Tag: drugs

Professors Erika Lietzan and Kristina Acri Argue That Current Data Do Not Support Evergreening Allegations

Post author By Joshua Grove
Post date May 2, 2023

By Jack Ring

Overlaid images of pills, a gloved hand of someone expecting a pill, and an eyedropper In their forthcoming paper, Solutions Still Searching for a Problem: A Call for Relevant Data to Support “Evergreening” Allegations,[1] C-IP² Senior Scholars Erika Lietzan of Mizzou Law and Kristina Acri of Colorado College call for relevant data to support evergreening allegations and accompanying policy proposals. “Evergreening” is often described as brand drug companies securing additional patents and FDA exclusivities, which grant greater market exclusivity than the initial exclusivities.[2] Evergreening has long been the subject of criticism and policy reform.

The article evaluates empirical data commonly offered to substantiate evergreening and explains that the data, while largely accurate, does not support proposed policy changes. The authors argue that the most relevant data points for policymakers are (1) when brands face competition and (2) what drives the timing of that competition. The authors indicate that no empirical studies answer these questions, so this article concludes by proposing a study designed to properly consider these factors.

I. Background

Evergreening allegations stem from protections on brand drugs that advocates view as too many patents or FDA exclusivities, which, they claim, improperly extend the drug’s exclusivity.[3] FDA exclusivities include exclusive periods of approval or markets as well as processes for bringing generic drugs to market. Under the Federal Food, Drug, and Cosmetic Act (FDCA), the FDA approves all new drugs before they are sold.^[4] However, the FDCA does not define “drug” or “new drug,” which may refer to an active ingredient, a finished product, or both.^[5] While the FDCA does not specify, the FDA in practice approves products (finished medicines as they are sold in the market), not active ingredients (active molecules and components of finished products).[6]

The FDCA controls the processes of bringing a generic drug to market.[7] As critics point out, some statutory processes bar generic drugs from entering the market until the patents expire. However, this is not always the true.[8] Moreover, the FDCA provides different forms and lengths of exclusive approval as a reward for drug makers performing the preclinical and clinical research needed to bring a drug to market. These range from six months for performing pediatric studies[9] to seven years for “orphan” drugs intended to treat a rare disease or condition.[10]

Much of the evergreening allegations and outcry focus on exclusivities stemming from continuing innovation. Continuing innovation is common because developing new molecular entities is time- and cash-consuming. Therefore, brand companies benefit from identifying new uses for new molecular entities. Moreover, those new medical uses (indications) may be eligible for new patents and statutory exclusivities. Protections for continuing innovation, however, are narrow and only prevent the approval of generic drugs for that new, specific use.^[11]

II. The Hastings Project and Current Data for Policymakers

The University of California Hastings College of Law hosts a database that (1) identifies the earliest and latest expiring patent or exclusivity for new drugs and (2) calculates the number of months between those dates.[12] The authors undertook a large audit of the Hastings Database. Like the Hastings Database, major empirical studies offered to support the allegation of “evergreening” focused on counting patents and exclusivities.[13] The Hastings Database utilizes three counting metrics: earliest protection end date, latest protection end date, and delta between the two called “months added.” The authors’ audit raised questions regarding the inferences drawn about competition from patent and exclusivity counts generally.

The authors argue that the Hastings Database is insufficient to inform policy debate because it does not provide the most relevant piece of information for policymakers: when new drugs face competition and why. The Hastings Database estimates new drug entry and competition based on the latest protection date for a drug’s applicable exclusivities. However, the exclusivities used to calculate that date do not prohibit all new drug entry. Therefore, because new drugs could enter the market before the latest protection date, that data point does not serve as a relevant data point for policymakers seeking to drive timely generic competition. In the authors’ own data review, every new chemical examined had a generic drug available before the latest expiry date listed in the Hastings Database. The authors’ audit confirmed their skepticism of the “latest protection end date” as a proxy for the likely generic entry date. Actual generic competition date will likely launch at least five years earlier, with nearly 18% launching more than ten years sooner.[14]

III. Takeaways and the Call for Relevant Data

While the authors audited the Hastings Database and analyzed their own dataset, they recognized their research still did not provide the answers to the most important questions: (1) when do generic drugs reach the market and (2) what drives that timing? A study designed to consider the market entry date of the first generic drug based on any brand product containing a particular new active ingredient would determine the factors driving that market entry date.

The publication closes by describing this better study and calling for this data. At a high level, the study would focus on each new molecular entity approved since 1983 with the relevant dates being the “Initial Protection End Date” and the “NCE Competition Date.” Initial Protection End Date would start with the first approved brand product containing the NCE. NCE Competition Date would be the commercial launch date for the first product, approved on the basis of an abbreviated application (relying on the brand company’s research), to contain that same NCE for the same indication(s). They recommend a database covering all new molecular entities since 1984 to allow policymakers to study these trends. The database would allow policymakers to see exactly how long brand companies with new chemical entities enjoy a market without competition from another company marketing the same chemical entity for the same use on the basis of the brand company’s own research. Where the Generic Competition Date (actual commercial launch date) is later than the Initial Protection End Date, one would need to investigate the reason for its timing. Perhaps the generic company had difficulty making a bioequivalent, the market is too small, or the generic company faced manufacturing issues.

IV. Policy Implications

As the authors make clear, policymaking based on latest expiration date (the Hastings Database approach) before consideration of actual market entry (the authors’ proposed study) would be premature. The number of patents and exclusivities, and the difference between the earliest and latest expiration date of patents and exclusivities, do not illustrate evergreening. Yet, current policy proposals rely on this counting method used by the Hastings Database to support reforms. This is reliance on data to with no correlation to the purported issue. This article, rather, provides a sketch of how a proper database could be built and a study could be conducted to measure evergreening. Evergreening claims can only be substantiated with proper empirical data. Unless empirical data shows that evergreening is a problem, policy solutions are unnecessary.

[1] Erika Lietzan and Kristina Acri née Lybecker, Solutions Still Searching for a Problem: a Call for Relevant Data to Support “Evergreening” Allegations, 33 Fordham Intell. Prop., Medifa & Ent. L.J. (forthcoming 2023), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4230310#.

[2] For an overview of arguments that drug companies obtain too many patents and too much exclusivity, which raises prices, see Erika Lietzan, The “Evergreening” Metaphor in Intellectual Property Scholarship, 53 Akron L. Rev. 805, 848-851 (2020); see also Erika Lietzan, The Evergreening Myth, Regulation 24, 25 (Fall 2020).

