The pharma fightback

With US pharmaceutical patents under greater threat than ever before, innovators are being forced to speak up for the rights that underpin their investment in crucial healthcare innovations

An unprecedented wave of criticism has been directed at the US patent system as it applies to pharmaceutical inventions in recent years, with the IP strategies of innovators coming under fire for their alleged role in gaining unfair monopolies, stifling competition and inflating drug prices. As discussed in issue 93 of IAM, there has been a chorus of condemnation in mainstream media outlets, from national legislators and even from prominent members of the Trump administration with regard to alleged abusive practices, such as patent evergreening. What is more, advocates of curtailing pharma patent rights are more confident than ever of achieving their political ends.

The past two years have seen attacks on pharmaceutical patent rights and patent strategies permeate the US national political debate like never before. A slew of critical coverage in major news outlets such as Bloomberg, The Washington Post and The Wall Street Journal, as well as on TV stations including CNBC and NPR, has added to and amplified the voices of advocacy groups, including the Initiative for Medicines, Access & Knowledge (I-MAK), Make Medicines Affordable and the AIDS Healthcare Foundation.

Rights holders have also faced a barrage of attacks from members of the Trump administration. The Secretary of Health and Human Services Alex Azar, a conservative former Eli Lilly executive, surprised many in November 2017 when he told a Senate health committee: “We have to fight gaming the system of patents and exclusivity by drug companies” – a sentiment that he repeated in January 2018 when he said that such a course of action was needed to promote greater and more effective competition for generic and biosimilar drugs.

President Trump also ruffled feathers when he stated that pharmaceutical companies are “getting away with murder”, and later when he insisted that “our patent system will reward innovation, but it will not be used as a shield to protect unfair monopolies”. Scott Gottlieb, commissioner of the US Food and Drug Administration (FDA), has also repeatedly condemned the gaming tactics whereby innovators are alleged to ‘evergreen’ a drug’s market exclusivity by acquiring large numbers of secondary or follow-on patent rights. Litigation involving such patent thickets, he said, “has delayed market access for biosimilar products that are, or shortly will be, available in markets outside the United States several years before they’ll be available to patients here”.

In short, biopharma innovators face their greatest challenge in IP protection in years. As a result, companies are realising just how crucial it is for them to put forward their side of the argument and push back against the anti-patent narratives that are ascendant in US public discourse.

Controversies about evergreening

The complaint that pharmaceutical companies have been abusing the patent system by engaging in evergreening has been pervasive, with many arguing that the current IP system allows large numbers of new rights to be attained for relatively trivial innovations relating to existing drugs. This is said to extend a drug’s exclusivity and tie up copycat producers in litigation, preventing market entry.

“Too often branded companies are seeking to patent features of the drugs that don’t represent true innovation. In our view, that is done in an effort to stifle competition, with the most common tactic being to build patent thickets,” comments Rachel Sher, deputy general counsel of generic drug company representative the Association for Accessible Medicines.

A powerful illustration of this argument came in August 2018 in a report released by I-MAK. “Overpatented, Overpriced: How Excessive Pharmaceutical Patenting is Extending Monopolies and Driving up Drug Prices” claimed that an average of 125 patents have been filed for the country’s top 12 best-selling drugs, with 71 rights being granted for each treatment. The mean length of total patent exclusivity claimed for the blockbuster franchises is 38 years, which the authors argue constitutes “systemic abuse” of the IP system, where inventions are typically granted up to 20 years of patent protection.

Evergreening has been particularly controversial, partly due to several high-profile patent litigation settlements relating to AbbVie’s Humira, which has a US patent for its active ingredient that expired in 2016. Having applied for 247 Humira-related patents, the Illinois company is said to have been granted 132 – some of whose terms extend to 2034, and 53 of which were applied for in 2015 and 2016. Large numbers of these secondary rights have been asserted in litigation against producers of potentially cheaper biosimilar versions of the drug – and with great success; AbbVie has reached highly favourable settlements with Amgen, Samsung Bioepis, Fresenius Kabi, Mylan, Novartis and Sandoz, which have agreed to delay US market entry until 2023 – after which they will pay a royalty fee.

