When Patents Aren’t Enough: The Case for Data Exclusivity for Biologic Medicines
|Written by Dr. Kristina Lybecker
Associate Professor of Economics, Colorado College
Posted: July 9, 2014 @ 8:00 am
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Biologic medicines are fundamentally different from traditional “small molecule” therapies, presenting a host of new challenges in the design and enforcement of the intellectual property (IP) architecture that will protect them. Protecting the intellectual property of biologics is complicated, difficult, and essential to the future of medicine. This new frontier is also one of the remaining hurdles in the Trans-Pacific Partnership (TPP) Trade Agreement negotiations. The debate over protecting biologics focuses on a proposed twelve years of data exclusivity and the consequences this will have for international trade, global public health, and access to medicines.
The nuances of producing biologics greatly complicate the logistics of protecting their intellectual property, making patents alone inadequate for safeguarding their IP. Data exclusivity protection allows for a period of time following marketing approval during which competing firms may not use the innovative firm’s safety and efficacy data, from proprietary preclinical and clinical trial results, to obtain marketing authorization for a generic version of the drug. From the moment when the compound first shows medicinal promise, data is generated and compiled, a process that is both expensive and time consuming. Data exclusivity provides the innovative firm with a period of protection for their investment in clinical trials and data collection, regardless of the length of time required to bring the drug to market.
Although complementary, patents and data exclusivity protection incentivize innovation in different ways and serve distinct purposes. Patents provide protection for innovations that meet the standards of patentability and are novel, nonobvious, and useful. In the context of biopharmaceuticals, patents protect both breakthrough discoveries as well as incremental improvements. Due to the length of the drug-development and patent-approval processes, effective patent terms rarely correspond to FDA approval. Accordingly, in some cases innovative therapies may experience patent expiry shortly after making it to market. In contrast, data exclusivity protects the tremendous investments of time, talent, and financial resources required to establish a new therapy as safe and effective. This is accomplished by requiring competing firms seeking regulatory approval of the same or a similar product to independently generate the comprehensive preclinical and clinical trial data rather than rely on or use the innovator’s data to establish safety and efficacy of their competing product.
Alternatively, the competing firm may wait a set period of time after which they are able to utilize the innovator’s prior approval in an abbreviated regulatory approval, eliminating the need for independently generated data. Data exclusivity is not an extension of patent rights, and it does not preclude a third party from introducing a generic version of the innovator’s therapy during the data exclusivity period, provided that the innovator’s data is not used to secure marketing approval. Fundamentally, data exclusivity protection incentivizes biopharmaceutical firms to invest the necessary time and financial resources in establishing the safety and efficacy of their product and prevents competitors from free riding on these efforts for a limited period of time.
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The Hatch-Waxman Act of 1984 provided innovative drug firms with a period of patent extension as well as a period of data exclusivity, in the hopes of providing a return on their investment and an incentive for future innovation. These protections have been crucial to the development of the innovative drugs and therapies that currently enhance and extend life. They are even more critical to the future of the biopharmaceutical industry and the development of biologic medicines that are more targeted and more complex. In an analysis of the appropriate length of data exclusivity, a financial model was utilized to determine how long the exclusivity period must be to provide a typical pioneer biologic a positive return on investment. Drawing on a representative portfolio of pioneer biologics, the break-even period ranges from thirteen to sixteen years.
An appropriate period of protection is essential if the promise of biologics is to come to fruition. Beyond the importance of biologics to public health and longevity, innovation is crucial to trade and economic prosperity. As evidence of the importance of these sectors, in 2011 IP-intensive industries exported more than $1 trillion in goods and services, which accounts for approximately seventy-four percent of total 2011 U.S. exports. Moreover, the biopharmaceutical industry is a significant contributor. The biopharmaceutical industry of the United States is the fourth-largest U.S. exporter among IP-intensive industries, with exports valued at $49.4 billion in 2010. Accordingly, the TPP Trade Agreement should include the proposed twelve years of data exclusivity and provide innovative firms with the incentives needed to continue to invest in the breakthrough therapies that will extend and enhance life for years to come.
Technology inevitably evolves faster than the legal architecture that surrounds it. The provision of data exclusivity protections is a straightforward legal step to catch up to the science that brings us biologic medicines. Biologic medicines are critical to the healthcare advances of the future, and data exclusivity is vital to innovative biologics. The period of data exclusivity provides innovators with an incentive to invest in the testing data necessary to prove a drug’s safety and efficacy by granting them a measure of certainty that they will enjoy a fixed amount of time during which they maintain proprietary control of the test data that resulted in the approval of its drug before requiring that data be made available to generic imitators. As technology changes to enable the development of new biologic vaccines and therapies, intellectual property protection must also evolve to ensure protection for these products. If we believe in the importance of biologic medicines for the future of healthcare, we must protect them.
 This piece is largely taken from the introduction of my article on the case for data exclusivity which appeared in a recent issue of the William Mitchell Law Review celebrating the 30th anniversary of the Hatch-Waxman Act of 1984.
 Historically, pharmaceuticals have been small, chemically manufactured molecules and these molecules still comprise more than ninety percent of drugs currently available. “Small molecule” therapies are synthesized by chemical reactions between different organic and/or inorganic compounds. In comparison, biologics or large molecules are therapeutic proteins and are most often derived from living cells. Biologics are produced from micro-organisms or animals by utilizing the metabolic processes of the organisms themselves.
 See Hatch-Waxman Act, Pub. L. No. 98-417, 98 Stat. 1585 (1984) (codified as amended at 34 U.S.C. § 343 (2012)).
 Henry Grabowski et al., From the Analyst’s Couch: Data Exclusivity for Biologics, 10 Nature Reviews: Drug Discovery 15, 15–25 (2011), available at fds.duke.edu/db/attachment/1592?.
 IP Creates Jobs for America, Global Intell. Prop. Center, U.S. Chamber Com. (May 25, 2012), http://www.theglobalipcenter.com/ip-creates-jobs-america/.
 Econ. & Statistics Admin. & U.S. Patent & Trademark Office, Intellectual Property and the U.S. Economy: Industries in Focus (2012), available at http://www.uspto.gov/news/publications/IP_Report_March_2012.pdf.
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Posted in: Biotechnology, Dr. Kristina Lybecker, Guest Contributors, Hatch-Waxman, IP News, IPWatchdog.com Articles, Legislation, Patents, Pharmaceutical, Technology & Innovation
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.