have been obvious, the legislation would have undermined a unitary system of patent law in favor of different standards for different fields of technology. It was a bold proposal, and it’s one that ignored the proven value of new drug formulations and methods of treatment.

While the amendment provided for a rebuttal to the presumption of obviousness, the language was ambiguous and likely to render the patent system even more unreliable than it already is. The proposed statute said that an applicant may rebut the presumption of obviousness if the covered claimed invention “results in a statistically significant increase in the efficacy of the drug or biological product that the covered claimed invention contains or uses.” It is unclear what would qualify as “statistically significant,” and proving this vague standard would be nearly impossible.

In order to show a “statistically significant increase in efficacy,” long and costly head-to-head clinical trials would be necessary. To be clear, this is not a standard required by the FDA for new drug approval, let alone patentability.

As if that wasn’t enough reason to reject the Graham amendment, the language was alarmingly similar to that of an Indian patent law statute that has been recognized by the US Trade Representative as a “major obstacle to innovators.” In 2005, in order to comply with the WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, India adopted for the first time patent protection for pharmaceuticals. Despite its recognition of IP rights in pharmaceuticals, India’s Act contains a troubling ambiguity in its Section 3(d), which requires an “enhanced efficacy” for known drugs in addition to the standard novelty, inventive step, and industrial applicability requirements.

India’s Section 3(d) has been invoked to reject patent protection for life-saving drug innovations, including Novartis’ landmark leukemia drug, Gleevec. Drug companies, government agencies, and policy makers have all recognized the threat to innovation that India’s patent law poses. In 2013, not long after the Novartis ruling, a bipartisan group of 40 Senators signed a letter to then Secretary of State John Kerry urging the state department to take action against India’s “deteriorating IP environment,” citing its willingness to “break or revoke patents for nearly a dozen lifesaving medications.”

Despite the widespread condemnation of India’s Section 3(d), the Graham amendment proposed adopting similarly indefinable standards to US patent law. While the language differed slightly—replacing “enhanced efficacy” with “increase in the efficacy”—it was no clearer, and implementation of this type of standard would only cause more confusion.

Protecting and Incentivizing Medical Innovation

Like most forms of innovation, the development of medicines and therapeutics is a process by which one builds and improves upon previous discoveries and breakthroughs. Sometimes those improvements are major advancements, but often they are incremental steps forward. In the pharmaceutical field, incremental or follow-on innovation frequently results in new therapeutic uses for existing drugs, which address serious challenges related to adverse effects, delivery systems, and dosing schedules. While they might not sound like medical breakthroughs on par with the discovery of penicillin, these advancements in the administration and use of pharmaceuticals improve public health and save lives.

Additionally, follow-on innovations are—and should remain—subject to the same patentability standards as any other technologies. Patents reward advancements that are novel, useful, and nonobvious, and our patent system has long recognized that patent claims are to be presumed patentable and nonobvious. The Graham amendment would have turned this established standard on its head, creating a separate and ill-defined hurdle for certain advancements in medicine.

The benefits of incremental innovation to public health and patients cannot be overstated. New formulations of malaria drugs, dosing regimens and delivery systems for AIDS patients, more efficient administrations of insulin for the treatment of diabetes, and developments in the treatment of cognitive heart disease have all been possible because of incremental innovation.

Imposing unjustified restrictions on the patentability of advancements like these would be disastrous for drug development, as the incentives that come with patent protection would be all but eliminated. Without the assurance that their innovative labor would be supported by intellectual property protection, pioneering drug developers would shift resources away from improving drug formulations and uses. The development of more effective treatments of some of the most devastating diseases would stall, as innovators would be unable to commercialize their products, recoup losses, or fund future research and development.

As critics continue to target myopically the patent system for a broader issue of drug prices in the American health care system, it’s likely not the last time that language like this will be proposed. In order to avoid the implementation of such ill-conceived standards into our patent laws, understanding what’s at stake is critical. The future of medical innovation depends on it.

