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The importance of early development strategy and planning for biologic patent term extension.
We have all heard the phrase, “The early bird gets the worm.” No different in the world of biologics, a company that implements an early development strategy can insulate itself from an early patent “cliff.” A pharmaceutical company’s patent cliff is typically a function of which patents have a term extension, if any. A patent term extension (“PTE”) on the right biologic patent can delay such a cliff up to two years past the 12-year FDA marketing exclusivity date-thus, a well-timed PTE can easily be worth hundreds of millions of dollars in revenue.
But there is now a cloud of uncertainty over PTE for biologics. This is an unfortunate result of Congress’ failure to update the PTE rules with the passage of the Biologics Price Competition and Innovation Act of 2009, as well as the lack of meaningful FDA policy and consequential federal court rulings. Pharmaceutical enterprises developing biologics are left with the old Hatch-Waxman PTE rules compensating patent owners for time spent waiting for product approval at the FDA.
Under this regime, early planning and development of PTE decisions for biologics will be critical because of the unpredictable issue of whether past court rulings over small-molecule PTE will be applicable to biologic PTE. Our view is that, especially in light of this uncertainty, businesses’ planning for PTE should begin before FDA approval-at the development phase, if possible. First, we think that the choice of a particular patent for PTE may be more fluid than it was for small-molecule drugs. Second, we suggest a few practical tips for businesses managing the selection of the biologic patent for PTE, including recommending a process-based solution to choosing a patent for PTE and providing a useful flip of the 14-year PTE rule that is key to narrowing down the selection of patents.
1. Will small-molecule jurisprudence on PTE be applicable to biologics? The case law is developing.
By far the most important outstanding issue in PTE for biologics is how the FDA, the United States Patent and Trademark Office (USPTO) and the federal courts will interpret the term “active ingredient” in section 156(c)-will the term be interpreted narrowly or broadly? The issue gets to the heart of the value of PTE. A patent is enforceable during the term extended by PTE only to uses “approved for the product,” where the term “product” means active ingredient. For biologics, what is the “active ingredient”? There is no good technical answer to this question given the diversity of biologic drugs, mechanisms of action and delivery systems. And biosimilars may be approved with different amino acid sequences that, depending on the technical argument or definition at play, could mean they have a different “active ingredient.”
For small-molecule drugs, in the context of patent prosecution and infringement litigation, the Federal Circuit has generally concluded that an “active ingredient” should be linked to each FDA-approved product. Under this regime for small-molecule drugs, it was reasonable that a later development stage patent must have a different active ingredient to be eligible for PTE (as was the case in PhotoCure ASA v. Kappos), or that a generic must have the same active ingredient as the branded product, allowing infringement during the term of the PTE on that ground (as in Pfizer Inc. v. Dr. Reddy’s, where enforcement of a patent during its PTE period applied to salts of the approved molecule). But there is no guarantee that the FDA, USPTO or the federal courts will arrive at similar conclusions for biologics and biosimilars.
For businesses developing and patenting second- or third-generation biologics and planning to apply for PTE, the applicability of PhotoCure is a critical consideration affecting the scope of the patent cliff. On the other hand, for a company evaluating a biosimilar (whether for development, or defensively), a critical consideration is knowing if it will infringe the term of a PTE based on the applicability of the Pfizer case. Despite the importance of these issues to businesses, searches of public document databases have revealed essentially no application of those two Federal Circuit decisions in the context of biologics or biosimilars. We believe that a highly relevant district court case and subsequent Federal Circuit appeal are all but guaranteed in the next 3-5 years as patent and biosimilar applicants challenge the applicability of older small-molecule jurisprudence to biologics.
During the next 3-5 years, companies may be at risk of involvement in a costly, precedent-setting dispute about the term “active ingredient.” To help manage this risk, we recommend that research and development business units highlight to patent counsel any potentially patentable inventions covering an alteration of a molecule or a delivery system claimed in an existing patent with PTE. For business units involved in operations, conversations with patent counsel should center around intel that competitors are developing a biologic with a slightly different molecular structure or delivery system to that claimed in a patent with PTE. Regarding this latter issue, if the business’ patent term covered by the PTE is unenforceable against a biosimilar with a different “active ingredient,” then that business’ effective patent cliff could come far sooner than expected.
