All Posts Tagged With: "Pharmaceutical Patent"
Pharmaceutical Patent Profits Facilitate Innovation
Roy Bodem
Without the potential for patent profits, there would be no reward for innovative ideas that lead to beneficial products. These products are the technological advances that make life better. Pharmaceutical companies have the ability to develop new drugs that can prolong life and provide cures to diseases that affect people worldwide. Patents are especially important to these drug companies because they can guarantee profit and make all the time and cost put into developing their new drug worthwhile. A patent is an economic catalyst to these pharmaceutical companies who push to research new and beneficial drugs on the premise that they will be able to reap rewards by way of profits.
Profits for patented pharmaceutical represent a reward that pharmaceutical companies earn through years of research and development and only then will they be able to profit from their work. The patent system allows drug companies to profit from patents by prohibiting any other company from marketing and selling an identical prescription drug. This system seems to be the best way to provide drug companies with the reward of potential profit for the research and development spending that in necessary to develop new and innovative prescription drugs.
What is a patent?
A patent is a property right to a product and in the case of pharmaceutical companies is usually in the form of a chemical formula that may not be duplicated by any rival company. The life of a patent is 20 years from the time the patent is issued. (Lehman, 2003) This gives the company ample time to profit from its invention. An invention is “any new or useful process, machine, article of manufacture, or composition of matter.” (Lehman, 2003) This means that the inventor has the guarantee that that his or her product will be the only product of its exact kind on the market for 20 years.
Inventions can also be new improvements to previous inventions. New inventions are evaluated by National Patent Offices to compare new inventions with previous inventions that are similar to be sure that the invention is novel and not just an obvious replica of a previously patented invention. (Lehman, 2003)
Thomas Jefferson reviewed and granted the first patent and the patent review process has remained the same ever since. (Roth, 2005) Patents are reviewed by searching through previously granted patents to make sure that the patent is new and unique. This patent provides the researcher with the incentive to spend the costs, time, and effort to be granted a patent. (Roth, 2005) The inventor knows that his work will be rewarded with potential profits once a patent is granted because a patent ensures no competitor will be able to copy his or her idea and prevent the inventor from profiting. (Roth, 2005)
Patents must be enforced.
Patents are enforced by the National Patent Offices, World Trade Organization (WTO) and evaluated by the World Intellectual Property Organization (WIPO). (Lehman, 2003) These organizations provide the patent protection to those seeking the protection by giving judicial enforcement of the intellectual property rights. (Lehman, 2003) This means that a company could sue a rival if it felt its patent was being violated and have official documents at the National Patent Offices to substantiate its claim to a product.
Patents are available for a variety of products including prescription drugs. Patents in the pharmaceutical industry are somewhat different and possibly more important than in other industries because of the laboratory research and clinical trials that must be done beforehand. This research costs the pharmaceutical company and is usually accomplished through capital investment on the basis that the result will lead to profit for the company. (Lehman, 2003)
Research and Development
The U.S. patent system is effective and attracts investment from companies who want to profit from industry. The U.S. market is perfect place to a pharmaceutical company to grow and profit. Expenditures on research and development in the pharmaceutical industry in the U.S. went from $1.7 billion in 1977 to $26.4 billion in 2002. (Lehman, 2003)
The pharmaceutical industry in the U.S. is effective and turning out new and beneficial drugs each and every year. 2001 saw 402 new cancer medicines, 123 new treatments for heart disease and stroke, 83 new AIDS drugs and 176 new drugs for neurological diseases. These new pharmaceuticals are the result of patent incentive with companies expecting to have a return in their investment on the research and development of these new drugs. (Lehman, 2003)
The U.S. is the world leader in pharmaceutical profits and research for the development of new pharmaceuticals. Ninety percent of all the biomedical research done in the world is done in the United States. Sixty percent of the profits generated by prescription drug companies are earned in the U.S. (Hoen, 2003) Without the innovation of the pharmaceutical companies of the U.S. then, most of the new drugs on the market wouldn’t even exist. This must mean that the system for granting patents that generate profits for companies who do the research to get the drugs on the market in the first place is the best way to promote the creation of new drugs.
