Street Talk: Patent Issues Could Dominate Pharma Industry in 2006 - Proposed reforms on current patent practices could hand pharma substantial losses of revenue and diminished profit margins -


Street Talk: Patent Issues Could Dominate Pharma Industry in 2006
Proposed reforms on current patent practices could hand pharma substantial losses of revenue and diminished profit margins

BioPharm International
Volume 19, Issue 1

"In the past, generic companies just used to wait for the patents on brand name drugs to expire, but now they're being a lot more aggressive and proactive," notes Laura Mahecha, healthcare industry manager and participating research director on the study. "They're bringing legal challenges to try to break patents in order to bring generic versions to market sooner."

Kline & Company cites generic drug companies such as Teva Pharmaceuticals, Sandoz, and the afore-mentioned Ranbaxy Laboratories as pioneers in the patent reform sector. Note the omission of the Pfizers, Mercks, or Roches of the world.

Even so, using Pfizer as an example, generic drug companies have had some success chiseling away at a brand name drug maker's patent protection.

"[Generic drug makers] have been aggressive in challenging Pfizer's patents and so far have had only limited success, but they just keep chipping away at them, which is really their ultimate goal in many cases. Even if their case gets shot down and they only get to bring their product to market a few months sooner, they win big," Mahecha says. She notes that patent challenges will increase as more brand name drugs approach their expiration dates.


But is it a good idea to reform or even abolish patent protection? Doesn't that de-emphasize research on the part of biopharmaceutical companies who fear, rightfully so, that generic vultures will swoop in and steal their billion dollar ideas? And won't this practice hurt the financial prospects of brand name drug makers and make it harder for them to create environments for important prescription drug breakthroughs?

Well, "yes" on all fronts, to be perfectly blunt.

The US government has been in the patent protection business since 1793, ostensibly to provide people and companies with exclusive rights to their great ideas, and to build a wall that keeps those who would poach those ideas away.

In a thoroughly researched book on the topic, Innovation and Its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, by Princeton University professors Josh Lerner and Adam Jaffe, the authors argue that the patent process has moved away from that original 1793 mission of idea protection to a 2006 environment of idea exploitation.

Said Lerner, in an October, 2004 interview with The New York Times, "The ability to litigate and expect to get substantial award from litigation (has) increased. As a result we've got somewhat of a vicious cycle. Once you get one firm in an industry beginning a strategy of aggressive patent enforcement, it creates an almost inevitable response — an almost arms-race dynamic — where everyone else in the industry says, 'We better be doing the same thing."

The authors want to jettison the current patent legal environment, which they say is highly jury-driven. They recommend a return to trials where judges are the final arbiters, as the complexities involved in patent law are better handled by trained jurists. "Over the last 30 to 40 years, there has been real replacing of judges by juries," Mr. Lerner told The Times. "Patent disputes by and large tend to be highly technical disputes, and in many cases a lay person without much training in the area is hardly an expert."

Some help for brand name drug companies may be coming down the pike from Congress, which is closing in on the passage of a bill called the Patent Reform Act of 2005 (HR #2795). The bill promises to make it easier to win patent approval and harder to litigate against patent holders.

The act changes the current "first to invent" standard to "first to file," which means patent rights go to the first inventor to file for a patent who can provide sufficient evidence for a claimed invention. It also reduces the scope of willful infringement by raising the standard of proof required, and limits the amount of damages a patent holder can collect from an infringer. Additionally, it limits the plaintant's ability to get injunctions against patent holders.

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