Healthy Skepticism Library item: 2239

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Publication type: news

Schwab D.
Patent protection is at forefront of the pharmaceutical industry's concerns for the coming years
STAR-LEDGER 2001 Dec 30

Full text:

When you think of patents, Thomas Edison, Alexander Graham Bell or anonymous pioneers who invented devices like the integrated circuit or autofocus camera probably come to mind.

But these days, patents are a big part of the pills you take, and patent protection is almost as important to the pharmaceutical industry as the safety or efficacy of the prescription drugs themselves.

For instance, the loss of patent protection on blockbuster medicines explains why some companies, notably Merck & Co. and Bristol-Myers Squibb Co., are suffering these days while some competitors, like Pfizer Inc. and American Home Products Corp., are faring much better with key medicines safely protected for years from competition from cheaper generic versions.

Moreover, with mounting criticism around the world that patent protections are partly to blame for excessive prescription drug prices, the dependence upon patents highlights a potential vulnerability in the industry and is likely to be a focus of debate in the coming year.

“What is looming on the horizon for the companies, for the first time, is the possibility of an assault on intellectual property,” said Robert Goldberg of the National Center for Policy Analysis, who writes about the pharmaceutical industry. “It has them nervous.”

Not even some of the most vocal critics of the drug companies and patent protection expect any significant change soon in U.S. laws that give companies a 20-year monopoly on scientific breakthroughs.

Indeed, while Bayer’s initial reluctance to cut the prices for its antibiotic Cipro at the height of the nation’s anthrax scare last fall got lots of attention, perhaps the most significant threat to patents lies aboard, with the agreement at the World Trade Organization meeting last November that poor countries can make generic versions of expensive brand name drugs to avoid epidemics such as AIDS.

But critics say drug companies are getting increasingly aggressive about filing lawsuits to prevent cheaper, generic versions of brand- name drugs from coming to market in the United States, their biggest and most lucrative region.

“I don’t think the drug companies feel terribly worried the patent laws are going to change in a harmful manner,” said Ron Pollack, executive director of Families USA, an advocacy group in Washington, D.C. “Quite the contrary, they continue to be aggressive to try to extend even more protections on their behalf.”

For example, in recent weeks, Bristol-Myers Squibb launched an intensive lobbying effort in Washington to seek special protection for its diabetes medicine Glucophage as part of a bill extending a prized patent provision that was set to expire at the end of the year — an effort that even put it at odds with others in the industry.

Pollack wants to limit the ability of drug companies to file legal appeals simply to delay the introduction of generic drugs, a key provision of a bill introduced last year by Sen. Charles Schumer, R- N.Y., and Sen. John McCain, R-Ariz.

With heightened concerns about rising drug prices, Clay O’Dell, a spokesman for the Generic Pharmaceutical Association in Washington, said the bill may gain significant support. “Maybe the tide is turning,” he said.

The pharmaceutical industry says long-term patent protections are essential because, otherwise, drug companies couldn’t afford to develop new medicines, which a recent study said now costs about $800 million. Patent protection is why so many new drugs are developed in the United States, they contend.

Patents are front and center these days because an unprecedented number of medicines will lose patent protection over the next five years. Analyst predict that could jeopardize branded drugs that account for more than $35 billion in sales.

The problem for the big drug makers who develop new drugs is that once a drug loses its patent protection, consumers are likely to switch quickly to cheaper generic versions, cutting sales by 70 percent or more.

That’s why Schering-Plough Corp. is trying to switch consumers to its new allergy medicine Clarinex as quickly as possible, because its blockbuster Claritin — a $3 billion drug — faces patent challenges by the end of next year.

It’s also why companies will often file patent challenges to prevent generic manufacturers from introducing generic versions, because any delay means more revenues. Critics contend AstraZeneca’s move to delay the introduction of a generic version of its ulcer medicine Prilosec, which had been the world’s biggest selling prescription drug, will cost U.S. consumers $5 million a day.

For most of the past two decades, about 3.5 percent of drug sales lost patent protection per year, according to Richard Evans, a senior research analyst at Sanford C. Bernstein & Co.

But that’s expected to double during the next decade, putting a drag on the industry, Evans said. U.S. drug sales last year totaled more than $150 billion.

Any shortfall intensifies pressure on major drug makers to find ways to grow earnings, since they are unlikely to make up the difference through cost-cutting or introducing new drugs, which is becoming more expensive and time-consuming all the time.

Alan Anderson, an attorney specializing in patent law at the law firm of Fulbright & Jaworski, said the drug business is little different from other industries in its dependence on patents — a situation he well understands, having handled cases involving Honeywell’s patent on autofocus cameras and the invention of a new snowmobile ski.

Except with prescription medicines, the stakes riding on a patent are unusually high, when a single blockbuster drug generates billions of dollars in sales year after year. At that point, the issue is not so much a matter of patent law as of public policy, Anderson said.

With pharmaceutical companies supplanting HMOs as Public Enemy No. 1 in the eyes of many consumers, moving the issue from patent court to the court of public opinion could spell trouble for the industry.

David Schwab covers the drug industry. He can be reached at dschwab@starledger.com or at (973) 392-5835.