Protecting IP Throughout the Product Lifecycle

Now that patents on several blockbuster drugs have expired, the industry-feeling the pinch-has focused its attention on intellectual property. Because every additional month of market exclusivity can mean an extra $50 million or more in revenue, pharma companies have gone to great lengths to block the entry of generic competition.

That competition, in turn, has changed the industry's approach to drug discovery and development. The most immediate change has been Big Pharma's increasing reliance on in-licensing, mergers, and acquisitions to stock dwindling drug pipelines with promising late-stage compounds. Although that represents a boon for biotechs and small to mid-size pharma companies, it is does not address the more fundamental challenges of drug development today. Faced with fewer blockbuster prospects in the pipeline, to maximize a product's profit the pharma industry has been forced to take a closer look at lifecycle management practices.

One primary area that has received greater attention is intellectual property (IP) strategy. Industry leaders have shifted from a reactive stance, with heavy reliance on a few early-development-stage patents to a more integrated strategic approach that blocks entry by competitors while extending the IP protection of highly profitable drugs.

This article examines the state of pharma's intellectual property protection, including how proposed regulatory changes may affect the formulation of an IP strategy. It details the tools and resources necessary to support IP strategy formulation and describes a specific roadmap that will help industry decision makers maximize the profitability of product franchises.

Patent Basics

Patents are granted based on the novelty of the invention at the time of filing. The holder is granted a right to exclude others from making, using, selling, or offering for sale any product covered by the patent. US and foreign patents typically expire 20 years from the earliest effective filing date.

The two key aspects of a patent are the priority date and the claims. In the United States, the patent system is based on the concept of "first-to-invent," in which inventorship and priority date are based upon the party with the earliest verifiable documentation of an invention. Most of the rest of the intellectual property world, however, is governed by a "first-to-file" system, in which the first party to file a patent application is granted inventorship and the associated filing date determines the invention's priority date.

In either case, a patent document having an earlier priority is held valid over a later patent filing that may cover similar subject matter. In addition, the breadth of a patent's coverage is defined by its claims. As a result, the acquisition of an early patent with broad claims can provide freedom to operate in an evolving market. Conversely, patents filed later must be distinct from the earlier literature and patents in that field, resulting in "narrow" claims. In many instances, holders of recent patents attempt to interpret their claims broadly but are tripped up by the patent file history that documents a narrow scope adopted during the earlier examination process.

Prior art is a term used to define the state of technology at a given time. Specifically, under Section 102 of US law (Title 35, US Code) prior art can be a patent, prior use, or publication anywhere in the world. In the United States, a piece of prior art must have been disclosed and publicly available at least one year before the filing date of the claimed invention. Under those rules, identification of a US journal article, or a German, Russian, or Japanese patent covering matter similar to that claimed in a patent and published a year prior to its filing, can undermine the patent's validity.

Many patents can be invalidated based on technicalities or worldwide prior art. Innumerable high-profile patents have been shown to be vulnerable to assault based on anticipatory references or to contain such a narrow claim scope that their effectiveness was limited.

The Hatch-Waxman Act

In the pharma industry, both US patent law and FDA govern a product's exclusivity. One example of that interaction

is FDA's ability to confer an automatic six-month extension to a drug's marketing exclusivity period if the manufacturer completes a pediatric clinical trial. The "Drug Price Competition and Patent Term Restoration Act," also known as Hatch-Waxman, made several specific modifications to FDA's patent regulations.

Passed by Congress in 1984, the act was intended to strike a balance between the need for innovator companies to recoup their research and development costs, while simultaneously offering consumer discounts by encouraging the development of generic alternatives.

Two key aspects of Hatch-Waxman influence the formulation of IP strategies for innovator pharma companies. First, it specifically permits generics manufacturers to produce, develop, and test their copies of patented products before the patent has expired-something that would ordinarily be considered an infringement. Second, it forces FDA to withhold approval of a generic product for up to 30 months if the manufacturer believes that introduction of a generic will infringe on an unexpired patent covering the drug. The 30-month stay on the generic's approval remains in effect until either

• all patents at issue expire

• the courts deliver a ruling of non-infringement or patent invalidity

• the 30-month period expires.

Hatch-Waxman has played a central role in companies' strategies to defend their patent rights, as illustrated by AstraZeneca's approach to protecting the Prilosec (omeprazole) franchise. AZ obtained lengthy exclusivity extensions through the combination of a successful pediatric trial and the filing of multiple infringement suits against generics manufacturers threatening to enter its market.

The regulatory landscape pertaining to Hatch-Waxman is currently in a state of flux. Until recently, there was no limit on the number of 30-month exclusivity extensions a company could invoke. But this June, FDA altered its regulations to limit pharmaceutical companies to a single 30-month stay. Also, the Federal Trade Commission (FTC) is taking aim at the practices of Bristol-Myers Squibb, GlaxoSmithKline, and others who have been accused of abusing the Hatch-Waxman statute by filing for 30-month exclusivity extensions based upon "frivolous" patents covering non-innovative features-pill shape, color, or packaging. So-called "defensive patenting" is a tactic that FTC has threatened to remove from the arsenal of innovator companies to ensure that exclusivity extensions are awarded only when truly innovative concepts are at issue.

Build a Strong Patent Portfolio

At a basic level, an IP portfolio must provide freedom to operate in desired markets. Companies need to conduct a region-by-region freedom-to-operate analysis to identify all IP that may cover their products and associated processes. At this stage, any relevant patents not under the company's control must be licensed, or the company must be prepared to argue that those patents are invalid based on the prior art.

Before reaching that point, however, executives must make critical decisions about how to construct the portfolio. The franchise's long-term goals will directly affect the type and scope of the patents that should be filed. In the past, the industry depended on early-stage "composition of matter" patents with narrow, easily defensible claims. Although it guarantees freedom to operate in the desired markets, that strategy is inherently limited in its ability to support lifecycle management goals. That shortcoming is illustrated by Lilly's experience with Prozac (fluoxetine), in which the company's reliance on a single patent in the final years of market exclusivity left it vulnerable to an aggressive generics manufacturer. The alternative is strategic patenting, as demonstrated by AstraZeneca's savvy late-stage patent filings which bought the company the time needed to move consumers to its next generation product, Nexium (esomeprazole). Strategic patenting entails filing numerous patents during the drug development cycle. The filings must contain claims of varying breadth and should cover compounds currently under development while laying the groundwork for future generations of the drug.

At Every Step

To maximize the long-term profitability of a franchise, pharma companies must take several steps, both IP and non-IP, during the course of the drug's lifecycle. (See "Product Lifecycle Stages.")

Early-stage discovery. When researchers identify a promising lead compound, the company must file an initial set of core patent applications covering the specific composition of matter and any related compound classes or chemical structures. Those early applications may form the foundation for the patent protection and associated market exclusivity once various regulatory hurdles have been cleared. As a result, it is critical that their claims be both broad enough to encompass later versions of the drug, as well as narrow enough to withstand an invalidity challenge. A thorough freedom-to-operate study for the compound and its related structures is a prudent step to ensure that the patent fits those parameters.

Development stage. As researchers optimize the compound's toxicological and biological profiles, the company must file additional patents to cover the new compositions. At this stage, it is also crucial for the company to begin filing IP that covers the demonstrated in vitro biological activity and, by extension, the compound's potential therapeutic uses. Because those patents will also form part of the company's first line of defense, it is critical that their scope be sufficiently broad and still remain protectable. It is also important to mine both patent and non-patent art to explore all possible therapeutic avenues that the in vitro data may suggest.

Clinical stage. As the compound moves into the clinical stage, development team members must undergo a fundamental mindset change and start to develop a proprietary strategy. While they must meet the needs of the regulatory machinery by pinning down formulations, dosage forms, and manufacturing methods, they must also think about how to extend the franchise longevity. Thus, the patents filed during this time-mostly formulations and manufacture methods-must cover likely work-arounds that generic competitors will pursue.

After-market stage. Once FDA approves the drug, the clock is ticking with respect to how soon the company can expect to face the first challenge from a generics manufacturer. In recent years, generics companies have filed legal challenges earlier and earlier in a brand-name drug's lifecycle, often years before its patents have expired. Before the ink is dry on the new drug application (NDA) approval letter, the franchise team should be taking steps to extend and maximize market exclusivity. (See "After-Market Activity.") The key strategies in the after-market stage can be broadly divided into three areas: scientific, regulatory, and marketing.

Scientific approaches include modifications to alter the drug's pharmacokinetics or side-effect profile, including

• excipient/compounding changes

• controlled release formulations

• drug combinations

• delivery systems

• single-isomer formulations.

Those modifications-and their patents-represent the framework for the development of next generation versions, with minimal further investment of R&D or regulatory expense.

On the regulatory front, companies should pursue, when applicable, two preemptive strategies. FDA provides an incentive in the form of six extra months of market exclusivity for companies that run trials to demonstrate pediatric efficacy of a drug currently approved for adult use. Although that involves additional clinical testing, the revenue from six competition-free months often outweighs the expense.

The other regulatory strategy involves filing for patent term restoration based on a statute in Hatch-Waxman that provides manufacturers with up to five additional years of market exclusivity as compensation for patent life lost during abnormally long approval processes.

Another regulatory strategy, also associated with Hatch-Waxman, comes into play when an innovator company has been notified of a generic manufacturer's filing of a paragraph IV certification in conjunction with its abbreviated new drug application (ANDA). The generic company can file such a certification if it believes that the patent(s) currently providing exclusivity are invalid or not infringed by the generic product. In response, the brand-name manufacturer can respond with a charge that the generic drug will infringe a currently valid patent, thereby triggering a 30-month stay while any patent issues are settled.

Although any drug manufacturer can use that strategy, it is most effective in cases in which companies have constructed a strong, well integrated IP portfolio for the product, thus removing validity questions and increasing the likelihood of an infringement finding for any generic product brought to market.

Last, when regulatory strategies have been exhausted, companies can use marketing-based strategies. If a company is successful in developing a next generation product, it should look to optimally time the process of converting current customers. A superior marketing force is a powerful tool that can help achieve that kind of customer transition. Another option is the development and marketing of a generic or over-the-counter version by the branded manufacturer. Schering-Plough used the latter strategy to deal with the patent expiration of its best-selling allergy drug, Claritin (loratadine). Similarly, the development and marketing of a low-priced generic version can be a formidable tool in helping to stem erosion of a company's market share when initially facing generic competition.

Internal Conflict

Having a well thought out IP strategy is only half the battle. There is still the issue of how best to implement it. Research by Boston-based Goodman Associates has shown that intellectual property concerns in the pharma industry are more fragmented than in many other industries because of the long timelines associated with drug discovery and development. In addition, the varying, and often competing agendas of R&D, business development, marketing, and legal departments can further fragment an IP strategy. The responsibilities of those various groups give rise to an uncoordinated and occasionally incoherent IP approach. As a result, a drug's IP portfolio can remain relatively static after the discovery and development stages, resulting in a dangerous over-dependence on early filings.

One way to ameliorate the situation is to provide decision makers from all of those constituencies with the necessary resources to develop a sound IP management strategy. The overarching goal is to provide those individuals with crucial IP information from around the world that may affect the company's freedom to operate or the validity of the patents underlying their franchise. Database searching is important, but it is also limited because more than 50 percent of critical prior art can be missed in a key-word search. Company researchers must also manually search patents, in their entirety and in their original language, in key regions around the world. Given the volume of patent filings worldwide, information overload is a serious problem. The result can be an impaired ability to identify important technical trends and, consequently, poor decisions.

Using an IP visualization technique is an effective way to manage such material because it provides valuable competitive intelligence about key trends and facilitates off-line analysis of critical information. When based on a thorough and comprehensive IP search, it can provide a fact-based approach to organizing large amounts of data while helping to identify patent opportunities.

By arranging the patents covering Prilosec, Nexium, and the core omeprazole compound on a grid, where the X axis represents the priority date and the Y axis represents technology or clinical categories-such as delivery method, excipients and coatings, and disease applications-it becomes immediately obvious how AZ constructed and implemented its IP strategy. The technique, called patent mapping, can be a powerful aid in visualizing the IP landscape surrounding a molecule or technology. When each patent is viewed in the context of all other claims worldwide, anticipatory disclosures, novel features, innovative trends, and strong claims become evident. ("See Patent Mapping.")

IP Vision

Although some companies have begun to appreciate IP as a critical asset that can guide decisions on new product development, alliances, and acquisitions, and long-range R&D portfolio management, by and large, the industry does not fully understand or value IP. Operating units-business development, R&D, new product development, and marketing-that have need of reliable IP data and analysis are too often siloed. Many companies do not properly deploy or apply IP strategies, and the result is that the important decisions about how to allocate critical R&D dollars are divorced from IP strategy.

In a changing regulatory environment, strategic patenting at each critical stage of a product's lifecycle may become even more necessary. To implement an IP-oriented approach to lifecycle management, companies will need to improve how they organize and manage the IP function-from the way they mine and analyze prior art to how IP intelligence flows throughout the organization.

The emerging competitive environment-including the rise of combination therapies and the patenting possibilities unleashed by genomics and informatics-places a premium on the creation of strong, carefully designed IP assets. Senior managers must articulate an IP vision for their companies and communicate its implications for business development, R&D, and strategic planning.