For example, Bristol-Myers Squibb spends over a billion dollars for research each year. Overall, drug companies spend more than $10 billion dollars every year on research. This spending has grown considerably in the past few decades as well, with research and development spending at only $1.5 billion in 1980. (Flint 1994) All this spending must payoff for the pharmaceutical companies or they will not be making such huge investments in researching new drugs.
Read the rest of this article on pharmaceutical patent protection.
Cipro and the Risks of Violating Pharmaceutical Patents
Thursday, November 15, 2001
by Frank R. Lichtenberg
When the threat of anthrax became a widespread concern, the Canadian government said it had serious doubts that Bayer, the owner of the patent for the anti-anthrax drug Cipro, could meet Canadian needs. Canada ignored the patent and ordered generic copies. In the United States, Sen. Charles Schumer expressed the same concerns and proposed that the U.S. government do the same. After Bayer said it could meet the needs of both nations, and after other drugs that are effective against anthrax were identified, Canada reversed its decision, and the issue was dropped in the United States for the time being.
But the proposal to override patents is certain to come up again as other drugs are needed, and as the population ages and demands drug treatment for an increasing range of illnesses and ailments. While overriding a patent might lead to a temporary increase in the supply of a drug, a great deal of evidence suggests that this policy would lead, in the long run, to a lower supply of innovative drugs, and poorer public health.
Research and development investment in general, and pharmaceutical R&D in particular, has made enormous contributions to the economic well-being and health of Americans. To have the incentive to undertake research and development, a firm must be able to get sufficient returns to make the investment worthwhile. The patent system is one of the most important ways in which the government can provide this incentive. Weakening patent protection (e.g., by government violation of patents) may have a chilling effect on private R&D investment, and therefore reduce the health and wealth of future generations.
Value of Medical Research.
A host of academic studies speak to both the value of medical research and the important role of economic incentives. For example, a major project sponsored by the Mary Woodard Lasker Charitable Trust addressed the question, “What is the true economic value of our national investment in medical research?” and found, “It provide[d] a surprisingly dramatic answer: the returns are exceptional.” The pharmaceutical industry performs about one-third of U.S. biomedical research. Some of my own academic research has estimated the benefits to consumers from the introduction of new drugs at the patient level, disease level and national level. These benefits include longer life, better quality of life, and reductions in total medical expenditure.
R&D Investment Is Responsive to Incentives in General.
Economic research on a number of industries (including pharmaceuticals) has demonstrated that the rate of private R&D investment is very sensitive to expected returns.
* In his influential study of almost a thousand inventions in four different industries, the late economist Jacob Schmookler found that the expected profitability of inventive activity determined the pace and direction of industrial innovation.
* In response to the enormous increases in energy prices during the 1970s, firms significantly stepped up spending on energy-R&D projects, in a targeted attempt to reduce energy consumption.
* Whenever the government offers to award a significant defense contract, potential military contractors make large investments of their own funds in R&D for the types of products the government is seeking to buy.
* According to the Food and Drug Administration, passage of the Orphan Drug Act in 1983 led to a twelvefold increase in the number of drugs for rare diseases brought to market.
* Both firm-level and industry-level evidence are consistent with the hypothesis that the threat of pharmaceutical price controls in the Clinton administration’s 1992-93 health care reform proposals had a significant negative effect on pharmaceutical R&D investment.
Economic theory and evidence indicate that, in general, a firm’s incentive to invest is positively related to its market value (relative to the replacement costs of its assets).
* My research has indicated that a 10 percent decrease in market value is associated with a 2.25 percent decrease in R&D expenditure, holding constant tangible assets, past R&D investment and cash flow.