Categories
Patent Law Pharma

Recognizing the Limits of Government Procurement in the Pharmaceutical Industries

pharmaceuticalsWhile recent headlines claim that rising drug prices can be easily addressed through government intervention, the procedures involved with government use of patented technologies are complex and often misunderstood. In addition to owning and practicing a vast portfolio of patents, the government has the power to procure and use patented technologies—including pharmaceutical medicines—in limited circumstances without specific authorization, license, or consent. But despite established mechanisms for government use of intellectual property, some advocates are now promoting an unprecedented and expansive interpretation of procurement that would deprive patent owners of their rights and threaten pharmaceutical innovation.

Today, escalating health care costs raise concerns from lawmakers on both sides of the political aisle. The U.S. pharmaceutical market alone was $333 billion in 2014.[1] Critics cite the escalating cost of certain specialty drugs as a leading cause of the high cost of health care, and some argue that price disparities have a disproportionate effect on certain groups. Accordingly, it has been argued that the federal government already has a responsibility and the necessary legal tools to combat the high price of drugs, e.g., through its procurement procedures. Yet combating disproportionate drug prices through government procurement should be a carefully considered process and not one based on misrepresentations of the history and rationale behind federal procurement procedures.

Federal Government Procurement Overview

The U.S. government oversees a vast and complex procurement system, including the General Services Administration (e.g., real estate, property, and services), the Federal Acquisition Regulation (FAR) system, and vast federal contracting. In sum, the annual federal budget will exceed $4.4 trillion in 2019.[2] Advocates note that the federal government spent nearly $1.1 trillion on health care alone in 2018.[3] In the health care sector, the federal government’s role is also exemplified by the following categories of activity: the direct purchasing of pharmaceutical through federal agency programs including, the Veterans Health Administration, Department of Defense, Indian Health Service, and Federal Bureau of Prisons; indirectly through other federally sponsored health insurance programs, notably Medicare and Medicaid; and, more broadly through its oversight and other involvement with private sector health insurance plans.

There is no denying that the federal government is a significant participant in the health care system. In the aforementioned contexts, the government generally seeks the legal right to use a patented product (e.g., a medicine or medical device) at a specified purchase price. But federal law provides a mechanism for the government to procure patented products and services without a specific authorization, license, or consent. Further, federal law allows it to use patents without prior consent (this is the quintessential definition of infringement), under limited circumstances, in exchange for compensation to the patent holder. Advocates argue that the federal government should now broadly and unprecedentedly employ this procurement power to combat high drug prices.

Congress’ Enactment of Section 1498(a)

In the early 1900s, Congress enacted legislation permitting the federal government to use patented products without the permission of the rights holder in exchange for some compensation. The statute, § 1498, states:

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.

28 U.S.C. § 1498(a) (emphasis added).

Congress enacted this law (and its subsequent amendments) in response to a number of war time and national security needs, which required the government and its federal contractors to use the inventions of recalcitrant patent owners. In essence, § 1498(a) is a waiver of the federal government’s historic sovereign immunity (hence allowing for lawsuits against the government) while ensuring that the patent owners receive fair compensation. As the statute currently reads, this government intervention is offset by promising “reasonable and entire compensation for such use and manufacture.”

Section 1498 emerged as a solution to a technical standing problem that was preventing IP owners from suing the government for infringement (going back into the 1800s) without reverting to legal fictions such as implied contract. It did not arise simply as strong-arm takings power to benefit the government and contractors. Rather, it is a careful compromise to provide a clear path forward for IP owners while freeing the government from the threats of litigation, such as injunctive relief. While any government intervention in the marketplace must be viewed with some suspicion, the statute ensures that the government will recognize the contribution of innovators through some form of compensation (e.g., an ex post facto royalty).

Scholars conclude that that the statute’s original purpose was to allow the federal government and contractors more flexibility in activities during war time efforts[4]—for example, the government’s procurement of the parts necessary for military equipment or naval ship building. The statute has been used in very few other categories. The Supreme Court observed:

The intention and purpose of Congress in the Act of 1918 was to stimulate contractors to furnish what was needed for the War, without fear of becoming liable themselves for infringements to inventors or the owners or assignees of patents. The letter of the Assistant Secretary of the Navy, upon which the Act of 1918 was passed, leaves no doubt that this was the occasion for it.

