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This article is adapted from Song CH, Han J-W. Patent cliff and strategic switch: exploring strategic design possibilities in the pharmaceutical industry. SpringerPlus. 2016;5(1):692. doi:110.1186/s40064-016-2323-1 under a Creative Commons Attribution 4.0 International License. It has been edited for length and style.
Patent protection can be used to temporarily prevent or limit competition. The basic principle of the ‘prevention strategy’ is therefore to exploit possibilities for extension of market exclusivity.
Additionally, the primary patent may be split into several patents. One patent may seek protection for a broad claims encompassing various compounds, while another patent may have claims related to a specific compound. In some cases, if one isomer is found to be more active than the other or offers substantial and previously unpredicted therapeutic advantages, it may provide a basis for a separate patenting. Accordingly, secondary patents encompass inventions directed to the incremental improvement of the primary patent and can permit the innovator to maintain the market share even if the generic producers try to enter the market by contesting the validity of the primary patent.
The Sector Inquiry by European Commission has revealed that there is a trend for companies to continuously file patent applications as the expiry date of the primary patent approaches at the ratio of primary to secondary patents of 1:7. This kind of strategic patenting builds portfolios of patents for a defensive rather than for inventive purposes, placing the innovator in a more favorable position for patent-related disputes. Glasgow (2001) concludes: “[…] intellectual property protection is not being used to promote an incentive to create and innovate. Rather, intellectual property rights are being used to gain and maintain an exclusive market share for the most profitable, not necessarily the most beneficial, drug”. Consequently, the term “evergreening” indicates the strategic maneuver to intentionally extend the market monopoly beyond the known patent life through secondary patenting. The consequent patent maze from secondary patents can result in difficulties for generic suppliers to determine when relevant patents will expire and when it is safe to enter the market without inadvertently infringing on patents. Even if the generic suppliers have success in maintaining a clear view through the multiple layers of patent protection, they may still be prohibited from producing the compound by the most economical route or using the most stable forms of the drug (Hutchins 2003). However, more recently, patent-related legal challenges from generic suppliers have been more successful and the lead time for the market launch of generic products has become much shorter (European Commission 2009). The secondary patents may not cover the proposed generic product properly and are contestable (Glass 2004).
Another possibility to extend the market exclusivity by pursuing legal avenues is provided through obtaining of supplementary protection certificates (SPCs). SPCs are an additional protective mechanism introduced by EU to serve as an extension to patents. For the pharmaceutical sector, SPCs are intended compensate the efforts put into research and development and the elapsed period between filing patents and obtaining market authorization. SPCs extend the effective protection of products already on the market by a maximum of 5 years following patent expiry. However, the protection granted through SPC can be legally challenged. A similar practice named "patent term restoration" exists in the United States and Japan. In the US, innovators can apply for up to five additional years of patent protection for a new drug to make up for time lost while the product was subject to the FDA’s regulatory review (Title II of the Hatch–Waxman Act).
Another aspect of Hatch-Waxman legislation, permits brand owners to file a patent infringement suit after an ANDA with a paragraph IV certification (a patent challenge) is filed by a generic manufacturer. The infringement triggers a 30 month period in which the FDA cannot approve the ANDA without a court decision invalidating the patent.
Another way of extending the market exclusivity is to apply for orphan drug status. In EU, orphan drug status extends 10 years of market exclusivity for drugs treating rare diseases affecting not more than 5 in 10,000 people for which there is currently no adequate or possible treatment. The United States has similar legislation providing 7 years of market exclusivity. The rationale for this market exclusivity is to make attractive opportunities which might not otherwise attract sufficient interest. However orphan drug status cannot completely prevent generic competition, because if a generic company can gain approval for an indication other than the orphan-protected one, prescribers may be free to adbminister the generic drug for “off-label” use.
In the US there is also the opportunity for a 6-month patent term extension for responding to an FDA request to submit pediatric clinical trials for a drug.
Another option for branded firms is to settle out of court, paying generic companies to abandon their patent challenge. These out-of-court agreements have been under increasing scrutiny from regulators and risk being declared anticompetitive.
|Strategic option||Description||Exclusivity period|
|Strategic patenting (later-issued patents)||Obtaining patent protection on different aspects around the base compound patent||20 years from the date of filing|
|Patent term restoration||Granting of additional market exclusivity for the time lost due to FDA approval process (Title II of Hatch–Waxman Act)||Maximum of 5 years|
|SPC||Protective mechanism serving as an extension to patent right||Maximum of 5 years|
|30-month stay provision||Filing a patent infringement suit to fight ANDA||30 months from the date of notice or till court decision|
|Orphan drug||Applying for orphan drug status for an already authorized drug||7 years of market exclusivity in US, 10 years in EU|
|Pediatric exclusivity||Submission of pediatric clinical trials on the FDA’s request||6 months of market exclusivity|
|Patent settlement agreements||Involving in settlements with generic manufacturers to delay the market entry||Duration of the agreement|