September 5, 2014 at 1:00 am

INTELLECTUAL PROPERTY

Foreign patent abusers undermine U.S. drug industry

The biggest roadblock to American pharmaceutical innovation isn’t science. It’s intellectual property rights.

Drug companies are struggling to finance the research and development of new treatments. And their difficulties are being seriously exacerbated by some of America’s closest trading partners. Foreign officials are repeatedly violating basic intellectual property protections and siphoning away valuable investment capital.

These abuses need to stop. The drug industry is a crucial part of the American economy. We can’t afford for it to cease innovating.

The largest drug companies typically invest over one billion dollars to develop a new medication. The drug development process usually takes 10 to 15 years. And many of these investments don’t pay off. Only about a fifth of the 5,000 compounds that enter pre-clinical testing every year even make it to human trials. And among those only one in five will ever get approved by the FDA.

Pharmaceutical companies are willing to undertake such costly risk because they hope to eventually recoup these investments once the drug is approved by the FDA. Patents provide innovators with a limited period of market exclusivity, in which competitors are barred from creating low-cost knock offs. The resulting sales help offset those massive upfront expenses.

But these patent protections are now under threat by some major U.S. trading partners.

Our neighbor to the north, Canada, has established uniquely burdensome hurdles for pharmaceutical patent-seekers. Usually, a company seeking a foreign patent must simply prove that its product is useful and new. But Canada demands that patent-seekers overcome an additional hurdle, in which they must “soundly predict” with a high level of specificity the underlying product’s ultimate function.

This creates a Catch-22 for pharmaceutical developers.

In order to “soundly predict” the use of a new medicine, they must gather extensive evidence from clinical trials. But by the time this lengthy trial process is completed, the drug is no longer exotic or new — and so it may no longer meet the “novelty” standard.

Canadian courts have embraced this double-bind and overturned the patents for more than 20 innovative medicines in the last decade. And even more drugs might be at risk of losing their patent protections. Canadian regulators are still allowed to revoke patents years after they’ve been awarded.

India, another major American trading ally, has also undermined the intellectual property rights of pharmaceutical companies. Indian courts have revoked or otherwise broken at least 14 drug patents in the last two years.

For example, although Pfizer’s cancer drug Sutent enjoys patent protections in 90 countries, Delhi recently revoked its patent. A judge unilaterally ruled the drug wasn’t sufficiently “inventive.” Regulators have invoked equally suspect grounds for snapping patents in other decisions, including the need to protect domestic manufacturers.

These patent violations undermine long-term drug innovation. By carving into companies’ ability to recoup its R&D investments, they reduce the funds (and the appetite) for new medical exploration. Firms will be less likely to take that huge risk entailed by the creation of breakthrough treatments and the supply of new life-saving drugs will diminish.

Peter J. Pitts, a former Food and Drug Administration associate commissioner, is president of the Center for Medicine in the Public Interest.