The business value and strategy of patent challenge in American generic drugs (1)

1、 The patent protection of original drugs and the patent challenge of generic drugs 1 The anti Moore's law of new drug development and the tail raising effect of drug patents are well known New drug development is a large capital, long-term, high-risk investment Of the nearly 2000 pharmaceutical companies registered with FDA in the United States, less than 50 are new drug leading pharmaceutical companies, and the rest are generic pharmaceutical companies The specific process and risk of new drug development are not discussed in this paper, but only a simple analysis on the return of capital investment In the field of modern science and technology, there is a very famous "Moore" law, that is, the change of a technology's index in unit time Taking chip technology as an example, when the price remains the same, the number of components that can be accommodated on the integrated circuit will double every 18-24 months, and the performance will also double However, since the 1950s, the investment return ratio of new drug development in the pharmaceutical industry has gone out of an "eRoom's" law curve, that is, the number of new drugs on the market per billion US dollars has doubled every 10 years In the 1960s, about 10 new drugs could be put on the market with $1 billion At the beginning of this century, only one new drug could be obtained In 2016, the average $1 billion was less than the expenditure of one new drug Figure 1 anti Moore's law of the pharmaceutical industry source: nature reviews| drug discovery 2014 currently, the cost of each new drug on the market in the United States is between 1.8-2 billion US dollars It is believed that by 2025, the figure is likely to reach $5 billion How can such a huge investment be recovered and profit be made? Patent is the only tool that pharmaceutical companies can rely on The problems faced by the pharmaceutical enterprises dominated by original drugs are: FDA approves an NDA, 5 years and 8 years less, 10 years and 20 years more, accounting for most of the effective patent period This forces drug developers to recover investment and make profits in the remaining patent protection period after FDA approval of NDA listing Once the patent expires, generic drugs will rush in and there will be a so-called "patent cliff" It can be seen that patent is the life and death of original medicine In terms of the value of drug patents, drug patents are quite different from other patents Due to the emergence of new technology, the general industrial patents are often of no value at the end of the patent period However, drug patents take up a lot of patent time due to R & D and FDA approval After the new drugs are listed, the remaining period of patents is few, which forms the "patent tail raising value" That is to say, the closer to the end of a patent drug patent, the higher its value! Therefore, from drug design to drug marketing, the "market exclusivity period MEP" management throughout the whole process revolves around patent application and patent protection From "core" patent to "extension patent" to so-called "rogue patent", the purpose is to strengthen the patentability and extend the patent protection period In 2015, Grabowski of Duke University calculated the average MEP of U.S patent drugs from 1996 to 2012 (i.e the time from FDA's approval of NDA to the market of generic drugs), which was 13.4 years The MEP of the so-called "block buster" with annual sales of more than $1 billion is only 12.4 years With a market monopoly period of about 10 years, we need to recover 1-1.8 billion US dollars of listed investment and earn profits High price is the only choice, "patent tail raising value" is also the result of the shopping mall law This is also the root cause of "high profit and loss valuation" of patent drugs to be analyzed later 2 The legislative reform of generic drugs -- the link between FDA regulations and patents in 1984, the debate on the legality and rationality of patent protection between patent drugs and generic drugs reached the extreme Patent drugs think that FDA's regulatory review is too complex, laborious and time-consuming, which consumes 80% of the original drug investment and takes up the patent protection period of 8-12 years When your FDA Approves NDA to enter the market, either the patent has expired, or there is still 2-3 years of patent protection, what is the use of the patent? How can medicine be inexpensive? Generic drugs are also full of complaints: the approval process of generic drugs, like original drugs, has been on the market for more than ten years Why should generic drugs repeat the expensive clinical research of original drugs? FDA has to wait until the patent expires to accept the application of generic drugs The first trial is three years and five years, which increases the patent protection for three to five years without any reason Why? In 1983, 150 patents for patent drugs expired, but no one imitated them! In 1982, Reagan moved into the White House, launched the health care reform plan, and urgently needed cheap drugs to enter the market The target of various political interests in the United States: FDA The patent infringement case of Bolar and Roche has become the fuse of the reform of American generic drug legislation In 1984, the U.S Congress held a hearing and debate on the legislation of generic drugs, trying to find a balance between "encouraging investment in new drug research and development and releasing water to market of generic drugs" Finally, Congress passed the drug price competition and patent term compensation act proposed by hatch and Waxman It's also known as the "modern generics act." The key points of the bill are as follows: 1) redefining "generic drugs", establishing a simplified new drug application (anda) system, making the cost of generic drugs really "cheap" and the entry of generic drugs into the market really "fast" The new concept of bioequivalence be, pharmaceutical equivalent PE and treatment alternative te has replaced the tedious clinical experiment "imitation" 2) the establishment of PIV patent challenge system has shaken the rigid protection of patent to drugs and opened the fair competition of generic drugs which can challenge patent The court has the right to decide the entry of generic drugs into the market within the patent period 3) make up for the time taken up by FDA regulation approval