[3] E.g., Robin Feldman & Evan Frondorf, Drug Wars: A New Generation of Generic Pharmaceutical Delay, 53 Harv. J. on Legis. 499, 510 (2016); Michael A. Carrier, A Real-World Analysis of Pharmaceutical Settlements: The Missing Dimension of Product Hopping, 62 Fla. L. Rev. 1009, 1016 (2010).

[4] 21 U.S.C. § 355(a).

[5] The term “drug” is ambiguous at FDA. The FDA approves brand products, not active ingredients, and those products are copied by generic companies. As a result, a brand’s active ingredient may be spread over multiple products. 21 U.S.C. § 321(g).

[6] FDA defines “active ingredient” as “any component that is intended to furnish pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease, or to affect the structure or any function of the body of man or other animals.” 21 C.F.R. § 314.3(b). The active ingredient includes the ester, salt, or other noncovalent derivative of the molecule responsible for the physiological or pharmacological action of the drug substance. 21 C.F.R. § 314.3(b). That molecule, in turn, is the “active moiety.”

[7] See 21 U.S.C. §§ 355(j)(2)(A)(vii)–(viii), 355(j)(2)(B)(i).

[8] These circumstances include when (1) the patent claims a method of use for which the generic company does not seek approval, or (2) the brand company does not sue for patent infringement after a paragraph IV certification. 21 U.S.C. §§ 355(j)(2)(A)(vii)(IV); id. § 355(j)(2)(B)(i).

[9] 21 U.S.C. § 355a. Pediatric exclusivity is awarded after the research is complete, when the brand company submits a report to the agency that “fairly” responds to the written request. Id. § 355a(d)(4).

[10] Id. § 360bb(a)(2).

[11] Moreover, generic companies seeking to enter the market can choose not to seek approval for the new indication. 21 C.F.R. § 314.127(a)(7). For example, if a brand drug treats conditions A, B, and C and condition C is still subject to a patent or statutory exclusivity, a generic drug company could still receive approval to sell their drug to treat condition A and B.

[12] See Evergreen Drug Patent Search, https://sites.uchastings.edu/evergreensearch.

[13] This includes pieces by Robin Feldman, a Hastings professor. Robin Feldman, May Your Drug Price be Evergreen, 5 J.L. & Biosci. 590, 590 (2018); Amy Kapczynski et al., Polymorphs and Prodrugs and Salts (Oh My!): An Empirical Analysis of “Secondary” Pharmaceutical Patents, 7 PLOS Online 12 (2012).

[14] Lietzan & Acri, supra note 1, at 44–46.

Tags drugs, Erika Lietzan, evergreening, FDA, FDCA, generic drugs, Hastings Database, innovation, Jack Ring, Kristina Acri, patents, University of California Hastings College of Law

Pharma

C-IP2 Statement on Interactions between Courts and the FDA

Post author By Joshua Grove
Post date April 20, 2023

Courts have recently questioned Food and Drug Administration (FDA) determinations. The FDA is the administrative agency whose job is to evaluate scientific data to determine if a drug is safe and effective enough to be approved, and post-approval, to continue to evaluate such data to determine if a drug should remain available.

Generally, the most expensive part of bringing a drug to market is the clinical trials necessary to obtain FDA approval. Courts substituting their evaluations of scientific data and overruling the FDA would harm innovation, future pharmaceutical research, and funding. While courts can and should review agency policies and decisions under the administrative procedures act, courts should not substitute their opinions for expert agency decisions.

Tags drugs, FDA

Patents Pharma

Policy Brief: The TRIPS Waiver for COVID-19 Vaccines, and Its Potential Expansion: Assessing the Impact on Global IP Protection and Public Health

Post author By Joshua Grove
Post date December 14, 2022

This policy brief, including the following “Introduction and Executive Summary,” comes from Eric M. Solovy.

CLICK HERE to read the brief in full.

Introduction and Executive Summary

On June 17, 2022, in the early morning hours of the final day of the World Trade Organization’s (“WTO”) 12th Ministerial Conference, the Members of the WTO adopted a waiver of the Agreement on Trade Related Aspects of Intellectual Property Rights (“the TRIPS Agreement”), commonly known as the “TRIPS Waiver for COVID-19 Vaccines” or the “TRIPS Waiver.”[1] The TRIPS Waiver, with its primary focus on compulsory licensing of patents (i.e., licensing without the authorization of the patent owner) that are “required for the production and supply of COVID-19 vaccines,” reflected a compromise position among WTO Members.[2] The initial proposal advanced by India and South Africa, on October 2, 2020, would have gone much further, authorizing WTO Members to waive the substantive and enforcement-related provisions of the TRIPS Agreement not only for patents but also for copyrights, industrial designs, trade secrets, and test data protection; moreover, the original proposal would have gone far beyond COVID-19 vaccines, to cover intellectual property (“IP”) “in relation to prevention, containment or treatment of COVID-19.”[3]

The debate over the TRIPS Waiver began at a time when the development of the first COVID-19 vaccines was already nearing completion. To wit, the Pfizer-BioNTech COVID-19 Vaccine received emergency use authorization from the U.S. Food & Drug Administration (“FDA”) on December 11, 2020 – i.e., just two months after India and South Africa had submitted their original TRIPS waiver proposal.[4] Yet, at the same time that certain countries began attacking IP rights as an obstacle to addressing the pandemic, it was already well understood that the rapid development of COVID-19 vaccines, therapeutics, and diagnostics would not have been possible but for the billions of dollars in private investments, over the course of many years, in technologies that were incentivized by strong IP protection.[5] It is no coincidence that the first COVID-19 vaccines were developed in industrialized countries that offer strong IP protection – protection that provided the incentives necessary for private investors to take the huge risks required when researching revolutionary technologies.[6]

For example, although mRNA was discovered in 1961, it took many years of research, at huge expense and great risk, to create the mRNA-based technology used in COVID-19 vaccines.[7] BioNTech’s Dr. Sahin and Dr. Tureci, a married couple, had been working on mRNA technology for more than 25 years, without any successful commercial applications prior to developing their COVID-19 vaccine.[8] To take another example, before going public in 2018 with its mRNA technology, Moderna had raised USD 2.6 billion in investments and partnership funding, along with USD 600 million raised in an IPO.[9] At the time of its IPO, Moderna was spending hundreds of millions of dollars a year, reporting in September 2018 that it “had an accumulated deficit of $865.2 million.”[10] This scale of private investment in a venture as risky as these ground-breaking new technologies would simply have been impossible but for the upside potential offered by the promise of IP rights over any resulting therapeutics or vaccines and, in turn, the potential to recoup returns on those investments. Further, the assurance that IP rights would be honored and, where necessary, enforced, in multiple countries enabled the creators of vaccines to enter into voluntary licensing agreements with enterprises around the world for the manufacture and distribution of the vaccines, making them rapidly available throughout the world.[11]

