What is the role of patents in the pharma industry

The Debate

Patents are exclusive property rights in intangible creations of the human mind. The vital point of a patent is that the product, manufacturing process or device must have never previously been disclosed anywhere in the world and something that would not be obvious to a person ordinarily skilled in the field before.

Patents are an integral part of the pharmaceutical industry. They have a huge role in preventing market failure and for keeping investment high in research. Medical innovation requires an extremely high amount of financial capital, with the Association of the British Pharmaceutical Industry placing the cost for drug discovery at approximately £1.15bn per drug. They prevent market failure because they provide an incentive for companies to invest these huge amounts of money so they can experience a 20yr period where they do not have to face government price control or competition.

Patents differ from industry to industry, with patents shared in the electronic industry through pooling or cross-licensing. This occurs because a given product often contains many patented technologies. To contrast, in the chemical and pharma industry the patent normally equals the product and protects the extensive investment in research and clinical testing required before placing it on the market.
The pharma industry has a very particular characteristic that sets it apart from other tech-based industries. In many other tech based industries it is possible to keep inventions a secret until they are marketed. This enables companies to delay patent filings until the last possible moment and therefore maximize the effect of the 20yr patent run. However, the culture of the medical research industry emphasizes early disclosure of inventions, usually long before the product is placed on the market. This is because scientists working in the medical research field have an obligation to share their findings as soon as possible with peers, so that their peers can also benefit from the research in their own work. Thereby there is a lengthy time period between patent filing and placing a product on the market, which means pharma companies receive far shorter periods of patent exclusivity than other tech companies.

However, patents have come under attack as patent protected drugs face no price caps or competition for 20 years and they have come under criticism for reducing patient’s accessibility to the latest treatments because they cannot afford them. There have also been arguments that patent protection can also cause incentive issues, as patents can be bought and sold. Therefore, certain companies have adopted the strategy of purchasing licenses and hiking up the drug price instead of investing money into new medicine research instead.

The Process


As previously stated, that product etc must have never been disclosed anywhere in the world and not be something that was obvious to someone working in the field. In order for this to be determined, the claims of the patent is compared against bodies of published literature, including previously issued patents. This process is called examination and assures that no one is able to claim patent rights on anything that is already in existence.

Patents are territorial in nature and exists only in the national jurisdictions in which the patentee has applied for and received recognition of there property rights.
Every country with a patent system has a national patent office where claims of inventors may be made a matter of public record. In most countries there is a detailed examination process before the inventor is given any rights, but some countries delay the examination process until a dispute over infringement arises. However even in these countries, a search of the prior art is often conducted as part of the registration process and the search results are published so that members of the public can assess the claims made by the registrant.

Patents can only be applied to ‘useful’ inventions. Patent applicants need only to supply a single operable use of the invention that is credible to persons of ordinary skill in the art. This can present some issues in the pharma field, as inventors often synthesize compounds without a precise knowledge of how they may be used to achieve a practical working result. To also be patentable, a pharma invention must be considered ‘novel’ and ‘non-obvious.’ To be considered novel, the invention must not be wholly anticipated by other public domain materials such as publications and other patents.

The first step for applying for a patent is preparation of the application. The application must be accompanied by a filing fee and must contain a specification of the invention. First the specification must enable persons of ordinary skill in the art to which the patent pertains to make and use the invention. Second the specification must contain a written description of the invention, sufficient enough to show that the inventor was in possession of the invention at the time the application was filed. And finally, it must detail the ‘best mode’ contemplated by the inventor of practicing the invention. Most importantly the specification must conclude with one or more claims the boundaries of the invention that the inventor claims as their own.

Once the application is completed it is sent to the countries patent office, such as the USA’s USPTO. It will be forwarded to an examining group who have expertise in that sort of invention. A supervisory patent examiner will assign the application to an individual examiner who will review it and conduct a search of the prior art.

The examiner must notify the applicant of their response coined an Office Action. If the claim is rejected, then the examiner must publish a case of unpatentability by a preponderance of the evidence. If a rejection has resulted, a patent attorney will usually respond by either amending the claims or asserting that the rejection was improper. If the examiner still remains unconvinced, they will issue a second Office Action termed Final Rejection. The applicant normally has three responses; 1) Abandon the application 2) Persist in prosecution by filing a so called ‘continuing application’ 3) Seek review of the examiners action by filing a petition to the Commissioner or appeal to the Board of Patent Appeals.


Types of Patents


There are a variety of pharmaceutical patents that inventors can apply for and they include:
  1. Product patent: This claims that the active ingredient is a new chemical entity and this claim is regarded as the superior claim. If there is a product patent, then no-one other than the patent holder or licensee can make, sell or import the product.
  2.  Product by process patent: This type of claim ‘claims’ a chemical or other process used to manufacture the drug, whenever the drug is made by the manufactured process. It is regarded as the next best claim, as it also confers protection against importation of a product. But the drug can be made and sold if another company devises a commercially viable process not covered in the patent
  3.  Process patent: This covers the process used to manufacture the drug. The chemical product itself is not covered.
  4. Formulation patent: Claims the pharmaceutical dosage form on the drug. It may take the form of formulation of a particular drug or class of drugs or a general formulation applicable to many drugs with different actions such as slow release technologies etc
  5.  Method of use: This covers the use of the drug to treat the disease


Astellas enters into the gene therapy market with $3bn acquisition


Astellas has announced its acquisition of Audentes Therapeutics for $3bn, adding a late-stage candidate for a rare disease into its portfolio.

This move fits well into Astellas recent strategy of streamlining its R&D operations, where it has been cutting programmes and staff to focus on its self-proclaimed key areas of immuno-oncology, cell therapies in ophthalmology and mitochondria-targeting small-molecules for neuromuscular diseases.

