Yesterday the latest copy of my college alumni magazine arrived. The magazine included an article on the campus’ new chemistry building, built at a cost of about 280 million dollars, and funded entirely by royalties from U.S. patent no. 5,344,932. That patent covers pemetrexed, the active ingredient in Eli Lilly’s Alimta® anti-lung cancer drug, which first received FDA approval in 2004.
Aside from making me wistful for my college years – it turns out that youth really is wasted on the young – and envious of the students who will have the opportunity to do labwork in this stunning new edifice (instead of toiling in the bowels of a 1930’s-era labyrinth, as did yours truly), what struck me was the accompanying article on the litigation around the ‘932 patent. Or rather, my nonchalance with respect thereto.
Specifically, my wife thought it interesting that my alma mater is suing Israel-based Teva, its subsidiary Barr and APP Pharmaceuticals for infringing the ‘932 patent. I was unperturbed. “Hon, this kind of litigation is routine with drug patents. I’d be shocked if the generic drug manufacturers didn’t challenge the validity of the patent and there wasn’t a lawsuit.” Only after making the remark did it strike me how utterly bizarre it is not only that Orange Book listings, paragraph IV certifications and the resulting lawsuits, and reverse payment settlements are the norm, but just how inured those of us who practice in this area of the legal world have become to this situation.
The incident drove home, not for the first time, the picture painted by Robert Armitage in a presentation he gave last May at the American Intellectual Property Law Association’s spring meeting in New York. Mr. Armitage is Senior Vice President and Chief General Counsel of Eli Lilly, and his talk focused on the fact that under the Waxman-Hatch system, the new drugs that get developed are those with the best patent protection; these are not necessarily the drugs for which there is the greatest need. The following summary is my own restatement of Mr. Armitage’s talk, but I strongly urge readers to read his entire paper, which may be downloaded here, with the gracious permission of Mr. Armitage.
The talk began by looking at the motivations and goals surrounding the enactment of the Hatch-Waxman amendment in 1984. New drug development, including the requisite clinical testing and the physician education and marketing necessary to get new drugs prescribed, is inherently a high-risk investment. Consequently, new drugs are priced to provide a return commensurate with that high risk. Waxman-Hatch was designed to create a generic drug industry that would sell copied versions of new medicines for roughly the cost required to manufacture those medicines. It was anticipated that because generics would in effect be government-certified substitutes for the new medicines, which could be prescribed and dispensed to patients in lieu of the new medicines, generics would be able to take over the market for the new medicine, without the need to brand the copied versions, to otherwise promote them, or to educate physicians regarding their use. Unburdened of these needs and the costs of new drug development, the entry of generic competitors to a particular drug would cause the price of that drug to drop. In this regard, the legislation was right on the mark: in the United States, the entry of generic competition causes drug prices to plummet.
Nevertheless, Hatch-Waxman appreciated that the originators of new drugs would need to be able to recoup their investments and produce profits, or else those investments wouldn’t be made in the first place and the new drugs would never see the light of day. The legislation chose to protect the innovators’ interests in a patent-centric manner:
● On the one hand, under Waxman-Hatch innovators were required to list relevant patents with the FDA, and the entry of generic drugs into the market was to await the expiration of those FDA-listed patents that would be infringed if the generic version were to be marketed. Generic drug manufacturers, on the other hand, were provided with a vehicle to seek approval for their copies of the innovator drug prior to patent expiration, and were provided a mechanism to challenge the validity, and to defend against a prospective charge of infringement, of any of the originator’s FDA-listed patents, in order to determine the actual timing for generic drug entry.
● Furthermore, to encourage prompt challenges of questionable patents, generic companies were given an incentive to challenge the validity or the infringement of the FDA-listed patents: successful challengers were given the right to be the exclusive generic drug entrant into the market for a 180-day period. This generic exclusivity period was justified on the basis that, absent the successful challenge, there would have been no generic drug entry until a later patent expiration date.
● Additionally, recognizing that the time taken to prove the safety and efficacy of a new drug might eat into the patent lifetime, Hatch-Waxman provided a means for innovators to obtain up to five years of extension for a patent covering a new drug whose entry into the market had been delayed by the FDA approval process.
This patent-centric regime does a poor job of ensuring that important new drugs reach the public. The principal problem with Hatch-Waxman in creating this patent-centric regime was that, even when originally enacted, the legislation didn’t take into account the fact that patent life doesn’t correspond to the realities of pre-market drug development, let alone post-market drug development. There is a time lag between patent filing and FDA approval; since the enactment of Hatch-Waxman, that time delay has only gotten worse.
