By Kevin E. Noonan --
The pros and cons of patenting in the biosimilars scheme recently enacted as part of the Patient Protection and Affordable Care Act have been discussed, here and elsewhere (see "Will Patents Become Irrelevant in a Biosimilars Future?"). Whether envisioned by the bill's drafters or not, the provisions of the Biologics Price Competition and Innovation Act of 2009 (particularly the litigation provisions) contain incentives for biologic drug innovators not to rely on patents to protect these drugs and the return on investment (or at least the reasonable prospect thereof) needed to support the capital-intensive effort that must be exerted to bring such drugs to market. Limitations on claim scope, possibilities of successful "design arounds" and the limited scope available for infringement by equivalents, as well as the uncertainties associated with amino acid sequence and other variants, make biologic drugs different from conventional small molecule drugs, which have been protected by patents under the Hatch-Waxman regime. Also a factor in why small molecule drug innovators have relied more heavily on patent protection that is likely for biologic drugs is the difference in term of exclusivity under the two Acts: Hatch-Waxman gives small molecule drugs only five years of exclusivity while the BPCIA gives biologic drugs twelve years (a term fought by the FTC (who wanted no exclusivity; see "No One Seems Happy with Follow-on Biologics According to the FTC"), Congressman Waxman (5 years; see "Waxman Introduces Follow-on Biologics Bill"), and even President Obama (7 years; see "White House Recommends 7-Year Data Exclusivity Period for Follow-on Biologics"). Patent law provisions (including 35 U.S.C. § 271(e)(2), which make the filing of an Abbreviated New Drug Application an statutory act of infringement) and drug regulatory law (wherein filing a patent infringement lawsuit by an NDA holder after receiving a Paragraph IV letter regarding an Orange Book-listed patent from a generic drug maker provokes a 30-month stay in FDA approval of the ANDA) have made patent litigation the principal battle ground between innovator and generic drug makers for a generation. None of these advantages exist in the biosimilar approval pathway specified under the BPCIA.
Even though patenting may not hold its preeminent place in protecting biologic drugs that it has had in protecting small molecule drugs, it would be a mistake to think that patents have become completely irrelevant to biologic drug deveopment. They may be so with regard to the (generally adversarial) relationship between biologic drug innovators and companies (perhaps including traditional innovator companies) that make biosimilars. But there is another conventional purpose for biologic drug patenting: protecting startup companies early in the development cycle. In this regard, patents continue to serve their purpose of providing exclusivity for further development stages, and in prohibiting larger, better-funded companies from expropriating early-stage technology. Patents also satisfy the requirements imposed on universities under the Bayh-Dole Act, and enable federally funded grantees to reap the benefits of licensing their technology.
These advantages are unlikely to change even for biologic drugs. But the expected de-emphasis on patent protection for later-stage development (including regulatory approval) can be expected to change the relative importance of patents in the two stages. Such de-emphasis will also change where the valuation in biologic drugs may lie, because there will be a relatively greater advantage in optimizing cell lines and other process parameters (which even today rarely benefit from patenting) than in patents on the biologic drugs per se. That doesn't mean that patents will be any less important for startups, but thirty years of deal-making and negotiating behavior between small companies and their larger brethren will be impacted, probably not in a way that will inure to the benefit of the startups. While patents will remain essential to early-stage companies, their diminished value to larger partners (and the concomitantly greater value of the contributions of such companies) should also diminish the valuation of such deals.
The counter-argument is that startups will play an even more important role in providing the next generation of new potential "blockbuster" drugs, something is short supply from big pharma over the past few years. Whether due to inherent flaws in the "waiting for a blockbuster" drug development model or because the "low-hanging fruit" of small molecule drug development has been expended (or more likely because the diseases of aging garnering the most attention today are particularly intractable to pharmaceutical intervention, i.e., you can't put eating right and regular exercise into pill form), the prospects for startups (particularly university-generated startups) may be rosier than might be expected if patents become less important in protecting biologic drugs.
A good source of information on the interplay between patent protection and statutory protection under the BPCIA comes from Dr. Yaniv Heled, a recent Patent Docs commenter (see "Patents vs. Statutory Exclusivities in Biological Pharmaceuticals - Do We Really Need Both?"). Dr. Heled's paper contains some valuable tables comparing the terms of the two types of exclusivity (patent and statutory) for dozens of biologic drugs. One conclusion from the paper is that patent protection provides (on average) about one additional year (~327 days) of exclusivity past the end of the 12-year exclusivity provided by the BPCIA. (The table also indicates that the average time between patent application filing date and FDA approval is more than ten years (~3728 days).) Dr. Heled's paper (while coming to slightly different conclusions and couched in the language of academic patent law) is consistent with the idea set forth here that the future will be different than the past regarding biologic drug development and efforts to obtain the benefits of biologic drug development at a reduced price. For all these reasons, we may find that for biologic drugs the goals espoused by the proponents of the biosimilar approval pathway may be surprised at how that future turns out.