For many months we have been hearing about the government attempts to “reform” health care in the United States, and this weekend the United States Senate is actually working, yes Senators working on a weekend, as the contentious debate continues. Even a relatively rare Presidential visit to Capitol Hill is scheduled for later this afternoon, presumably so President Obama can rally the troops for whatever lies ahead. While patent policy has not taken center stage in these debates, it is hard to ignore the under current that rages through the debates. Health care costs too much, so costs need to be contained. Of course, market initiatives like a national heath insurance market, which would lower premiums for everyone overnight, are not being considered. Likewise, attempts to prevent those without insurance from clogging up emergency rooms for simple matters like runny noses, sprains, colds and a litany of other ailment is not on the table either, so rather than discussing health insurance premium reform and government sponsored clinics in areas where there is the highest density of uninsured, we are debating a host of other things and trying to squeeze the private sector. I have long wondered why there has been such an all-out patent war against pharmaceutical and biotechnology companies, but the ACLU patent challenge against Myriad Genetics and the assault on biologic from some corners of government has me thinking that the preferred way to control costs in the minds of some politicians is to either stop or dramatically slow medical technology progress through revised patent and innovation policy. That is a mistake, an enormous mistake. We enjoy an ever increasing life span and higher quality medical care than anywhere in the world because of technology and innovative advances in an array of disciplines, and that MUST be preserved.
Did you know that on average, it takes an investment of more than $1 billion over 10 years to develop a biotech medicine. There are typically multiple companies making this sort of investment and ultimately bringing to market products to treat the same or similar conditions, which then compete with one another. All of these competing innovator products go through similar lengthy and costly processes to bring their products to market, which means making them available to patients like you and me. This marketplace competition among innovators has always existed. There is, however, another kind of competition that up to now has not been possible – competition from biosimilar manufacturers who seek a scientific and regulatory shortcut to bring their products to market. Unlike innovators who undertake their own costly research and development programs to independently prove the safety and efficacy of their medical biotechnology products to secure Food and Drug Administration (FDA) approval, biosimilar manufacturers seek product approval through an abbreviated process that allows them to rely on an innovator’s data to secure approval. Conceptually this is similar to how generic drug manufacturers seek to undercut brand name pharmaceuticals. We love generic drugs, but we also know that without an appropriate length of exclusivity to reward the tremendous risk undertaken we won’t get new drugs, and that is just unacceptable. So why should biotech medicines be any different?
This kind of copy-cat competition, which allows a competitor to “use” (i.e., steal) the innovator’s research, does not exist in virtually any other industry outside of drugs. In fact, such copy-cat competition does not even exist today for biologics at all, which is why in order to authorize such a short-cut, non-innovative path to market Congress must enact legislation to authorize the FDA to use an abbreviated approval process for biosimilars. Despite the misrepresentations made by many, the innovator biotechnology industry has never argued that short-cut competition should exist, but has advocated for a fair and reasonable length of exclusive protection before such short-cut competition is allowed to exist. So the question is not whether this kind of competition should be possible, but rather how long an innovators’ data should be protected before they can be used by non-innovators who will piggyback on the large R&D investment made by the innovator to gain approval of a competitive product. This period of time is referred to as data exclusivity. The innovator biotech community has urged Congress for 12 to 14 years of data exclusivity, the Federal Trade Commission has concluded in a lengthy report that zero years of data exclusivity is appropriate, President Obama has suggested that 7 years of data exclusivity is appropriate and Congress has so far agreed with the biotech industry and supported 12 years of data exlusivity.
Before going any further, allow me to point out that the FTC position is ridiculous. The FTC essentially wants innovator biotech companies to spend $1 billion over 10 years and then immediately turn over their data to non-innovators. This irresponsible and intellectually dishonest position would ensure that biotech innovators cease to exist, medical advances in the biotech sector would end and it should be clear to everyone (except those at the FTC apparently) that this would not benefit society. So the real debate is whether it should be between 7 to 14 years. President Obama has not specified why he thinks 7 years is appropriate, and all of the research and data available show that a minimum of 12 years is required to make the risk-benefit calculus make sense for innovator biotech companies. So what Congress is leaning toward, 12 years of data exclusivity, seems right on target.
Now, lets turn to some explicit Fact vs. Fiction.
FICTION: Data exclusivity = market exclusivity.
FACT: Data exclusivity is not the same as market exclusivity.
