Perspectives: Protecting Innovation and Advances in Medical Technology

Michael Losow is an attorney who joined the Biotechnology Industry Organization (BIO) in 1996. He has more than 20 years experience in public policy and government relations, 15 spent as a health and disability consumer advocate, and 13 spent at the National Multiple Sclerosis Society where he established its government relations program.

He is a national leader on employment of people with disabilities who focused on access to health care and prescription drugs as a key to keeping people with disabilities at work, or getting them to return to work. He is also a strong advocate for patient privacy protections as pertains to medical and genetic information. In 1994 he helped establish a coalition of organizations in Ohio to protect patient privacy.

In his position at BIO as Outreach Director, he has worked on special projects focused on improving health in minority populations, and reaching out to women’s groups and religious organizations. Michael continually expands BIO’s contacts with different groups and organizations to ensure a dialog and the development of shared policy goals between the industry and those who will benefit from its products.

Congress, Innovation, and Patent-Pending

Perhaps the most significant issue Congress is working on is one that will not even register on the radar screen of the people who should care the most – patients and physicians. That issue is patent reform.

Every patient advocacy organization and medical specialty group has its top legislative priorities - from NIH funding to medical malpractice reform. So why should a change in patent laws mean anything to the practice of medicine or the treatment of one’s disease? First let me explain the significance of patents to the biotechnology industry.

This July, Congress will be trying to pass patent reform legislation. The patent reforms proposed are the most significant in nearly a half century. From our industry’s perspective, patents are the life blood of small and mid-sized biotech companies. Biotechnology research and development (R&D) is very high risk. Most products fail. Additionally, it often takes 12 or more years to develop an approved product – and the cost is well over $800 million.

Investors are wary about committing so much in investment for so long a time. Yet when a product pans out, biologics can be miracle drugs giving life and quality of life. The returns on these risky investments can be significant in both a monetary and social context.

Breakthrough therapies

How do biotechnology companies develop the next innovative breakthrough therapy in Alzheimer’s or breast cancer? Patents! With their patents, biotech companies can generate venture capital investment to further their R&D efforts. That is how we have been able to see the development of breakthrough drugs for rheumatoid arthritis, lymphoma and more.

So what is the concern for patients and doctors? If patents are not strong and sure, investors cannot afford the additional risk. If investment dries up, the industry will shrink – significantly. This does not mean the pharmaceutical and biotechnology industry will go away. There will always be development – especially focused on potential blockbusters where there are significant populations or large markets. But the amount of research, the number of companies, and the types of diseases addressed will all change. It is already difficult to get research into rare disorders, but the biotechnology industry has addressed, and continues to address, many of these unmet needs.

Changing patent laws

This year Congress is trying to change the patent laws. This change is primarily driven by some in the high technology sector whose product may be based on the compilation of thousands of patents. Each new product, whether it is a computer, computer software or an MP3 player, has thousands of components, each covered by patents. Invariably, at least one will be an existing patent of which the company was unaware when it developed the product. What is more, these companies’ products change yearly. Patented products are on the market almost as fast as the patent is issued.

This is not so with the development of biologics. More often than not, a product that finally makes it to market has used up more than half its patent life before the first of it is sold. We know the pipeline for new products starts with the research and patents from universities and small companies.

Moving from ideas

Without strong patents, most innovative ideas would be just that – ideas. Patent reform is not in and of itself bad. However, the types of reforms being considered by Congress are harmful to biotechnology research and development. With small companies accounting for two-thirds of the pipeline, it is our concern that patent reform does not have the unintended consequence of drying up a huge portion of potential products and our greatest hope for better treatments and interventions. If a patent can be challenged easily, frequently, or at any time during the long process of product development – or even if a patent can be perceived to be weak and at risk of challenge the closer the research gets to a product – venture capital markets will necessarily look for areas other than healthcare in which to invest – perhaps the next generation I-Phone.

There are three key changes to the patent laws that are threatening to this industry:

• The proposed open-ended post-grant administrative cancellation system: The proposed post-grant cancellation proceeding in S. 1145/H.R. 1908 could be commenced under a low threshold; would allow administrative validity challenges throughout the full term of the patent; would permit repeated challenges of the same patent; and fails to sufficiently incentivize challengers to diligently survey the patent landscape close in time to patent issuance.
• Apportionment of damages: A guilty infringer of a patent must compensate the patentee for lost sales, or pay a reasonable royalty. The legislation introduces a new mandatory procedure for determining and applying reasonable royalty damages. If royalties are based upon the value of a component, not the value of the product as a whole, this result would make infringement cheaper, thus encouraging infringement and making infringement just another business decision.
• Delegating to the PTO substantive rulemaking authority: For the first time in the history of our patent laws, the PTO would be delegated the authority to promulgate substantive rules governing the issuance of patents. BIO is concerned that such unfettered rulemaking powers will permit the PTO to impose non-statutory restrictions on the ability of biotechnology companies and other innovative industries to obtain appropriate patent protection.

Patents and epilepsy

When is the last time there was a significant new drug approved for epilepsy? I can't remember hearing about any major breakthrough. If I'm right, then it is going to take the innovation of biotech companies to develop something that changes the treatment of the disease - not just another anti-seizure drug.

Reviewed by Steven C. Schachter, MD