Adam Houldsworth

The former global head of pharma intellectual property at Novartis has told IAM that life sciences companies should consider a more tech-like approach to IP management, involving licensing out development patents to competitors, rather than seeking to maintain market exclusivity on all incremental innovations. As well as making increasing commercial sense, such a strategy, he suggested, could help the pharmaceuticals industry to avoid negative perceptions and forestall a political backlash against life sciences patents.

Paul Fehlner, who held the top IP position at Novartis until earlier this year and now leads a life sciences IP consultancy, spoke exclusively to IAM about the challenges that pharmaceuticals innovators currently face. “The pharma industry risks overplaying its hand with regards to secondary patents,” he stated.  These rights – acquired for modifications to a drug, its dosage or medical use, rather than for a new active ingredient – might be meritorious, protecting new formulations that suppress adverse side effects and have other benefits; but, said Fehlner: “Those features are not always important enough to have exclusivity in the market.”

Fehlner suggested that pharma businesses could benefit from approaching these issues more like the tech industry by making secondary patents available for licensing, rather than seeking to extend market exclusivity beyond the expiration of the core compound patent. “For example, a company might announce that to avoid uncertainty and unnecessary litigation, it will make patents on the salt form and stable formulation of its product available for licensing on fair and reasonable terms,” he explained. “A generic could choose to license the patented technology or design around it, based on its business needs.”

As well as helping to avoid costly and high-risk litigation, Fehlner stated, the commercial benefits of this strategic shift would include opening new, reliable and continuous income streams. These revenues would initially be modest, he conceded, but the business case for secondary patent licensing could become more compelling in the future: “Until now the profits on exclusive products have been so great, and potential royalties so small, that there is little incentive to give up exclusivity by licensing (secondary) patents. But as pricing pressure decreases the profitability of new products, royalties start to look more significant [especially in the biosimilar space, which has higher base prices]. And once the industry accepts a licensing model in place of all-or-nothing exclusivity, depending on the nature of the patents, such royalties could be more than minimal.”

There are also political and public relations benefits to be gained from adopting a secondary patent licensing strategy. “Pharma might do this to avoid the perception of enforcing exclusivity too aggressively,” Fehlner contended. “There has been a legislative or administrative backlash against development patents in some countries, like India and Argentina.” He pointed out that compulsory licensing already exists in several jurisdictions: “It may be better for an innovative pharma company to manage that process itself instead of letting governments do it…Public opinion could also push innovative companies in this direction.”

Fehlner’s comments come at a time when there are acute political controversies surrounding pharmaceuticals patents and market exclusivity in the US. Allergan’s recent attempt to circumvent the inter partes review patent invalidity process by transferring its Restasis rights to a Native American tribe has provoked public criticism, and even attracted censure from within the industry: Regeneron CEO Leonard Schleiffer last week describing the move as “nuts”, because it broke Allergan’s ‘social contract’ and made it look bad to the public.

With legislative proposals, both favourable and unfavourable to pharma patent holders, currently being considered by Congress, and with the potential for administrative changes under an Andrei Iancu USPTO Directorship, political debates surrounding pharmaceuticals IP rights may have a significant impact on the US patent system in coming years.

Whether the approach advocated by Fehlner will be adopted by pharma innovators in the future remains to be seen, but his suggestion will surely provide food for thought for life sciences companies considering how innovators might gain the upper hand in the public debates that will shape the patent system in the long term.