1. Pharmaceutical Development:Pharmaceutical Development:
Protecting Innovation vs. Promoting PublicProtecting Innovation vs. Promoting Public
HealthHealth
December 12, 2008
Aaron S. Kesselheim, M.D., J.D., M.P.H.
Division of Pharmacoepidemiology and Pharmacoeconomics
Brigham and Women’s Hospital
Harvard Medical School
akesselheim@partners.org

2. InnovationInnovation
 How do we optimally integrate drugHow do we optimally integrate drug
development and public health?development and public health?
– Ensure creation of important new drugsEnsure creation of important new drugs
currently through incentives for investmentcurrently through incentives for investment
– Ensure that access to such drugs is not undulyEnsure that access to such drugs is not unduly
compromisedcompromised

3. Background: PatentsBackground: Patents
 Make drug development profitable byMake drug development profitable by
secure market exclusivity for new drugsecure market exclusivity for new drug
– 20 years20 years
 US Constitution, Art I, § 8, cl 8: “…US Constitution, Art I, § 8, cl 8: “…
promote progress of science and the usefulpromote progress of science and the useful
arts…”arts…”
 Four basic criteria for patenting…Four basic criteria for patenting…

4.  Proper subject matterProper subject matter
 UtilityUtility
 NoveltyNovelty
 Non-obviousnessNon-obviousness
 Patent document requirements: WrittenPatent document requirements: Written
description, enablement, best mode,description, enablement, best mode,
definitenessdefiniteness
Background: PatentsBackground: Patents

5. Background: PatentsBackground: Patents
 Quid pro quoQuid pro quo
– Make details of invention public, but secureMake details of invention public, but secure
government protection against free ridersgovernment protection against free riders
– Primary claim: Composition of matter coveringPrimary claim: Composition of matter covering
the active ingredientthe active ingredient

6. 0
5,000
10,000
15,000
20,000
25,000
30,000
1975-1979 1980-1984 1985-1989 1990-1994 1995-1999
Source: National Bureau of Economic Research
Number of New Drug-Related Patents Granted
Background: Patents

7. Policy problemPolicy problem
 Patent lifePatent life ≠ Drug development≠ Drug development
– Invention of new molecules occurs early inInvention of new molecules occurs early in
course of drug developmentcourse of drug development
– Patent law requires filing of patent onPatent law requires filing of patent on
composition at that timecomposition at that time
» Publication, use can make ineligiblePublication, use can make ineligible
– Preclinical studies, clinical trials, FDA reviewPreclinical studies, clinical trials, FDA review
» 8-10 years between patent filing and approval
– Once approved, can charge whatever marketOnce approved, can charge whatever market
will bearwill bear

8. Policy problemPolicy problem
 Patent lifePatent life ≠ Drug development≠ Drug development
– Historically, FDA required full complement ofHistorically, FDA required full complement of
tests (NDA) for companies seeking to markettests (NDA) for companies seeking to market
identical copies of drugs whose patentidentical copies of drugs whose patent
protection had expired (“generic drug”)protection had expired (“generic drug”)
» By 1984, 150 brand-name drugs lacked genericBy 1984, 150 brand-name drugs lacked generic
versions despite being off-patentversions despite being off-patent
» Generics accounted for only 19% of allGenerics accounted for only 19% of all
prescriptionsprescriptions
– Result: de facto permanent market exclusivityResult: de facto permanent market exclusivity
» Runs past end of patent termRuns past end of patent term

9. Solution: Hatch-Waxman ActSolution: Hatch-Waxman Act
 1984 Drug Price Competition and Patent Term1984 Drug Price Competition and Patent Term
Restoration ActRestoration Act
– To promote access, uplift generic drug mfrs:To promote access, uplift generic drug mfrs:
» ““ANDA” for generic drug mfrs showing bioequivalenceANDA” for generic drug mfrs showing bioequivalence
» 6-month generic exclusivity incentive for first company to6-month generic exclusivity incentive for first company to
challenge patentchallenge patent
– To provide incentives, assist brand-name mfrs:To provide incentives, assist brand-name mfrs:
» 5 yrs of data exclusivity for new products5 yrs of data exclusivity for new products
» 2.5 year window for resolution of patent challenge2.5 year window for resolution of patent challenge
» FDA review time added back to patent life (maxFDA review time added back to patent life (max 14 yrs14 yrs))

