Looking Beyond the Patent Cliff

Sep 01, 2010

Driven by technological advances and the importance of a more collaborative commercial model, management of intellectual property (IP) has morphed from a technical backwater to a showcase strategic activity attracting some of the industry's most creative thinkers. To patent and prevent are no longer words that ring in unison; instead, the function is now seen as a source of new ideas in leveraging neglected knowledge assets to create entirely new businesses. And the policy dialogue around IP grows more uncharacteristically fecund and lively by the month, with one CEO quoted as associating patents with a cuss word, while a European industry spokesman has expressed his frustration with IP reforms by advocating a common language for patent translations modeled on Star Trek's Klingon dialect. More important, decisions of individual companies on IP continue to shape basic issues of access, price, and quality for medicines valued by millions of patients around the world.

There is also the intersection between technology, freedom, and power, highlighted by the basic decision: To patent or not to patent? Scientific advances like decoding of the human genome make this a far more complex calculation than in the past.

To add fresh perspective to this changing landscape, Pharm Exec sat down this month with Roy Waldron, Senior Vice President and Chief Counsel, Intellectual Property at Pfizer. Our Q&A below reveals how the world's biggest biopharmaceutical company—and a historic lead player in IP, having led the fight to ratify the 1994 TRIPS Agreement—is putting its stamp on the effort to reposition IP as a key partner to the business. William Looney, Editor-in-Chief

Pharm Exec: I think we agree that patents remain the lifeblood of today's biopharmaceutical enterprise—it's arguably the only big industry left where that statement remains true. What are the critical external and internal drivers that highlight patents as the embodiment of a company's knowledge assets?

Waldron: Changes in the business environment and commercial model have accentuated the role of all forms of intellectual property (IP). Thirty years ago, Pfizer and other drug companies existed as highly integrated organizations with a mission to "capture" knowledge and commercialize it, relying almost exclusively on in-house expertise and technologies. There was little collaboration across companies and markets, while geographies were narrowly segmented with a strong focus on developed countries with established IP regimes. Today the balance of power has shifted; a revolution in information technology and the pace of globalization have combined to make knowledge a "floating asset," largely accessible to all.

Industry has to mitigate the risks of rapid technological, environmental, and market changes through partnerships. Patents are critical to this task because they provide a predictable and measurable structure to transfer and develop technologies around this new collaborative model. Because the parties to a partnering transaction are also so diverse, patents help manage expectations, avoiding the "tragedy of the commons" that plague many well-meaning multilateral initiatives that take too long to consummate and often yield little of value to patients.

Pharm Exec: Many economists are making the point that rapid changes in the technology base render the "push to patent" obsolete, because by the time a patent is approved, the novelty and utility of the invention has been surpassed by competing improvements. This has been advanced as an explanation for the loss of interest in other industries—like computer software—in patenting as a commercial tool.

Waldron: I don't accept this argument. No industry can grow without IP protection. Absent patents, you are left with unlimited free association, no boundaries, and the assumption that all resources are inexhaustible. I don't know of any business that wants to operate that way. "Open source" is an interesting academic concept but it does not create the internal incentives that bring complex new medicines to the marketplace. Biopharmaceutical science is transforming as rapidly as any other business sector; patents build out certainty for the long term and thus makes the risk and cost of lengthy development cycles more predictable. In fact, Pfizer is using IP to facilitate better licensing agreements and novel partnerships around deals that once might have been considered too risky because the outcomes were not pre-ordained or the relationships are new. We see IP as a proactive instrument to help us build a lead position in this collaborative business model—to become industry's preferred partner of choice.

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