Since the inception of the TRIPS Agreement nearly thirty years ago, there have been voices calling for its dilution. The ongoing COVID-19 pandemic amplified some of these voices. Ignoring the role of IP in the creation of COVID-19 vaccines (and diagnostic and therapeutic products), many governments bought into the narrative claims that protection of IP rights obstructs access to important vaccines and therapeutic products. In making this argument, they conveniently put to the side the multitude of trade, regulatory and logistical barriers that clearly prevented vaccines from quickly going into arms in a number of developing countries.[12] At the same time, some have argued that certain countries viewed the pandemic, and a TRIPS waiver in particular, as a strategic opportunity to get access to next generation technologies that would provide benefits to their domestic economies long after the COVID-19 pandemic ends.[13]

Upon the announcement and public release of the terms of the TRIPS Waiver, the reactions were, not surprisingly, mixed. They were generally aligned with the long-term views of international IP rights that had been consistently expressed by countries, activists, and industry since the inception of the TRIPS Agreement.

For those countries and activists that have long advocated against IP protection for pharmaceutical products, they characterized the TRIPS Waiver as a compromise that did not go far enough but that nevertheless served to validate (in their view) that they had been right all along about the relationship between IP protection and global health. For example, Médecins Sans Frontières (“MSF”) expressed disappointment that the scope of the TRIPS Waiver was not as broad as the original proposal but then went on to question whether patent protection is ever appropriate for pharmaceutical products, calling “on governments to take concrete steps to rethink and reform the biomedical innovation system to ensure that lifesaving medical tools are developed, produced and supplied equitably where monopoly-based and market-driven principles are not a barrier to access.”[14]

For those who, in record time, created and produced the revolutionary vaccines, diagnostics, and therapeutics that have enabled families and businesses around the world to begin returning to normal, the TRIPS Waiver was understood as a threat to IP rights, to the incentives they create, and ultimately, to innovation itself. As the U.S. Chamber of Commerce stated in advocating against a TRIPS waiver:

Waiving intellectual property rights would only hobble the innovation that is critical to improving lives and raising living standards globally. If enacted, this move would set an unfortunate precedent and may limit innovative companies’ ability to devote unprecedented resources to quickly discover and deliver solutions for the next global crisis, be it pandemic, food security, or climate-related.[15]

There are currently calls for a further expansion of this waiver, both in terms of duration and product scope. As explained below, any expansion of the waiver could deal an additional blow to incentives to biopharmaceutical innovation, which would, in turn, compromise our ability to deal with future public health emergencies (as well as possible future variants of COVID-19).

When WTO Members gather in Geneva, Switzerland, to decide, pursuant to the direction in paragraph 8 of the TRIPS Waiver, whether the waiver should be “extend[ed] to cover the production and supply of COVID-19 diagnostics and therapeutics,” it is important to take a step back from the public rhetoric and evaluate the TRIPS Waiver in view of its actual text, as well as the text of the provisions of the TRIPS Agreement that it waives and/or purports to “clarify.”

In Part II, below, this paper briefly discusses the evolution of global IP protection and why a multilateral treaty such as the TRIPS Agreement is absolutely essential to incentivizing R&D in an increasingly globalized economy. Part III then offers a summary of the legal content of the TRIPS Waiver. Part IV places the TRIPS Waiver into its proper context in the WTO system, explaining the legal nature of a waiver as a matter of WTO law.

Next, in Part V, I turn to the potential impact of the TRIPS Waiver. After first noting that no WTO Member has given notice of an intent to make use of the TRIPS Waiver since its inception over five months ago, I explain (in Part V(A)) that, by creating uncertainty as to the value of pharmaceutical patents, the TRIPS Waiver may serve to decrease the incentives to innovation created by the patent system, to the detriment of global public health. Part V(B) highlights how, in contrast to the mechanism set out in Article 31bis of the TRIPS Agreement, the failure to include tracking, tracing, and detailed transparency requirements in the TRIPS Waiver could lead to diversion of vaccines, which would be counterproductive to the stated intent of the TRIPS Waiver.

Part V(C) considers the potential harm that may arise if WTO Members rely on one of the so-called “existing good practices,” as referenced by the TRIPS Waiver, for determining remuneration to a patent owner whose patent is compulsorily licensed. In Part V(D), I consider the potential impact of the provision of the TRIPS Waiver addressing regulatory data protection, a type of IP right distinct from patents which provides important incentives to bring new pharmaceutical technologies to market. Part V(E) considers the public debate, particularly in the United States, surrounding the possible impact of the TRIPS Waiver on the global competitiveness of certain WTO Members.

Finally, Part VI considers how the proposed expansion of the product scope of the TRIPS Waiver to COVID-19 diagnostics and therapeutics (as not yet defined) could serve to create uncertainty for a much larger group of patent owners and, in turn, further reduce incentives for innovation, to the detriment of global public health. It would do so at a time when R&D is rapidly progressing in preparation for new variants of COVID-19 and ultimately for the next pandemic.

CLICK HERE to read the brief in full.

[1] See Ministerial Decision on the TRIPS Agreement, WTO Doc. WT/MIN(22)/30 (Jun. 22, 2022), available at: https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/30.pdf&Open=True (“TRIPS Waiver”).

[2] Id. at ¶ 1.

[3] TRIPS Council, Communication to the TRIPS Council from India and South Africa, Waiver from Certain Provisions of the TRIPS Agreement for the Prevention, Containment and Treatment of COVID-19, Annex at ¶ 1, WTO Doc. IP/C/W/669 (October 2, 2020).

[4] Press Release, U.S. Food & Drug Admin., FDA Approves First COVID-19 Vaccine(Aug. 23, 2021), available at https://www.fda.gov/news-events/press-announcements/fda-approves-first-covid-19-vaccine#:~:text=The%20first%20EUA%2C%20issued%20Dec,trial%20of%20thousands%20of%20individuals.

[5] Eric M. Solovy, The Doha Declaration at Twenty: Interpretation, Implementation, and Lessons Learned on the Relationship Between the TRIPS Agreement and Global Health, 42 Nw J. Int’l L. & Bus. 253 (2022), at 289-296, available at https://jilb.law.northwestern.edu/issues/?vol=vol%2042%20-%20issue%202.

