IP: Time for a Reset?

Mar 31, 2012

William Looney
APRIL IS CALLED THE MONTH OF SHOWERS—but it is not raining patents. As the world IP community prepares for its annual "day of recognition" on April 26, Big Pharma's patenters are squinting through a mist of uncertainty. The list of imponderables is long: patent filings are falling as pipeline portfolios place bigger bets on in-licensing opportunities, where companies are less the master of their own IP; legal boundaries defining patentability are fraying, as the science behind invention grows more complex; and progress on a multilateral consensus to extend minimum levels of IP protection is stalled, with an effective moratorium on enforcement in place for more than a decade. Last but certainly not least, IP-friendly allies across industries are increasingly scarce.

Here's a sign of the times. Try as we might, Pharm Exec could not pin down one of India's most influential drug innovation advocates, Dr. R. A. Mashelkar, on the implications of his country's first grant of a compulsory license against foreign drug maker Bayer. In our interview with him in this month's issue, he chose instead to focus on slow progress in implementing technology transfer provisions of the 1994 WTO Agreement on Trade-Related Intellectual Property (TRIPS). It's a neat sidestep—and a pragmatic one if you compare the relentless, in-your-face passion of pro-licensing activists like Medecins sans Frontiere (MSF) to the halting and largely defensive stance of industry.

Harsh cutbacks induced by the patent cliff bear witness to the continuing importance of IP as the balm for investor confidence and commercial success—patents, data exclusivity, copyright, and trademarks are the essential incentive for which there is no obvious replacement. Nevertheless, the basic guarantee of a predictable period of market exclusivity at prices linked to market demand, which are assumed to accompany the launch of a patent protected medicine, is beginning to spring some big leaks. The spread of therapeutic reference pricing, where no distinction is made between pricing of newer patented and older generic products, has severed the notion that patent status confers any form of price advantage to the owner. Has anyone mentioned the centrality of patent protection in Europe lately?

Another threat is the growing interest of regulators in "adaptive" licensing. Here, permission to market a medicine no longer stretches to the end of the product life cycle, but is instead subject to periodic re-review—including the prospect of early withdrawal if regulator expectations around vague criteria linked to pricing, value, or "medical need" are not met. The potential thus exists for product life cycles to be shortened dramatically or, at best, to be subject to significant uncertainty, effectively depriving the patent holder of the protections such status is supposed to provide.

Likewise, "disruptive innovation" from advances in science pose an implicit threat to the IP status quo. Questions for the IP specialist are both elemental and complex: how do you marry the rights to a companion diagnostic developed with many partners with a promising oncologic whose patents are held by only one owner, where that diagnostic is intended as a core element in the product's value proposition to payers? Our cover profile on Ernst & Young's Carolyn Buck-Luce, HBA's 2012 Woman of the Year, includes her own take on the challenge. "Because pharma is changing faster on the outside than the inside, time horizons for the industry will be dictated by the frenetic world of high tech, not the patent-secured world of pharma," she says. IP must adapt to new ways of extracting value from assets the industry never knew it had, beginning with information itself.

Pharma's current identity crisis in adjusting its business model could serve as a crucible for change, at least in the way IP is leveraged, applied, and explained to a growing roster of stakeholders. Ways to begin? Start with a more robust defense of data exclusivity, as a non-threatening, access-friendly tool that promotes the patient interest in safety and quality. How extended patents lead not to feeble imitations but more, better, and safer medicines. Promote a more active engagement around "use patents" that facilitate commercialization of secondary applications from existing drugs. Other priorities might involve a stronger, shared industry definition of "open innovation," as well as expanded commitments to pre-competitive collaboration in drug testing and development. One final option: training more scientists to serve as patent specialists. Education is key. The survival of IP depends on explaining why it is a driver of progress, not a draught for protection.

William Looney