Richmond Screw Anchor Co. v. United States, 275 U.S. 331, 345 (1928).

The law and literature reveals two important aspects about § 1498(a). First, it was intended for the government’s limited use of a certain category of patented inventors while respecting their innovative contribution with compensation for their efforts. Rather than civilian inventions, the § 1498(a) case law presents a theme: a series of military, war time, and post-war research related inventions, including weapons, communications equipment involving the Signal Corps of the Army, to stealth airplane carbon fiber fighter plane panels.[5] Second, it was intended as a war time safety valve against recalcitrant inventors – essentially, as a national defense provision. It has been used rarely and in limited contexts. Even when the nation faced an anthrax attack scare, its use was threatened by then HHS Secretary Tommy Thompson, but never actually used.[6] Moreover, it is not a price control mechanism. Nowhere in the text of the statute, the legislative history, nor Supreme Court case law endorses § 1498 as a discount federal procurement mechanism. In other words, § 1498(a) is not a “Groupon” for discounted federal shopping sprees.

Even those advocating for the use § 1498 as a discount procurement tool note a number of potential problems, which include the likelihood of undercompensating innovators and undermining pharmaceutical firms’ incentives to innovate, the potential overuse by the federal government, and giving too much responsibility and discretion to courts to make decisions in this category. Critics of the statute’s use in this context observe that as with any government intervention in the marketplace, consequently, it has a number of negative effects—e.g., chilling innovation, more uncertainty around R&D. The issue about preserving the incentives for R&D for new cutting-edge medicines is not abstract. A Tufts University center study reports that, on average, more than $2.6 billion is spent on R&D for a new prescription drug that gains market approval; the life-cycle cost rises to $2.9 billion when other post-approval develop costs are included.[7] In practice, for every drug that is successfully developed, reviewed, and made available to patients, many dozens more fail.[8] Due to this high failure rate and the costly investment in R&D, well-balanced intellectual property rights are essential for innovators to commercialize the products that do make it to market and improve—or even save—patients’ lives.

In practice, the use of § 1498(a) raises a number of other challenges. The application of a “reasonable royalty” itself leads to uncertainty and lengthy dispute settlement time frames. Ultimately, the retroactive decision of whatever truly is a “reasonable royalty” requires a heightened reliance on the courts to determine its “reasonableness.” The opponents note that this undermines certainty and chills the incentives for innovation. Also, the limited scope of the government’s direct applicability (e.g., prisons, Indian tribes) questions whether this makes its use either an ineffective solution for the public at-large or it will distort markets further by the misallocation of costs on different communities.

Notwithstanding its poor legal mooring for this purpose, in the end, § 1498 is an impractical tool for lowering drug pricing nationwide, vis-à-vis, the widespread government procurement of medicines in the national health care marketplace. As a general proposition, every fundamental understanding of government and liberty informs us that the federal government cannot just seize one’s property—house, livestock, vehicles—for free. Nor can the government use patented inventions (IP) for free.

Conclusion

Today, the Nation faces an increasing populist hue and cry surrounding a number of public health challenges, including the availability and affordability of patented pharmaceuticals. As the cost of drugs sharply rises, outpacing the rate of inflation, policy-makers consider a range of public policy options. The use of a compulsory license or the § 1498 statute offers a superficial false hope/promise to reduce health care spending. Hence, it is naïve to suggest that the government procurement process is designed to give short shrift to inventors by depriving them of just compensation.

Nothing in the § 1498 statute’s wording, history, nor congressionally-mandated purpose supports its role as either a general procurement or price control tool. As with all government interventions into the market place, it has potential consequences. In this context, the consequences are ultimately harmful, e.g., threatening to harm future medical innovation by reducing the incentives for R&D and creating uncertainty in the marketplace. While the goals at the heart of this debate are quite worthy (i.e., increased drug availability and affordability), policy-makers should consider other measures that avoid the inevitable negative consequences. The federal government has an alternate, powerful array of tools at its disposal to improve the access and quality for health care. In sum, § 1498 was never contemplated to be a general procurement discount vehicle—hence the federal government should not begin mistakenly prescribing it.

