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By Nate Raymond
IP Law & Business
02-22-2007

A new report from the Government Accountability Office finds a slowdown in new drugs coming to market. One culprit? Abusive patent practices, says the GAO.

Big Pharma may be spending big money on drug research, but it's not getting big breakthroughs. That's the assessment of a report released in December by the Government Accountability Office that blames patents, among other things, for why innovative new drugs aren't coming to market.

From 1993 to 2004, pharmaceutical research and development spending jumped from $16 billion to almost $40 billion, adjusted for inflation, according to the GAO report. Despite the 147 percent increase in spending, the Food and Drug Administration saw only a 38 percent increase in new drug applications, according to the GAO. Worse, the GAO says, applications containing new molecular entities, or drugs containing unmarketed ingredients, climbed only 7 percent. The number of new drug applications approved overall has been dropping since 1996.

Those findings could spur changes in Congress, where a trio of senior Democratic lawmakers, including Sen. Edward Kennedy and Rep. Henry Waxman, requested the report. The GAO report says that what Waxman's office calls "patent law loopholes" have discouraged innovation. But IP lawyers who represent pharmaceutical companies say recommendations in the report to alter intellectual property laws would only create new difficulties. "I hesitate to call it a solution," says Foley & Lardner partner Steven Maddox, who has represented generic companies Andrx Corp. and Cobalt Pharmaceuticals Inc.

Consumer advocates say drugs are often repatented for minor changes, creating "me too" drugs that are only slightly different chemically from existing drugs. They say that patenting drugs with only slight changes stifles innovation since they offer no significant therapeutic benefits over drugs already on the market. Additionally, they say companies often seek new uses for previously approved, unpatented drugs in order to gain three more years of market exclusivity under the Hatch-Waxman Act, the federal law that has governed drug patenting since 1984. Drug companies, in contrast, say these patents are necessary to keep developing drugs in the face of rising costs and the increasing complexity of making new drugs.

One possible fix, the GAO says, would be to extend the life of patents from the current 20 years to 25-30 years for innovative drugs with high therapeutic value; patents for drugs with fewer benefits would last only ten years. The report gives no indication how the relative therapeutic value of drugs would be determined.

Patents aren't the only stumbling blocks to new drugs, the report says. The GAO also blames what it calls imprecise FDA regulations on safety and effectiveness, which affect which drugs go under development, and mergers in the pharmaceutical industry, which can result in development projects being canceled to save money. The report also finds that a push to develop drugs for chronic or complex diseases like cancer has increased clinical test failures and research costs. But some IP lawyers say the report is simplistic or wrong. Drugs like Pfizer Inc.'s Viagra and Eli Lilly and Co.'s Cialis contain new molecular entities, yet are aimed at the same patients, calling into question how they would fit into the GAO's definition of "innovative," says Finnegan, Henderson, Farabow, Garrett & Dunner pharmaceutical partner David Frazier.

"Me too" drugs can also be beneficial since no drug is one-size-fits-all. "There's a benefit obviously for patients to have multiple choices for depression, multiple choices for acid reflux and all these types of conditions," says Frazier, who has worked with brand-name clients Eli Lilly and Wyeth Pharmaceuticals Inc.

Furthermore, minor changes in drugs can have major impacts, says Fish & Richardson pharmaceutical partner Louis Myers. For example, many drug companies are looking to create insulin inhalers to replace shots for diabetics. "That's quite a big deal," he says.

While those drugs may be beneficial, that doesn't mean their patents can't be ripped away by generics. Hunton & Williams partner Robert Schulman says that since December 2004 the U.S. Court of Appeals for the Federal Circuit has invalidated or held unenforceable all but two of the more than 30 pharmaceutical patents before it. Generics succeeded in getting the court to invalidate what they argued were incremental improvements to existing drugs such as Schering-Plough Corp.'s Claritin and GlaxoSmithKline plc's Paxil. "I think in the case of some of these second-generation things, the court hasn't been totally off the mark," Schulman says. "But I think it's gone way beyond that."

Still, IP lawyers for both generics and brand names say that a patent system giving long patent lives to some drugs but not others would only create new problems. Says Myers: "It would do nothing to encourage more innovation."