* In a National Bureau of Economic Research paper, economists Sara Ellison and Wallace Mullin estimated that the threat of Clinton health care reform reduced the market value of pharmaceutical firms by 44 percent during the period from September 1992 to October 1993.
We would therefore expect to observe an industry-wide decline in the rate of growth of pharmaceutical R&D investment at the time of (or soon after) the threat of pharmaceutical price controls. The facts bear this out: the growth rate of pharmaceutical industry R&D investment was much lower during the period 1993-95 than it was during any other period since 1987.
Read the rest of this article on pharmaceutical patent protection.
The Value of Pharmaceutical Patents & Strong Intellectual Property Protection
Table of Contents
- Overview of patent system
- Patents provide incentive to innovate
- Process of innovation is long, risky and expensive
- Patents help save lives, enhance life
- Strong IP protection is needed to ensure pharmaceutical innovation continues
- IP: The key to innovation and growth
Overview
- Abraham Lincoln said that patents “added the fuel of interest to the fire of genius.” But, it was not genius alone that Lincoln and our founding fathers desired from a patent system. Rather, their objective was innovation. Innovation is why we protect intellectual property.
- The founding fathers felt so strongly about the importance of innovation that patent and copyright protection is the only right expressly mentioned in the original articles of the Constitution.
- Patent protection in the United States gives inventors the exclusive right to sell an invention for up to 20 years before others may copy and sell it. However, the effective patent life, which only begins to run when the patent is granted and the invention can be marketed, is closer to 18 ½ years. For pharmaceuticals, the effective patent life is actually closer to 11 or 12 years since federal law requires a company to test its product for safety and efficacy and secure regulatory approval before marketing it, a process that can take years.
- Patents are a kind of agreement in which an inventor is given a limited period of time of exclusivity to make and sell a product incorporating an invention in exchange for agreeing to make his or her invention public, thus enabling and encouraging the continuation of scientific discovery.
Read the rest of Innovation.org’s pharmaceutical patent paper (pdf).
A Cost-Effective Approach to Maximizing International Intellectual Property Protection
By David E. Rogers, Squire, Sanders & Dempsey L.L.P. and Amy L. Hartzer, IsoPatent
Aug. 12, 2009
International competition is increasing daily. Competitors are nimble and quick to copy, and customers are demanding and looking for the best price. Brand name and personal relationships still carry some weight, but not as in years past. One way for U.S. manufacturers to compete effectively in today’s marketplace is by controlling innovation through intellectual property ("IP"). Given the international nature of business, IP protection should also be international and, to the extent cost effective, coextensive with a business’ current and future market presence.
We suggest a three-step approach to creating an international IP portfolio. First, regardless of location, always utilize contracts and trade secrets with employees and business partners, such as suppliers, distributors and contractors. Second, if practical, use patents to both (i) fortify the protection provided by contracts and trade secrets, and (ii) protect your technology from entities with which you have no contractual relationship. Third, select the countries in which you desire patent protection, which are usually those in which your products are sold or will be sold, and then implement your IP strategy.
Below we explain the IP protection mechanisms, how to select the countries in which patent protection should be obtained, and two case studies that apply these principles.
(1) The IP Protection Mechanisms: Contracts, Trade Secrets and Patents.
(a) Contracts: Whether or not your technology is protected by a patent, it may still be protected by contract. Contracts should always be used with employees and your direct business partners, such as suppliers, distributors and contractors. Contractual protection may even be suitable for customers (for example, if you already enter into contracts with customers to sell industrial machinery.)
The contracts should require your employees and business partners to (i) maintain the confidentiality of business information (such as your technology, designs, marketing plans, costs, selling prices, and the identity of vendors and customers), (ii) not compete with you during the term of the contract and for a reasonable period of time (usually one to five years) thereafter, and (iii) assign improvements to your technology to you.
You can usually select the law that governs a contract and the locale for resolving contract disputes. Select the law of one of the United States that is likely to uphold the contract’s provisions (particularly the non-compete clause) and require any dispute to be resolved in a U.S. court or in arbitration in the U.S. If your employee or business partner is outside of the U.S., check with an attorney in the country where your employee or business partner is located to ensure the contract provisions are enforceable there.