10. Effects of Hatch-WaxmanEffects of Hatch-Waxman
 SuccessSuccess
– Remarkable number of important new drugsRemarkable number of important new drugs
approved in 1980s and 1990sapproved in 1980s and 1990s
» Cardiovascular disease, cancer, GI disease,Cardiovascular disease, cancer, GI disease,
psychiatric disorderspsychiatric disorders
– Low costs of generic drugs allow cost-savingLow costs of generic drugs allow cost-saving
and promote patient adherenceand promote patient adherence
» Beginning at conclusion of market exclusivityBeginning at conclusion of market exclusivity
» Now 65% of prescriptions are for generic drugsNow 65% of prescriptions are for generic drugs

11. Persistent ProblemsPersistent Problems
 Since Hatch-Waxman, balance betweenSince Hatch-Waxman, balance between
incentives for drug development and publicincentives for drug development and public
health goals continues to plaguehealth goals continues to plague
pharmaceutical marketpharmaceutical market
 In particular, two categories of problemsIn particular, two categories of problems
have emerged:have emerged:
– Problem #1: Abuse of available incentivesProblem #1: Abuse of available incentives
– Problem #2: Incentives misaligned with publicProblem #2: Incentives misaligned with public
health goalshealth goals

12. Abuse of available incentivesAbuse of available incentives
 1. Inappropriate patents1. Inappropriate patents
– Patents granted for pharmaceutical productsPatents granted for pharmaceutical products
that don’t meet statutory requirementsthat don’t meet statutory requirements
– USPTO is a regulatory body with importantUSPTO is a regulatory body with important
limitationslimitations
» 2006: 332,000 applicants; 4,000 examiners2006: 332,000 applicants; 4,000 examiners
» In the pharmaceutical compound area, timeIn the pharmaceutical compound area, time
allocated for complete examination of an applicationallocated for complete examination of an application
is 18 hours for an upper-level examiner, and 21is 18 hours for an upper-level examiner, and 21
hours for a mid-level examinerhours for a mid-level examiner
» Do not seek outside expertise, may not even beDo not seek outside expertise, may not even be
allowed to search Internetallowed to search Internet

13. Drug patentDrug patent

14. Patents: ExamplesPatents: Examples

15. Patents: ExamplesPatents: Examples

16. Patents: ExamplesPatents: Examples

17. Abuse of available incentivesAbuse of available incentives
 Result: 90% of all drug patent applications areResult: 90% of all drug patent applications are
eventually approvedeventually approved
– Patent feesPatent fees
 Overturning bad patents takes time, effort,Overturning bad patents takes time, effort,
resourcesresources

18. Abuse of available incentivesAbuse of available incentives
 2. Patents not reward true discoverers2. Patents not reward true discoverers
– Early basic science critical to drug development, butEarly basic science critical to drug development, but
may not meet statutory req’ts for “patent”may not meet statutory req’ts for “patent”
– Example:Example: RochesterRochester casecase
» 1990s: Researchers at Univ of Rochester isolate COX-21990s: Researchers at Univ of Rochester isolate COX-2
receptor, apply for patent on “method of inhibiting”receptor, apply for patent on “method of inhibiting”
» Pharmacia/Pfizer develop Vioxx and Celebrex ($5BPharmacia/Pfizer develop Vioxx and Celebrex ($5B
market), claim Rochester’s patent invalidmarket), claim Rochester’s patent invalid
» Circuit Court upholds – did not take critical step ofCircuit Court upholds – did not take critical step of
isolating a compound, akin to “alchemists”isolating a compound, akin to “alchemists”
Source: Kesselheim & Avorn, University-based science and biotechnology research:
defining the boundaries of intellectual property. JAMA 2005;293:850-854.

