Patently Innovative

How Pharmaceutical Firms Use Emerging Patent Law to Extend Monopolies on Blockbuster Drugs

R A Bouchard

• Publisher: Woodhead Publishing
• Year: 2012
• ISBN:
  9781908818089
• Topic: Law
• Subtopic: Intellectual Property Law
• Index: Law

Patently innovative provides a review of the importance of traditional patent law and emerging linkage regulations for pharmaceutical products on the global stage, with a focus on the linkage regime in Canada. The primary focus is on how innovation in the pharmaceutical sector can be strongly regulated and how government regulation can either stimulate or inhibit development of breakthrough products.

• Includes empirical research to relate innovation to drug law
• A multidisciplinary approach is taken, including the intersection of IP (intellectual property) law, drug law and innovation
• Discusses the impact of government regulation on firm innovation

1

Introduction

Abstract:

Global linkage regulation of pharmaceutical products has emerged under intense political pressure to balance effective patent enforcement over new and innovative drugs with the timely market entry of lower-priced generic competitors. The United States was the first jurisdiction to institute linkage in 1984, following which time pressure was brought to bear on other countries to do so through inclusion of linkage terms in various free-trade agreements. Canada was the second jurisdiction to bring in linkage as part of its perceived obligations under NAFTA and TRIPS. It has now been over two decades since the regulations were enacted and to date there has been little objective assessment as to whether the regulations have, in fact, stimulated innovation and timely generic entry. This book describes the public health implications of the evolution of pharmaceutical linkage worldwide, with a particular focus on empirical studies of the scope of linkage between drug approval and drug patenting. A major goal of the work was to probe in detail the specific legal nexus between the innovative character of new and follow-on drugs approved by domestic regulators, the scope of intellectual property protection afforded to these drugs under the linkage regulations, the effect of linkage on the timing of generic entry, and the impact of linkage on public health. The implications of the data for the legal legitimacy of pharmaceutical linkage as an emerging intellectual property paradigm are discussed in light of the public policy goals to stimulate new and innovative drug development while also facilitating the timely entry of generic products as well as leading patent law jurisprudence.

Keywords

Introduction

pharmaceutical linkage

drug approval

drug patenting

innovation

access to essential medications

Prompt and affordable access to essential medicines is a significant component of most domestic and global models of public health, and is central to the goal of ensuring value for money regarding drug costs and expenditures. The availability and costs of new and generic drugs is a function both of traditional patent law incentives and emerging linkage regulations in conjunction with food and drug laws.

Patent law is a well described,¹if controversial,²policy lever for stimulating the development of new drugs.³Linkage regulations tie generic drug availability to existing drug patents by connecting approval to the resolution of patent validity or infringement.⁴All patents listed by a brand manufacturer on a patent register must be demonstrated in litigation to be either invalid or not infringed by the generic drug in order for market entry to occur. This can result in long and costly litigation, the costs of which are ultimately borne by consumers.⁵The alternative is that generics do not gain market entry, and that brand firms continue to enjoy patent monopolies on products until all relevant patents expire, thus reducing access to affordable essential medications in both developing and developed nations.

The patent system has been in operation for about 500 years, with early patent laws in Italy and the United Kingdom.⁶By contrast, the linkage regime has only been in existence for about 25 years following the passage of Hatch-Waxman in the United States in 1984⁷and the Canadian Patented Medicines (Notice of Compliance) Regulations in 1993.⁸Up until recently, North America was the only economic region where generic entry and drug access were explicitly tied to existing brand-name drugs through linkage regulations. In both jurisdictions, the linkage regime was brought in explicitly to balance the competing policy goals of stimulating the development of new and innovative drugs and the timely entry of generic drugs.⁹