[1] https://www.trade.gov/topmarkets/pdf/Pharmaceuticals_Executive_Summary.pdf.

[2] The federal government purchases hundreds of billions of dollars of goods and services annually through an array of intricate procurement procedures and systems. These systems are based on willing sellers who work within the government framework (e.g., the schedules also known as Federal Supply Schedules and the Multiple Award Schedules (MAS)) to ensure fairness and a level playing field with pre-negotiated prices rather than letting the federal government use patented products without compensation. See generally https://www.gsa.gov/buying-selling/purchasing-programs/gsa-schedules.

[3] https://www.taxpolicycenter.org/briefing-book/how-much-does-federal-government-spend-health-care (The break down includes spending Medicare ($583 billion), the Medicaid and Children’s Health Insurance Program (CHIP) ($399 billion), and veteran’s medical ($70 billion)).

[4] Sean M. O’Connor, Taking, Tort, or Crown Right? The Confused Early History of Government Patent Policy, 12 J. Marshall Rev. Intell. Prop. L. 145-204 (2012).

[5] Id. at 190.

[6] “Thompson Negotiating With Drug Companies to Purchase Anthrax Antibiotics; Sees No Need to Override Cipro Patent,” June 11, 2009 (“Tony Jewell, an HHS spokesperson, said that agency officials ‘do not believe’ that breaking the patent is necessary, adding, ‘It would not save money to break the patent.'” https://khn.org/morning-breakout/dr00007586/.

[7] https://www.scientificamerican.com/article/cost-to-develop-new-pharmaceutical-drug-now-exceeds-2-5b/.

[8] “The overall attrition rate for new drugs remains high—‘horrendously high’ according to [U.S.] NIH Director Francis Collins—and may be increasing. Recent estimates place the phase 2 failure rate at sixty-five to seventy percent and even higher for drugs with new mechanisms of action.” Erika Lietzan, The Drug Innovation Paradox, 83 Missouri Law Review 39 at 78-79 (2018) (describing the U.S. regime).

Categories
Innovation Patent Law Pharma

A Cure Worse Than the Disease? Proposed Changes to European Patent Law are Threatening Pharmaceutical Innovation

a hand reaching for a hanging, shining keyInnovation is all around us. We love and appreciate the latest video games, software apps, and smartphones. We await the integration of self-driving cars and other forms of artificial intelligence. Beyond the gadgets and luxuries we think we can’t live without, there are even more essential products that affect the lives of millions around the world on a daily basis. Patented medicines are at the top of the list of innovations that save lives and preserve the quality of life. Unfortunately, some proposed changes to European patent law are jeopardizing the development and delivery of safe and effective drugs, threatening jobs and innovation, and putting global public health at risk.

Policy-makers and the public acknowledge that balance is critical in the legal regimes governing essential medicines. Our generation is the beneficiary of patent protections which strike a balance. European regulators have long acknowledged that the benefits of new cures (e.g., arising from the research and development of therapies) require a societal investment in the form of intensive capital resources and strong intellectual property protection. In turn, a balanced system includes a reasonable patent term as a quid pro quo for the public disclosure of knowledge and the follow-on generic industry.

The medicines sector highlights the need for that careful balance, as well as the success of the current legal regime. New drug research and the development of new cures is extremely capital intensive. Legions of European scientists, engineers, and clinicians can work for years on a new drug’s development and regulatory review. A recent Tufts University center study reports that, on average, more than $2.6 billion is spent on R&D for a new prescription drug that gains market approval; the life-cycle cost rises to $2.9 billion when other post-approval development costs are included.[1] This is a 145% increase, correcting for inflation, over the estimate the center made in 2003.

