Héctor E. Chagoya C. February, 2010.

1. Effect of patents in the pharmaceutical industry: burden or boost to innovation 6th Annual International Seminar of MarkPatent.Org “Intellectual Property Rights: Advantage Business” Héctor E. Chagoya C. February, 2010.

2. Pharmaceutical Patents • Topics • Development and sanitary approval of new drugs and generic drugs – patent independent. • Kinds of pharmaceutical patents and patent filings during drug development. • Data protection, experimental use exemption, commercial purposes of a sanitary registration and Roche-Bolar exception. • Access to drugs and investment for development dilemma: sources of conflict. • Conclusions.

3. UNCURABLE/ NON-TREATABLE DISEASE DISEASE 1 DISEASE 2 DISEASE 3 A new drug DOCTOR/ SCIENTIST/ INNOVATOR MOLECULES WITH POTENTIAL PRECLINICAL TRIALS “IN VITRO” $$ $ $$ PRECLINICAL TRIALS “IN VIVO” (ANIMALS) CLINICAL TRIALS IN HUMANS Phase I – Safety $$$$ Y Pass? Pass? Pass? Y Y $$$ $$$$$ N N N > $$$$$$$$ OF DEVELOPMENT Very high cost for end user RETURN ON INVESTMENT Y CLINICAL TRIALS IN HUMANS Phase II - Efficacy N Pass? N SANITARY APPROVAL Y Pass? RISK $$$$$$$ CLINICAL TRIALS IN HUMANS Phase IV – Long Term CLINICAL TRIALS IN HUMANS Phase III – Clinical $$ Pass? Y $$$$$$ N

4. A “generic” drug before Bioequivalence PRECLINICAL TRIALS “IN VIVO” (ANIMALS) FIRST DRUG HEALTH APPROVAL $ $ CLINICAL TRIALS IN HUMANS Phase I – Safety $$ N Y Pass? Pass? Y $ N $$$ RETURN ON INVESTMENT SANITARY APPROVAL Y N Pass? CLINICAL TRIALS IN HUMANS Phase II - Efficacy $$ $ Still high cost for end user CLINICAL TRIALS IN HUMANS Phase III – Clinical $ Pass? N NO risk > $$$$$$$$ OF DEVELOPMENT $$$$ Y

5. From first approval to generics $$ FIRST DRUG HEALTH APPROVAL BIOEQUIVALENCY TESTING (“Me Too”) OTHER MANUFACTURERS FILE FOR APPROVAL $$ SAFETY & EFFICACY ALREADY PROVEN (“Me Too”) N Pass? Y RETURN ON INVESTMENT HEALTH APPROVAL NO risk > $$$$$$$$ OF DEVELOPMENT Lower cost for end user UNFAIR COMPETITION: THE SOURCE OF CONFLICT

6. Unfair competition Paris Convention - Article 10bis [Unfair Competition] (1)… (2)… (3) The following in particular shall be prohibited: 1. all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; 2. false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor; 3. indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.

7. Understanding pharma patents • From all the content of a patent, the RIGHTS CONFERRED are limited to the CLAIMS. • TRIPS presents an obligation to provide for patents in ALL AREAS OF TECHNOLOGY (including pharma and biotech), with very limited exceptions including therapeutic methods. • Accordingly, pharma patents are defined as such because of the breadth or coverage of its CLAIMS, and may protect several kinds of innovations according to the stage of drug development. They can be divided into three categories: • Product • Process • Use

8. Regulatory vs. Patent timelines PATENTS ACTIVE PRINCIPLE EXPIRES SUITABLE SALT PATENT EXPIRES SPECIFIC FORMULATION EXPIRES ACTIVE PRINCIPLES SUITABLE SALT SPECIFIC FORMULATION 2nd MEDICAL USE OR FORMULATION PRECLINICAL 0 STAGE OF DEVELOPMENT / REGISTRATION NEW PROCESSES PHASES I-IV HEALTH APPROVAL / COMMERCIAL USE DATA PROTECTION FIRST GENÉRIC??? 10 20

