Washington Report: Treating Patents

Patent issues have moved to center stage in Washington. In June, the Supreme Court ruled unanimously that pharma companies can do research on patented materials without infringing on intellectual property rights. Patent-extension proposals continue to pop up as incentives for desirable new drug research. Congress has launched a serious effort to overhaul the current US patent system and policies. And, somewhat ironically, industry strategies for transferring valuable patent rights to overseas subsidiaries put pharma companies in a prime position to benefit from a one-time tax break for companies that bring some of those foreign profits back to this country. (See "Bringing It All Back Home.")

Jill Wechsler

Not Just for Generics

It may seem unusual that a court ruling challenging patent protections is considered a victory for Big Pharma. But the decision was supported by pharmaceutical companies, along with the Justice Department, as a way to spur biomedical research and new-drug development. If there is any loser, it's small biotech companies, which may find it harder to negotiate licensing deals for patented compounds in early research stages. And it remains to be seen if, in the long run, the ruling undermines intellectual property protections on a broader basis.

Bringing It All Back Home

In the Integra Lifesciences v. Merck KGaA decision, the court confirmed the status of the Bolar Amendment under the Hatch-Waxman Act of 1984, which sought to speed up the development of generic drugs by allowing generic makers to conduct tests on patented compounds prior to patent expiration. The decision makes it clear that innovator firms have a right to experiment with patented materials, so long as the activity is "reasonably related" to the development of a new medicine. The safe harbor created by Bolar isn't "limitless," according to the justices, and has to involve research likely to yield an application to FDA, but it isn't limited strictly to generic drugs. And the justices agreed that even though a research effort may fail ultimately to bring a new drug to market, that's not a reason to limit access to useful compounds and research tools.

Integra had sued Merck of Germany for conducting animal research involving its patented molecules and proteins. A lower court, taking a narrow view of Bolar's scope, agreed with Integra that this was infringement. The Supreme Court, however, decided that Bolar could be interpreted much more broadly to allow the use of patented compounds in early research.

Several pharma companies, as well as the Justice Department and consumer groups, filed amicus briefs urging the court to clarify what types of research are protected by Bolar. But many companies have had mixed feelings about the case. The court's broad interpretation of Bolar supports research activities by large pharma companies, but it also opens the door to greater use of compounded materials by all parties, which could erode intellectual property protections. Eventually, industry may call on Congress to clarify the scope of Bolar as it applies to research other than for generic drug development.

The ruling may lead to changes in the way pharma and biotech companies negotiate investments and partnerships. Small companies may find it more difficult to structure deals that offer up-front payments or royalties for access to compounds and tools. This may not be devastating over the long run because most pharma companies want to avoid court battles that could delay bringing a promising drug to market, and are thus likely to seek licensing arrangements once they move into more advanced development. But small research firms may find revenues from exploratory licensing deals drying up.

Eyeing Extensions

Meanwhile, policy makers continue to look at patent extensions as incentives to encourage research on certain kinds of medical products or products for certain patient populations. Patent extensions are the prime carrot in new legislation to boost research and development of vaccines and therapies to counter bioterrorism. And companies can win six-month patent extensions on drugs by conducting research that leads to pediatric labeling.

Now FDA officials are talking about patent extensions for companies that develop personalized drugs based on pharmacogenomic research. An FDA working group is preparing a document on how existing incentive programs, such as those for orphan drugs, could be adapted to pharmacogenomic products. Felix Frueh, associate director for genomics at the Center for Drug Evaluation and Research (CDER), is heading this effort, which will include a final guidance on how to submit pharmacogenomic data to FDA. It will discuss how companies might qualify for three-year market exclusivity based on orphan drug status or a new indication by using pharmacogenomic data to stratify patient populations.

Patent Office in Trouble

Of course, in order to protect or extend patents, one has to apply for one from the US Patent and Trademark Office (USPTO), a process that is getting longer and more expensive. USPTO has been overwhelmed by patent applications for increasingly complex technologies. It currently has more than a half-million unexamined applications, and the backlog is projected to hit one million by 2010. Reform is in the air, but the debate is pitting biotechnology and pharmaceutical companies against other high-tech sectors over policy changes that will inevitably create winners and losers.

Patent experts, academics, and industry representatives have been discussing patent regulatory and legislative changes for several years, and now the debate is moving to Capitol Hill. Representative Lamar Smith (R-TX) kicked off the effort in June by introducing the Patent Reform Act of 2005 (HR 2795). The bill aims to reduce legal challenges to patents and thus make the system less costly and more efficient.

Probably the most significant change would shift the United States from a first-to-invent to a first-to-file patent award process. This would harmonize the US patent system with the rest of the world, a move welcomed by global pharma companies despite the high cost and turmoil guaranteed to accompany such a significant reform.

The legislation also contains a number of controversial provisions that aim to simplify patent legal challenges and reduce the overall cost of protecting intellectual property rights, but not always in ways that pharma companies support:

Curbs on injunctive relief The bill would make it harder for patent holders to gain injunctive relief against patent infringers pending legal resolution of a patent case. High-tech computer companies with hundreds of patented products back the change as a way to gain relief from frivolous patent challengers. Pharma companies, however, tend to have fewer but higher-value products, and they rely on injunctive relief to protect intellectual property rights.

Streamlined patent challenge process The legislation proposes a nine-month period for challenging newly issued patents through a faster administrative process. The aim is to resolve many early disputes quickly, which pharma and biotech companies generally support. Industry opposes a related proposal that would permit a second window for post-grant opposition review which could make initial patents less secure.

Eliminating the "best mode" requirement Inventors no longer would have to disclose the best mode for producing an invention, a change opposed by generic drug manufacturers.

Jill Wechsler is Pharmaceutical Executive's Washingtoncorrespondent.