The response to the perceived abuses of the patent system by pharmaceutical companies has been vehement as a result of growing political frustration over the high price of prescription medicines – and healthcare in general – in the United States. According to statistics from the Organisation of Economic Cooperation and Development, US patients spent an average of $1,112 on prescription medicines in 2017 – 44% higher than in the next most expensive jurisdiction, Canada, and more than double that paid by patients in the United Kingdom.

As revealed by I-MAK, the country’s 12 best-selling drugs have increased in price by an average of 68% since 2012. In addition, US voters from across the political spectrum now rank lowering drug prices among their highest and most urgent political priorities. President Trump has repeatedly stated that this is also one of his top priorities.

The prospect of anti-patent reforms

Against this background, a number of proposals have been made to reform the US patent system in ways that are hostile to pharmaceutical rights holders. Legislators across the board – but especially in the Democratic Party – have taken aim at pharma patents. For example, the Medicare Negotiation and Competitive Licensing Act seeks to lower drug prices by making use of compulsory patent licensing – a step which was previously unthinkable in the United States. Senator Bernie Sanders recently said that he would allow the government to strip medicines of their patents.

Several civil society organisations are pushing for radical changes too, with I-MAK seeking to “raise the bar for the inventiveness standard” in order to address the “epidemic of overpatenting”. It also advocates a complete ban on continuation applications and an expansion of the grounds on which a patent can be challenged in administrative review before the USPTO.

James Love, director of Knowledge Ecology International, told IAM that he would like to see several life sciences technologies become completely ineligible for patent protection and government spending replace the revenues achieved by monopoly pricing. He argues: “In the area of medicine, the fact that the patent system effectively kills people, by denying them access to a known treatment, should be acknowledged as a pretty serious flaw.”

While critics of the patent system as it applies to pharmaceuticals are yet to speak with one voice and the Trump administration is unlikely to focus on IP reform in order to bring about a reduction in drug prices, a negative view of life sciences patents certainly seems to be on the ascendant.

Recognising the danger

This growth in political hostility is causing concern among life sciences innovators and their representatives, who are keen to push back. Deputy general counsel for intellectual property at the Biotechnology Industry Association, Hans Sauer, told IAM: “I do think there is a problem with the public narrative around pharmaceuticals patents. Everybody who reads newspapers in the United States will come into contact with the concept of so-called ‘evergreening’ and the false idea that innovators are extending monopolies with new patents for old drugs.”

Nicole Longo of PhRMA – which represents the country’s major pharmaceutical companies – argues: “There are a lot of misconceptions regarding biopharmaceutical patents and innovation, and a number of proposals overlook the value of patents in fostering continued medical innovation here in the United States.” Indeed, PhRMA has increased its lobbying spend considerably in recent years, from $19.62 million in 2016 to $25.43 million in 2017, and rising a further 35% year-on-year in the first three months of 2018.

Global head of IP policy at Novartis, Corey Salsberg, also admits that he has concerns about the public perception of the patent system: “Patents in general, irrespective of field, have suffered from a significant ‘image problem’ in the United States for the last several years, largely due to concerns over ‘patent trolls’ and the associated narrative. This has resulted in significantly heightened media coverage and public awareness of patents and patent issues, which unfortunately has been overwhelmingly negative. Against this backdrop, the broader focus on drug pricing in today’s political environment and the high-profile nature of the first patent litigations under the Biologics Price Competition and Innovation Act have put biopharmaceutical patents in the spotlight.”

Any move to significantly curtail the patent rights available to pharmaceutical companies would have a major impact on life sciences innovators, which rely heavily on exclusivities to recoup (and make a profit on) large investments in R&D. According to Deloitte, the average cost of bringing a new drug to market had risen to $1.99 billion in 2017 from $1.18 billion in 2010. Moreover, many pharma R&D projects fail, with only a small minority of assets ever being brought to market. Those new drugs that do make it to market are often launched well into their patent terms. Therefore, major anti-patent reforms would risk reducing the incentives for innovation in the sector and would inadvertently have a negative effect on future health outcomes.