The Audentes deal not only provides gene therapy as a fifth platform technology but also a neuromuscular treatment, AT132, which is a candidate for the treatment of X-linked myotubular myopathy (XLMTM). XLMTM is a rare, genetic, neuromuscular disorder that causes muscle weakness that can range from mild to life-threatening.

As it is a rare disease, XLMTM only affects approximately 40,000- 50,000 newborn males, so there is a small indication. However, as Audentes treatment is a gene therapy, it will command high prices, as shown by Novartis spinal muscular atrophy therapy, Zolgensma, which is now the most expensive drug in the world, pushing the therapy to $160m in sales in its first full quarter in the market.
Astellas stated that gene therapy will be a ‘key driver’ for the company in the future and intends to let Audentes operate as an independent subsidiary, allowing to keep its flexible operation but also to tap into Astellas scientific resources. A benefit for Astellas is the fact that Audentes comes with its own gene therapy manufacturing site, a high valued asset considering the lack of production capacity for gene therapies.

Analysts say that Astellas did pay a premium for Audentes, at a quoted value of 110% premium on the share value. However this follows the recent trend of gene therapy acquisitions such as Novartis $8.7bn AveXis takeover and Roches $4.3bn takeover of Spark Therapeutics.

Amgen raises its 2019 forceasts after successfully completing $13.4bn purchase of Otezla


The $13.4bn deal was in response to competition authorities imposing a key requirement onto the proposed BMS/Celgene acquisition to divest Celgene’s blockbuster Otezla.

Otezla has continued to perform well, growing 26% to reach $1.6bn across its psoriasis, psoriatic arthritis and Behcets disease indications last year and continuing to a total tally of $1.43bn in the first nine-months of this year.

Amgen in response has raised its full year sales forecast to $23.1-23.3bn, with Amgen stating it now expects “at least low double-digit percentage Otezla sales growth, on average…over the next five years.”

Amgen also plans to build the scope of Otezla by entering the drug into ongoing trials such as genital psoriasis and paediatric plaque psoriasis, potentially expanding the eligible patient population. Otezla also fits well into Amgen’s current portfolio of psoriasis and anti-inflammatory product range which includes Enbrel and Amgevita (biosimilar of AbbVie’s Humira, which is approved and already available in Europe and approved ahead of a likely US launch in 2023).

Celgene/BMS will continue to produce Otezla finished goods for Amgen under a contract manufacturing agreement for up to two years, which can be extended. With the other agreement also being workers joining Amgen from Celgene as a result of the takeover

Novartis unveils its long-term strategy highlighting 25 potential blockbusters


At a R&D event in London, Novartis unveiled their long-term growth strategy, highlighting 25 or more potential blockbusters.

Among these products are a group that are set to enter into pivotal trials in the coming year. These products have been fastracked by Novartis due to belief they address areas of significant unmet need. Some of these products include:

·       MBGG453: a first-in-class anti- TIM-3 mAb which is currently advancing into a pivotal phase 2 programme in myelodysplastic syndrome. With phase 1 data due to be presented at the upcoming ASH 2019 conference.

·       Iscalimab (CFZ533), a monoclonal antibody (mAb) which has the potential to become the standard of care in transplants, as well as demonstrating a positive proof-of-concep tin Sjogrens syndrome, which can cause rheumatic autoimmune diseases.

The pharma company not only has promising early stage products, but also has an impressive series of late-stage pipeline phase 3 readouts and launches to announce, which are to be used to drive mid-term growth. These launches include:

·       Ofatumumab (OMB157): A novel treatment for relapsing multiple sclerosis which has produced new analysis demonstrating a reduction in confirmed disability worsening.

·       Canakinumab (ACZ885), AN 1L-1 beta mAb for non-small cell lung cancer, which as trials being recruited in both the first and second line settings and plans for regulatory filings in 2021.

Rounding of the day with a big announcement, Novartis announced that it has 90 new emerging molecular entities (NMEs) from its Institute for BioMedical Research, creating a diverse portfolio for the company. This implies that Novartis plans to make 80 significant submissions to regulators for approvals from 2020-22 in the US, Europe, Japan and China, an improvement from its 60 submissions it reported lasted year for the period of 2019-21.

Novartis confirms $9.7bn takeover of The Medicines Company


MedCo is a company that has produced an inhibitor that lowers cholesterol by blocking the synthesis of PCSK9 in the liver rather than targeting the protein itself. It acts via a mechanism that can be given as a subcutaneous injection initially and then again at three months and every six months thereafter

MedCo’s Inclisiran is seen as a serious competitor and disrupter to the market, particularity Amgen’s Repatha and Sanofi/Regeneron’s Praluent. Especially in the sense that Inclisiran has the benefit of a twice-yearly dosing schedule and data demonstrating it can reduce cholesterol even in patients on maximum does of statins. While Repatha and Praluent are dosed much more frequently either monthly/bi-monthly.

Novartis has obviously seen the promise in MedCo and has agreed to pay $9.7bn for the company, which amounts to $85 per share. Novartis is betting on the growth potential of inclisiran, where analysts have suggested it has blockbuster potential if approved for a wide patient population.
Repatha and Praluent have been struggling this year with payer resistance stinting growth. The respective developers have sinced offered discounts ranging from $14,000 per year to $6,000. This presents interesting food for thought for Novartis as it considers the price it will be on offer for inclisiran if approved.

According to Bloomberg, analysts have responded well to this announcement as Inclisitan fits very well into its current cardiovascular portfolio along with Entresto. Inclisirans planned approval is set to be completed before the end of the year in US and in Europe for the first quarter of 2020. If this all goes to plan, Novartis expects inclisirian to start to contribute to group sales from 2021.

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