The costs to enter into contracts are the legal fees associated with preparing and negotiating them. Depending on a contract’s complexity and the length of negotiations, plan on about $3,000 - $10,000 per contract with each business partner. The costs for employee contracts are usually negligible.
(b) Trade Secrets: A trade secret is information that both: (1) derives actual or potential economic value from not being generally known and not being readily ascertainable to others by proper means, and (2) is the subject of reasonable efforts to maintain its secrecy. Trade secrets cost nothing to obtain, although maintaining them requires some expense because each person or business exposed to the trade secret should execute a contract with an appropriate confidentiality provision (also called a non-disclosure provision).
Here, all persons and businesses that executed contracts in the preceding Section (a) would be bound to maintain the confidentiality of your business information. By using contracts and other reasonable efforts to maintain the secrecy of your information, trade secret protection protects against the misappropriation of your information by anyone, even persons with whom you have no contractual relationship. That is the added benefit of trade secrets as compared to contracts.
Information that cannot be maintained as a secret includes (1) publicly-available product designs, and (2) things that can be reverse engineered, such as (i) internal components that can be discovered through disassembly of a product, and (ii) material compositions that can be ascertained through laboratory analysis.
Trade secrets have at least one advantage over patents. In many countries, including the U.S., trade secret life is potentially indefinite whereas a patent’s life is typically 20 years from the original patent application filing date.
A major disadvantage of trade secrets is that they do not protect against independent development by a competitor, whereas patents do. Further, once a trade secret has been disclosed to numerous people, even with the proper confidentiality agreements in place, it can be misappropriated without you knowing who was responsible.
Read the rest of this article on pharmaceutical patent and other intellectual property issues on IndustryWeek.com.
Pharmaceutical Patent Trolls: Short-Term Pros And Long-Term Cons
Pharmaceuticals is an industry exposed to many unique risks. The capital intensive research and development (R&D), the uncertainty of Food and Drug Administration (FDA) approval, and a constant shroud of legislative risks may seem like a lot to deal with, but one of the fastest growing threats for pharmaceuticals are patent trolls.
The Pharmaceutical Process
FDA approval is already a long process, and even properly-approved drugs have left companies open for litigation. To take just one example from 2008/2009, there is an ongoing legal argument about whether federally approved warning labels pre-empt state law. The main problem was that if the Supreme Court ruled that warning labels didn’t pre-empt state law, or if Congress changed the rules to give state law equal importance, then drug companies could find themselves facing more lawsuits. In addition, the drug companies would have to go through FDA approval followed by state by state compliance checks - all of this adding to the already considerable costs of doing business.
Patent trolls, by either attacking existing patents or hoarding vague patents, hurt pharmaceutical companies more acutely by reducing returns on investment at a time when both the companies’ costs and risks are rising. Drug companies need large cash reserves/war chests at all times to pay for capital-intensive research, FDA approval and settling lawsuits. To maintain this war chest they need strong and, more importantly, stable profits from their products.
Risk and Return
These companies pay out the huge R&D costs in return for huge possible rewards on patented drugs. The rewards are more or less proportional to the risks, as many drugs never make it to market, meaning they never pay back their R&D costs. Drug companies want their patents, essentially their intellectual property rights, protected for as long as possible. They want an exclusive monopoly over their product in order pay back the costs of development along with a profit equal to the risks taken on by the company. Excess profits will either go to the shareholders or cover the costs of the many failed drugs that never make it out of developmental stages.
Trolls Provide Short-Term Benefit
Whether it is generic aspirin or generic Viagra, the patient receives an immediate benefit from patent trolls in the form of a lower price for medicines. This short-term benefit is no doubt much appreciated. The government also tends to think short-term - a cynic would say in four-year cycles - and generally in line with patients. They want cheap pills for voters and are more than willing to see corporate profits take a hit to meet that end. Governments have shown their support for patent trolls by creating legislative loopholes and eroding patent rights.