[6] See Bojan Pancevski & Jared Hopkins, How Pfizer Partner BioNTech Became a Leader in Coronavirus Vaccine Race, Wall Street Journal (Oct. 22, 2020), https://www.wsj.com/articles/how-pfizer-partner-biontech-became-a-leader-in-coronavirus-vaccine-race-11603359015.

[7] See Elie Dolgin, The Tangled History of mRNA Vaccines, Nature (Sept. 14, 2021), https://www.nature.com/articles/d41586-021-02483-w.

[8] See Pancevski & Hopkins, supra note 6; see also David Gelles, The Husband-and-Wife Team Behind the Leading Vaccine to Solve Covid-19, New York Times (Nov. 10, 2020), https://www.nytimes.com/2020/11/10/business/biontech-covid-vaccine.html.

[9] See Moderna, Inc., U.S. Securities and Exchange Commission filing (Amendment No. 1 to Form S-1 Registration Statement), November 28, 2018, at i, 1.

[10] Id. at 20.

[11] See, e.g., Guilherme Cintra, Is an extension of the TRIPS waiver needed for COVID-19 tools?, Global Health Matters, IFPMA (Oct. 15, 2022), available at https://www.ifpma.org/global-health-matters/is-an-extension-of-the-trips-waiver-needed-for-covid-19-tools/; see also COVID-19 vaccines and treatments output continues apace, IFPMA (Apr. 13, 2022), available at https://www.ifpma.org/resource-centre/covid-19-vaccines-and-treatments-output-continues-apace-as-health-systems-and-last-mile-hurdles-remain-collective-stumbling-blocks/ (“The COVID-19 vaccine manufacturing scale-up has seen 372 partnerships forged, of which 88% (329) include technology transfer or fill & finish. 51 manufacturing and production agreements were made in developing countries (LICs and LMICs).”).

[12] See Indicative List of Trade-Related Bottlenecks and Trade-Facilitating Measures on Critical Products to Combat COVID-19, WTO Information Note (July 20, 2021), available at https://www.wto.org/english/tratop_e/covid19_e/bottlenecks_report_e.pdf.

[13] See Shayerah I. Akhtar, Cong. Rsch. Serv., R47231, World Trade Organization: “TRIPS Waiver” for COVID-19 Vaccines (2022), at 13.

[14] Lack of a real IP waiver on COVID-19 tools is a disappointing failure for people, Médecins Sans Frontières (Jun. 17, 2022), available at https://www.msf.org/lack-real-ip-waiver-covid-19-tools-disappointing-failure-people (asserting that “we are disappointed that a true intellectual property waiver, proposed in October 2020 covering all COVID-19 medical tools and including all countries, could not be agreed upon, even during a pandemic that has claimed more than 15 million people’s lives.”).

[15] Press Release, U.S. Chamber of Commerce, Proposal at WTO to Waive Intellectual Property Would Set Harmful Precedent (Jun. 15, 2022), available at https://www.uschamber.com/intellectual-property/proposal-at-wto-to-waive-intellectual-property-would-set-harmful-precedent; see also, e.g., Press Release, PhRMA, PhRMA Statement on the TRIPS Waiver Agreement (Jun. 17, 2022), available at https://phrma.org/resource-center/Topics/Trade/PhRMA-Statement-on-the-TRIPS-Waiver-Agreement (stating that the COVID-19 TRIPS Waiver “undermine[s] the very intellectual property rights that enabled hundreds of collaborations to produce the COVID-19 vaccines on a global scale.”).

Tags COVID-19, drugs, Eric Solovy, pharma, TRIPS, waiver, WTO

Biotech Patents Pharma

Reply and Response to C-IP2’s March 4, 2021, Blogpost on UC Hastings’ Evergreen Drug Patent Search Database

Post author By Joshua Grove
Post date September 14, 2021

C-IP²’s original post on the UC Hastings’ Evergreen Drug Patent Search Database can be read here.

Reply to Blog Post on UC Hastings’ Evergreen Drug Patent Search Database

Robin Feldman
Arthur J. Goldberg Distinguished Professor of Law
Albert Abramson ’54 Distinguished Professor of Law Chair
Director of the Center for Innovation at University of California Hastings

We would like to thank the author of the blog post for taking the time to look at our work for the Evergreen Drug Patent Database. It is always appreciated when others explore and examine our data. In addition, the benefit of a website is that helpful feedback from visitors can be used to make the information more accessible and easier to navigate.

We would also like to point out that the blog post misunderstands the nature of the project. The project begins with the initial patent protection on the chemical formulation of a drug and then tracks additional protections. Some of these protections increase the amount of time that the drug is protected. Others increase the number of protections that a challenger would have to overcome, without extending the length of time.

One can think of the difference in terms of building a wall of protection. Some protections make the wall higher by extending the total time period. Other protections make the wall thicker, so it is tougher for a competitor to break through.

We do have a separate tab that allows one to calculate only the months of added protection, for those who wish to view the data in that manner. We also offer tabs to view the number of unique patents and the number of patent extensions. Our goal is to allow the user to examine the information through different lenses, so that one can understand the many ways a patent holder can extend or toughen protection. If we like certain aspects, we should keep them; if we don’t like certain aspects, we should amend them. Either way, it is important to understand the system in which we live.

In addition, the blog post also may have misunderstood the database’s starting point. Specifically, the post asks why the database “allot[s] ranolazine less than four months of ‘earliest’ protection time” and suggests that such a short period of protection “seems suspect.” The answer is simple. The Evergreen Drug Patent Database begins in 2005. Thus, drugs whose original patents were around a long time have little protection left when the database begins. (The blog post itself notes this history of the drug.)

Finally, the blog post questions the database’s treatment of different strengths of the drug, questioning the fact that when patents and exclusivities apply to multiple strengths of a drug, they are counted once for each instance. We chose this approach because the law prevents automatic substitution at the pharmacy counter among different strengths. In fact, shifting the market to a new strength can create a powerful method of product-hopping by blocking generic substitution. Try asking your pharmacist the cost to fill your prescription with two 25 mg tablets rather than one 50 mg tablet. The cost variations can be odd and economically irrational. In short, creating multiple strengths of a drug can provide a form of protection in and of itself. Our goal is to report as many of these aspects as possible.

In the same vein, if the brand company has shifted the market to a different strength or formulation of the original drug, delisting the original drug can be used as an evergreening technique. It can prevent generic hopefuls from obtaining samples of a brand drug, when having samples is essential for FDA approval. It also can lead health plans to reimburse the generic at the disfavored rate of brand drugs, because the generic is now the only drug on the market at that precise dosage and formulation. One could argue that a delisting request should be characterized as something other than a protection; the argument would not be unreasonable. Nevertheless, the database chronicles the Orange Book history of each drug, based on all changes recorded. We consider any delisting information to be part of a complete picture of that history.

