The Terminating the Extension of Rights Misappropriated (TERM) Act sets out that patents for pharmaceutical products expire at the same time as the earliest patent filed.
The aim of the legislation is to lower drug prices in the US by preventing what is known as “evergreening”, in which pharma innovators file patents with only marginal improvements to the original product with the goal of keeping generic companies off the market while maintaining market exclusivity.
“From a policy perspective, for the future of medicine and patients, this bill is highly problematic because it is essentially establishing you are not allowing people to benefit from IP rights except for one patent,” says the global head of IP for a US-based pharma innovator company.
“The presumption that you can’t exercise your patent right fundamentally misunderstands how patents work in the pharma space,”
Representative Hakeem Jeffries co-sponsored the TERM Act to address what he believes are unfair practises by pharma innovators to keep generic companies off the market.
He said: “This legislation would address the rising costs of prescription drugs by significantly limiting the process known as ‘evergreening’, whereby pharmaceutical companies make minor changes to a drug and file for a new patent on those trivial changes in order to extend their exclusivity and maintain high prices.”
One concern about the TERM Act among in-house counsel is that it questions the validity of all patents filed for a pharmaceutical product. Even if one patent has several years left on its term, so long as the original patent expires all others are assumed to be invalid.
“The USPTO examines the patent for inventive step and if they don’t think it’s inventive enough they don’t give the patent,” says the IP director of a UK-based innovator drug firm. “This legislation punishes everybody and it just means people will be less inclined to search for new drugs. People would be discouraged to optimise drugs if there is minimal reward.
“I can understand the rational given the political pressure to lower drug prices, but this bill seems like a very blunt instrument.”
According to the US-based global head of IP, at the root of the bill is a misunderstanding of the risks involved in researching and clearing all the regulatory hurdles. The patent system protects the few medications that do survive to market and allows drug companies to continue developing new products.
“If this bill passes it is one thing to say you can do away with patents for all drugs you’ve invented, but if we are told this is the law going forward, how can we invest all the billions of dollars in R&D? Most drugs fail; it’s almost 90%. Only about 10% get through the clinical trials phase.”
He says only one in five drugs will make back their R&D costs and while a rare few medications are blockbusters, most are not. Some drugs cost the company tens of millions of dollars from conception to market approval, with most of the money going towards the clinical trials. If all patents expire simultaneously, drug companies could be left with only a few years of exclusivity to make back their costs.
“Most of us understand medicine is a risky business and without a business model that includes the patent system we won’t have innovation. We have the private system and the patent system to thank for all these medicines,” he adds.
The senior director of IP at another US-based pharma innovator company believes legislators are reacting to the patents around the blockbuster biologics that have grabbed attention in the press. Medications like Humira were patented before most of the legislation governing biologics was drafted.
“The flurry of legislation that we’ve been seeing is somewhat unfortunate. The bills we are seeing are a solution to a problem that doesn’t really exist,” she says.
She explains that because biologics are such complex drugs, they would naturally need protection with many patents. Most new medications, however, do not have the same technology nor the same amount of patents.
With drug costs skyrocketing in the US compared to many other places in the world, politicians have focused on the patent system as a seemingly simple solution to lower prices. For some in the industry it feels like pharmaceuticals are being specifically targeted for their multiple patents in a way other industries are not.
“If you compare medicine to mobile phones, the phone will have thousands of patents compared to one drug. So patent thicketing is far more prevalent in telecoms than in it is in pharma or biotech, the issue is that nobody ever died from not having the iPhone 10,” says the UK IP director.
Another chief misunderstanding cited by pharma innovators is the feeling that legislators do not understand the complexity around discovering and testing new medicines.
“You aren’t dealing with a new iPhone, you are dealing with science and if you don’t get it right you kill people,” says the global head of IP affairs. “The point is this is hard work, it’s incredibly complex and hard to create new medicines, and we need to have a period of exclusivity, and bills like this make it impossible to do that by denying you exclusivity.”
Evergreening“It is a complete mythology that evergreening exists,” says the global head of IP affairs.
He explains that, contrary to popular belief, a medication cannot receive two patents for the same invention. Any new patent awarded is for a specific advancement in the medications such as an improved dosage or mode of administration.
“What the media do not understand is that when you get a new patent it is not on the product, it is on the invention. If I have got a patent on the core active substance I cannot get the patent on the same thing twice because it is no longer novel,” he says.
The UK IP director says that what this legislation does is punish the many pharma innovators for the sins of a few: “There are examples where people have filed patents that are quite shaky, however, the examples where practices were found to be illegitimate are very small in number.
“If you can say hand on heart there is a legitimate reason to filing a patent you shouldn’t be criticised for doing so,” he says.
While this legislation will impact the evolution of medication by discouraging pharma companies to conduct research, it will do nothing to lower drug prices.
The head of IP affairs says: “The effect will be to have fewer innovative drugs launched in the US. The other point is that pricing has nothing to do with the patent. What the patent does is give you exclusivity to get your return on investment. The pricing is not determined by how many patents you have.”
Legislators are facing increased political pressure by their constituents to lower drug costs. With the increased media attention for the rising prices of essential medicines such as insulin and asthma inhalers, the IP director believes patents have become an easy target for reform.
“Going after the patent system is misguided criticism, but it is quite common for drug prices to be higher in the US than in Europe. Trying to work out why that is would be a good place to start,” he says.
The senior director of IP suggests that legislators look more closely at the complex health care system in the US to understand how health care can be delivered more effectively and cheaply to patients.
“The insurance system is awfully complex. With the health care system things are so complicated and not transparent enough that people who are interested in saving money or paying a fair price actually find it quite difficult because of the practises some doctors and hospitals use up front,” she says.
In these very charged political times the right and left wing factions of government have come together to address the problem of getting affordable medication to patients. How Congress can achieve this goal remains to be seen.
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