By attacking long-term patents, trolls are able to open up specific formulas for generic mass production and bring cheap generic drugs to market quicker. In the short-term, it’s hard to argue that cheap medicine doesn’t benefit the general population. In the long-term, however, the actions of patent trolls may actually hurt everyone.
Long-Term Problems
Bringing cheap pills to market quickly makes patent trolls look like important middlemen in the process towards generic drugs, but their long-term impact is more subtle and devastating. In the current pharmaceutical structure, drug companies pony up the cost of R&D. Therefore, even a slow drain on their reserves means less R&D and less new drugs in the future.
You might disagree with how much these companies take as profits for their shareholders, but it is those same profits that motivate the best corporate and scientific minds to keep searching for new medicines - and it is those profits that convince investors to put their capital behind the research rather than investing it somewhere else.
Possible Fallout
There are a lot of possible outcomes for the rise of the patent trolls. One is that drug companies will be pushed further away from high-cost, high-risk research and into simple domestic products like mouthwash and skin cream. Some of this can be seen in the 2009 acquisitions by Pfizer (NYSE:PFE), Merck (NYSE:MRK) and others. These companies have focused on other companies that have strong brands in household goods. These products and markets will be used to hedge against losses in the pure drug research, but they will also divert capital and research from the R&D. Instead of a pharmaceutical industry, we’ll end up with a bunch of Johnson and Johnson (NYSE:JNJ) clones that occasionally make medicine.
Along with a more domestic focus, the trend of buying companies to fill existing and upcoming holes in the pipeline will intensify. As patents end prematurely and new drugs have yet to fill their place, many drug companies acquire other companies’ products to prop up revenue. Unfortunately, the merger of two pipelines and two corporate cultures often leads to less overall spending on R&D rather than any significant synergy. Many drug companies are focusing ever more on pills with commercial appeal (erectile dysfunction, weight loss, etc.) and tightening their spending on expensive research into cures for rarer but more critical maladies.
As patent rights are shortened, less drug companies, especially poorly-capitalized small companies, will be able to survive. Some of them will be absorbed into the larger conglomerates, but just as many will simply fold up. Consolidation might not lessen competition so much as shutdown areas of research if the innovation of smaller firms is lost. Taking this one step further into extreme speculation, government might then have to step in and fund drug research with tax dollars – with all the waste and add-ons that come with government-led initiatives. So you might end up with taxpayers footing the bill for expensive R&D that may achieve nothing, rather than R&D that costs nothing to taxpayers.
Read more about pharmaceutical patent trolls.
Maximizing Pharmaceutical Patent Lifecycles
by Stephen Albainy-Jenei
June 30, 2009
The American Conference Institute’s Maximizing Pharmaceutical Patent Lifecycles, the 10th Anniversary Edition will be held at the Helmsley Park Lane Hotel, New York, New York, on Wednesday, October 7, 2009 to Thursday, October 8, 2009.
Overview
This 10th American Conference Institute event on Maximizing Pharmaceutical Patent Life Cycles will bring you the thoughtful and targeted commentary and in-depth analysis that you have come to expect from this industry leading conference. This year’s conference will help you prepare for the sweeping changes currently underway by providing you with:
* Focused panels on the pending Follow-On Biologics and Patent Reform legislation that will allow you to assess how both legislative proposals will impact pharmaceutical patent life cycle management
* Access to key officials from the FTC’s Bureau of Competition’s Health Care Division and the EC’s DG Competition’s Pharmaceuticals Task Force who will provide you with direct insights into the logic of these agencies on some of the most pressing antitrust matters currently affecting the industry
* An in-depth review of new FDA determinations regarding exclusivity, forfeitures, patent listing and delistings and strategies for incorporating these guidelines into your initial life cycle management plan
* Analyses of key cases that have affected patent life cycle strategies and tips for using these rulings to your advantage
Also, this year they have added the following specialized class:
Hatch-Waxman Boot Camp – A Primer on IP Basics and Regulatory Fundamentals
This Boot Camp, together with in-depth Master Classes for brand names and generics on:
* New Strategies for Obtaining Pharmaceutical Patent Extensions in a Post-KSR World
* Updated Drafting Guidelines for Paragraph IV Certifications and Notice Letters
will offer hands-on practical advice on core Hatch-Waxman principles as well as some of the most critical day–to–day concerns for both sides of the pharmaceutical industry.
