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U.S. Patent System Crimps Drug Innovation for Toughest Diseases

Oct. 16, 2019, 8:46 AM

The U.S. patent system discourages drugmakers from pursuing the hardest problems in medicine, according to a paper to be published next year in the Washington Law Review.

The current approach of starting the clock on patent life when the application is filed, while drugs are still in early-stage clinical trials, leads to shorter periods of patent exclusivity. That’s despite steps taken by Congress to add years at the end of a patent term to make up for some of the time spent in the development stage, according to an analysis by authors Erika Lietzan and Kristina M.L. Acri.

There has long been tension between the need for innovation and the often billion-dollar price tags attached to innovative drug development. However, generic drugmakers and patient advocates have argued that the current balances are necessary to ensure that patients can get affordable medication.

Developing a new prescription medicine from scratch is estimated to cost $2.6 billion and take almost 11 years on average, according to most recent data available: a 2014 study by Tufts Center for the Study of Drug Development and published in the Journal of Health Economics.

The paper comes as high drug prices are under fire from the Trump administration and members of Congress and defended by brand-name drugmakers. The companies argue that sufficient patent terms are critical to encourage research into the most intractable health problems facing Americans.

The maximum patent term allowed by law is 14 years after a drug receives approval from the Food and Drug Administration. That span of time includes any patent extensions, known as restorations, due to time spent in drug development.

The average patent term for drugs once they reach the market is actually closer to 12 years than 14, according to the analysis.

As a result, drugmakers are less likely to try to take on the biggest challenges in health care—such as Alzheimer’s disease and rare cancers—because the payoff isn’t enough to offset the extraordinary cost of developing cures and treatments, said Lietzan, of the University of Missouri School of Law.

“For some of the more intractable diseases today, we are not providing sufficient incentive for companies to dive in and try to solve those,” Lietzan said.

“The short answer is, unfortunately, research isn’t free,” she added.

The Research

Lietzan and Acri analyzed 642 approved drugs that received some patent term restoration to evaluate the relationship between research and development timelines and actual patent life.

Their data set covers every grant of patent term restoration between the enactment in 1984 of the Hatch-Waxman Act, which provided for restoration, and April 1, 2018.

The researchers wanted to determine how various factors affect the period between when the product is approved and when the patent expires.

Among the factors they examined were: the length of the clinical testing period and the length of time from the earliest patent application filing to the start of clinical trials.

In all cases, they found that as these periods got longer, the patent life got shorter.

What It Means

While the findings may be obvious, the work is the first to reach that conclusion based on empirical data—and though the impact could often be small, even a few weeks of lost revenue can be significant for brand-name drugmakers. Blockbuster drugs can sometimes bring in millions of dollars in that amount of time.

The paper also found that drug companies are most likely to obtain a full 14 years of effective patent life by securing a new, original patent that issues late in the clinical trials--often these later-expiring patents are for the formulation (in addition to the original patent for the compound) or for the method of treatment for a given drug.

“The problem with that is formulation and method of treatment patents have been invalidated at a much higher rate than other patents in Inter-Partes Reviews [administrative patent challenges through the Patent Office],” said Ha Kung Wong, a New York-based patent attorney and partner with Venable LLP. “The fear is real. In that respect, you’re running out of time, you’re running out a set clock.”

For example, just 6% of all patent claims for drug compounds were found unpatentable, while 36% of all formulation claims were found unpatentable, and 44% of method of treatment claims were found unpatentable, according to Wong’s own analysis of all inter partes review cases from when they began in 2012 through Sept. 15, 2019.

Per Hatch-Waxman, drugmakers can get up to five years back on their patent terms depending on various factors, but it’s not a day-for-day restoration. Instead, it roughly boils down to about half the time spent in clinical trials, maxing out at five years restored.

Brand Perspective

The paper’s message confirms what the brand-name drug industry has been asserting for years.

The new research “adds a lot of data and analysis to any discussions” surrounding patent term restoration and incentives for innovation, said David E. Korn, vice president of intellectual property and law for the Pharmaceutical Research and Manufacturers of America, the industry group representing branded drugmakers.

“By all means we should be thinking about ways that [drug development] process can be more efficient, more streamlined—not less rigorous,” Lietzan said. “If we can reduce the cost at the front end that will give them a longer period, they will be on the market sooner and they’ll have more time to recoup” costs.

Why Change Could Be Problematic

Congress changed patent terms in 1995. Instead of having exclusivity for 17 years from issuance of a patent, drugmakers now have 20 years of exclusivity from filing an application for a patent.

The paper cites this change as part of the problem that cuts into the eventual life of a patent and thus discourages innovation.

However, that change was made for important reasons, including to end the practice known as “submarine patents,” said Charles Duan, a patent lawyer and director of technology and innovation for the R Street think tank in Washington, D.C.

Submarine patents are when drug companies would file an application at the Patent Office and use procedural methods to bog down the application in paperwork for years, or even decades, until the company was ready to launch a drug, Duan said.

By gaming the system this way, drug companies were extending the life of their patents and delaying the point at which more affordable generic drugs could enter the market.

To suggest that “we return to a system where our drug patents can essentially get potentially very long patent terms based on the time of issuance simply ignores well-established history that showed that patent term is prone to abuse and very problematic to the innovation community,” Duan said.

To contact the reporter on this story: Valerie Bauman in Washington at vbauman@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Randy Kubetin at rkubetin@bloomberglaw.com