In practice, for every drug that is successfully developed, reviewed, and made available to patients, many dozens more fail. CPIP Senior Scholar Erika Lietzan has observed:

The overall attrition rate for new drugs remains high—‘horrendously high’ according to [U.S.] NIH Director Francis Collins—and may be increasing. Recent estimates place the phase 2 failure rate at sixty-five to seventy percent and even higher for drugs with new mechanisms of action.[2]

Due to this high failure rate and costly investment in R&D, well-balanced intellectual property rights are essential for innovators to commercialize the products that do make it to market and improve—or even save—consumers’ lives.

Medicines must be safe and effective, and while regulatory review is essential, it is a time-consuming and highly expensive process. The reality is that the essential patent term is eaten away by years of regulatory review delay.[3] This extra review process is what makes the investment and research questions in the bio-pharmaceutical space so different from a smartphone or the latest virtual reality entertainment software. Professor Lietzan christened this the “innovation paradox.” She explains:

In medicine today, we face an innovation paradox. Companies that develop new medicines depend on a period of exclusive marketing after approval, to fund their research and development programs. This period is made possible by patent protection and regulatory data exclusivity.[4]

Likewise, it is the reason that there needs to be some supplementary legal protection to raise new capital and investments for cures and therapies.

The practical effect is that the necessary regulatory review results in the loss of years of effective patent term protection, warranting special treatment for innovative pharmaceutical products that come to market with little time to realize the benefits of exclusivity. In the 1990s, European policy-makers successfully restored the balance between innovation and the public interest by establishing the Supplementary Protection Certificate (SPC), which provides limited exclusive legal protection after a patent’s expiry.

Supplemental Protection Certificates Ensure a Necessary Balance

Supplementary Protection Certificates (SPCs) reinforce the balance between the rights of innovators and the public by extending the exclusive term for a variety of compounds, e.g., human and veterinary medicines and plant products. SPCs provide a limited extension of legal protections (e.g., exclusivity capped at five-and-one-half years) to compensate for the patent term effectively lost during the regulatory review process to ensure safety and efficacy.

Since SPCs were established, it is estimated that more than 20,000 SPCs for patented products have been filed in Europe during the period 1991–2016.[5] Despite the SPC’s twenty-plus-year track record of success, it, and the balance it preserves, is coming under pressure due to special interest lobbying by the generic drug industry.

The European Commission (EC) recently proposed waiving the SPC for pharmaceuticals and biosimilars[6] and permitting limited generic drug protection via the following two provisions prior to the SPC’s expiration:

(1) The “Manufacturing Provision.” This proposal would “allow EU generic or biosimilar manufacturers to develop and store generic or biosimilar manufacturers in Europe . . . with the goal of enabling immediate generic or biosimilar market entry following the expiration of intellectual property protections . . . .”

(2) The “Export Provision.” This proposal would “allow generic or biosimilar manufacturers to export products to countries where no intellectual property protection for the products is in place.”

While these two proposals are touted as limited in scope, their impact would be significant and detrimental on many fronts across Europe, including for the public health, innovation, jobs, and trade.

The Dangerous Impact of SPC Waiver

The overall impact of the SPC waiver threatens the balance that has worked so well for twenty-plus years, plain and simple. Specifically, the negative impact and risks are evidenced through the inherent complexity of a medicine’s regulatory review process, undermining the public health via counterfeit medicines, and harming Europe’s economy and jobs.

a. Risks of Limiting Innovation for a Variety of Important New Compounds and Cures

 

The most important reason to preserve the current balance is that it is a proven path to develop new medicines for the public’s health. Recently, a commentator highlighted two critical medicines that would not be available to patients, but for the opportunity afforded by the SPC process: (1) Fingolimod (a drug to treat renal failure after a kidney transplant that was subsequently brought to the market for the treatment of multiple sclerosis (MS)); and, (2) Secukinumab (a treatment of psoriasis, psoriatic arthritis, and ankylosing spondylitis (a type of spinal arthritis) that required an extended, more complicated clinical trial review period).[7] In both cases, the benefits of the additional period of exclusivity under the SPC provided the necessary time and resources for the follow-on clinical trials and research for the medicine’s safety and efficacy review.