Paul Fehlner, former head of intellectual property at Novartis and now president and CEO at ReVision Therapeutics, is clear on what he considers to be the challenges facing the industry. “The danger is that the law of unintended consequences will kick in if the US patent system is further modified,” he warns. “The patent system has already been eroded, which makes the country a less favourable environment for innovation.” He highlights the fact that the United States has fallen down the US Chamber of Commerce ranking of global patent systems and concludes that “attacking the patent system is probably the least effective way to address the issue of high drug prices”.

Longo echoes Fehlner’s argument. “Strong patent protection is important for maintaining the global leadership of the United States, and industries that drive economic development rely on strong patent protections, including the aerospace and biopharmaceutical industries,” she explains. “The robust US patent system promotes competition and gives innovator companies certainty that their invention is protected, while also making the specifics of the invention public so other innovators can learn from it and use it as the foundation for future invention and discovery.” Longo continues: “For the biopharmaceutical industry specifically, strong and reliable US patent protections for medicines have helped keep jobs here, maintain US global leadership in medicine development and speed up access to new medicines.”

Table 1. Patent protection for the US top 12 best-selling drugs

Average number of patent applications filed

125

Highest number of patent applications filed

247 (Humira)

Average number of patents granted

71

Highest number of patents granted

132 (Humira)

Average length of patent protection sought

38 years

Longest patent protection sought

48 years (Herceptin)

Source: I-MAK report, “Overpatented, Overpriced: How Exessive Pharmaceutical Patenting is Extending Monopolies and Driving up Drug Prices”, August 2018

Making the case for patents

In present circumstances, making the case for the value of patents as a driver of healthcare innovation is essential, says Salsberg. “As a starting point, it’s important to educate law makers and the public about the critical role that patents play in enabling biopharmaceutical innovation. We need to do a better job of explaining that – particularly in our field – patents are not so much a reward for inventing something new as they are an incentive to engage in the type of innovative R&D needed to invent and develop new medicines in the first place.”

He continues: “Most people don’t realize that every approved medicine is actually the end product of a very long and arduous R&D process that, on average, takes 10-15 years, involves up to 10,000 failed candidates for every success, and costs billions of dollars to develop. If people had a better understanding of what really goes into inventing and developing a medicine, how the patent system makes that possible, and how every medicine in existence today is a product of the system, that would likely go a long way to increasing public and political support for the system.”

“It’s also important to explain where our industry is heading in terms of innovation, and how central patents will continue to be to enable the future of medicine,” Salsberg adds. “We are in the very early stages of a true revolution in medicine with the invention, development and introduction of the first CAR-Ts and gene therapies, and the convergence of medicine with digital technologies and artificial intelligence. Given how nascent these powerful technologies are, now is a critical time to ensure that the United States has the right incentives in place to enable their development, and to ensure that the United States remains a leader in these fields.”

Table 2. Political priorities for US voters (percentage of voters saying extremely important)

 

Taking action to lower prescription drug prices

Raising the current $7.25 an hour federal minimum wage

Taking action to repeal or replace the Affordable Care Act, also known as Obamacare

Reducing budget deficit and federal spending

Total

40%

33%

26%

30%

Republican

30%

14%

53%

36%

Democrat

51%

42%

18%

29%

Independent

36%

29%

21%

30%

Source: Politico/Harvard poll 30 August to 3 September 2017

Questioning the evergreening narrative

Maintaining or regaining public and political support for strong pharmaceutical patent protection requires an effective response to concerns about the use of follow-on patents to evergreen IP protection for drugs. While most people appreciate the need to reward inventions with patents, they will strongly oppose what they perceive to be the use of IP rights to unfairly extend market exclusivity for healthcare products. Although the figures presented in the I-MAK report will lead many to conclude that the patent system currently offers too much monopoly protection to innovators, there is also a strong argument to be made that secondary patents are crucial for encouraging innovation that brings real value to patients.

“Much of the criticism over ‘secondary’ patents stems from a series of misunderstandings about what they are, how they work, and the role that they play in the system,” says Salsberg. One key misapprehension, he argues, is the belief that patents are granted for medicines, when in fact they are granted for inventions. “This is a critical distinction because, like most other complex forms of technology (eg, cars, smartphones, electronics), innovative medicines are typically comprised of many different inventions.”

