The business strategy of patent challenge in American generic drugs (4)

7、 Patent challenge litigation results statistics patent litigation results show that generic drugs have obvious advantages in litigation The following are the patent litigation statistics given in three figures 1) in 2002, the Federal Trade Commission (FTC) reported the implementation effect of the generic drug legislation reform to congress at the request of Congress The report of FTC gives the statistics of litigation results of 104 patent litigation cases in 1984-2002 (Figure 1) Figure 1 source: generic drug entry prior to patent expiration: an FTC study July 2002 Among them, 29 cases were not prosecuted, 22 cases were won by generic drugs, 20 cases were settled, 1 case was withdrawn, 8 cases were won by patent drugs, and 72 cases were won by generic drugs in total The other 22 are open 2) Figure 2 In 2015, Grabowski counted the patent classification litigation results of the top 20 new chemical entity drugs in 1994-2006 Figure 2 Source: Grabowski 2017 3) Figure 3 Trends paragraph IV challenges cornerstone research 2016 Figure 3 The first three reports basically reflect the results of patent litigation in 1984-2015 The winning rate of generic drugs is 75% basically credible Martin voet also mentioned this data in his book generic challenge patents VIII Business value analysis of patent challenge the significance and statistical data of generic drug challenge patent are described in the front to illustrate the possibility and necessity of patent challenge and the tendency of winning rate of patent litigation So what is the business value of the patent challenge? If the original drug is willing to settle, what is the price of settlement compensation? A correct understanding and analysis of the business value of patent challenges is of great practical significance to the operation and investment of generic drugs The following is an analysis of the 180 day exclusive value of the challenge patent and the impact of PIV patent challenge on the market value of the challenger and the challenger 1 Gold 180 days from the FDA regulations and patent connection chart, we can see that the patent challenge is to use the rules allowed by the regulations to exclusively list generic drugs within the remaining patent protection period of the patent drugs, and seize the "patent tail value" of the patent drugs Compared with the early investment of original drugs, the process development and regulatory application of generic drugs are almost zero cost Generic drugs only pay for patent litigation and attorney costs, generally 5-10 million US dollars per case Compared with the US $1-1.8 billion investment of original drugs, the 180 day exclusive period is the sale of "quasi new drug price" / "no cost profit" In these 180 days, generic drugs are generally sold at 80-90% of the original drug price The drug substitution law in the United States guarantees the sale of generic drugs Figure 4 shows the impact of generic drugs on the market share of original drugs [2] Figure 4 data source: IMS 2014 shows from Figure 4 that once generic drugs enter the market, the market share of patent drugs will soon be consumed by generic drugs Generally, at the end of 180 days, generic drugs will consume 80% of the market share According to Jacobo Rubio's 2014 analysis [4], the average sales of the first generic in 180 days is $100 million In general, the profit of the first 180 days will be higher than the total profit of the remaining generic drugs after entering the market Table 1 shows the estimated 180 day sales of several patent challenges According to anti Moore's law, if the cost of developing new drugs reaches 5 billion US dollars by 2025, how valuable will the 180 day patent challenge be? Only God knows 2 The profit and loss valuation of patent drugs and the market access valuation of generic drugs in 180 days are only the sales value of the first generic drugs in 180 days However, the challenge of generic drugs is often the patent drugs with high value, and the pharmaceutical giants are often behind them These pharmaceutical giants are generally listed companies, and their stock prices and market values are huge Every patent lawsuit, every debate, every judgment, and every FDA approval will cause stock price fluctuations Ruben Jacobo Rubio and others from George University in the United States studied the impact of challenging patents and patent litigation on the value of original drug companies and generic drug companies in 2014, respectively known as "original drug profit and loss valuation" and "generic drug market access valuation" Based on the analysis of patent litigation from 1984 to 2012, the average profit and loss of original drugs is estimated to be US $3.9 billion in 2011, while the average entry right of generic drugs is estimated to be US $748.6 million Jacobo Rubio analyzed the patent litigation from 1984 to 2012 by using the event income analysis method, and the results are shown in Table 2 and table 3 Source: Jacobo Rubio et al., 2014 in this table, Jacobo Rubio collected 159 patent litigation samples, 93 of which have final judgments The average annual sales value of the sample is 1.02 billion US dollars, the proportion of giant bullet drugs is 32%, the average number of patents for each drug is 1.87, each drug has at least one compound patent, the winning rate of patent drugs is 57%, compared with the average patent remaining time on the judgment date of 5.6 years Basic criteria is calculated according to the judgment date of the court, and announcement criteria is calculated according to the announcement date of the court 159 – 93 = 63, probably 63 settlements Source: analysis of event profit and loss of litigation in Table 2 in Table 3 of table 5 "Profit and loss valuation" of patent drugs = expected value of patent drugs winning - expected value of patent drugs losing (average $3.9 billion), "market access valuation" of generic drugs = estimated value of generic drugs winning - estimated value of generic drugs losing (average $748 million) according to this calculation, the "profit and loss valuation" of original drugs is five times of the "market access valuation" of generic drugs! This is the huge chip that imitates medicine to challenge patent medicine The "litigation expectation" won by the generic challenge patent is far greater than the sales profit of the 180 day exclusive period! For ease of understanding, Jacobo – Rubio explained the expected valuation of patent litigation more simply According to the calculation of litigation ruling date, the average patent remaining time of patent drugs is 5.6 years (see Table 5); the average annual profit of patent drugs is 690.8 million US dollars, so: 690.8 million US dollars x 5.6 years @ 3.9 billion US dollars of original drugs have invested a lot in the process of new drug listing, and every day after the listing of patent protection is "hard to buy an inch of time" For example, an ordinary giant bullet drug with annual sales of $1 billion is worth about $2.78 million a day Therefore, even when patent litigation has obvious advantages, some original drugs may choose to settle rather than Sue Because they can't stand the risk of losing On the other hand, the difference between the "profit and loss valuation" of patent drugs and the "market access valuation" of generic drugs is so huge Generic drugs use the psychological advantage of the difference to challenge patent drugs The higher your market value is, the more challenging I am Because the chip to challenge patent medicine is not "how much can I earn", but "how much will you lose"! Commonly known as "barefoot is not afraid to wear shoes." References: [1] generic drug entry prior to patient Expiration: an FTC study, Federal Trade Commission just 2002 [2] recent trends in brand name and generic drug competition, Journal of medical economics 2013, 1 – 8 Henry Grabowski Duke University, Durham, NC, USA 【3】PHARMACEUTICAL PATENT CHALLENGES AND THEIR IMPLICAITONS FOR INNOVATION AND GENERIC COMPETION HENRY GRABOWSKI July 2015 【4】The Private Value of Entry and Deterrence in the U.S Pharmaceutical Industry Ruben Jacobo-Rubio∗ et al, January 11,2014