The pharmaceutical industry relies on innovation to develop new medical treatments, but bringing a product to market is high risk and high cost. It can take decades to develop a new medicine and cost hundreds of millions. What role will IP management play in protecting pharmaceutical companies in the future? Casey Fowler, VP of IP Search, CPA Global writes.
Casey Fowler
Protecting the process
IP rights protect the extensive investment in research and clinical testing that must take place before a new product can enter the market. It can take 10–15 years to develop a new medicine - from the earliest stages of compound discovery until its approval for use by the public. The cost of developing a new medicine is also expensive - $2,558 million according to analysis conducted by the Tufts Centre for the Study of Drug Development.
Capital invested in the pharmaceutical industry is almost all directed to clinical research and drug trials, rather than the manufacture of the final product. Copycats can replicate the manufacturing process for a new drug at a fraction of the cost. The threat of plummeting sales at the end of a long product lifecycle can be enough to discourage pharmaceutical companies from investing in R&D in the future.
The pharmaceutical industry relies on innovation to develop new medical treatments. By patenting IP, pharmaceutical companies can protect against low-cost reproduction of clinical research that undermines the work of IP owners and the substantial contributions of investors.
Finding a place in the market
Patents help pharmaceutical companies secure market exclusivity and create more opportunities for return on investment. However, the fight for market exclusivity has led to a number of patent challenges.
In 2015 global pharmaceutical company Novartis AG lost a patent fight with Torrent Pharmaceuticals over its blockbuster multiple sclerosis drug Gilenya. With $2.5 billion annual sales in 2014, Gilenya is the highest revenue generating drug for Novartis worldwide and contributes significant value to its IP portfolio. However, the US Patent and Trademark Office (USPTO) concluded that certain claims made by Novartis were “obvious” and did not merit patent protection. The first series of Gilenya patents will begin to expire in the US in 2019, leaving the market open for competitors and cheaper drugs.
Patent disputes following copycat activity is an active threat and pharmaceutical companies aim to obtain patents for the entire lifecycle of a drug including methods of manufacture and active ingredients, to minimise the likelihood of disputes.
The unique challenges with pharmaceutical patents
Patent protection for pharmaceutical companies is different from IP protection in other industries. Many technology-based inventions can be kept secret until they reach market, when products can utilise the full term of patent protection - 20 years. The high cost involved in research and development (R&D) means the majority of pharmaceutical companies apply for patent protection during research stages and before clinical trials. The average effective patent life for medicines is just 11.5 years.
Early patenting not only reduces the patent life of a product when it reaches the market, but shortens the time available for marketing a new drug. Pharmaceutical companies should consider obtaining patents for the broadest possible scope during the R&D process. ‘Methods of use’ and ‘Formulation’ patents can be filed later – at the clinical trial stage of drug development and when the products use is properly defined.
The issue of reduced patent life has been addressed in legislation in the United States, where patent applicants can now apply for a term extension. However, the time periods permitted for such extensions do not always equal the time lost. In the United States, patents can only extended for half the time period that was consumed by the regulatory approval process and for a maximum effective patent term of fourteen years.
Trade secrets are becoming an increasingly useful tool for pharma, particularly in the US where recent changes to guidelines for examination at the US Patent and Trademark Office have applied severe limitations on the patentability of natural products and methods using laws of nature. While patent protection in many territories is limited to 20 years from the date of filing, the period of protection conferred by a trade secret can be indefinite. Trade secrets entail significant risk but can speed up the process of drug development.
The great patent divide
Drug development requires significant funding, but with a strong patent system and a market free of price controls, the American pharmaceutical industry is rarely short of investment. The private sector, which focuses heavily on R&D, is largely protected by patents. But the public sector is far more open.
Until the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement in 1994, many developing countries provided little opportunity for patent protection for pharmaceutical products. While the countries that joined the World Trade Organisation (WTO) committed to providing stronger patent protection, less developed countries were not required to meet this obligation until 2016.
Successful research and development in pharmaceuticals is occurring in developing countries such as Brazil, China, Cuba, Egypt, India, Kenya, South Africa, and South Korea. These nations are at varying points of economic development, but each is considered an “innovating developing country” in pharmaceuticals.
If a pharmaceutical company cannot secure private investment, it may be forced to develop a new product in the public arena, making it harder to protect its ideas. Alternatively, it would need to resort to protection via trade secrets. The combination of poor patent protection and a lack of experience licensing IP to the private sector, means the development of commercial enterprises is much more difficult.
Generic ‘copycat’ companies also have access to a company’s drug development process when it is forced to take place in public. With little chance of patents being an obstruction, companies can quickly reproduce drugs cheaply and in large volumes.
To patent or not to patent?
Generic companies such as Ranbaxy Laboratories are increasingly taking advantage of the tedious pharma patent lifecycle. Ranbaxy reportedly reaped $500 million in sales from its knockoff of Pfizer's ($PFE) cholesterol pill Lipitor during its first six months on the market. The competitive nature of the market makes patents a critical form of IP management and protection. It is important that pharma companies seek an intelligent intellectual property management solution to provide competitor insight, manage the lengthy protection process and fuel insightful research and development. Patents can significantly reduce the risk of revenue loss and safeguard the pharmaceutical industry’s development and innovation for the future.