The business strategy of patent challenge in American generic drugs (3)

6、 Challenge the business strategy of patent 1 Challenge blockbuster From the perspective of the process of patent formation, when the patent examiner grants the patent right, he does not know whether the patent will become a drug in the future In theory, whether the initial patent application will become a drug or not, the examination process and standards of all patents are the same As for whether the substance involved in the patent can become a drug, it has nothing to do with the patent itself High value drugs do not necessarily have high-quality patents However, from the perspective of challenging patents, winning high-value drug patent litigation can certainly obtain high profits From the perspective of business strategy, if allowed, it must try to challenge patents of high-value drugs Since the amendment of hatch Waxman act in 1998, challenging high-value patented drugs has become one of the core strategies of PIV patent challenge Because, since the difficulty of patent challenge depends on the quality of patent and has nothing to do with the value of drugs, it's obviously not worthwhile to spend high litigation costs to challenge small market value drugs Figure 1 The IMS statistics of patent challenges in 1995-2012 are presented Figure 1 shows that high-value drugs are undoubtedly more challenged 2 The challenge time is ahead of time, ahead of time, and then ahead of time According to IMS calculation, at present, the average patent effective period-mep of giant bullet drug is 12 years (NDA approved patent remaining period + USPTO patent extension (PTE)), while the total average patent effective time of drug patent is 13.4 years In addition to FDA's monopoly period of about 5 years, the actual time left for patent challenge is only about 5-7 years In terms of time, it's not easy to get 180 days Therefore, it is particularly important to plan patent challenges in advance MMA was issued in 2003 For patents registered in orange peel book after anda was submitted, anda that has been submitted shall not be liable for subsequent patents However, the later submitted anda shall submit a patent status certificate for all the patents in the orange peel book This means that the later the Anda is submitted, the more proof of patent status is likely to be submitted, and the more patents are challenged, the more difficult it is to obtain anda approval In other words, in some cases, if you don't challenge the patent ahead of time, you may not even have the chance to follow the copycat (the patentee will extend the patent) If we challenge patents at the first time, especially giant bullet drugs, we may be able to take the bus to challenge with other generics giants, implement "joint challenge", joint litigation, save time, effort and money Most of the patent challenges are limited time challenges with the nce-1 rule Especially in the past 10 years, the vast majority of valuable drugs are almost unchallenged as soon as they reach the allowed challenge Challenge time has a great impact on the price of generic drugs entering the market If you get the "top card", 180 days is the "quasi original drug price" / "zero cost" sales The more generic drugs enter the market, the lower the price If you want to get high prices, you have to find a way to catch up with the "patent challenge first bus" Figure 2 shows the statistics of patent challenge time moving forward: Figure 2 Data source: (38) it can be seen from the figure that the more high-value drugs are, the earlier they are challenged Then look at the impact of the number of generic drugs entering the market on the price: one more opponent, half the price! At present, some patent challenges have not been approved by NDA, but start preparation research and bioequivalence research at phase II or phase III of NDA Once the NDA is approved, submit high quality anda and PIV challenge certificates as soon as possible 3 Do you want to challenge compound patents? Compound patent is undoubtedly the "strong" patent with the strongest protection effect, and the winning rate of challenge is not high Generic challenge compounds (active ingredients) are only 3% of the patent winners Most of the giant bullet drugs take compound (or active ingredient) patents as "core patents" However, according to statistics, the probability of challenge for giant bullet drugs with sales of more than US $1 billion is 94% On the contrary, the challenge rate for so-called "small drugs" with sales of less than US $500 million is only 48% [1] That is to say, although the winning rate of challenging compound patents is the lowest, the probability of being challenged is the highest Why do generic challengers challenge compound patents even though they know they don't win? There are three reasons: 1) no one is willing to give up the 180 day exclusive right of the first imitation challenge Although the winning rate is very small, if other generic competitors win, you will lose 180 days and lose all your previous achievements According to the MMA Act 2003, if the first copy Challenger (FTF) patent action is not completed and other challengers win the patent action, the 180 days (75 days not sold) of the first copy will be void If you win the first challenge, you'll get 180 days, and you'll be able to shut out other competitors (other generic drugs will be on the market in 180 days) On the contrary, if compound patent is avoided (P III certificate is submitted), PIV challenge of other competitors is prior, even if they settle with the patentee, you will lose 180 days The practice of approving challenge qualifications from FDA also tends to be that PIV challenges come first 2) The higher the market value of drugs, the less willing they are to bear the litigation risk, and the more likely they are to settle For example, as shown in Figure 3: source of Figure 3: Wilmer Hale 2016, figure 3 also shows that although the winning rate of challenging compound patents is only 3%, the settling rate is 42% 42% + 3% = 45%, the overall victory of challenge compound is close to 50%! So from a psychological point of view, challenging compound patents is actually "beating wolves with hemp sticks, and being afraid of both ends" Patent drugs are not willing to take the risk of litigation failure because