19. Abuse of available incentivesAbuse of available incentives
 3. Evergreening/“Life Cycle Management”3. Evergreening/“Life Cycle Management”
– Multiple (legitimate) patents covering the sameMultiple (legitimate) patents covering the same
active ingredient, minor changes, or peripheralactive ingredient, minor changes, or peripheral
features of the pillfeatures of the pill
– Intended to perpetuate market exclusivityIntended to perpetuate market exclusivity
– Example: Exploit “non-obvious” requirementExample: Exploit “non-obvious” requirement
» Combination drugsCombination drugs
» Use of drug (e.g. crushing and mixing inUse of drug (e.g. crushing and mixing in
applesauce)applesauce)
» Prilosec/NexiumPrilosec/Nexium

20. Prilosec/Nexium
 Omeprazole (Prilosec)
– Original patents expire Apr 2001
– Patents on pill coating protect until 2007?
– Generic availability delay 21 months
»Meanwhile, market s-isomer (Nexium) in 2001
 No evidence of improved outcomes
»Market over-the-counter version
Source: Kesselheim AS, Fischer MA, Avorn J. The rise and fall of Natrecor for congestive
heart failure: implications for drug policy. Health Affairs 2006;25:1095-1102.

21. 2001 2002 2003 2004
$120M
$100M
$80M
$60M
$40M
$20M
Actual spending on omeprazole
Projected spending on omeprazole
No IP extension = $609M
Subst for Nexium = $1.2B
Prilosec/Nexium
Source: Kesselheim AS, Fischer MA, Avorn J. Extensions of intellectual property rights and delayed
adoption of generic drugs: effects on Medicaid spending. Health Affairs 2006;25:1637-47.

22. Prilosec/Nexium
 Policy implications
– Medicaid programs facing rising costs
– One area where cost savings can be achieved
without affecting patient care

23. Abuse of available incentivesAbuse of available incentives
 4. Manipulation of Hatch-Waxman4. Manipulation of Hatch-Waxman
regulatory/legal systemregulatory/legal system
– Multiple Orange Book listingsMultiple Orange Book listings
– Collusive agreements between brand-name andCollusive agreements between brand-name and
generic mfrsgeneric mfrs

24. Abuse of available incentivesAbuse of available incentives
 Reform effortsReform efforts
– Patent reformPatent reform
» Supreme Court revamps “non-obvious” standard forSupreme Court revamps “non-obvious” standard for
combination invention (combination invention (KSR v. TeleflexKSR v. Teleflex))
» Patent office reform (e.g. allow broaderPatent office reform (e.g. allow broader
input/reexaminations of patents)input/reexaminations of patents)
– Eminent domainEminent domain
» Government takes over control ofGovernment takes over control of
inappropriate/abusive patentsinappropriate/abusive patents
– Better ways of determining multipleBetter ways of determining multiple
contributions to a finished drug productcontributions to a finished drug product
Source: Kesselheim AS and Avorn J. Biomedical patents and the public’s health: is there
a role for eminent domain? JAMA 2006;295:434-437.

25. Misaligned incentivesMisaligned incentives
 Some important public health issues fallSome important public health issues fall
outside of patent incentive structureoutside of patent incentive structure
– Orphan DiseasesOrphan Diseases
– Pediatric PopulationsPediatric Populations
– AntibioticsAntibiotics
– Neglected DiseasesNeglected Diseases

26. Orphan Drug ActOrphan Drug Act
 ““Orphan condition”: <200,000 peopleOrphan condition”: <200,000 people
 Incentives:Incentives:
– Federal funding of some grants and contracts toFederal funding of some grants and contracts to
perform clinical trials of orphan productsperform clinical trials of orphan products
– A tax credit of 50% of clinical testing costsA tax credit of 50% of clinical testing costs
– Market exclusivity for orphan indication for 7Market exclusivity for orphan indication for 7
years from date of approvalyears from date of approval
» Iron-clad, stronger than patentIron-clad, stronger than patent

27. Orphan Drug ActOrphan Drug Act
 Great success …Great success …
– 325 approvals since 1983 for rare diseases and enzyme325 approvals since 1983 for rare diseases and enzyme
deficienciesdeficiencies
 …… at a substantial costat a substantial cost
– Annual spending on specialty pharmaceuticalsAnnual spending on specialty pharmaceuticals
increases by more than >20% per yearincreases by more than >20% per year
» Patients disproportionately bear costsPatients disproportionately bear costs
» Harder to introduce genericHarder to introduce generic
– Misuse?Misuse?
» Vioxx approved as orphan for JRA in 2004Vioxx approved as orphan for JRA in 2004
» Epogen approved as orphan in anemia of CKDEpogen approved as orphan in anemia of CKD
– Currently, ½ of all drugs produced by biotechCurrently, ½ of all drugs produced by biotech
companies are orphanscompanies are orphans

