The business value and strategy of patent challenge in American generic drugs (2)

3 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 10 shows the impact of generic drugs on the market share of original drug sales after entering the market Figure 10 source: ims2014 from Figure 10, once the generic drugs enter the market, the market share of patent drugs will soon be swallowed by the generic drugs Generally, at the end of 180 days, the generic drugs will swallow 80% of the market share According to the analysis of Jacobo Rubio in 2015, the average sales of the first generic drug 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 The following table is a few famous cases of 180 day expected profit: Table 4 according to anti Moore's law, if the cost of developing new drugs reaches 5 billion US dollars by 2025, what is the value of 180 day patent challenge? 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 The result of patent litigation and every FDA approval will cause the fluctuation of stock price 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 the method of event income analysis The results are shown in Table 5 and table 6 Statistical data source of PIV patent challenge drugs: Jacobo Rubio et al., 2014 In this table, Jacobo Rubio collected 159 patent litigation samples, 93 of which have final judgment 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 = 66, most likely 66 out of court settlements Table 6 Data sources of event profit and loss analysis of litigation case data in Table 5: Jacobo Rubio et al., 2014 patent drug "profit and loss valuation" = expected value of patent drug winning - expected value of patent drug losing (average $3.9 billion) generic drug "market access valuation" = estimated value of generic drug winning - estimated value of generic drug losing (average $748 million) According to this calculation, the "profit and loss valuation" of original drugs is 5 times that 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, then: 690.8 million US dollars x 5.6 years = 3.9 billion US dollars The original drug has invested a lot of money in the process of new drug listing, and every day of patent protection after listing is "it's hard to buy an inch of time with an inch of money" For example, an average megabomb drug with annual sales of $1 billion is worth about $278 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." 3 Patent settlement and reverse payment from the above chart statistics, we can see a large number of settlements in patent litigation Profit and loss valuation and market access valuation also show that reconciliation is a high probability event In general, generic drugs can get higher profits than 180 days' sales through settlement compensation For commercial reasons, it is difficult to obtain specific compensation data for each settlement case FTC published data of several cases in 2002, but did not mention specific enterprises and products: Table 7 source: generic drug entry prior to patent expiration: an FTC study, July 2002 From the perspective of settlement and compensation 15 years ago, the settlement and compensation obtained by generic drugs are also considerable At present, there is no specific compensation for reconciliation, but it is certainly much higher than 15 years ago According to Jacobo Rubio's paper in 2014, the average value of settlement negotiation between original drugs and generic drugs is between 3.2 billion and 4.5 billion US dollars (Ruben Jacobo Rubio 2014) Settlement methods include reversed payment or pay to delay The logic behind the delay in payment: Table 8 if the patent drugs are paid $2 per tablet for the first copy, the loss of the patent drugs can be reduced by 80%, while the generic drugs can get $2000 if they do nothing 4 Challenge the legal risk of patent 1) injunction and compensation: the compensation for losing a patent lawsuit can be large or small, which is completely decided by the judge As large as hundreds of millions and billions of compensation, as small as a "ban" on entering the market According to the drug price competition and patent period compensation act of 1984, if you just lose the patent litigation, your product has not been put on the market, and generally only "ban" is implemented In 2006, the Supreme Court of the United States no longer enforced the "injunction" of patent litigation, but required the court to consider four factors before issuing the "injunction": whether the loss is irreparable and whether there are other remedies The "injunction" should consider the balance of various stakeholders in the public interest 2) "intentional" and "unintentional": if the court thinks that it is "intentional" infringement, you have to pay high compensation Therefore, we should do a good job of "intentional" and "unintentional" prevention with lawyers when setting up the project of generic drugs For example, it is better to ask a third party or a social lawyer to issue a "non infringement search report" to prove "unintentional"; once entering a patent lawsuit, do not withdraw the lawsuit easily, do not modify the PIV certificate easily, etc In a word, as long as the products are not listed or infringed intentionally, the loss of challenging patent is only the lawyer's fee and product development and application fee 3) "venture at risk": the so-called "venture at risk" refers to the listing of generic drugs after the approval of FDA and the court's ruling has not been completed Losing a lawsuit after going public is to compensate for the market loss For example, Teva pharmaceutical often adopts "venture listing" in terms of patent challenges, and it has won many times It is known as "venture listing shark" in the United States However, in 2008, Teva and India's sunpharma venture listed Pfizer's "protonix", while in 2013, they lost the appeal, and Teva and sunpharma paid Pfizer and taketa2 $100 million (Martin voet 2014) Even so, from 1984 to 2012, the reversal rate of patent litigation appeal was less than 20% After all, the high profit of "venture listing" has great temptation 4) patent infringement risk of non orange book registration: some patents of original drugs are not registered in orange book, and FDA does not consider these patents when auditing generic drugs Once anda is listed on the market, the patentee can sue for compensation according to these patents However, from 1984 to now, this kind of litigation has not formed the mainstream of patent litigation, and has not been reported in detail in the literature From the perspective of business psychology, patent drugmakers generally do not intentionally exclude important patents from the FDA orange book, because the number of patents has a deterrent effect on generic drugs, which can scare off even a challenger, and the cost of prosecution saved is enough 4 Business strategy of patent challenge 1 Obtaining the challenge qualification and FDA's "secret operation" to obtain the challenge qualification is the first step to challenge the patent, there is no way to talk about without tickets There is no specific standard for obtaining PIV challenge qualification In FDA regulations, only anda is required to provide "substantially completed" documents and data; "detailed statement" PIV certification FDA only announces which day is the "first copy submission date" As for whether your anda is FTF, it depends on FDA's "accepted letter" The FDA doesn't release and approve several ftfs You don't know who your competitors are or how many The FDA doesn't approve it and won't tell you why Therefore, FTF qualification is FDA's "dark box operation" According to experience, in order to obtain FTF, first of all, we need to do well in the application documents and data that can please FDA PIV certification needs to be recognized by FDA legal experts Only when they think that the "detailed statements" you submit may win patent litigation, they will challenge your PIV qualification Since FDA adopts the best of all method in many andas, the compliance of documents and the excellent be data determine whether FDA accepts anda In addition, the regulatory standard of be stipulated by FDA is 80 – 125% According to experience, FDA generally grasps the scale between 90 – 110% The reason is that in 2011, many people thought that the be formulated by FDA was too harsh and required to relax the scope of the standard So FDA released 2070 anda be data, 90% of which