of their high market value Generic drugs are not willing to take the risk of litigation failure because of the strong patent protection of compounds Perhaps it is for these reasons that a patent medicine with a large market value is likely to negotiate a settlement with you 3) Challenge patent and other games have the same thing, "card position" is very important! Because compound patents are ahead of the expiration date of the product patent pool, the time to challenge compound patents is ahead It doesn't matter if we can win the lawsuit If we lose the position of first imitation, the challenge will be meaningless! Of course, if you are not aiming at "180 days of first imitation", only for safe listing, you are not willing to invest too much litigation costs, avoid compound patents, and challenge "weak patents" is also a business strategy If everyone loses the compound patent and plays "weak patent", you may be the winner 4 Patent classification and challenge patent in terms of technical difficulty of patent challenge, compound patent is the most difficult, use patent is the second, and preparation patent is the most easy In the process of drug development, it is also the first to apply for a compound patent, then for a use patent, and then for a preparation patent (generally, but not absolutely) Then the patent protection time forms the compound patent that expires first, then the use patent, and finally the preparation patent Because patent drugs need to extend patent protection time by establishing patent pool, they will apply for new "evergreen patents"; most of these so-called "evergreen patents" are utility patents and preparation patents In other words, most of the patents registered in orange peel book are relatively easy to challenge Patents related to active ingredients are 40% and the other 60% are other patents not related to compounds (Grabowski 2015) Figure 4 Compound patent and non compound patent registered in orange peel book 1985-2010 The light color part in the figure is non compound patent 5 The so-called "effective life cycle management market effective period" will exist for patent medicines challenged by "evergreen patent" Management (MEP), in a derogatory sense, is evergreen patents Its core content is to extend the exclusive time of patent drugs through new patent applications It is called "subsequent patent" here Figure 5 MEP process diagram of Changqing patent Source: author's 2017 note: AI = active ingredient For various reasons mentioned above, the follow-up patents are often "weak patents" in the patent pool The success rate of challenging weak patents is very high First, because of the inherent shortcomings of weak patents, and second, in view of the Anti Unfair Competition Law of the United States, the judge is also more strict on the "follow-up patents" deliberately manufactured by evergreen patents C Scott Hemphill and bhaven sampat counted the results of drug patent litigation from 2000 to 2008, and almost all subsequent patents were destroyed [3] Figure 6 Comparison of litigation results of active ingredient patents, total patents and follow-up patents Source: 22 March 2013 Vol 339 science It can be seen from the figure that in the nine years from 2000 to 2008, the "follow-up patents" of patent drugs won only 14% of the litigation! That's why for some giant bullet drugs, generics giants often challenge from compound patents, then use patents, then preparation patents, and finally follow-up patents 6 In patent litigation, reconciliation plays an important role, because almost 50% of patent disputes are settled by settlement In addition to balancing the advantages and disadvantages of both parties and seeking their own best interests, reconciliation or reverse payment is also a powerful means to exclude other competitors For example, according to the 180 day exclusive rule in the patent challenge, once the first generic FTF gets 180 days, other generic drugs may not enter the market until 180 days have been completed In order to move the market entry time of other competitors backward, patent drugs will seek to reach a settlement agreement with the first imitation Patent drugs will give certain benefits to the first imitation challenger The first imitation will move the start time of 180 days backward, so that the market entry time of other competitors will move backward, so that the monopoly period of patent drugs will move backward, and patent drugs can get more high profits brought by monopoly For example, a blockbuster drug with annual sales of $1 billion has a market value of $2.87 million per day A one month extension means about $100 million in revenue From the perspective of business strategy, reconciliation can remove the uncertainty of both sides As mentioned above, it's better to sit down and talk about reconciliation than to "fight wolves with hemp sticks and be afraid of both ends" There are four ways of reconciliation: 1) to reach an agreement on the time when generic drugs will enter the market; 2) to pay generic drugs for generic drugs in exchange for generic drugs not to enter the market; 3) to exchange products with each other and license each other to ensure their own interests; 4) to reach an agreement that the original drugs will not authorize others or their own listing of "authorized generic drugs" within a period of time Table 1 FTC patent litigation settlement statistics [11] authorized generics patent drugs manufactured by themselves or authorized others after the expiration of the patent, and sold under the original drug brand, which is called authorized imitation In principle, it should bring great impact on generic drugs However, for more than 30 years, authorized generic drugs have not greatly affected the market entry and patent challenges of generic drugs The U.S Trade Commission (FTC) and the U.S Department of Justice (DOJ) gradually put pressure on the settlement of pharmaceutical disputes, often bringing the parties to court in violation of the anti unfair competition law, which is also a difficult problem in settlement negotiations 7 The arbitrariness and contingency of patent litigation result are no different from other litigation in legal theory Every lawsuit has its contingency and arbitrariness In particular, drug patent litigation involves many professional technologies