Creating completely new drugs is the most expensive, time-consuming, and risky approach to keeping the pipeline filled. Thus, keeping the product pipeline of a pharmaceutical firm filled is often as dependent on a good legal team as it is on a crack research and development department. Many of the successful legal and regulatory maneuvers employed by pharmaceutical firms involve extending existing patent protection on a product. Extending the patent protection on a blockbuster drug by only a few months can enhance the coffers of a pharmaceutical firm by a billion dollars or more. One mechanism for extending the patents on a blockbuster drug is obtaining supplementary protection. This added patent protection, which can extend a patent up to five years, is a means of compensating pharmaceutical firms for loss of market exclusivity during a lengthy regulatory review process. Another approach is to acquire orphan drug designation from the Office of Orphan Products Development at the FDA for drugs with a market potential limited to fewer than 200,000 patients. The Orphan designation, available since 1983, qualifies the pharmaceutical firm for seven years of marketing exclusivity, with a 50 percent tax credit for research expenses, and a waiver from certain FDA fees in exchange for developing the drug. The drug must then go through the new drug approval process like any other drug. However, because orphan drugs are developed for rare, often life-threatening diseases, including certain forms of cancer and genetic disorders, the review process is usually shorter and less comprehensive than the review of a typical drug. According to the FDA, as of the first quarter of 2003, over 1,000 orphan products have been designated and over 220 have been approved for marketing. Orphan drug programs, such as “Tin Mesoporphyrin and Heme Therapy in Acute Porphyria” have been enacted by the EU, Japanese, and Australian governments. A list of orphan drug programs funded by the FDA can be found on Web: www.fda.gov/orphan/grants/awarded.htm.
Pediatric exclusivity is one way to obtain six months of added patent protection for a drug. Most drugs undergo clinical trials with adult subjects. However, for drugs that have application in pediatric populations, and in which the clinical trials consider pediatric uses, it may be possible to qualify for pediatric exclusivity. Discovering a new indication for an existing blockbuster drug, while not as good as discovering a completely new drug, can be worth billions. For example, Minoxidil® was originally introduced by UpJohn in the late 1970s as an oral antihypertension medication, and later used as a topical treatment for male pattern baldness. In the late 1990s, the cholesterol-lowering drug Pravachol® by Bristol-Myers Squibb was approved by the FDA for a new indication—reducing the risk of a transient ischemic attack (a miniature stroke) and a recurrent attack in patients who have had a heart attack. The most difficult and time-consuming of the various maneuvers to extending a patent involves developing a new formulation of a drug that is just different enough from the blockbuster to be granted a patent. A new formulation, such as adding particles to a cream to hold the active ingredients can add a decade to the life of a patent, regardless of its effectiveness relative to the original drug. Finally, switching to a marketing strategy in which a drug just off patent is reintroduced into the market as a generic, is a low-cost option to capture revenue once other options have been exhausted. In addition to extending patent protection, a more controversial approach to keeping the competition off-guard is to actually discontinue a drug before its patent has expired. This practice confounds not only the competition, but physicians and patients as the scenario slowly unfolds. One example is the practice of withdrawing a drug from the market while the drug is still under patent protection, and introducing a similar drug before the competition has a chance to introduce generics into the marketplace. During the window of opportunity created by the overlap in patents, physicians may have no choice but to transfer their patients to the newly released drug. Months later, when the patent on the original drug expires, many patients will already be on the pharmaceutical firm’s second drug. As a result, fewer patients are transferred yet again to the generic drug when it becomes available. This approach was apparently used by Shering Plough when it withdrew Clarityn® (loratadine) before its patent expired and immediately introduced Neoclarityn® (desloratadine).To better appreciate the role of legal maneuvering in keeping