In closing, we note that it is highly unusual for legal academics to publicly release their data, let alone at this level of excruciating detail. We do so in the spirit of academic exchange and full disclosure, and we hope that those who write for this blog, as well as those who read it, will be motivated to follow suit.

Response to Professor Feldman’s “Reply to Blog Post on UC Hastings’ Evergreen Drug Patent Search Database”

C-IP² appreciates Professor Feldman taking time to respond to our March 4, 2021, blogpost describing some of the problems we have identified with the UC Hastings’ Evergreen Drug Patent Search Database. We have posted her response in full, in the spirit of academic inquiry and collegiality that C-IP² strives to foster. At the same time, we want to emphasize that we do not believe that her response in fact undercuts the observations in our original post. While we agree with Professor Feldman that legal academics should release for public scrutiny the data upon which they have based their conclusions—particularly when those conclusions are intended to have some bearing on important public policy considerations—we stand by our original statement “that—because of limitations in the methodology used and given the inadequate transparency with respect to the underlying data—policymakers and others who consult the Database [could] be misled by the statistics.”

C-IP² disagrees with Professor Feldman’s suggestion that our post “misunderstands” Hasting’s database and its starting point. The post’s description of the database as a resource that UC Hastings had created “to address the perceived problem of ‘evergreening’” reflects UC Hasting’s own description of the database. See, for example, statements on the database’s “About” page.[1] Indeed, the database is explicitly referred to on that page as “Evergreen Drug Patent Search.” One might easily be confused into thinking that the database provides information reflecting the actual period of exclusivity experienced by FDA-approved drugs, which it clearly does not.

With all due respect, Professor Feldman seems to misunderstand some aspects of the original post. For example, at one point she states that the reason the database “allot[s] ranolazine less than four months of ‘earliest’ protection time” is because the database “begins in 2005.” But the starting point of the database is irrelevant. The database reports the drug’s “Approval Date” as January 27, 2006, and the “Earliest Prot[ection] Date” as May 18, 2006, which is a little less than four months. The database goes on to report that May 27, 2019, is the drug’s “Latest Prot[ection] Date,” leading the database to conclude that the drug had received 156 “Months Add[itional] Prot[ection] Time.” C-IP² continues to find “suspect” the database’s implied assertion that a drug that has been on the market less than four months is already benefitting from “additional protection time,” particularly when the context of the database might lead one to believe that “additional protection time” equates with “evergreening.”

[1] https://sites.uchastings.edu/evergreensearch/about/#.YS_g6o5KhM1

Tags biopharmaceutical, data, drug, drugs, evergreen, Evergreen Drug Patent Search Database, evergreening, patent, Robin Feldman, UC Hastings

Biotech C-IP2 News International Law Patents

Panel Discussion: Vaccines, Intellectual Property, and Global Equity

Post author By Joshua Grove
Post date July 6, 2021

The following post comes from Colin Kreutzer, a 2E at Scalia Law and a Research Assistant at C-IP².

The COVID-19 pandemic has shined a spotlight on the role of intellectual property in modern medicine and on the complex social questions surrounding a system that grants exclusive rights over life-or-death products. On the one hand, there is clearly a difference between public access to lifesaving medicines and other patented goods, such as consumer electronics. However, creating these drugs required billion-dollar investments and enormous risk, made feasible only by that promise of IP rights. Wouldn’t taking that promise away harm future development of new medicines? As the world considers a waiver of IP rights over COVID-19 vaccines and other technologies, experts are analyzing not only what’s right and what’s wrong, but also what works and what doesn’t.

On June 10, 2021, C-IP² and the Smithsonian’s Lemelson Center for the Study of Invention and Innovation held a panel discussion on vaccines, intellectual property, and global equity. With opening remarks by Lemelson Director Arthur Daemmrich, and moderated by C-IP² Faculty Director Professor Sean O’Connor, the panel featured Dan Laster, Director of the Washington State COVID-19 Vaccine Action Command and Coordination System (VACCS) Center; Professor Arti K. Rai, Elvin R. Latty Professor of Law and Co-Director of the Duke Law Center for Innovation Policy; and Eric Aaronson, Senior Vice President and Chief Counsel, Corporate Affairs, Intellectual Property and Intellectual Property Enforcement, Pfizer Inc.

Opening Remarks

Mr. Daemmrich began with a historical perspective of medical developments in this country, as well as the social, economic, and regulatory issues that would invariably be tangled up within them. His tale foretold many of the conflicts we see today—going from a time when most modern medicines didn’t exist, and high mortality was a fact of life, to a time when vaccines and other treatments existed, but access depended partly on wealth. In between those two periods, we saw rapid growth in IP protection that helped move society from one to the other. But whether in the form of religious opposition to smallpox inoculation, regulatory reforms after tragedies from bad medicine, or protests from a marginalized community during the AIDS crisis, legal and social issues have always played a prominent role in the story of medical science.

Building on this historical base, Mr. Daemmrich posed the problem now facing us: compared to other medicines, there are relatively few vaccines. On a grand scale, the entire field of vaccination is still in a stage of early development, and there exists great potential for growth in the future. The question is how to best stimulate that growth, or rather, how to ensure the greatest access to already-developed vaccines without stifling the creation of new ones?

Prof. O’Connor then led the panel with a series of questions. He began by asking about the difference between two classes of medicine. Vaccines are generally thought of as biologics—treatments that are derived from live cells—whereas pharmaceuticals belong to the class of “small-molecule” drugs. They are primarily chemical compounds rather than a biological product.

Q: From an IP perspective, are vaccines different from small molecule pharmaceuticals? What role does IP play in making vaccines available?

Prof. Rai responded that vaccines are indeed very different from small molecule drugs. From an IP perspective, the two classes derive their greatest protection from different sources.

Small molecule drugs can be produced without the need for company trade secrets. All the most critical information can be found within the text of the patent. So, the greatest protection comes from the patent itself, which grants its owner the right to exclude others from making or using the drug, and from data exclusivity, which prevents other companies from using the original developer’s clinical data to obtain regulatory approval of its own product.

Vaccines, on the other hand, cannot be quickly copied solely by reading the patent. There is a great deal of “know-how” involved in the manufacturing process. Because of this, trade secrets can be just as important to vaccine protection as the patent.

The role of IP in vaccine access, she said, is an interesting question. While public funding exists in the world of small molecule drugs, it has a “heavier footprint” in vaccine development, which then has some impact on the incentive model as it applies to vaccines.

Mr. Laster said the role of public funding was critical to his prior work at PATH, an organization devoted advancing global healthcare equity through public-private partnerships and other initiatives. Public funding has a “de-risking” effect in that the high costs and uncertainty of clinical trials are not borne entirely by the private sector. And because vaccine development typically requires cooperation among many parties, it is valuable to have different types of incentives in play (i.e., “pull”-type incentives, such as patent grants, as well as “push”-types, such as public funding). But from an IP perspective, exclusivity can pose a challenge to those cooperative efforts.

Additionally, he said that the detailed know-how involved with vaccines makes technology transfer incredibly difficult. If the intended receiver in a developing nation lacks the capacity to utilize the technology, how can effective tech transfer work in real-world practice? The question is less about whether we should be transferring vaccine technology to developing nations than it is about whether we can.

Mr. Aaronson said that a key piece of our IP system is that it does allow for greater cooperation by providing a means of transferring technology among partners while preventing that technology from being used for unauthorized purposes. He credits that cooperative system for enabling Pfizer to partner with BioNTech, producing a vaccine in record time. He added that this vaccine is currently supplied in 116 countries and counting, that they have committed to supplying at least 2.5 billion doses, and that they have just struck a purchase agreement with the United States for 500 million doses to supply lower-middle income nations. The required research, discovery, and development would not have been possible without a strong IP system that provides the right incentives and enables secure technology sharing among a large host of players.

Q: While we don’t know what final form the waiver might take, do you see it playing a necessary role in actually increasing vaccine supply and access in the coming year or two? Are there potential downsides to an IP waiver that should be considered?

Prof. Rai said that the biggest effect of a waiver would likely be its “symbolic” value, as other factors will have a much greater impact on vaccine access. But even if there were no substantive effect, it would be good for high-income nations to demonstrate an interest in global health issues. However, she considered the waiver issue “a little bit of a sideshow,” saying it likely would be “neither as bad as opponents fear nor as good as proponents hope.”

Prof. O’Connor noted that this is a particularly difficult question to answer when nobody knows what form any potential waiver would eventually take.

Mr. Laster based his perspective on his ten years of negotiating vaccine development and distribution efforts with PATH, saying he is “not sure [the waiver] aligns well” with what’s needed. Recognizing the importance of trade secrets and the complexity of the partnerships involved, he says a successful system must encourage willing cooperation. Simply waiving IP rights won’t necessarily do that. He also cautioned against taking a “static view” of the problem by taking for granted that the vaccine already exists rather than considering the IP system that helped create it, and failing to ensure that the same system is incentivizing new vaccines in the future. That said, the threat of a waiver might provide enough encouragement to bring about voluntary participation before an actual waiver becomes a reality. He credits this threat with already having a noticeable effect on pricing and other strategies.

Mr. Aaronson added that we are dealing with multiple vaccines based on very different technologies. Concentrating “a little more on the practical versus the theoretical,” he noted that the impacts of an IP waiver can vary greatly from one technology to another. The mRNA vaccine is the first drug of its type to ever receive approval. Much of the necessary tech transfer would not be limited to COVID-19, but could apply to the entire mRNA technology platform, drastically impacting its value. Waiving the rights to a groundbreaking technology could reduce the incentive to explore uncharted technological fields.

He also said it’s not certain that waiving IP rights would yield a net increase in the number of doses produced. The existing developers are producing large amounts of the vaccine. Opening the supply chain up to new entrants who may not be able to effectively utilize those supplies could yield a net decrease in production.

Prof. O’Connor also took audience questions for the panel. Some are listed below, starting with a “great foundational question.”

Q: How would it be ethical to allow lifesaving medicines and vaccines to be patented?

Prof. O’Connor began by addressing the purely legal perspective—that such patents are allowed under U.S. law, although there have been exceptions in some other countries at certain times because of this complex ethical question.

Mr. Aaronson said it’s important to think about patents as a part of a broader incentive structure. Are we putting the incentives in place to get someone to get up every morning and put in the work, money, and risk to create a product? We need an incentive structure, or there won’t be anyone making those lifesaving medicines. A patent system is one way to achieve this.

Q: If patent disclosures cannot teach producers how to make a vaccine without also getting corresponding know-how, how can they satisfy the disclosure requirement for patentability?

Prof. Rai has written multiple articles about this question (see one here) and offered several reasons. Some of the know-how is not easily written down. The need for shared know-how could possibly be satisfied by depositing biological materials with the Patent Office, but this is unlikely to happen. Another reason is that the final product that emerges from a years-long regulatory approval process is not always identical to the product described in the patent. There is also a mistaken view that patents and trade secrets cannot protect the same product. It is true that a singular feature cannot be both patented and kept as a trade secret, but a single product may have different features that are protected under one regime or the other.

Mr. Aaronson also pointed out that a single drug may be protected by many patents. Some of the know-how simply involves knowing how to properly combine the patented technologies.

Q: If most of the medical innovations occur in wealthy nations, IP laws will lock developing nations out, at least initially. Is there a way to include developing nations earlier in the innovation process?

All panelists agreed on the importance of this issue, as well as on the fact that it’s much easier said than done. Prof. Rai said that every nation must begin to create its own manufacturing capacity to avoid reliance on others, but this requires large amounts of human capital and infrastructure. The problem really goes beyond medicine to the balance of rich and poor nations generally. Mr. Laster said this is the sort of thing he was working on with PATH, which has created some networks, but there is a long way to go. Building the required skillsets and infrastructure locally takes time, but public-private partnerships can help. Mr. Aaronson said that it’s essentially like asking a nation to stop being a low-income country. It’s a somewhat circular issue, in which money is required to build infrastructure, but infrastructure is required to make money. However, this is where IP is not the problem; it is the solution. A strong IP system can create the necessary investment incentives to begin building a better future in any nation.

Closing Remarks

In closing, Prof. Rai said that “regrettably, the public debate on the . . . waiver has been very simplistic.” She hoped that the panel had “shed some light” on the issue and thanked her fellow panelists for a respectful and productive dialogue. Mr. Last er agreed that “it is a complex topic” but said that “it’s not about the waiver; I do think there are mechanisms that can lead more likely to the outcomes we want.” Mr. Aaronson finished by saying that “we all have the same goal, to figure out ways to bring medicines and vaccines to patients, no matter where they are in the world. We’re fortunate and thrilled that our vaccine has had that potential to change lives, and our goal is to continue . . . to ensure access” to both this and to future vaccines.

A recording of the panel is available here.

FTC Healthcare

CPIP Scholars Join Comments to FTC on How Antitrust Overreach is Threatening Healthcare Innovation

Post author By Joshua Grove
Post date January 9, 2019

dictionary entry for the word "innovate" On December 21, 2018, CPIP Senior Scholars Adam Mossoff and Kristen Osenga joined former Federal Circuit Chief Judge Randall Rader and SIU Law’s Mark Schultz in comments submitted to the FTC as part of its ongoing Competition and Consumer Protection in the 21st Century Hearings. Through the hearings, the FTC is examining whether recent economic or technological changes warrant adjustments to competition or consumer protection laws. The comments submitted to the FTC explain how the FTC itself is harming innovation in the health sciences by meddling in patent disputes between branded and generic drug companies.

The introduction is copied below, and the comments can be downloaded here.

***

How Antitrust Overreach is Threatening Healthcare Innovation

Imagine passing a rigorous test with flying colors, only to be told that you need to start over because you weren’t wearing the right clothing or you wrote your answers in the wrong color. Does that sound silly? Unfair? That scenario is happening to the American pharmaceutical industry thanks to regulators at the Federal Trade Commission who aren’t content to let the Food & Drug Administration (the experts in pharmaceutical safety and regulation) and federal courts (which referee disputes between branded and generic drug companies) decide when new drugs are ready to come to market. The consequences of these regulatory actions impact people’s lives.

The development and widespread availability of safe and effective pharmaceutical products has helped people live longer and better lives. The pharmaceutical industry invests billions each year in research and infrastructure and employs millions of Americans. The industry is closely regulated by many agencies, most notably the FDA, which requires extensive testing for safety and effectiveness before new drugs enter the market. Many thoughtful proposals have been advanced to improve and modernize the FDA’s review and approval of new drugs, but there is broad agreement that the FDA’s basic role in drug approval serves valid ends.

In recent years, however, other government agencies have played an increasingly intrusive role in deciding whether and when new drugs can enter the market. One such agency is the Federal Trade Commission, which has recently taken steps to block branded drug companies from settling patent litigation with generic drug makers. The FTC substitutes its own judgment for the business judgment of sophisticated parties, simultaneously weakening the patent rights of branded drug companies that spend billions in drug discovery and development and delaying generic drug companies from bringing consumers low cost alternatives to branded drugs. This example of government agencies picking winners and losers—indeed, deciding there should be no winners and losers—harms consumers in the short run by slowing access to drugs and in the long run by weakening innovation.

This paper describes the role of patents in protecting drugs and the special patent litigation regime Congress enacted in the 1980s to carefully balance the needs of branded drug companies, generic competitors, and consumers. Although these systems are not perfect, the FTC’s overreach in its regulatory powers in this area of the innovation economy results in a net loss for American consumers, as described below.

To read the comments, please click here.

Tags Adam Mossoff, Antitrust, competition, drugs, healthcare, innovation, Kristen Osenga, Mark Schultz, pharma, pharmaceutical patents, Randall Rader

Innovation Pharma

The Drug Innovation Paradox: Matching Incentives to Market Realities

Post author By Joshua Grove
Post date April 19, 2017

scientist looking through a microscope The hardest things are often the most important things. That’s one of the implicit justifications for the intellectual property system. If we want people to do the hard and important work of researching, developing, and commercializing game-changing innovations, then we need to secure the fruits of their labor with property rights.

In her forthcoming paper, The Drug Innovation Paradox,[1] Professor Erika Lietzan of the University of Missouri School of Law gives reason to question whether our IP and regulatory system is properly encouraging pharmaceutical innovators to work on the most important, and hardest, questions.

This paper, produced while Prof. Lietzan was a CPIP Edison Innovation Fellow, considers a paradox. Some of the biggest health challenges, the most important things, are indeed the hardest things. Therapies for diseases such as multiple sclerosis and Alzheimer’s demand research, development, and testing that takes longer. Unfortunately, the longer something takes to develop, the shorter the term of exclusivity under the IP system, and thus the less secure the investment.

The drug innovation paradox is that the hardest and most important cures are often the ones most poorly supported by our IP system.

Combining several different data sources for the first time, Prof. Lietzan presents comprehensive statistical findings that bring the extent of the drug innovation paradox into focus. The implications for innovation policy are profound, especially if we wish to see groundbreaking new therapies that are inherently more difficult to develop.

Incentives are particularly important in the pharmaceutical industry, where the average cost of developing an approved new medicine is over two billion dollars.[2] Drugmakers would hardly invest so much without the promise of exclusivity once the medicine goes to market. However, the period of exclusivity—the incentive—we give to drugmakers depends upon how long it takes them to bring a new medicine to the market. The more time they spend on developing a new medicine, the less reward they receive for their troubles by way of a shorter patent term.

In the United States, it takes 3.5 years on average for a patent to issue, and in many industries, patent owners thus might expect to enjoy around 16.5 years of clear market exclusivity.[3] However, things are very different in the pharmaceutical industry, where the safety and efficacy of a new drug has to be proven before it can be marketed. Years of preclinical testing and clinical trials run down the patent term clock while a drugmaker awaits approval. Congress has instituted measures to restore a portion of the time lost, but the fact remains that longer development programs result in shorter periods of exclusivity.

Pouring over the data going back to 1984, Prof. Lietzan examines the variables that play a role in perpetuating the drug innovation paradox. Critically, she notes that many of the factors that consistently lead to longer development programs—including the drug, disease, and endpoints to be met—are simply beyond a drugmaker’s control. Of course, it is impossible to say for certain what drugs were never invented because the incentives were not there. But the data does give us an accurate sense of how many years spent in development are lost when the patent expires.

For example, Prof. Lietzan breaks down the data with respect to the category of therapy being developed. As the following figure shows, the average length of the clinical testing period for some therapeutic categories ranges from about 3 to 9 years:

It is important to note that this lengthy testing period represents only one part of a development program, and the preclinical testing period has to be taken into account as well. Prof. Lietzan estimates that the average preclinical testing period for new drugs is 5.61 years. It is easy to see how the majority of the patent term for drugs that fall into certain therapeutic categories may be gone before the drug even enters the market.

The danger of the drug innovation paradox is that we may be under-incentivizing pharmaceutical research and development for drugs that are inherently more difficult to develop. The next great breakthrough treatment for difficult-to-treat diseases like cancer or multiple sclerosis may never be developed unless the incentives are there to reward drugmakers for taking the risk to develop the treatments in the first place. The data collected by Prof. Lietzan shows us just how time-consuming these endeavors can be, and they suggest that we should break the paradox if we hope to have even greater drug innovation.