This latter scenario probably has not arisen yet because biosimilar applicants have conservatively filed abbreviated Biologics License Applications (“aBLA”), e.g., the first four approved biosimilars all had the exact same amino acid sequence as the reference biologic product. In time, however, aBLA applicants will develop slightly different molecules-which are still biosimilar-for some distinct advantage, such as increased freedom to manufacture, cost savings, or even improved treatment. Business managers would be wise to flag any competitive intelligence reports containing early indications of such development.
2. Practical tips for managing the selection of the biologic patent for PTE
We take the view that a process-based strategy, applicable across every patent portfolio, is optimal to manage the selection of a biologic patent for PTE. As a first step in the process, we recommend increasing the available pool of strong candidate patents for PTE by intentionally linking and overlapping patentable subject matter so that resulting applications contain claims covering a mixture of compounds, formulations, and methods of use. Practically, this may mean filing more patent applications than is typically common, and perhaps paying additional fees for the privilege of so doing. The upside is that a patent with a PTE containing a broad specification with a hybrid claim set could significantly help to insulate against uncertainties in the law, e.g., such a patent could reduce the risk posed by courts narrowly interpreting the “active ingredient” provision (and thereby adversely affect enforceability during the PTE term).
Second, we recommend combining the efforts and information from multiple disciplines in a PTE chart updated at regular intervals alongside a business unit’s life cycle management plan. Managers should seek consideration and input into the chart from experts on FDA law and procedure, as well as experts on marketing, finance, and patents-the goal for all disciplines should be to maximize revenue before the occurrence of a PTE patent cliff. Having the informational chart on hand will provide business units with continuity about the most relevant and up-to-date facts from a swath of experts at time periods throughout a product life cycle. This is an important aspect because, as with any business decision involving significant uncertainty and financial risk, a final decision on choosing a patent for PTE should be approved by all key stakeholders with all of the current facts on hand.
To help formulate a chart to efficiently manage information and guide your decision on a PTE patent, we highlight a critical PTE time period-this is the 14-year rule, which limits PTE on a patent covering an approved biologic to no more than 14 years following FDA approval. The practical effect of this rule has nothing to do with 14 years-it has to do with 11 years, and 6 years, and everything in between. Why? The post-approval years between 12 and 14 will typically be the most important in terms of revenue generation for PTE because (a) there is FDA exclusivity between 0 and 12 years post-approval, (b) PTE is blocked after 14-years post-approval, and (c) there is only a maximum of 5 years of PTE. Thus, to fully capture years 12 through 14 with PTE, the earliest a patent application can be filed is 11 years before the FDA’s approval date of a biologic. Applying similar logic, the latest a patent application can be filed to take advantage of a single day of PTE in the 12-to-14-year timeframe is just before 6 years prior to the FDA approval date of the biologic.
We recommend that the cutoff dates of 11 years and 6 years be present in any early developmental consideration of PTE. Knowing these dates for PTE will allow the pharmaceutical executive managing and compiling changing information from R&D, patent lawyers, FDA consultants, and marketing and finance specialists to conduct a quick check on which patent applications may be expected to take advantage of PTE even in the very early stages of development.
Micheal L. Binns is a partner and member of the Parker Poe Adams & Bernstein Life Sciences Industry Team.
Sharad K. Bijanki is a member of the Parker Poe Adams & Bernstein Life Sciences Industry Team.
 Note that this is a separate mechanism from patent term adjustment which compensates patent owners for delays at the United States Patent and Trademark Office (“USPTO”).
 We also note that these dates should not be overly relied upon because they are only relevant to capturing the 12-to-14 year time period with PTE. Other worthwhile patent strategies may not be subject to this criteria, but those strategies are outside the scope of this article.