28. Pediatric Exclusivity ExtensionPediatric Exclusivity Extension
 6 mos of market exclusivity if conduct clinical6 mos of market exclusivity if conduct clinical
trials of products in pediatric populationstrials of products in pediatric populations
 Success …Success …
– 1/3 of drugs underwent labeling changes1/3 of drugs underwent labeling changes
 …… at a costat a cost
– Awarded regardless of outcome or utility of trialAwarded regardless of outcome or utility of trial
» Many trials not publishedMany trials not published
– Overcompensates blockbusters (and may under-Overcompensates blockbusters (and may under-
compensate turkeys):compensate turkeys):
» Cost of trials: $6 - $37MCost of trials: $6 - $37M
» Return from 6 mos exclusivity: $-9M to $507MReturn from 6 mos exclusivity: $-9M to $507M
Source: Li et al,Li et al, JAMAJAMA, 2007, 2007

29. AntibioticsAntibiotics
““The pipeline of newThe pipeline of new
antibiotics is drying up.antibiotics is drying up.
Major pharmaceuticalMajor pharmaceutical
companies are losingcompanies are losing
interest in the antibioticsinterest in the antibiotics
market because these drugsmarket because these drugs
are simply not as profitableare simply not as profitable
as drugs that treat chronicas drugs that treat chronic
(long-term) conditions and(long-term) conditions and
lifestyle issues.”lifestyle issues.”

30. AntibioticsAntibiotics
 Perceived inadequacies of current system forPerceived inadequacies of current system for
antibiotic reimbursementantibiotic reimbursement
– Short courses of therapy – blockbusters unlikelyShort courses of therapy – blockbusters unlikely
– Resistance make “life-cycle management” less effectiveResistance make “life-cycle management” less effective
– Public health efforts to limit prescribingPublic health efforts to limit prescribing

31. Spellberg B, Powers JH, Brass EP, Miller LG,
Edwards Jr. JE. CID 2004;38:1279-86.
Powers JH. Clin. Microbiology &
Infection 2004;10(S4): 23-31.
Is this really a problem?Is this really a problem?

32. New therapiesNew therapies
Talbot, et al., CID 2006; 42:657–68.
Acinetobacter baumanniiAcinetobacter baumannii TigecyclineTigecycline
Aspergillus speciesAspergillus species Some therapies in development,Some therapies in development,
but no substantive breakthroughbut no substantive breakthrough
drugdrug
ESBL–producingESBL–producing
Enterobacteriaceae and KlebsiellaEnterobacteriaceae and Klebsiella
speciesspecies
TigecyclineTigecycline
VREVRE Quinupristin-dalfopristin andQuinupristin-dalfopristin and
linezolidlinezolid
Pseudomonas aeruginosaPseudomonas aeruginosa Carbapenems onlyCarbapenems only
Methicillin resistantMethicillin resistant
Staphylococcus aureus (MRSA)Staphylococcus aureus (MRSA)
Many drugs under developmentMany drugs under development

33. Wildcard Patent ExtensionsWildcard Patent Extensions
 New class of antibiotic with specific targetedNew class of antibiotic with specific targeted
indications, the company would be able to pickindications, the company would be able to pick
any drug in its portfolio and add, for example,any drug in its portfolio and add, for example,
between six months and two years of marketbetween six months and two years of market
exclusivityexclusivity
 ““It is potentially very attractive to establishedIt is potentially very attractive to established
companies, but is politically challenging becausecompanies, but is politically challenging because
the economic burden would be placed on patientsthe economic burden would be placed on patients
or payers for different medicines, possibly inor payers for different medicines, possibly in
another countries.” -- WHOanother countries.” -- WHO

34. Permanent PatentsPermanent Patents
 ““Patent terms for antibiotics should bePatent terms for antibiotics should be
extremely long … trying to encourageextremely long … trying to encourage
pharmaceutical companies to stockpilepharmaceutical companies to stockpile
drugs to deal with potential plagues.”drugs to deal with potential plagues.”
Kades E. Northwestern Univ. L. Rev. 2005;99:611-675