Nearly 2,000 pharmaceutical patent professionals – for both brand names and generics – have made this conference their source of information for the legal issues surrounding life cycle management for nearly the last ten years.
Pharmaceutical Patents Benefit Latin American Patients
Pierre Verstraete
February 5, 2008
Latin America has room for improvement in fostering environments where intellectual property is respected, particularly with regard to patented pharmaceuticals. On many occasions, in fact, countries still reward the copying of patented drugs rather than the development of innovative life-saving medicines. Pharmaceutical innovation, however, is undeniably in the interest of Latin America and its patients, and countries in the region should take concrete steps to create the conditions that foster it, including strong and effective intellectual property protection.
Already a success story is Mexico, which has greatly benefited from the intellectual property protection provided through the North American Free Trade Agreement (NAFTA). Today, Mexico is the leading pharmaceutical market in the region. In part, owing to Mexico’s decision to protect intellectual property, pharmaceutical patents and foreign direct investment in the pharmaceutical sector have grown and are expected to grow further.
Strong patent and data protection for pharmaceuticals is good for patients and important for research-based companies like Schering-Plough Corporation. New medicines are developed and medical breakthroughs occur when companies take large and enormously expensive risks. By providing a limited period during which our products may not be copied, intellectual property protection gives Schering-Plough and its investors the incentive to take those big risks. This is the engine that propelled some of the great advances in human health in this century, including treatments for deadly infections, heart disease and cancer.
This engine also drives Latin America’s home-grown industries that rely on intellectual property protection for risky investments. Local pharmaceutical companies use the incentives afforded by strong patents and effective data protection to overcome the risks inherent in the development of innovative drugs. For instance, the medicinal properties of the flora and fauna in Brazil’s tropical forests were well-known long before Brazil’s decision to strengthen intellectual property protection in the mid-1990s. But it was only with the introduction of such protection that Brazilian researchers felt secure enough to take the risks that resulted in innovative, patent-protected biomedical products developed in Brazil for global use—a good result for Brazilian companies, the Brazilian economy, and Brazilian patients alike.
And while the time-bound exclusivity provided by strong intellectual property protection allows pharmaceutical manufacturers to recoup their investments, it is the region’s patients who benefit the most from gaining early access to life-saving and life-improving medicines. It would be unwise to undermine or destroy the intellectual property engine that is increasingly responsible for improved health outcomes for patients in the region and around the world. Timely access to the world’s latest and most innovative medicines will make the region’s populations healthier and more productive. New medicines, for example, can help to reduce production losses due to worker illnesses, lower absenteeism rates, and improve school attendance, all of which will contribute to accelerated economic growth and help to decrease poverty.
Some, however, will still find access to healthcare and medicines difficult because of cost. Where cost is truly a barrier to treatment, healthcare stakeholders, including insurers, pharmaceutical companies, providers, governments and others can and must find creative solutions to help patients, something to which Schering-Plough is deeply committed.
Governments in Latin America should act in their own best interests and those of their patients by accelerating the tentative steps they have already taken in favor of strong intellectual property protection for pharmaceuticals. It is urgent that we rethink the traditional view of intellectual property in Latin America: No longer should governments in the region wait for the United States to insist on strong intellectual property protection in other countries. Rather, the region’s governments should be the ones seeking improved protection, not because the United States insists, but because it is in their own national interest and that of their citizens.