During a period of data exclusivity, a competitor would be unable to piggyback on the massive investment in R&D made by an innovator to receive approval from the FDA for their “copy-cat” product. Simply put, during the period of exclusivity the FDA may not rely on an innovator’s safety and efficacy data to approve a competitor’s product.
Market exclusivity is an altogether different thing – it is the inability of any competitor to enter a specific market. Market exclusivity for biological products would mean that there could be, for example, just one drug to treat leukemia, one drug to treat diabetes, one drug to treat MS. This is not the case. At any moment, hundreds of biotech companies are racing to develop the next wonder drug for any one of these diseases. That situation will not change because of data exclusivity periods. There will continue to be competition among innovative biological products regardless of a data exclusivity period enacted as part of biosimilars legislation.
Providing innovators with data exclusivity enables them to recoup the investments they made into developing new products and testing product safety and efficacy. This allows them to continue to invest in new breakthrough medicines, therapies and cures for diseases such as cancer, HIV/AIDs and ALS. Competitors are free at any time to conduct their own costly research and development, including clinical trials, and create their own biologics.
FICTION: 12 years of data exclusivity extends innovators’ monopoly power.
FACT: Data exclusivity does not give it any sort of monopoly.
You would be hard pressed to find a term that is used more and understood less than the term “monopoly.” Patents don’t give monopolies, and neither would data exclusivity. If patents gave monopolies then how is it possible that anyone other than Apple could sell a portable MP3 player? Apple has the iPod and iPhone locked up tight, but not so tight that other companies are prohibited from selling similar products. Look at all the iPhone wanna-bes that are on the market now. Seriously! You have to stop thinking that patents grant monopolies. What they do is make it difficult for others to copy an innovation, but if you can make something that does the same thing that isn’t a copy then patent law does not prevent that.
Similarly, products that compete with innovative biologics can still be introduced during the period of data exclusivity. A period of data exclusivity merely means that those who do not innovate cannot piggyback off the hard work of innovators and rely on the research conducted by the innovator company. They must conduct their own safety and efficacy research and testing to obtain FDA approval and, obviously, not infringe the patents owned by the innovator. So can we please stop using the world “monopoly”? No matter how many times it is used it will never accurately describe the protections provided. If you doubt that do a patent search and you will see in every industry numerous patents that all purport to cover similar things. How else, for example, could Microsoft and Apple both have patent portfolios? How else could Motorola and Nokia have patent portfolios? How else could AMD and IBM have patent portfolios? And so on, and so on…
FICTION: 12 years of data exclusivity is “not workable for patients.”
FACT: Patient advocacy groups support 12 years of data exclusivity.
Groups supporting 12 years of data exclusivity include the ALS Association, Alliance for Aging Research, AIDS Institute, National Minority AIDS Council, Children’s Tumor Foundation and National Kidney Foundation. They understand how important it is for biotech companies to be able to continue to innovate.
This data protection period would permit innovators to recoup their billion-dollar investments in a reasonable period of time. Without such a reasonable “break even” point, investors simply will put their money somewhere else and not in biotech. That ultimately is bad for patients, and for society at large. Whether you like it or not, the truth is that less than 12 years of data exclusivity is not workable for patients because it would kill the industry. It is foolish to believe that not having advances that save and improve lives is better or more workable than having and encouraging such advances.
FICTION: 12 years of data exclusivity is anticompetitive.
FACT: The biotech industry is – at its heart – competitive.
The biotech industry currently exhibits robust competition as innovators compete against other innovators, with similar products targeting similar diseases or conditions. The fact that an industry is against the government forcing them to turn over their data to competitors does not mean the industry is against competition, it just means the industry is for fairness. What business owners out there would accept the government telling you that you must open up and allow your competitors to take whatever they want? For crying out loud, throughout trade secret law fighting over customer lists happens all the time. Business don’t want to have their customer lists fall into the hands of competitors because it took time, money and energy to create that list and identify customers. Having an employ run off with a customer list to start a new company that competes is unfair and illegal in every state, yet there are some who think that biotech companies who invest billions of dollars should allow copy-cat companies to do exactly what the law prohibits everywhere else. How could that make any sense to anyone, unless of course the goal is not to encourage medical advances but only to keep costs down?- - - - - - - - - -
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Posted in: Biotechnology, Congress, Gene Quinn, IP News, IPWatchdog.com Articles, Patents, Technology & Innovation
About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.