35. Exclusivity-based solutionsExclusivity-based solutions
 ProblemsProblems
– Using patents as a lever involves substantial costsUsing patents as a lever involves substantial costs
» For wildcard patents, public health implications in otherFor wildcard patents, public health implications in other
marketsmarkets
– No guarantee that market will respond as predictedNo guarantee that market will respond as predicted
– Potential for abusePotential for abuse
See: Outterson et al, Lancet Inf Dis, 2005

36. Neglected DiseasesNeglected Diseases
 Tropical infections endemic in low-incomeTropical infections endemic in low-income
populations, usually in Africa or Asiapopulations, usually in Africa or Asia
– WHO: >1 billion people suffer from aWHO: >1 billion people suffer from a
neglected tropical diseaseneglected tropical disease
– Kala-azar, Chagas’ disease, sleeping sickness…Kala-azar, Chagas’ disease, sleeping sickness…
– 1975-1999: 1,393 new drugs were made1975-1999: 1,393 new drugs were made
available to the public, but only 16 were meantavailable to the public, but only 16 were meant
for neglected diseasesfor neglected diseases
Source: Troullier et al,Source: Troullier et al, LancetLancet, 2002, 2002

37. Priority Review VoucherPriority Review Voucher
 Food and Drug AdministrationFood and Drug Administration
Amendments Act of 2007Amendments Act of 2007
– Require review of new product within 6 mosRequire review of new product within 6 mos
– Awarded upon approval of NDA for drugAwarded upon approval of NDA for drug
treating tropical diseasetreating tropical disease
» Ineligible if active ingredient previously approvedIneligible if active ingredient previously approved
– May transfer/sell to other companiesMay transfer/sell to other companies

38. Priority Review VoucherPriority Review Voucher
 ProblemsProblems
– Incentives do not include implementation,Incentives do not include implementation,
“recycled” products, or adapting products to be“recycled” products, or adapting products to be
useful in tropical climatesuseful in tropical climates
– Lack of transparency in transfer dealsLack of transparency in transfer deals
– Public health concern with speedy FDAPublic health concern with speedy FDA
reviews for products without substantial healthreviews for products without substantial health
interest involvedinterest involved
Source: Kesselheim, NEJM, 2008

39. Misaligned IncentivesMisaligned Incentives
 Reform:Reform:
– Critically examine whether incentives areCritically examine whether incentives are
needed, and if so, how muchneeded, and if so, how much
– If additional incentives are needed, must includeIf additional incentives are needed, must include
oversight to protect against abuse, ensure publicoversight to protect against abuse, ensure public
benefitbenefit
» Orphan Drugs: Ensure not pricing out of market, endOrphan Drugs: Ensure not pricing out of market, end
exclusivity at certain pointexclusivity at certain point
» Pediatric Trials: Condition of drug approval?Pediatric Trials: Condition of drug approval?
» Antibiotics: Reward appropriate conservation andAntibiotics: Reward appropriate conservation and
patient outcomespatient outcomes
» Neglected diseases: Independent funds awardNeglected diseases: Independent funds award
research, development, and then implementationresearch, development, and then implementation

40. Proposed alternatives to patent-basedProposed alternatives to patent-based
incentive systemincentive system
 ““Regulatory exclusivity”Regulatory exclusivity”
– Starting for fixed period of time after FDAStarting for fixed period of time after FDA
approval (e.g. biologics)approval (e.g. biologics)
– Vary time based on importance of drug, origin ofVary time based on importance of drug, origin of
IP, investment by sponsor, how they handle theIP, investment by sponsor, how they handle the
post-approval periodpost-approval period
 PrizesPrizes
 Government investment/public fundsGovernment investment/public funds
– Include fair return to underlying publicly-Include fair return to underlying publicly-
funded sciencefunded science

41. ConclusionConclusion
 Patent system provides incentives, intellectualPatent system provides incentives, intellectual
property protection for drug developmentproperty protection for drug development
 Not optimally designed to do that, leading toNot optimally designed to do that, leading to
misuse and unresolved public health issuesmisuse and unresolved public health issues
 In attempting to reform and find better balance,In attempting to reform and find better balance,
keep in mind:keep in mind:
– Reward important public health outcomes overReward important public health outcomes over
intermediate stepsintermediate steps
– Ensuring rewards accrue to proper inventorsEnsuring rewards accrue to proper inventors