during the period of new drug listing through data exclusive period and patent period compensation Figure 2 Explain the connection between FDA regulations and patents after the reform of generic drugs legislation in 1984 Figure 2 The connection diagram between FDA regulations and patents highlights the important role of patents in protecting the value of new drugs and resisting the market entry of generic drugs Over the past 30 years since the implementation of the act, the pharmaceutical market in the United States has changed as follows: 1) in 1984, the share of generic drugs in prescription drugs in the United States was 20%, and in 2016, it was close to 95% 2) the average patent protection time of original drugs has been extended for 3 years 3) the average time for generic drugs to enter the market is three years ahead of schedule 4) the return rate of investment in new drug R & D decreased by about 12% 3 The rules of patent challenge and the significance of patent challenge 1) the rules of patent challenge: according to the PIV challenge rules, when generic drugs submit anda to FDA, they should make a patent status statement for all patents listed in the orange peel book of the target drug (RLD) The patent status can be divided into four categories: paragraphi: no patent paragraphii: there is a patent, but the patent has expired paragraphii: there is a patent, but the generic application does not seek to be listed within the patent period paragraphiv: there is a patent, but the generic application does not infringe the patent, or the patent is invalid When submitting anda with the paragraphi IV certificate, it is deemed as patent infringement The Anda applicant shall notify the patentee within 20 days, and the patentee can sue the Anda infringement in the court within 45 days, and notify the FDA FDA will automatically stop the Anda audit for 30 months If the generic drugs win or settle a lawsuit and get FDA approval for listing, the Anda (FTF) can enjoy 180 days of generic market monopoly period 2) significance of patent challenge: one of the characteristics of drug patent is that only when FDA Approves the drug to be listed, its patent can reflect its value FDA only reviews the compliance of pharmacodynamics of Anda, but not the patent of the patent involved in the drug However, in the connection between FDA regulations and patents, FDA will automatically exclude the patent dispute anda from the market In other words, if the PIV patent challenge is not set, as long as there are patents, anda can only be listed when the patent expires If the patent itself is invalid, or anda has no infringement, why can't it be listed within the patent period? Moreover, due to the "anti Moore's law" and "patent tail value" of the pharmaceutical industry, the entry of generic drugs into the market one day earlier means huge economic benefits From the perspective of patent jurisprudence, ordinary patent does not have the function of preventing "infringement" behavior Only after the "infringement" behavior occurs, the patentee can start legal proceedings to recover the "infringement" loss and request to stop the "infringement" behavior According to the Anda application rules of FDA, drug patent can prevent the "infringement" behavior Because during the validity period of the patents listed in the orange peel book, FDA will not approve the corresponding generic drugs to enter the market, so the FDA's regulations prevent the occurrence of "infringement" This is "after the fact and prior to fact" The challenge of setting up a PIV patent is stipulated by law: submitting a PIV certificate is deemed as "infringement", which can start legal proceedings, thus making up for the defects in the connection between FDA regulations and patent law From the perspective of pharmaceutical economics, it is FDA's approval of NDA listing that endows corresponding patents with commercial value If there is no NDA listed, the patent itself has no value FDA gives patent value, but it is not responsible for the authenticity and patentability of patent content Therefore, the issue of "re audit of NDA patent value" was raised If NDA wants to maintain a high price, it must accept the patent challenge of its competitors Only if it wins the patent lawsuit can it prove the patent In 1984, the patent challenge system was established in the reform of generic drug legislation, and 180 days of market monopoly was used as encouragement and reward for challengers What I didn't expect is that these 180 days have made generics rush to challenge patents and become the main source of profit for us generics Due to the particularity of drug development, patent flaws are also possible in terms of the writing, application, examination and use of drug patents So "high-value drugs may not have high-quality patents, but challenging high-value drug patents will provide you with opportunities to obtain high returns." 2 The challenge of patents changed the business model of generic drugs At the beginning of the reform of generic drugs legislation in 1984, the challenge of patents did not arouse enough interest of generic drugs, and there were few challengers From 1993 to 1998, FDA approved only three patent challenges The reason is that the legislation is not rigorous enough It not only stipulates that the challenger can obtain the first to filer (FTF) 180 days exclusive right only if he wins the patent lawsuit, but also does not limit the 30-month containment period As a result, the original drugs use patent extension, patent pool and other ways to create difficulties for challengers, so that they continue to deal with new patent litigation, and have a new 30-month containment period, so they can not get 180 days of exclusive rights In 1998 and 2003, the rules of generic drug legislation and patent challenge were amended accordingly For example, in the 1998 Mova infringement case, the court rejected FDA's PIV challenge to the principle of patent litigation winning At this point, no prosecution, victory and reconciliation can get 180 days of exclusive right The MMA act of 2003 has made many reforms in favor of generic drugs: it stipulates that multiple ftfs share 180 days, only one 30-month containment period, only one patent extension, etc Since 1998, not only the patent challenge has increased year by year, but also the frequency of challenge has been higher and higher, and the proportion of winning cases of generic drugs has also been higher