9. Limits of patent claims • Pharmaceutical PRODUCT claims: • Active principles or modifications of active principles (Preclinical) • Vehicles or delivery methods (Phases I to IV) • Pharmaceutical compositions or formulations. (Phases I to IV) • Intermediates. (Any stage during production) • Metabolites and precursor molecules (Phases I to IV) • Pharmaceutical PROCESS claims: • Synthesizing Active principles (Any stage during production) • Formulation processes or medicines manufacturing. (Phases I to IV, during scale-up). • Pharmaceutical USE claims: • “Swiss style” CLAIMS – Second medical uses (Phases III and IV) • Methods of treatment (not patentable in many countries)

10. Evergreen patents? Not so green! • Some examples of “abuses” considered “evergreening”: • Patents for second medical uses of known active principles. Do not cover the first medical use. • Patents for variations (i.e., new salts or enantiomers) of known active principles. Do not cover the first described salt or form of the active principle. • Patents for combinations of known active principles. Do not cover the active principles alone (not combined) • Back to business driven “critics”: • Patent holders: Accused to patent “insignificant” or “frivolous” improvements to unlawfully make the monopoly last longer. • Generic manufacturers: Accused to copy those “insignificant” or “frivolous” improvements instead of using the first described product. • Patents directed to formulations, new salts, second uses and the like are currently developed by different firms each, thus making impossible “evergreening”.

11. Patents and access • Any person may use the technology described in an expired patent without permission of its holder. • Any patent that is granted to an improvement of a former invention does not include protection for the first description, but only to the extent covered by the claims of the NEW patent. • A strong patent system has shown greater competition and access to medicines. • MEXICO: Before 1991 drugs were not patentable. 80% of the drugs available in 1995 were registered in Mexico after 1992, in spite of a big base of generic drug manufacturers. • Before 1991 counterfeiting of drugs was the only way to get a new treatment, which leaded to less access to treatment through social security.

12. The path to “bioquivalence”: US case • Before the so-called Hatch-Waxman act, the REGULATORY provisions then in force: • Testing in humans was required for registration of generic drugs, which was both unnecessary and unethical. • Such testing in addition benefited the developer of the product in excess of a patent (if it existed) by posing an additional barrier to competition. • Such testing was a burden to price in drugs and was paid by the consumers, which restricted access to better medicines to the general public. • Use of a drug for purposes of obtaining health approval is considered commercial use and therefore infringement of patents (when existed).

13. Path to “bioequivalence”: US case • The Hatch-Waxman Act “solution”: • Authorized “me-too” approach as an exception to unfair competition, thus authorizing the use of bioequivalence testing as compared to a “reference drug” instead of full clinical trials to prove safety and efficacy. • Recognized that patent protection could be insufficient given the length of the regulatory process. Therefore, in exchange to making possible “me too” approvals, they incorporated a data exclusivity term independent to patent rights and also an exception to patent terms by extending the same in account to any “extra” time spent in the regulatory process. • Accordingly, generic drugs based on bioequivalence testing exist because patent terms were extended. • Use of a patented drug for obtaining a health approval was still infringement.

14. Further US fight: Roche-Bolar Hatch-Waxman did not consider the time required for the grant of ANDA’s.

15. Roche-Bolar • Roche v. Bolar, 733 F 2d, 858 (Fed. Cir. 1984). The case was related to the sleeping pill Dalmane. Patent expired January 17, 1984 because it granted 17 years before, in 1967. • Although the US permitted experimental use exemption of a drug, due to the fact that the only use of a health approval is commercial, the use of a drug for health approval purposes was not considered “experimental” and therefore, such use was considered patent infringement. • Bolar desired to sell a generic version of Dalmane as of January 18, 1984 under Hatch-Waxman. However, it could not because sanitary and patent law were inconsistent because the regulatory approval process extended in the practice the patent term if Bolar was not allowed to use the drug while the patent was in force for performing bioequivalence testing.

16. Roche-Bolar The controversy resulted in a decision favorable to Bolar, where it was established that, if an ANDA was filed within 2 years prior to the date of expiry of the corresponding patent, the use of the patented drug would not be considered infringement, as an exception to infringement, provided that the approval were effective as of expiry date of the patent. This leaded to the necessity of the so-called Orange Book, where patent holders must list the patents related to a determined drug, which in turn gave birth to the so-called “linkage” system, because somehow the filing for approval of a drug covered by a listed patent is somehow a “recognition” of infringement.

