The Good, the Bad, and the Ugly: Developments in the Intersection of Patents and Pharmaceutical Policy

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This week I am focusing on patent law, which is one of the more arcane and technical areas of pharmaceutical policy. A recent major decision by the Court of Appeals for the Federal Circuit (CAFC) in Bristol-Myers Squibb v. Teva Pharmaceuticals (BMS v. Teva) is rather remarkable in the degree to which it departs from prior decisions on the patentability of small molecules as the active ingredients in drugs. Chris Holman, a leading scholar in the intersection of intellectual property and the biotechnology and pharmaceutical industries, wrote a great article a few years ago arguing that a significant degree of unpredictability in patent law would substantially depress pharmaceutical innovation. Holman argues persuasively that the uncertainty as to whether or not a patent claim to a drug’s active ingredient would be enforceable is, in essence, an additional cost burden on pharmaceutical research and development, and that this increasing cost burden is responsible for a decrease in the output of pharmaceutical research. Holman pointed to a long period of stagnation in the number of new drugs approved as evidence of the decreased output of pharmaceutical research. He uses two examples of Eli Lilly patents that had been invalidated as evidence of the unpredictability of patent law. Holman’s analysis of the unpredictability problem centered on three different ways in which uncertainty is created: Continue reading

The End May Not Be Near But The Future Is Not Looking Very Good

I have always been an optimist about the future of biotechnology and the future contribution of the life-sciences industry to health and healthcare. There have been a fair number of market cycles since I first began studying the biotechnology industry in 1984. When venture capital was tight or the window for initial public offerings slammed shut, I was always confident that those downturns in financing were temporary. Sooner or later the level of investments in early-stage biotech would rebound and the public markets would again be open to biotech companies with significant products in later stage development. My optimism that the markets would recover rested on my faith in the long-term rationality of the investment markets, both public and private. As long as basic research continued to provide the foundation for significant commercial opportunities, sooner or later profit-seeking investors would seize on those opportunities. It is the “as long as basic research” part of that premise that causes me to be concerned. Continue reading