Protect Patent Settlements for Washington’s Biotech Future

12/3/10

In America’s health care system, patients benefit from the balance between availability of innovative, life-saving medicines and access to lower-cost generic medicines; in fact, generic medicines account for 74 percent of prescriptions written in the U.S. This balance is based on a variety of factors. Unfortunately, one of those factors is currently under attack in the nation’s capital. It’s about the ability of brand pharmaceutical companies—like those growing in Seattle’s biotech cluster—to resolve potentially costly and lengthy legal battles with their generic counterparts to come.

As part of the generic medicine regulatory process, it is routine for companies that manufacture these medicines to file legal challenges to the patents guarding brand pharmaceutical technologies. This does not necessarily reflect on the quality of the patent at issue, but rather is a response to incentives that exist for early generic challengers.

Following these challenges, however, the two legal adversaries often find themselves entangled in a costly, lengthy patent dispute – one that could take years, and many millions of dollars, to resolve in court.

As with other types of litigation, brand and generic companies may reach a settlement agreement to resolve the patent dispute. Typically, the brand company will agree to allow the generic medicine onto the market prior to patent expiration, making it available to patients months or years sooner than if the brand company had won in court.

Unfortunately, these settlement agreements are often mischaracterized as “delaying generic entry,” so some federal lawmakers are supporting legislation that would dramatically restrict a broad range of agreements.

At face value, such restrictions are unnecessary. After all, we currently have a regulatory system in place, including Federal Trade Commission review and the courts, to help ensure that these agreements are pro-competitive and in the best interests of patients.

More importantly, however, the proposed law is likely to hinder patient access to lower-cost generics prior to patent expiration. In the U.S., 74 percent of prescriptions are filled with generics. This high rate could be undermined if lawmakers take steps to over-regulate settlements that bring generics to the market early.

It’s also important that our laws and judicial system respect the value of patents and the ability of patent owners to protect their property. Intellectual property exists for a reason – to encourage … Next Page »

Diane Bieri serves as Executive Vice President and General Counsel for the Pharmaceutical Research and Manufacturers of America (PhRMA). Follow @

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  • http://www.lymanbiopharma.com Stewart Lyman

    As a Washington State resident, I’m siding with the government on this issue. Pay for delay agreements are, in a word, anti-competitive: they limit a consumer’s choice. The FTC has estimated that ending the current “pay for delay” practice will save American taxpayers some $35 billion over the next decade in reduced drug costs. These payments by pharma companies to generic competitors serve to keep the generic drug off of the market, on average, some 17 months longer than deals that don’t include such payments. Ending pay for delay agreements would save the federal government a significant amount of money, given that the government pays for about one-third of prescription drug costs. According to the FTC “Considering that generic entry can reduce the price of a branded drug by up to 90 percent, it’s easy to understand why branded firms are willing to pay generics not to come to market – and then share their illegally obtained monopoly revenues.”. Patent laws are strong, and pharmaceutical companies have tremendous financial resources to block the early entry of generic drugs on the market. Patent disputes favor the company holding the patent, who only profit from delays to having their patent claims rejected. It is beyond belief that a drug company selling a drug that brings in several billion dollars a year would be concerned about spending a few million dollars a year in legal fees to protect their patents from generic challenge. Over the past decade pharma has seen a significant 50% decline in their ability to develop and bring new drugs to market. This has nothing to do with intellectual property issues, as I detailed in a recent Xconomy piece. It has everything to do with their failure to innovate, which, to be fair, gets increasingly more difficult in the biopharma business due to the complexities of biology.

    Of the 300 or so medicines that have been brought to the US market in the past decade, only one of those (Dendreon’s Provenge) is being currently being sold by a company that is headquartered in Washington State. Other large pharma and biotech companies have site operations here, but they employ only a tiny fraction of the 20,000 people you mention. If Washington State consumers pay less for their drugs, they will have more money to spend on other purchases that will drive the local economy and lead to an increased number of jobs. Similarly, increased tax revenues earned by the State on all of those other purchases will be used, in part, to fund biomedical research via such vehicles as the Life Sciences Discovery Fund.

    Let’s cast the issue in a different light and see how it looks. Imagine that you have just moved to a new town and need to find a dentist. There is only a single one in your entire town, and the nearest other dentist is over 1000 miles away. You have no choice; you need to see the local dentist if you are having problems with your teeth. Your local dentist, as it turns out, is experienced, competent, and has a pleasant manner. However, he charges a lot of money for his services, but you have no choice but to go to him. Year after year you visit your dentist, happy with his services, but wishing that they didn’t cost so much. After 20 years, you hear a rumor that a new dentist will be moving to town. He has the same training, experience, and pleasant manner as your dentist. Even better, he will offer the exact same services, but only charge 10% as much as your dentist. Your dental expenses will drop by 90%! Sound like a pretty good deal. However, the new dentist doesn’t arrive in town when he was expected to. Turns out he’s not coming after all, because your dentist paid him to stay in his current city. The savings you were hoping for will not materialize after all. The situation is pretty much the same with the competition between branded and generic drugs.

  • http://www.corengi.com Ryan Luce

    I think Stewart makes some great points about how this issue should really be framed. Additionally, Diane doesn’t do her arguments any favors by conflating a couple of issues.

    First off, she mentions that 74% of all prescriptions filled are generics. This is pretty misleading (it suggests generics are dominating)- as generics account for only 25% of all the revenues. (http://www.pharmacytimes.com/issue/pharmacy/2010/May2010/RxFocusTopDrugs-0510)

    Secondly, she’s talking about the importance of this issue to the local biotech community – whereas PhRMA’s real focus for this issue is on traditional pharmaceutical compounds. As of right now, I think there is only one “generic” version of biotech drugs available – whereas there are thousands of generic versions of traditional pharmaceuticals. The term more often used is “biosimilar” – and while there are several in development – I think there’s only been one approved by the FDA – http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm220092.htm

    Given Stewart’s analysis and Diane’s seemingly misleading characterization of some of the issues, it makes it hard to not take her overall argument with a grain of salt.