The Importance of Protecting Incremental, Improvement Innovation
|Written by Dr. Kristina Lybecker
Associate Professor of Economics, Colorado College
Posted: October 17, 2013 @ 7:45 am
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Earlier this month the Brazilian House of Representative outlined proposed changes to Brazil’s patent law in a report by the Center for Strategic Studies and Debates, titled Brazil’s Patent Reform: Innovation Towards National Competitiveness. Current efforts to amend existing intellectual property legislation in a number of emerging markets, including India, Brazil and South Africa, are mistakenly heralded as steps toward “fixing” the patent system. Prominent in the discussions of proposed changes are arguments against protecting incremental or improvement innovation. Couched in the pejorative language of “evergreening”, the arguments fail to recognize that all innovation is valuable, both breakthrough discoveries as well as improvements to existing therapies.
The proposed changes are misguided from a legal perspective as well as from a public health standpoint. Two widely-propagated fallacies must be countered: the patents protecting incremental innovations are not legitimate patents and that improvement innovations delay generic competition. Legally, improvement innovations must meet all patentability standards. Patents for improvements to existing technologies are only granted if they meet all of the legal requirements for patentability, as determined by a trained patent examiner. All patents require advances that are novel, useful and non-obvious. Clearly these characteristics may describe both incremental innovations as well as groundbreaking advances. Patents protecting incremental innovations are not an abuse of the intellectual property rights system, rather they protect valuable discoveries.
Moreover, patents for innovative improvements do not delay or prevent generic competition. The patent system allows for the production of generic copies of the initial innovation, even while the improved innovation is protected. Importantly, incremental innovations are usually launched at a discount and the resulting competition across drugs in a therapeutic class results in lower prices. In a 2000 study, DiMasi examines twenty new drugs, accounting for half of U.S. sales, launched between 1995 and 1999. The study shows that all but one of the follow-on drugs were discounted and sold at prices up to 70% lower than the pioneer drug.  Incremental innovation does not stymie competition; instead it has the potential to enhance it. In that context, it is important to recognize that improvement innovations may emerge from the original innovator, competing firms, or generic producers.
From a public health perspective, incremental innovation ensures a variety of drugs are available within a therapeutic class which provides physicians with the ability to treat the individual needs of diverse patients with precision. For patients, the benefits to incremental innovation are tremendous. Innovative improvements have the potential to: increase the number of available dosing options, uncover new physiological interactions of known medicines, allow for reformulations to encourage children’s compliance, increase the shelf-life or heat-stability of a given medicine to secure effectiveness in diverse environments, eliminate treatment-limiting drug reactions or side effects, enhance patient administration and improve patient compliance. According to Wertheimer, Levy and O’Connor (2001), drugs within a single therapeutic class differ in their therapeutic profile, metabolism, adverse effects, dosing schedules, delivery systems, and other features.  These differences increase a patient’s probability of finding a treatment that is both effective and tolerated. Moreover, multiple therapies ensure an uninterrupted supply and availability of vital medications if the initial drug fails in the development stage, in the market, or suffers from manufacturing interruptions.
Incremental innovation provides both follow-on medicines as well as new uses for existing therapies, supplemental indications. Since first-in-class drugs are rarely optimal, improvement innovations may become best-in-class and first line therapies. A recent study by Cohen and Kaitin (2008) finds that 63% of the drugs on the World Health Organization’s Essential Drug Lists are follow-on drugs.  While abstract explanations of the value of improvement innovation are helpful, specific examples are more illustrative.  Importantly, several of these examples describe treatments for neglected diseases and maladies of the developing world.
- AIDS: Atripla, the first-ever single-pill AIDS treatment regimen combining three drugs into one pill, simplifying the dosing regimen and increasing patient compliance.
- Diabetes: Inhaled insulin administered through an inhaler has been shown to have a more rapid onset of action than injected insulin.
- Congestive Heart Failure: Captopril was the first ACE (angiotensin converting enzyme) inhibitor. Unpleasant side effects lead to additional research efforts which yielded a completely new understanding of the enzyme linked to congestive heart failure.
- Hepatitis C Virus: A modified formulation of interferon alfa (IFN?) improved the positive response rate of patients receiving treatment from 38-43% to 54-56% and drastically simplified dosing regimens improving patient compliance.
- Malaria: Improvement innovation led to the development of a new formulation of two anti-malarial drugs, artesunate and amodiaquine, reducing dosing regimens from eight tablets a day to two.
- Type 2 Diabetes: The combination of two treatments, metformin and saxagliptin, allows for a single dosage form, a much simpler drug therapy regimen.
- Chagas Disease: Clinical trials are underway to explore the effects of the antifungal medicine ravuconazole against the pathogen that causes Chagas disease, a neglected tropical disease affecting nearly 10 million people.
Innovation provides new therapies and breakthrough treatments that extend and enhance life. The scientific and financial resources required for these advances are an investment worth making and an important precedent for global health. Patents encourage those innovations, making cutting-edge treatments a reality. Patents give innovation life. Current efforts to amend existing intellectual property legislation to “fix” the patent system will only undermine the incentives that encourage innovation. All innovation, both breakthrough discoveries and incremental improvements, is valuable and should be protected and rewarded. India, Brazil, South Africa and other emerging economies should take note. Their proposed changes, aimed at weakening intellectual property rights protections, are misguided and potentially very damaging to public health.
 DiMasi, Joseph A., “Price trends for prescription pharmaceuticals 1995-1999,” a report prepared for the Conference on Pharmaceutical Pricing Practices, Utilization and Costs of the U.S. Department of Health and Human Services, 2000. Available at: http://aspe.hhs.gov/health/reports/Drug-papers/dimassi/dimasi-final.htm
 Wertheimer, A., R. Levy, and T. O’Connor. “Too Many Drugs? The Clinical and Economic Value of Incremental Innovations,” in Investing in Health: The Social and Economic Benefits of Health Care Innovation, 2001, volume 14, pp.77-188.
 Cohen, J., and K. Kaitin. “Follow-On Drugs and Indications: The Importance of Incremental Innovation to Medical Practice,” American Journal of Therapeutics, vol.15, 2008, pp.89-91.
 Examples are drawn from IFPMA (2013) and Cohen & Kaitin (2008).
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About the AuthorDr. Kristina M. Lybecker is an Associate Professor of Economics at Colorado College in Colorado Springs. She earned a B.A. from Macalester College, with a double major in Economics and Latin American Studies, and received her Ph.D. in Economics in 2000 from the University of California, Berkeley. Kristina’s research analyzes the challenges surrounding intellectual property rights protection in innovative industries: incentivizing pharmaceutical research and development especially on neglected diseases, addressing the difficulties of strengthening intellectual property rights protection in developing countries, battling the problems related to pharmaceutical counterfeiting and the unique nature of protection for biotech therapies. Recent publications have also addressed alternatives to the existing patent system, the balance between pharmaceutical patent protection and access to essential medicines, and the markets for jointly produced goods such as blood and blood products. Kristina has testified in more than a dozen states on the economics of pharmaceutical counterfeiting. She has also worked with US Food and Drug Administration, Reconnaissance International, PhRMA, the National Peace Foundation, the OECD, the Fraser Institute, the Macdonald Laurier Institute, and the World Bank, on issues of innovation, international trade, and corruption.