a large pharmaceutical firm solvent, recall the 10 drugs in 2002. Note that, with the exception of Pharmacia and Pfizer’s Celebrex® and AstraZeneca’s Prilosec®, the top products all experienced significant growth. The reasons for the 19 percent contraction in sales of Prilosec® illustrates some of the major legal challenges and tactics associated with the pharmaceutical industry. In 2001, Prilosec was the number two drug in terms of global sales, contributing $6.1 billion in sales, just behind sales of Pfizer’s Lipitor® at $7 billion. However, with the primary patent for Prilosec® expiring in October of 2001, AstraZeneca undertook a multipronged approach to maintain its share of the market for heartburn drugs. One tactic was to shift marketing resources behind its follow-up product, Nexium®, with a $478 billion campaign in 2001 aimed at moving patients on Prilosec over to Nexium, which, by many accounts, provides no real benefit over Prilosec. In fact, the two drugs are simply isomers (mirror images) of each other. Even so, the mirror image is technically a different drug from the original, and is protected by a patent.Meanwhile, AstraZeneca filed for patent extension, maintaining that four generic drug makers infringed on AstraZeneca PLCs patent on Prilosec. A federal judge ruled that the U.S. Andrx Corporation, Genpharm Inc., an affiliate of German Merck KgaA, and Reddy-Cheminor, a unit of India’s Cheminor Drugs, infringed on AstraZeneca’s patent on Prilosec. The ruling was based on AstraZeneca’s patent for the formulation of the subcoating used on Prilosec that protects the active drug from being digested by the stomach acids. The secondary patent on the subcoating doesn’t expire until 2007.
The ruling didn’t entirely stop the competition from lower-cost generics, however, because the fourth company, KUDCo, a unit of the German company Schwarz Pharma AG, uses a different coating. However, given the delay caused by the litigation, sales of KUDCo’s generic amounted to a mere $150 million during 2002. The other three companies were forced to reformulate the coating used with their generic versions of the drug. The delay gained by the litigation provided AstraZeneca with ample time to build up a campaign around its new patent-protected Nexium product, which is under patent until 2014.AstraZeneca is also encouraging large hospitals and health-care enterprises to use the new drug through substantial rebates that make the new drug significantly cheaper than the drug it replaces, resulting in savings for the hospital. Pharmaceutical houses customarily maximize the use of a new drug through this type of incentive. In exchange, the physicians with the hospital gain experience prescribing the new drug, and they’re more likely to prescribe it in the future. In addition to competition from generics, AstraZeneca’s heartburn offerings are is being chased by established pharmaceuticals, including TAP/Abbott (Prevacid®), Eisai/Johnson & Johnson (Aciphex®), and Wyeth (Protonix®).One reason that patent litigation is so popular in the pharmaceutical industry is The Drug Price Competition and Patent Term Restoration Act, more commonly referred to as the Hatch-Waxman Act, enacted in 1984. The law allows pharmaceutical firms to “stop the clock” on the normal 20-year patent term expiration by excluding litigation from the 20-year term during which the FDA is exercising regulatory oversight and review. Because of the Hatch-Waxman Act, drug patents receive an average of 11 to 12 years of protection once they’re released to the market, instead of only 4 to 5 years. The Hatch-Waxman Act also created the generic drug industry in the US by softening the blow the extended patent protection has on the makers of generics. A component of the act created the Abbreviated New Drug Application (ANDA), which requires a generic drug manufacturer to prove that its product is bioequivalent to the original, patented drug. What’s more, the generic drug manufacturer needn’t wait for the original drug to come off patent before testing for bioequivalence. As a result, the generic drugs can be advanced on the market as soon as the innovative drug’s patent expires. Hence the interest of the top drug manufacturers in delaying the entry of a competing generic drug.
In addition to engaging in strenuous patent litigation and introducing follow-on products, switching the original products from prescription only to over-the-counter status is another tactic to extend the life cycle of a pharmaceutical product. Direct-to-consumer advertising is proving to be just as useful for prescription drugs as it is for over-the-counter products.
Please, read related posts in my blog: