by Michael Fuller | February 2, 2016 3:00 pm | 0 Comments
The Trans-Pacific Partnership (TPP) is a recently ratified and controversial free trade agreement between 12 Pacific Rim countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam. One of the more controversial provisions of the TPP concerns the data-exclusivity term for biologics, which effectively enforces a monopoly for that medication by preventing a competitive manufacturer from leveraging the owner’s data about treatment efficacy during the exclusivity term. This exclusivity term runs concurrently with any patent protection and can extend beyond the expiration of applicable patents.
What Are Biologics?
When people think of pharmaceutical agents, they think of “small molecules,” so called because of their low molecular weight. These include aspirin, antibiotics, and most of the other marketed drugs in the world. As our understanding of genetics and molecular biology grew, scientists were able to start manufacturing biologic agents (such as antibodies, DNA, and peptides) as therapeutics, which differ from “small molecules” in terms of their size. Examples from each class may differ in size by as much as an order of magnitude.
Another important difference is how they are made. Small molecules are generally made through well-established synthetic pathways by chemists. When someone creates a generic small molecule, it must be structurally identical to the original molecule or there will be no guarantee that the generic will work like the original. Patents on these small molecules must provide sufficient detail that someone skilled in the art of making small molecules could make it.
Additionally, when a small molecule manufacturer wants to market its small molecule as a therapeutic agent in the United States, the Food and Drug Administration requires that it pass the standard clinical testing process, which can last several years and cost millions of dollars. If the FDA had reason to believe a generic drug manufacturer’s small molecule was not exactly the same as the agent it hopes to compete with, the generic manufacturer would have to subject its generic small molecule to the full course of clinical testing proscribed by the FDA.
Biologics, however, are derived from less well-defined biosynthetic pathways by molecular biologists, using living cells or other materials derived from living organisms that may introduce a significant amount of variability into the final biologic product. Because of the complexity of biologics, it is possible to synthesize a generic biologic agent that is different enough structurally from the original that it would not infringe a patent on the original biologic while still being comparably effective as a therapeutic agent. Biologics are also much more expensive to manufacture than small molecules.
Despite the high cost and complexity of getting biologics to the market, some of the biggest companies in the world are selling biologic therapeutics. The top five biologics companies by sales (2014 revenues) are as follows:
- Roche ($30.1 billion)
- Amgen ($17.6 billion)
- Novo Nordisk ($14.2 billion)
- AbbVie ($13.9 billion)
- Sanofi ($13.9 billion)
Data Exclusivity
The ability to make copycat biologics (called biosimilars) and thereby potentially dramatically reduce the period of patent exclusivity for the original biologic maker compelled U.S. biologics makers to lobby Congress to pass the Biologics Price Competition and Innovation Act of 2009, which codified a 12-year period of data exclusivity for biologic therapeutics that runs concurrently with the patent protection (which itself is 20 years and can be extended, for example, if the United States Patent and Trademark Office feels that the regulatory review process has deprived the patentee of valuable patent life). This means that, for 12 years from the FDA’s approval of the original biologic agent, generic makers cannot leverage the original clinical trial data that would support the effectiveness and safety of their biosimilar. This, in turn, would allow the generic maker to petition the FDA for abbreviated clinical trials (called an aNDA), saving them millions of dollars needed for said trials and shortening the time needed to get the biosimilar to the market as a competing product with the original biologic agent.
The countries that are affected by the TPP along with their current years of data exclusivity are as follows:
- No exclusivity: Brunei, Mexico
- 5 years of exclusivity: Australia, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam
- 8 years of exclusivity: Canada, Japan
- 12 years of exclusivity: United States
Proponents of the changes to the biologics data exclusivity period in the TPP argue that these changes will lower the cost of biologic therapeutics by shortening the time to market for more affordable generics. Biosimilar manufacturers can more quickly request the data needed to make exact copies of the original innovator’s biologic agent and thereafter get their generic version of the biologic agent to the market faster, forcing the original innovator to lower the cost of their biologic therapeutic to remain competitive.
Opponents of the changes to the biologics data exclusivity period argue that these changes (particularly in the U.S., which stands to lose at least four years of data exclusivity period under the TPP) will have severely negative effects on the industry, primarily in the area of innovation. The research and development of new biologic agents is a very expensive and risky endeavor, so when companies for whatever reason are forced to cut costs, they will usually start with research and development and focus on getting therapeutic agents already in the development pipeline to the market as quickly as possible. Because so much biologics innovation occurs in the United States, opponents argue that drug companies are likely to cut R&D costs to make up for the four years of lost data exclusivity they will incur once generic biologics makers have earlier access to the data they need to begin making and marketing lower-cost generics.
The patent data suggest that the impact of the TPP will be much less severe than what opponents of the TPP argue. The worldwide biologics market is extremely robust and unlikely to wane significantly anytime soon, even in light of the TPP.
- The biologics patent landscape has seen 12 consecutive years of year-over-year increases in patent filings (Figure 1) and is occupied by some of the largest pharmaceutical companies in the world. This filing trend was not affected by the 2008 recession, which did impact filing activity in many other industries.Figure 1. Number of Active Biologics Publications by Application Year. Click to enlarge.
- The >54,000 companies in this space have invested billions of dollars in R&D and in filing over 1.1 million patent applications across 86 jurisdictions to protect their patent rights.
- Innovation in the biologics space is occurring globally, with the most innovation occurring in the United States, Japan, and China. Chinese biologics patent filings have picked up in recent years suggesting this gap is likely to close in the near future.
- The companies in this space have shown they will aggressively defend their IP rights through litigation as indicated by increasing patent litigation filings every year since 1996.
The robust health of the biologics industry in terms of both patent protection (which overlaps with the biologics data exclusivity period) and current commercial returns suggests that any negative impacts due to shortened data exclusivity due to the TPP will not be as dramatic as the worst-case fears, and are likely to be focused on markets, like the United States, that stand to lose years of data exclusivity. Other markets that currently have no data exclusivity, like Mexico, are likely to benefit from having longer data exclusivity.
Michael Fuller is a Senior Client Success Consultant in the Client Success group at Innography. He is a USPTO-registered patent attorney who has worked in the IP consulting field since 2007. Before that he worked in the pharmaceutical industry for 15 years researching treatments for neurodegenerative diseases like Parkinson’s disease and Huntington’s disease.
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