Contrary to the view that follow-on patents often protect trivial innovations, all biopharmaceutical patent applications must meet the same inventiveness standard as any other patent application. “The fact is that the invention of a new substance is usually just the beginning of a much longer process that entails years of further investment, innovation and development to create a safe and effective medicine,” Salsberg emphasises. He goes on to stress that patents obtained after a medicine is marketed do not constitute an ‘abuse’. “The patent system has in fact expressly allowed and encouraged ‘improvements’ to existing technologies since its inception in 1791, in recognition of the importance that incremental innovation plays in advancing scientific and technological progress.”

In the case of biopharma innovation, this may include developing a new form of the substance; formulating it with the right additional ingredients; figuring out the disease or conditions for which it is best suited; determining the right dose or dosage form; and inventing new ways to manufacture it to scale and quality.

As Salsberg explains: “Each of these separate inventions represents an important contribution to a finished medicine that can be patented. While we sometimes use the term ‘secondary patents’, it is important to understand that these are distinct inventions within a medicine, not a ‘second’ patent on the same invention or an extension of a first patent. Every one of these inventions must also separately meet the requirements for patentability.”

Perhaps the most important point overlooked in public discourse is the fact that follow-on patents covering new innovations relating to approved medicines do not extend patent protection on those earlier inventions. Much of the discussion surrounding pharma patents implies the opposite.

Salsberg concludes: “When innovators seek new patents relating to existing medicines, they do not relate to any aspect of the medicine that already exists, but only to one or more improvements to the medicine, such as a new formulation or a new medical use for the product. These patents do not cover the original formulation, substance or use, and do not extend any earlier patent that covers those aspects.”

This point is echoed in “Patentability Standards for Follow-on Pharmaceutical Innovation”, published by Timo Minssen, Eric Solovy and Christopher Holman in the Biotechnology Law Report. The authors of the article explain: “The assumption is that follow-on patents are used to extend the effective term of patent protection for a drug beyond that provided by an initial patent. In these circumstances, the concern over such so-called evergreening is, however, to a large extent illusory. Once the primary patent expires, there is no patent-based restriction on the ability of generic competitors to bring competing versions of the original formulation to market.”

Figure 1. Average cost of bringing an asset to market for large biopharmaceutical companies

Source: Deloitte

The benefits of secondary innovations

Secondary patents often protect inventions that bring substantial benefits to patients and provide important incentives to develop those innovations. As Salsberg describes, “these patents frequently represent life-changing and life-saving innovations for patients, such as the ability to treat new diseases (new uses), bring medicines to new populations (pediatric formulations or heat-resistant formulations for tropical environments), help with drug dependency (abuse-resistant formulations), and improve patient compliance (fixed dose combinations). Some of the most important breakthroughs in medical history were actually new uses of existing products”.

Minssen, Solovy and Holman argue that patents on extended release formulations, often accused of facilitating evergreening, “in fact can provide substantially improved therapeutic outcomes for patients”. They conclude: “The availability of a drug that can be taken once a day (instead of multiple times throughout the day) has been shown to improve patient compliance, a significant issue with many drugs, particularly in the case of drugs taken by patients with dementia or other cognitive impairments. The process of generating and obtaining FDA approval for a modified-release formulation is expensive and often fraught with unpredictability. Without a patent incentive, drug companies would be less inclined to invest in developing these products.”

Originally studied as a potential cancer treatment, azidothymidine (AZT) was shown to be effective in the treatment of HIV following further R&D. If a patent had not been available for this new medical use, no patent protection would have been available for – and little incentive would have existed to invest in developing – AZT as an HIV drug. Osteoporosis treatment Evista is another interesting example. Also studied originally as a possible cancer treatment, Evista was protected by a patent granted in 1983, which had only three years until it expired when the FDA approved it in 1997 for use in treating Osteoporosis. Arguably, without a new medical use patent, Eli Lilly would have lacked sufficient incentive to bring the product to market.

