A niche blog dedicated to the issues that arise when supplementary protection certificates (SPCs) extend patents beyond their normal life -- and to the respective positions of patent owners, investors, competitors and consumers. The blog also addresses wider issues that may be of interest or use to those involved in the extension of patent rights. You can email The SPC Blog here

Monday, 24 October 2011

Shoot the phoenix, count the cost!

Gently chiding The SPC Blog for the symbolism of its phoenix logo, our good friend Sophie Miller (Legal Adviser, Association of the British Pharmaceutical Industry, ABPI) kindly reminds us that an SPC is not a resurrection of an expired patent, but rather an agreed continuation of a patent term for an inventive pharmaceutical medicine, in accordance with EU Regulation.  She continues:
"Even with an SPC extension, a recent study by the ABPI IPEN with data supplied by UK IPO has found that the actual years of valuable patent life that a pharmaceutical patent that a company can actually use with a product on the market tends to last no longer than a total of between 10 and 12 years (even with the maximum 5 year SPC granted on top of the 20 years from the date of the patent application).

Even once a marketing authorisation has been granted by MHRA or EMA (National or European routes), companies need then to persuade governments (who are the sole purchasers of medicines through their national health services) to purchase new medicines for which companies need to prove increased efficiency over the existing drugs on the market through the Health Technology Appraisal (run in England through the lovely acronymed NICE, the National Institute for Healthcare and Clinical Excellence) , even before you can start to educate the doctors about the innovative new medicine and how it can help patients who are not responding to current treatments on the market. We’ve all heard of postcode prescribing. Well, the NHS is pretty reluctant to allow doctors to prescribe innovative new medicines that may have cost up to about £1.3bn to produce… unless all other avenues have failed with a particular patient first, and even then the local NHS PCT has to agree that the doctor is allowed to spend the money on the patient before treatment can start.

This makes pharmaceutical patents rather unique in that they become more valuable the closer to the end of the patent term you reach – so much so that pharmaceutical companies can find it worth while spending millions on patent litigation to protect weeks worth of SPC (see the Merck negative–term SPC cases in which in order to gain a handful of weeks of a 6 month SPC for paediatric study, Merck spent a lot of money trying to persuade the IPO and other patent offices around Europe to grant a negative term SPC (ie less than zero term) so that they could obtain the promised extra few months of the maximum 6 month extension allowed by the paediatric regulation.)

Compare this with the patents granted in the world say of mobile phones, where you have product almost immediately available on the market as soon as the invention is made to keep up with your cutting edge. They manage to squeeze the most of the full 20 years of market control available from the patent term …

I’d say the pharmaceutical industry as a result gets a pretty rough deal! (Noting also that any profits reported on the share market actually get ploughed back into the process of inventing the next new drug… and they don’t go into the pockets of the share holders at all.) And with the science getting more difficult and personalised (smaller sections of society benefiting from resulting innovation, now that genetically related “lock and key” mechanisms are being investigated) there is less and less money to pay for the next “big thing” through sales of resulting medicines before the generic market gets a look in (who can also use the same clinical data submitted by the innovator patentee to prove their significantly cheaper to produce generic manufacture-only costs medicine is safe to go on the market..). Since none of the profits of the generic industry gets ploughed back into the reimbursement of costs of development of the new medicines by innovator companies, we need all the protection we can get!

So less of the phoenix rising, and more on funding the costs of getting innovation from bench to bedside please!

I attach a handy graphic of information (reproduced below) on the R&D lifecycle we publish in our “Did you Know” booklet about the pharmaceutical industry. 
© Association of the British Pharmaceutical Industry from “Did you know?” Jan 2011 www.apbi.org.uk
This shows the process timeline and average cost of bringing a new medicine to market – even once the basic scientific invention costs are done. It also shows how and why pharmaceutical companies need SPCs".
Knowing how broadly this weblog's readership is spread between the proprietary and generic manufacturers, private practitioners, administrators, investors and academics, I suspect that there may be some interesting responses to Sophie's position. All opinions are welcome on The SPC Blog's moderated comment service.


Anonymous said...

I would like to know what percentage of the profit made by a pharmaceutical company is actually invested in research and how much goes into marketing. Sophie, please comment!

Anonymous said...

Yes, I too am curious as to the answer to Anonymous' question.

And perhaps Sophie could also comment on the percentage of innovator pharma companies' turnover typically spent on R&D, with the typical price difference between innovator and generic medicines?

I have looked at Sanofi-Aventis' published 2010 financial statements, which I expect are fairly typical. These financial statements reflect R&D expenses at 14,5% of net sales, with "selling and general expenses" at 24,9%. In comparison, the average price difference between innovator and generic products is a lot more than 14,5%!

I am a little puzzled by Sophie's comment about reported profits getting ploughed back into R&D, rather than being distributed to shareholders. Is the R&D to which Sophie refers additional to the R&D reflected as an expense in the financial statements?