CPIP is pleased to once again have Prof. Lietzan as a CPIP Edison Innovation Fellow for 2017 – 2018. We look forward to supporting more of her groundbreaking work on this difficult, but absolutely important, issue.

[1] Erika F. Lietzan, The Drug Innovation Paradox, 83 Mo. L. Rev. ___ (2018), available at https://papers.ssrn.com/abstract_id=2948604.

[2] See Joseph A. DiMasi et al., Innovation in the Pharmaceutical Industry: New Estimates of R&D Costs, 47 J. Health Econ. 20 (2016) (estimating average total pre-approval cost of approved new compound at $2.558 billion in 2013 dollars), available at https://www.ncbi.nlm.nih.gov/pubmed/26928437.

[3] See Mark Schultz & Kevin Madigan, The Long Wait for Innovation: The Global Patent Pendency Problem (Ctr. for the Prot. of Intell. Prop. Oct. 2016), available at http://sls.gmu.edu/cpip/wp-content/uploads/sites/31/2016/10/Schultz-Madigan-The-Long-Wait-for-Innovation-The-Global-Patent-Pendency-Problem.pdf.

Tags drug innovation paradox, drugs, Erika Lietzan, incentives

Biotech Commercialization Conferences Copyright Innovation Intellectual Property Theory Inventors Uncategorized

The Common Economic Case for Patents and Copyrights

Post author By Joshua Grove
Post date October 19, 2014

This is the second in a series of posts summarizing CPIP’s 2014 Fall Conference, “Common Ground: How Intellectual Property Unites Creators and Innovators.” The Conference was held at George Mason University School of Law on October 9-10, 2014. Videos of the conference panels and keynote will be available soon.

The opening panel of CPIP’s 2014 Fall Conference examined the common economic case for patents and copyrights. Unfortunately, IP policy discussions often include a false narrative that intellectual property produces monopolies that harm innovation and economic growth. The panelists, Troy Dow (Disney), Professor Stan Leibowitz (University of Texas at Dallas), Jon Santamauro (Abbvie), and Professor Jay Kesan (University of Illinois College of Law), highlighted how this narrative, in fact, ignores the essential role that intellectual property serves in enabling the creation, development, and commercialization of both inventions and creative works.

Kesan explained how patents provide economic benefits from both an ex-ante and ex-post perspective. Ex-ante, a strong patent system provides incentives to create, invest in R&D, and finance further innovation. While there are other ex-ante motivations to invent (such as a first mover advantage, the ability to secure trade secrets, and reputational advantages), Kesan argued that innovation is best facilitated ex-ante by a combination of all of these incentives plus the incentives created by patents. The ideal system incorporates a heterogeneous mix of these incentives to invent—in the absence of patents the level of disclosure decreases and innovation slows down.

Patents also provide numerous ex-post benefits. Patents facilitate coordination with producers and perform important signaling functions. They additionally allow for important private ordering by giving inventors increased control over who uses their invention and under what circumstances. In many industries, this is essential to collaboration, interoperability of products, and the aggregation of complementary benefits.

Jon Santamauro discussed the role of patents in the pharmaceutical industry. The exclusive property rights created by patents encourage R&D and serve as a crucial catalyst for new discoveries and businesses. Patent protection is particularly important in the pharmaceutical industry due to the high-risk, lengthy, and costly process necessary to develop new, safe, and effective drugs.

Pharmaceutical companies developing new drugs screen thousands of potential compounds over 6-7 years of testing to gain FDA approval, at an average cost of about $1.2 billion per drug. The reasons for the high R&D costs? Out of 10,000 initial molecules tested, only 6 go to clinical trials, and of these, only 1 is approved by the FDA for use in the healthcare market. Of the 1 out of 10,000 drugs that make it to market, only 2 out of every 10 medicines produce enough revenues to recoup the initial high costs of R&D and also provide revenue to invest in more R&D. In short, pharmaceutical and biotech firms face very high risk—high R&D expenditures and very few market successes. Strong IP protection helps offset this risk and encourages further investment and research.

Leibowitz explained that one of the primary criticisms of copyright—that it grants a monopoly, and that monopolies are intrinsically bad for society—is utterly thoughtless. A property right is, by definition, a monopoly of sorts. This criticism is an indictment of property rights on the whole, including real property rights. This is even more inapt to copyright, as copyright does not restrict entry and does not provide an economic monopoly.

Leibowitz also addressed the common argument that IP isn’t necessary because inventors and creators would continue inventing and creating even if they didn’t get to own the fruits of their productive labors. While some innovative and creative activity would undoubtedly continue, many innovators and creators do not simply create for creations sake. They need salaries (like everyone else), and strong IP rights allow them to capture the value of what they produce.

Finally, Troy Dow highlighted the benefits of strong copyright protection in the movie industry. Bringing a film to market involves substantial risks that many people do not appreciate. He explained that studios perform the same market function as venture capitalists: they invest in films at the birth of the original idea and then provide financing all the way through the final showing in movie theaters. This financing comes from banks, other investors, or other studios in order to spread the risk. Dow analogized a new film project to a new startup company, as each new film has its equivalent of a CEO (producer), COO (director), and thousands of employees and independent contractors. And just as with startup companies, everyone must be paid before the film makes a single cent in revenue.

A single film can cost over $200 million to produce. While a particularly big hit can gross over $350 million after long-term distribution (including on-demand and DVD sales), only 4 out of every 10 movies recoup their investment at the box office. Copyright thus serves the vital function of making it possible for studios to make substantial, upfront investments with the hope of a return on this investment and a sufficient profit to reinvest in further film projects.

Disney’s IP is enormously valuable and is the dominant driver of their business. Even though only $6 billion of Disney’s $45 billion in revenues last year came directly from movie revenue, the movies, including the stories they tell, are at the heart of the Disney experience. The movies form the basis for other products, media networks, theme parks, and licensing. A strong copyright regime allows studios like Disney to keep producing both creative works and the myriad other products and experiences that so many of us enjoy.

Together, the four panelists illustrated that the economic foundations of IP are equally applicable to the creative industries as they are to the innovation industries. By securing for inventors and creators the value of their productive labors, IP provides the economic bedrock of our creative and innovative economy.

Tags Abbvie, copyright, creative industries, Disney, drugs, Illinois, innovation industries, investment, Jay Kesan, Jon Santamauro, movie, patent, pharma, risk, Stan Leibowitz, studio, Troy Dow, UT-Dallas, venture capital

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