17. Access to drugs • According to the World Health Organization: • 50 percent of the population in developing countries lack access to essential drugs; • 50-90 percentof drugs in developing and transitional economies are paid for out-of-pocket, placing the heaviest burden on the poor; • Up to 75 percent of antibiotics are prescribed inappropriately, even in teaching hospitals in developing countries; • The worldwide average of patients who take their medicines correctly is 50 percent; • Antimicrobial resistance is growing for most major infectious diseases; • Less than one in three developing countries have fully functioning drug regulatory authorities; and • 10-20 percent of sampled drugs fail quality control tests in many developing countries, often resulting in toxic, sometimes lethal products.

18. Drugs push inflation?

19. A matter of pricing?

20. Who is self sufficient?

21. Mexico’s pharma balance

22. What is the incentive? Generic Drug Commercialization Incentives: • Service to mankind – Broadening access to medicines. • Differentiation through manufacturing and distribution capabilities. • Return on investment through low-cost and high volume. New Drug Development Incentives: • Service to mankind – Finding new or better cures for diseases. • Differentiation through innovation. • Return on investment through patents Ethical issues for both models. • Drugs and diseases are chosen through larger returns on investment, not better service to mankind. • Patent system either used or attacked due to its effect in return on investment and business, not for the effect in pricing or access.

23. Doha: Healthcare dilemma BASED ON THE EVIDENT PROBLEM OF AIDS, THE ENTIRE MODEL WAS QUESTIONED ABOUT: • What happens with epidemics in entire countries which do not have money enough to pay for patented drugs nor money to develop internal drug manufacturing capacities? • What happens with endemic or exotic diseases? • What if epidemics cannot be covered by a government if there is lack of support from a patent holder?

24. Doha: The agreements Ministerial Conference, 14-Nov-2001 (Doha) • Recognized the severity of the health problems in developing and less favored countries. • Recognized the importance of IP as incentive for development of new medicines and its effect in pricing. • Stated that the TRIPS agreement is not intended to be a tool for jeopardizing access to medicines to all people. • Confirmed that countries are free to establish compulsory licensing provisions consistent with TRIPS so as to make AIDS and other EPIDEMICS be treated as a national urgency or emergency.

25. Doha: In practice • In spite of the fact that some countries had enacted regulations on compulsory licensing under the decision of August 30, 2003 about Paragraph 6 of the Doha declaration concerning countries lacking of drug manufacturing capabilities and the export possibility from countries with manufacturing capabilities, DRUG ACCESS HAS NOT IMPROVED. • The criticism to the patent system only changes the business balance from new drug manufacturers to generic drug manufacturers, but does not solve the problem of lack of access to drugs.

26. Doha in practice: The WIPO study • There are 16 sub-Saharan African countries where more than 10% of the adult population is infected with HIV. 8 of them had no obligations under TRIPS (until at least 2006), namely Burundi, Central African Republic, Djibouti, Ethiopia, Lesotho, Malawi, Rwanda and Zambia. • Causes of the lack of access to medicines in sub-Saharan Africa are wide and complex. Laying blame on the WTO and TRIPS Agreement is overly simplistic and wrong, and does nothing to alleviate the crisis. • Most antiretroviral medications are not widely patented in Africa. In the majority of countries of sub-Saharan Africa where no patents exist, there is still a dramatic lack of access to drugs. Similarly, there are tremendous access problems with medicines long ago off patent. • Even if antiretroviral HIV/AIDS drugs were made available free tomorrow, there is a lack of health care infrastructure to conduct testing, store and distribute medications, and monitor patient compliance with what are often very complicated regimens.

27. CONCLUSIONS • Access and cost of drugs is not directly dependent on patents. They are consequence of regulatory processes and lack of investment. • “Evergreen” patents do not exist. There is reluctance of generic firms to use “old” technologies. • Not only have patents proven its effectiveness as a tool for certainty in the return on investment for new drug development, but have also proven to be an element of certainty for both, new drug developers and generic manufacturers. • Patents are not a burden for innovation, and are not the factor for boosting innovation neither, which is demonstrated by the lower number of new molecules available. However, patents give certainty for investment on both, new drug and generic manufacturers.

28. QUESTIONS? hchagoya@bcb.com.mx