Ultimately, SPCs benefit capital intensive pursuits, such as new drug discovery and development, by yielding new drugs or new applications for such drugs. More importantly, the patients who need these drugs clearly benefit. As Europe looks to an aging population and increasing health care costs, there is an ever growing need for effective cures for diseases such as HIV/AIDS, Alzheimer’s, multiple sclerosis (MS), cancers, and others requiring orphan drugs.[8] The SPC system is an important part of how the next generation of pioneering life-saving medicines will come into being.

b. Risk to the Public Health and Safety Through Counterfeit Medicines

 

Another key concern for stakeholders and the public at-large resulting from the current proposals is the inevitable increase of piracy and counterfeiting of these medicines. Global piracy and counterfeiting of medicines is big business. A 2016 study estimated that drug piracy costs Europe more than €10 billion each year, may result in the loss of up to 40,000 direct jobs, and may have a total direct and indirect negative impact of over €17 billion and 90,000 job losses.[9]

In addition to the significant financial impact, piracy and counterfeiting is a matter of public health and safety. It is often the case that the counterfeit medicines are manufactured without sufficient quality controls, or worse, with unsafe or dangerous substitute ingredients. The SPC Export Provision waiver heightens the risk that poor quality or unsafe counterfeits will be diverted across borders. Counterfeit drugs are a massive public health risk throughout Europe and big business for criminal enterprises that either ship fake, unsafe medicine or divert counterfeits across borders trying to profit on the product demand and price differentials among nations.

The SPC Export Provision waiver will ultimately increase medicines piracy and counterfeiting on many grounds, including making it difficult to distinguish between medicines produced legally in one country and other jurisdictions without adequate IP protection, making it difficult to prevent product diversion, and diminishing quality control due to infringement.

c. The European Economic Case: Jobs and Trade

 

Europe boasts a first-class research-based pharmaceutical industry which is estimated to have invested €31.5 billion in R&D in 2015 alone.[10] The leading European countries which contribute to this annual R&D investment include Germany, France, Italy, Spain, and the U.K. The research industry trade association, EFPIA, explains some of the economic benefits of the SPC regime:

The SPC is part of an incentives framework that helps to generate the 35 billion in investment in R&D in Europe by the research-based industry. . . . It helps to safeguard over 750,000 jobs directly employed by biopharmaceutical companies and critically facilitates, research into unmet medical needs, finding treatments and cures for patients across Europe and beyond.[11]

R&D Investment in Europe (2016). Germany, 19%. France, 15%. Italy, 4%. Spain, 3%. U.K., 16%. Rest of Europe, 43%.

European Pharmaceutical Industry: Recent Trends and Statistics[12]

Evaluating the economic factors around an industrial policy proposal—new manufactured units, SMEs, direct and indirect jobs—is a legitimate part of the policy debate. In the public health context, it is one of several factors for policy-makers. Both sides of the debate have offered competing economic analyses of the impact of the waiver.[13] However, the past is prologue, and Europe has 20-plus years of a positive economic experience with the SPC regime.

Today’s debate over the SPC waiver is reminiscent to biotechnology patentability debates in the 1980s that weakened intellectual property rights and drove innovative activity out of Europe. As a recent article explains, the legal choices made by Europe during that crucial era led to an irreparable loss of its technological global leadership in the biotech and health care arena:

Europe lost the competitive and commercial edge in biotechnology to the U.S., which had the foresight to protect a new and innovative industry. This new industry both revolutionized modern medical research and healthcare treatments and brought economic growth to the many U.S. cities in which these new companies sprouted and flourished.[14]

Likewise, additional commentators warn that an SPC waiver poses a threat to Europe’s global competiveness: “Europe is becoming an innovation backwater, easily outspent on R&D by peer nations such as the United States, Japan, South Korea and Australia, according to the 2017 European Innovation Scorecard.”[15] While there are allegations that the SPC waiver would be beneficial for European jobs and its economy, this has been debunked for their flawed methodology or extreme overstatement of the facts.[16]

Conclusion

The EC’s proposed SPC waiver provisions are a cure far worse than the disease. The policy debate around this subject boils down to whether Europe wants a strong or a weak health care system for its citizens. The purported goals advanced by special interest tactics certainly sound noble: more competition, lower prices. In fact, the opposite ignoble result is an inevitable undermining of the incentives for the discovery and development new medicines.

