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Insight & Intelligence : Jul 14, 2009
Potential Effects of Pending Biologics Legislation on the Patent Application Process
While patent reform may get bumped to a later Congress, a resolution to biosimilars law may get passed as part of a healthcare reform bill.!--h2>
There are two groups of legislation that seem to be on the docket during each Congress: patent reform and biologics-related. Both are subject to intense lobbying for different reasons, and it is likely that at least one of them will be kicked down the road to a future Congress. The minutiae of these bills are likely to change during committee review and markup and may not include several of the provisions currently being debated. Looking at the big picture, however, it is instructive to consider how biologics patent applications and each interest group are going to be affected under each bill.
The longest running debate centers on patent reform legislation. Two of the primary issues for the biotech industry are assessment of damages and third-party challenges to issued patents. The issue around damages and what constitutes a “reasonable royalty” has the biotech/pharma industry on one side and the semiconductor/computer/hardware industry on the other. Biotech/pharma firms would like royalties to be as high as possible, because the infringer’s product could represent most if not all of the claimed invention; the opposite is true of the hi-tech industry, which primarily views this issue from the defendant’s side.
The patent reform bill could also add at least a 90-day opposition period similar to that in the EU where someone can oppose the final issue of the patent application. On the other end of the spectrum, the bill may allow third parties to challenge patents for any reason, thereby weakening the re-examination requirements, until the point where the patent expires. This particular aspect of patent reform is troubling to start-ups and venture capital groups, because a patent’s status remains challengeable for the life of the patent for any reason, not just based on unknown prior art. This could result in significant uncertainty in the value of a small or growing patent portfolio.
The second major piece of legislation, related to the approval process for biosimilars, if coupled with passage of significant patent reform could result in a sea change in the way biotechs, start-ups, and VCs protect and fund innovation. There are two bills in the House, one introduced by Rep. Henry Waxman (D-CA) and the other by Rep. Anna G. Eshoo (D-CA). Both allow generic manufacturers to utilize biosimilars, which may not be identical but are shown to be similar or comparable to an already approved biologic. This provision attempts to address the controversy that generic manufacturers cannot replicate the innovator product due to the complexities inherent in biologic development and manufacturing. Each bill also introduces exclusivity periods ranging from 5 to 14 years, with the Waxman bill asking for a shorter exclusivity period and the Eshoo version providing for a longer period. A placeholder introduced into the Senate by Edward Kennedy (D-MA) puts exclusivity at 13.5 years.
Filing Applications under Each Option
Under the Waxman bill, an innovator company may need to file patent applications early and in groups to get the most blanket patent coverage for the maximum length of time after the FDA approves the compound or composition. There are provisions in the Waxman bill for extensions based on new uses, but those extensions are on the order of one to three years.
This group filing procedure can be cost prohibitive for start-up companies. In addition, venture capital firms may be reluctant to provide early funding for these companies because of the risk associated with the length of time for FDA approval and the chance that patents will be challenged after issue under a patent reform bill if enacted. Another concern for VCs is that generics manufacturers may be able to design around patented biologics to produce biosimilars that get the best of both worlds—they can avoid the innovator company’s patents and at the same time ride the back of the innovator company’s testing and clinical data. This point requires that patent applications are carefully drafted to minimize “design arounds”.
Under the Eshoo bill, an innovator company may be able to delay filing of patent applications that are directed to different uses or indications, because the exclusivity period after FDA approval can be significantly longer than under the Waxman bill. This staggered filing procedure can be beneficial for universities and start-up companies. Venture capital firms may be more willing to provide money to these companies because of the increased exclusivity period coupled with the ability to file meaningful patent applications on “rolling research”. The design-around concern is still present, but it is mitigated by the longer exclusivity period. Generics manufacturers would likely have to wait 3 to 10 additional years over the Waxman bill to manufacture biosimilars especially if there is a lengthened FDA approval process (more than 10 years).
Patent reform has been kicked down the road for the last few years, and there’s nothing to indicate that it is going to be pushed through during this Congress. This is primarily because there are issues that this Congress is likely to put ahead of patent reform, such as the economy, healthcare reform, and foreign issues. Biologics legislation may actually be a priority this year because of the emphasis on healthcare reform, where this legislation may be tacked on to a larger healthcare reform bill. One would expect that the final biologics bill would be a compromise between Waxman and Eshoo, where biologics are given a longer exclusivity period than Waxman but less than Eshoo. This would make sense given the complexities in biologic development coupled with the potential for generics manufacturers to piggyback on innovator company’s work through development of biosimilars.
Sandra P. Thompson, Ph.D., is a shareholder at law firm Buchalter Nemer.
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