Obama Administration Caves on Data Exclusivity in Historic TPP Trade Deal

President Obama delivers State of the Union Address.

The New York Times is reporting that trade partners negotiating the Tans-Pacific Partnership trade deal have reached an agreement. In order to reach an agreement the United States granted a key concession relating to biologics, which are advanced medicines made from living organisms. [1] Presently the United States provides 12 years of data exclusivity for these types of medicines, but the TPP agreement knocks that term down to 5 years. See also POLITICO.

According to the New York Times, Senator Orin Hatch (R-UT) has threatened to fight the trade deal if protection for biologics was weakened. Sources have confirmed to me that a TPP deal that so substantially reduced biologic data exclusivity will face an uphill battle in Congress.

Already feeling the sting with respect to patent reform and terribly unfavorable rulings by the United States Supreme Court, the pharmaceutical and biotechnology industry has been under siege over the last several years. The announcement that one particular drug would experience a 5,000% price increase also created problems when that eye-popping figure and circumstance made its way into the race for President. Further, after being told there will be no legislative help to combat post grant inter partes review (IPR) challenges of biotech and pharma patents, this issue could be the one that forces the industry to draw a line in the sand and fight with all it can muster. Given the enormous power of the pharmaceutical and biotechnology lobby, and how that lobby has been pushed around in recent years, it seems possible that this concession could lead to a full court press, which may make it impossible for the TPP deal to be ratified.

Those in favor of reducing the term of data exclusivity for biologics point to several factors. According to POLITICO, some countries viewed 12 years of data protection as prohibitively expensive as they search for ways to offer such treatments to their population. Indeed, with protection for so long it was viewed as breaking the bank on rising healthcare costs. The U.S. government, specifically the Obama Administration, has long wanted to reduce data exclusivity. Some believe the Obama Administration’s push over the years to challenge the term of data exclusivity is thanks to Obamacare, or whatever universal healthcare system that comes next.

It is simply too expensive to provide these drugs to everyone, and to date governments, including the U.S., have not wanted to have a conversation about denying the latest treatments from the poor despite the fact that once the term of exclusivity runs naturally the drugs would be widely available for a fraction of the cost. Even a 12-year term seems too short for many to withhold the latest treatments. Of course, this dilemma is not new. The higher prices allowed during the term of exclusivity offsets the many drug failures, which number more than 90%, while still providing enough financial incentive to warrant the tremendous risk being taken with literally billions of dollars for each new drug or treatment.

[Bio-Pharma]

Notwithstanding, it is important to understand that reducing the term of data exclusivity is not one in the same with reducing the term of market exclusivity. From the moment when the compound first shows medicinal promise, data is generated and compiled by the innovator, a process that is both extremely expensive and time consuming. Data exclusivity provides the innovator 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.

Data exclusivity protects the tremendous investments of time and financial resources required to establish a new therapy as safe and effective. This is accomplished by requiring competing firms (i.e., generics) who are 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, if the generic provider does not want to generate the data themselves they simply wait out the data exclusivity period.

It may at first seem unnecessary to have both data exclusivity and market exclusivity, which is offered by patents, but in some cases innovative therapies may experience patent expiry shortly after making it to market. Given the current patent eligibility climate, thanks most directly to the Supreme Court’s rulings in Mayo v. Prometheus, Association of Molecular Pathology v. Myriad Genetics and KSR v. Teleflex, some innovative therapies may no longer qualify for patent protection at all.

Even if the claimed innovation is patent eligible, the KSR Rationales and the so-called lead compound cases can easily lead to an innovative therapeutic being declared obvious. See The looming patent nightmare facing the pharmaceutical industry. In the scenario where patent protection cannot be obtained there is no market exclusivity and 5 years of data exclusivity will be insufficient to incentivize research and development. According to the industry it takes at least 10 years to break even with these drugs, and 12 years to show any level of acceptable profit given the real risk of failure.

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. Without sufficiently lengthy data exclusivity we will see the industry stop pursuing biologics, which will ultimately be bad for patients and healthcare generally speaking. Thus, we all have a direct interest in this matter.

NOTE: Portions of this article were taken from Dr. Kristina Lybecker’s article titled When Patents Aren’t Enough: The Case for Data Exclusivity for Biologic Medicines, which was published on IPWatchdog.com on July 9, 2014.

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[1] 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.