The EC should reconsider the proposed waiver for many reasons. The current SPC system offers a successful twenty-year-plus track record. It respects the balance between patients and the medicines innovation ecosystem. The waiver will directly stifle innovation in the guise of fostering competition, as well as dampen the future of innovative medicines and harm the European economy. One must conclude that the SPC waiver should be reconsidered for the sake of the public health and future well-being of the European citizenry.

[1] https://www.scientificamerican.com/article/cost-to-develop-new-pharmaceutical-drug-now-exceeds-2-5b/.

[2] Erika Lietzan, The Drug Innovation Paradox, 83 Missouri Law Review 39 at 78-79 (2018) (describing the U.S. regime), available at https://ssrn.com/abstract=2948604.

[3] Id. at 59 (“Through the 1970s, as the modern new drug premarket paradigm took shape, scholars and policymakers became aware of diminishing effective patent life. Because inventors typically file active ingredient patent applications before clinical testing starts, these patents tend to issue before or during the trials. At the time, a patent lasted for seventeen years from issuance. Today, it generally lasts for twenty years from the filing of the patent application. In either case, a significant portion of the term of an active ingredient patent may lapse before FDA approves the marketing application. This shortens the period of time that the drug sponsor may exploit the invention in the market while enjoying patent rights.”).

[4] Id.

[5] Malwina Mejer, 25 years of SPC protection for medicinal products in Europe: Insights and challenges (May 2017), available at https://ec.europa.eu/info/publications/25-years-spc-protection-medicinal-products-europe-insights-and-challenges_en.

[6] The European Medicines Agency (EMA) explains that “[a] biosimilar is a biological medicine highly similar to another already approved biological medicine (the ‘reference medicine’). Biosimilars are approved according to the same standards of pharmaceutical quality, safety and efficacy that apply to all biological medicines. The European Medicines Agency (EMA) is responsible for evaluating the majority of applications to market biosimilars in the European Union (EU). Biological medicines offer treatment options for patients with chronic and often disabling conditions such as diabetes, autoimmune disease and cancers.” Available at https://www.ema.europa.eu/en/human-regulatory/overview/biosimilar-medicines-overview.

[7] Nathalie Moll, Betting on innovation, the case for the SPC, available at https://www.efpia.eu/news-events/the-efpia-view/blog-articles/betting-on-innovation-the-case-for-the-spc/.

[8] The European Medicines Agency (EMA) notes that “[a]bout 30 million people living in the European Union (EU) suffer from a rare disease. The [EMA] plays a central role in facilitating the development and authorization of medicines for rare diseases, which are termed ‘orphan medicines’ in the medical world.” Available at https://www.ema.europa.eu/en/human-regulatory/overview/orphan-designation.

[9] http://www.pharmexec.com/counterfeit-drugs-cost-europe-more-10-billion-year.

[10] https://www.ihealthcareanalyst.com/european-pharmaceutical-industry-recent-trends-statistics/.

[11] https://efpia.eu/news-events/the-efpia-view/statements-press-releases/efpia-statement-on-the-implementation-of-the-spc-manufacturing-waiver/.

[12] https://www.ihealthcareanalyst.com/european-pharmaceutical-industry-recent-trends-statistics/.

[13] http://ecipe.org/blog/ec-spc/; https://www.medicinesforeurope.com/newsroom/.

[14] Kevin Madigan & Adam Mossoff, Turning Gold Into Lead: How Patent Eligibility Doctrine is Undermining U.S. Leadership in Innovation, 24 Geo. Mason L. Rev. 939 (2017) (“We believe these are sensible provisions to avoid weakening Europe’s IP framework further, particularly in today’s context of intense global competition for pharmaceutical research and development investment.”), available https://ssrn.com/abstract=2943431.

