By Donald Zuhn --
In an article published earlier this fall on Medium, Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood urges Congress to modify the inter partes review (IPR) system, which he argues has "turn[ed] the serious business of medical innovation and entrepreneurial risk-taking into a casino." Noting that IPRs were designed by Congress to offer a quicker alternative to the district court system in resolving patent disputes and as a way to curb the growing number of frivolous lawsuits filed by so-called "patent trolls" in the tech sector, Mr. Greenwood contends that "this attempted solution for one sector's problem has created dangerous, unintended consequences in other sectors, by undermining valid patents that support innovation in diverse industries–from manufacturing, to consumer products, to biotechnology." He asserts that Congress needs to act to address this serious issue "for the sake of biomedical innovation and the need that all of us have for the vital medical advances it provides."
To support his argument, Mr. Greenwood first compares the IPR system with the Hatch-Waxman regulatory scheme, "a thoughtfully conceived process instituted by Congress over thirty years ago" that "strikes an effective balance" by allowing generic companies to deliver lower cost drugs to patients and still incentivizing innovator companies to invest in new medications. He notes that as a result of the Hatch-Waxman scheme, patients have access to generic versions of about 90% of all prescription medicines on the market. Mr. Greenwood suggests, however, that "the IPR system has inadvertently created a parallel track to challenge biopharmaceutical patents, but one with lower standards that conflict with those of Hatch-Waxman." In particular, while patents are presumed valid when challenged via the Hatch-Waxman process, Mr. Greenwood indicates that "there is no presumption at all" when patents are challenged via the IPR system.
Mr. Greenwood also points to an unintended consequence of the IPR system: the use of IPRs by hedge funds "to manipulate the shares of public biotechnology companies, which the hedge funds sell short in advance of filing IPRs against their patents, hoping to profit by damaging these businesses and driving their share prices down." He notes that more than thirty such IPRs have been filed by hedge funds since the IPR system was implemented. Given the cost of new drug development, and the importance of patents to the biotech industry, Mr. Greenwood asks: "Who will invest in the treatments of tomorrow with the specter of IPRs looming, magnifying the uncertainty of any potential return on investment? . . . What investor would put hundreds of millions of dollars at risk in such a situation?"
Mr. Greenwood concludes his article by noting that twenty major life science venture capital firms, representing over $60 billion in investments, have asked Congress to exempt biopharma patents from the unintended consequences of the IPR system, and that over 100 patient advocacy groups wrote Congress requesting the same (see "101 Patient Organizations Ask Congress to Curb IPR Abuse"). Given Congress' consideration of patent reform legislation, Mr. Greenwood suggests that Congress take the opportunity to modify the IPR system.