Sauer suggests that these points need to be better understood: “Any debate around this subject must include a fair acknowledgement that drug products – and the improvements made along the way – contribute real value for patients and providers. Often, I am baffled to hear no acknowledgement being made that these innovations are actually valuable. I don’t think that companies should be blamed for making their products available for treatment of other diseases that were not envisioned, or for studying a drug to see if it is safe for administration to children instead of just adults, or for developing products that have a more stable shelf life. We need to talk more about the real contribution of these innovations.”

Figure 2. Return on R&D investment for large biopharmaceutical companies

Source: Deloitte

Biologics and secondary patents

However, responding to criticisms about patent evergreening is becoming both more difficult and more important as biologics – complex drugs made from living cells – assume an increasingly important role in healthcare, as well as in IP disputes, such as those involving Humira. This is because the collections of patents pertaining to biologics tend to be much larger than those that relate to small molecule drugs. While innovations relating to a small molecule drug typically produce a handful of secondary patents, those surrounding biologics often produce dozens of patent applications and patents – as shown by I-MAK’s report.

Critics of the pharma patent system may object that, while expensive ongoing innovation relating to new medical uses or improved formulations may justify a handful of additional patents relating to a drug, it is difficult to see how it could merit the large patent thickets that protect many of the major biologics franchises. This argument is also likely to resonate with the general public.

Sauer retorts that the higher number of patents gained for biologics reflects major technological differences between them and small molecule drugs. “There is more technology packed into making a successful biological product on average than a successful small molecule product. Biologics often have more indications and may warrant greater ongoing R&D investments. It is well understood that the quality of a biologic product depends on the way it is made, so there are more likely to be patents for methods of manufacturing, purification methods and the cells being used to produce the drugs. There is also an incentive to improve the methods of administering these drugs.”

Follow-on patents and competition

To what extent do secondary patents impede competition from approved biosimilars in practice? First, while a copycat drug producer may be blocked by secondary patents from selling a treatment in a particular formulation or for a protected new medical use, it will not be precluded by law from marketing the original off-patent version of the drug.

Second, many follow-on patents are narrow in scope, allowing for design-arounds. For example, a patent on a particular salt form can be circumvented by using another salt – of which many are suitable to be used in drugs. Holman, Minssen and Solovy explain: “If a patented invention is insubstantial, then the patent should have an insubstantial effect on the availability of drugs on the market, since prior treatments remain available.”

The same applies to biologics and biosimilars, as Sauer emphasises: “These secondary patents would not necessarily block market entry. Maybe some of these patents could be designed around. The FDA does not require the biosimilar product to be produced by exactly the same manufacturing method as the original, for example. And biosimilars are not required to be sold for all the same indications as the reference product.”

However, this is not to say that secondary patents have no effect on competition. “If a patented invention provides truly substantial benefits when compared to pre-existing products, then it might very well be the case that the patent will significantly impede competition during the life of the patent,” Holman, Minssen and Solovy note. But this is because of the advantages offered by the patented secondary inventions, not because protection of the drug itself has been extended.

In practice, the inability to sell the most effective version of a drug or to market it for treatment of a particular condition will often reduce the commercial incentives for a generic company to produce or sell a copycat, and may make purchasers reluctant to buy it. This is a problem for biosimilars, which are expensive to develop – costing between $75 million and $250 million, in contrast to between $2 million and $3 million for a small molecule generic drug, according to Sandoz.

The resolution of patent disputes can significantly delay the market entry of copycat drugs. This is the case in biosimilars litigation as the rules are not as clearly defined as those set out for small molecules disputes in the Hatch-Waxman Act and because such litigation can be highly complex when large numbers of rights are asserted, as in the Humira disputes.

Yet, as Sauer points out, six out of 15 approved biosimilars have been launched despite the existence of secondary patents. He adds: “Often biosimilar litigation will not be about whether the biosimilar can enter the market at all, but the nature of its market entry – what indications it can be used for and the terms of its use. That is not often recognised in public discourse.”

Sauer also stresses the importance of the success of generic small molecule drugs in the US market: “Evergreening is a big red herring. People have studied Hatch Waxman drugs for many years. You can measure how long it takes from first approval to generic entry – 13.2 years has been the average time for small molecules. That was true in the 1990s and continues to be true today. I never see that number other than in the professional literature. Generics are not getting to the market any later today than they did 20 years ago, but they are getting more market share. In the United States today, 90% of all prescriptions are generic drugs. They take 50% of the market within six months.”