[15] See, e.g., Philip Stevens, The European Commission’s pharmaceutical innovation incentives review is at risk of serious overreach, available at http://ecipe.org/blog/ec-spc/.

[16] Sussell et al, Reconsidering the economic impact of the EU manufacturing and export provisions, J. of Generic Medicines, 1-17. (citing arithmetic error and providing a counter factual analysis of the unit, job, SME, and economic benefits in a recent generic industry study praising the SPC waiver proposal).

Categories
Patent Law Pharma

New CPIP Policy Brief: An Unwise Move to Discriminate Against Pharmaceutical Patents

enlarged image of a moleculeCPIP has published a new policy brief entitled An Unwise Move to Discriminate Against Pharmaceutical Patents: Responding to the UN’s Guidelines for Pharmaceutical Patent Examination.

The brief, written by CPIP Senior Scholar and UMKC Professor of Law Chris Holman, analyzes the UN’s recent Guidelines for Pharmaceutical Patent Examination, which are influential in the policy debates regarding the role of patented pharmaceuticals in public health. Professor Holman critically examines the Guidelines, pointing out that they “put a thumb on the scale in favor of generic medications” while failing to adequately consider “the development and incremental improvement of innovative pharmaceutical products.”

The Executive Summary is copied below:

EXECUTIVE SUMMARY

Recently, United Nations agencies have encouraged countries to make it harder to get patents on pharmaceuticals. The primary vehicle for this policy has been the Guidelines for Pharmaceutical Patent Examination: Examining Pharmaceutical Patents from a Public Health Perspective (the “Guidelines”). The Guidelines advocate excluding entire categories of pharmaceutical inventions from patentability.

This new approach represents a departure from past patent policy. The patent system has long applied the same rules to everybody instead of discriminating against particular types of technologies or industries. Ordinarily, each invention is judged on its individual merits based on neutral and generally-applicable rules for patentability.

The aim of the Guidelines is to make medicines cheaper, which is a laudable goal, but the kind of goal that has long been kept out of patent examination for good reasons. If a government objects to the prices of a product or how a business behaves in the marketplace, it applies other laws after the patent is granted. But when governments interject politics and policy before a patent is granted, the patent system as a whole becomes unreliable and unpredictable. Businesses are reluctant to invest in unreliable property rights and in the markets that make them unreliable. They either stop investing in innovation or avoid the markets where their innovations are unprotected.

The Guidelines contend that many forms of pharmaceutical innovation are inherently routine and hence unpatentable by default. Consequently, they demand exceptional circumstances from pharmaceutical inventions not required in other fields. The Guidelines would also restrict patents on innovations that occur later during drug development, including after the initial launch of a product.

This Policy Brief provides an evidence-based review of the categories of pharmaceutical innovation addressed by the Guidelines and dismissed as undeserving of patents. These include “Markush claims,” selection patents, patents on different forms of the drug, prodrugs and metabolites, compositions, combinations, doses, and new medical uses. Many of these categories of inventions are rather technical, so the Policy Brief attempts to briefly illuminate what each is and why it matters to the process of discovering and bringing new drugs to patients.

Once each category is carefully explained and examined, one finds real innovations. As illustrated by the decisions surveyed in this Policy Brief, when courts delve deeply into the substance of these inventions, they are often struck by the unpredictability and difficulty inherent in pharmaceutical innovation. These innovations can provide new and beneficial ways to formulate, prepare, and deliver the drugs as well as different ways to use the drugs.

Considered in the abstract, it is easy to devalue the inventiveness of the categories of pharmaceutical innovation targeted by the Guidelines. However, it is hoped that this Policy Brief and the full-length version, In Defense of Secondary Pharmaceutical Patents: A Response to the UN’s Guidelines for Pharmaceutical Patent Examination, will provide some counterweight to balance some of the more radical, and in my view unwarranted, recommendations set forth in the Guidelines. The interested reader should consult the full-length article for an expanded explanation including examples and citations to primary sources.

To read the policy brief, please click here.