1.1 The emergence of global pharmaceutical linkage

As discussed above, compared with the patent system, the linkage regime represents a novel and emerging intellectual property paradigm for protecting pharmaceutical inventions. Nevertheless, by 2010, we were witnessing a rapid spread of the linkage regime on a global level. This is due to a growing number of Free Trade Agreements (FTAs) involving the US.¹⁰Recent agreements include Trade Related Aspects of Intellectual Property Rights (TRIPS), ¹¹as well as narrower multilateral and bilateral agreements with Canada and Mexico,¹²Australia,¹³and Korea,¹⁴among others.¹⁵The latter agreements require participating nations to incorporate linkage and other intellectual property provisions in their patent systems in exchange for preferential trade terms¹⁶and are increasingly negotiated outside the purview of the World Trade Organization (WTO). As these provisions provide stronger intellectual property protection for drugs than provided for by TRIPS, they are referred to as ‘TRIPS-Plus.’¹⁷Indeed, the European Commission (EC) has recently reported numerous instances where member nations have attempted to institute pharmaceutical linkage regimes even though EU law prohibits the same.¹⁸

The implications of pharmaceutical linkage for global public health are potentially immense. For example, recent empirical work has shown that the Canadian linkage regime can extend cumulative patent terms for high-value pharmaceuticals by as much as twofold.¹⁹This is consistent with early predictions of the potential impact of pharmaceutical linkage by Schondelmeyer,²⁰based on his work with the US Hatch-Waxman linkage regime.²¹An additional concern is that the extension of market exclusivity on brand drugs (and thus prolonged monopoly pricing) occurs even though up to 50–75% of the patents challenged in Canada and the US may be either invalid or not infringed by the generic equivalent when challenged on the merits.²²A related issue is that costs of prolonged litigation are known to be passed on to consumers,²³with differential costs to governments and the public in accordance with their system of drug reimbursement,²⁴public health,²⁵public-private discourse,²⁶and health equity.²⁷This creates a conflicting system where governments with linkage regimes that limit the timely appearance of generics also depend on these firms to produce cost savings and limit the growth in pharmaceutical expenditures.

Considerations such as these must be balanced against the need for innovative drugs in developed and developing nations, the presumption favoring the validity of patents in most developed nations,²⁸and data suggesting that enhanced national research and development activities can increase national productivity and prosperity,²⁹as well as the idea that if the state grants a party an exclusive right, in this case an intellectual property right, it cannot turn around and grant a third party permission to invade that right without just cause.

In addition to shaping the marketplace for brand and generic drugs, intellectual property protection for pharmaceuticals has become a controversial cog in the global machine of providing individuals with essential medications, in both developed³⁰and developing³¹nations. Canada, like a host of developed nations, has attempted to play a key role in the global effort to provide underserved populations with essential medications through its Access to Medicines Regime,³²but with less success than anticipated to date.³³Moreover, and perhaps more importantly, up to this point effort has been focused primarily on the limits of traditional patent law,³⁴with emerging forms of patent law such as pharmaceutical linkage receiving considerably less attention.

A related observation is that while the concept of pharmaceutical linkage is relatively new compared to the patent system, there is already significant pressure to broaden it beyond drug approval to include linkage between patent rights and other regulatory aspects of drug approval and marketing.³⁵ As such, the perceived success of drug approval-drug patenting linkage may operate as a ‘template’ for the expansion of the concept of linkage. In this regard, the basket of a given nation’s global trade obligations clearly represents an expansive notion of linkage compared to the relatively discrete nexus envisioned between drug patents and the marketed products against which they are listed when linkage first came into force.³⁶

For example, the EC Pharmaceutical Sector Inquiry³⁷recently articulated a broad basket of pharmaceutical linkage practices, including linkage of patent status to formal legal proceedings between parties; patent settlements; and interventions before national drug regulators regarding market approval, drug pricing, and reimbursement.³⁸An evolving landscape such as this raises the question of whether the pharmaceutical industry is using linkage as an expansive stepping stone in its efforts to reach across global borders. Moreover, a growing number of legal disputes have been reported whereby countries without linkage regulations have attempted to import or export drugs and the shipments have been seized by other nations alleging that these shipments are in violation of domestic patent laws linked to international trade instruments³⁹such as TRIPS or other FTAs.⁴⁰

In addition to being extended beyond the drug approval nexus, the linkage regime may also be serving as a model for the development of other systems of intellectual property protection. For example, the legal mechanism currently being developed for the regulation of follow-on biologics⁴¹ appears to be a hybrid of traditional patent law, pharmaceutical linkage regulation, and data exclusivity regimes.⁴²

Linkage regulations in respect of therapeutic products have therefore quietly emerged as a key driver of public health costs and medical product regulation on the global stage.

1.2 Canadi...