Restoring public confidence

Turning the tide in recent political controversies requires a number of commonly held misconceptions about the nature of the drug patents awarded to innovators to be challenged and the value of IP rights to be more effectively communicated to legislators and the general public. The rise of biologics makes this especially important.

However, this may not itself be enough. An increase in the take-up rate for biosimilars and a subsequent drop in the price of medicines would also go a long way in assuaging public concerns. The difficulty of litigating biologics patent disputes requires clearer judicial or legislative guidance on how such disputes are to proceed. As Fehlner suggests, copycats could achieve greater market penetration if purchasers gave more thought as to whether it is worth paying the cost of the latest formulation of a drug or method of using a medicine, or whether it is better on balance to purchase earlier off-patent versions of a drug. It may also be commercially viable for pharma innovators to license more of their secondary patents to competitors for a royalty fee, as Fehlner suggested in an IAM article in 2018.

Innovators would also do well to avoid actions intended to circumvent aspects of the patent system that have been set up by the government, such as Allergan’s 2017 attempt to shield its Restasis patents from controversial inter partes review proceedings by transferring them to the St Regis Mohawk Native American tribe, which claimed that its sovereign immunity protected it from such challenges. In addition to being a legal failure, the move was a PR disaster, prompting a torrent of vehement criticism directed not just at Allergan, but also at “unscrupulous patent holders” in general.

Salsberg comments: “We believe it is important that the system continue to ensure a high level of patent quality through the examination process and enable the fair and expeditious resolution of patent disputes. Both patent owners and challengers should participate in good faith in the legal processes that Congress and the Courts have put in place to adjudicate patent disputes. All of these actions should help to improve public confidence in the system.”

Further, rights holders would be well advised to avoid drastic price increases that could compromise patient access to medicines; although many of the most extreme examples of price gouging (eg, Martin Shkreli’s Daraprim) relate to off-patent drugs.

Sharing the risks of drug development

Many of the individuals that IAM spoke to do not believe that branded pharmaceuticals companies can be expected to lower the cost of drugs unilaterally.

For example, Fehlner called on other players in the healthcare sector to share more of the risks associated with innovating, developing and launching new products. “In order to see a fall in medical costs it is important to see more sharing of the risks involved in drug innovation,” he stated. “Tens or hundreds of millions of dollars’ worth of clinical development is necessary for clinical approval of a drug or indication. On top of that, there is the significant commercial risk of whether or not people will buy the product. The only way to overcome that at present is to have large marketing and sales campaigns, which pharma companies get criticised for. Drug companies also have risks associated with liability. Many people complain about drug pricing, but no other organisations are prepared to share these risks with pharmaceutical companies.”

He concluded: “The authorities that approve medicines and the payer community need to take a more active role in ensuring that value-adding medicines are available to patients. This could mean taking on some of the burden of encouraging the use of meaningful and effective products, so that access is less dependent on sales reps visiting doctors and persuading them to buy medicines. At the moment, pharma companies spend more on marketing and sales than on research and development. Cutting some of those costs and increasing the uptake curve would mean that companies could operate profitably, selling their products at lower prices.”

Debates about the price of medicines in the United States must look beyond pharmaceutical companies and their patent strategies.

Action plan

The US pharmaceutical patent system and branded pharma patent strategies are facing unprecedented criticism from civil society, legislators and even the Trump administration.

  • It is crucial for industry players to put forward their side of the argument and to effectively highlight the importance of patents for healthcare innovation.
  • Better public understanding of secondary or follow-on patents is important for maintaining public support for the IP system.
  • Promoting greater biosimilar competition is also key. Creative licensing models are one way of achieving this, while greater willingness among consumers to consider purchasing off-patent versions or formulations of a drug could also make a difference. Clearer legislative or judicial guidance on biosimilars patent litigation is also needed.
  • A decrease in medical costs cannot be brought about by pharma companies alone. A greater sharing of the risks associated with innovation may be required.


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