Thus under the no-publication-until-grant, 17-years from patent grant system in place at the time Hatch-Waxman was enacted, the scheme envisioned by the legislation wasn’t perfect, although it wasn’t necessarily unreasonable either. Innovators with still-pending patent applications on new active ingredients that were likely to mature into drugs could delay the grant of the patents until around the time of FDA approval by making appropriate use of continuation applications. And innovators with granted patents could still obtain an extension of patent term to compensate for time lost from the effective patent life due to regulatory review. Nevertheless, it was possible for innovators to lose effective patent life due to the lag between patent grant and FDA approval of the new drug.
Subsequent to Hatch-Waxman, as part of its obligations under GATT-TRIPS, the United States moved to a 20-years-from-earliest filing regime. This change in the law, without a commensurate change in the Hatch-Waxman provisions, meant that the effective lifetime of patents on new active ingredients was significantly foreshortened. Under the post-TRIPs regime, patent applications still need to be filed early in the development process, but if FDA approval takes more than five years – which is routinely the case – the innovator isn’t compensated for the lost effective patent lifetime.
Moreover, as part of the Medicare amendments of 2003, the 180-exclusivity for first generic filers was spread around to all generic drug companies that were the first to file abbreviated new drug applications (ANDA) on the same day, rather than the one company that was first to file in absolute terms, even if that was by a matter of minutes. This has resulted in more generic challenges to listed patents.
As a result of this situation, companies that develop new drugs are reluctant to do so for any particular drug candidate if the drug approval process will be too long, because their period of market exclusivity – the period in which they will realize a return on their investment and generate profits for shareholders and, more importantly, for re-investment in the development of newer drugs – will simply be too short to justify the investment. That’s the case even for drug candidates for which patent protection is available. If there is no patent protection, forget about it: there will be no new drug, because no one will invest the hundreds of millions of dollars necessary to bring the drug to market. (Although in the USA an innovator receives 5 years of FDA data package exclusivity protection independent of the existence of any patent protection, that five-year period is insufficient to warrant the necessary development in new drugs.)
Perversely, it is precisely the potential drugs that require the most testing, such as drugs for cancer or chronic diseases, that are the victims of this situation. A case in point from Israel: there’s a research group here that in the early 1990’s synthesized and identified some potential anti-Alzheimer’s drugs, and file a patent application at that time. Sometime after June 1995, the group filed a new application on some new compounds synthesized as part of their ongoing research. Unfortunately for the group – and, possibly, for people with Alzheimer’s and their families – the group’s patent attorney made the mistake of filing the new application in the USA as a continuation-in-part of the first application, even though the new compounds could have been filed in a stand-alone application. As a result, the new compounds lost several years of patent protection, and no one wanted to make the investment necessary to develop a commercially available drug from the group’s research. The compounds are still sitting on the shelf today. Maybe one of those compounds will make a good medicine for Alzheimer’s, but unde the current Hatch-Waxman scheme, we’ll never know, since at present, good patent protection is a necessary component of new drug development.
Mr. Armitage’s proposed solution for this problem is to de-couple protection for innovators from patent portfolios, by granting innovators 14 years of data exclusivity for their newly-approved drugs. (The 14-year figure is taken from the article by Henry Grabowski published in 2008 in Nature Reviews Drug Discovery, Vol. 7, pp. 479-488.)
This would elegantly address several issues:
● First, it would establish for all parties when generic competition may enter the market, rather than leaving that determination in limbo as courts deal with multiple Hatch-Waxman challenges to an innovator’s FDA-listed patents. This in turn would enable innovators to properly assess the economics of proceeding with drug development. It would also liberate resources within both innovator and generic companies that currently are directed to patent litigation.
● Second, it would enable innovators to conduct after-launch testing and monitoring of the drug, including the development of new indications for the drug. Such after-launch monitoring has become a matter of increasing concern in recent years, as the public has come to understand that the FDA does little in the way of after-launch monitoring.
● Third, it would not preclude others from conducting their own clinical trials and bringing their own copies of the approved drugs to market before the end of the 14-year period.
● Fourth, and most importantly, it would facilitate the development of drugs for cancer and chronic diseases, as the innovator would not have to concern itself with a ticking patent clock while it conducts the clinical trials necessary for drug approval. In other words, it would enable development of the best medicines, not just the medicines with the best patents.
Mr. Armitage’s proposal makes awfully good sense. Which is why I don’t hold out hope of it being adopted by legislators any time soon…although occasionally politicians do get things right…