Biotech industry says no to EU pharma competition

In the international survey of 365 people working across the sector, 88 per cent said that the time lag for generic competition entering the market is not indicative of anti-competitive abuses of the system, and only 27 per cent believe the patent system needs rebalancing to help generics compete.

Meanwhile, 80 per cent express support for creating a European Community Patent, saying the IP framework here is inferior to that of the US.

The Commission’s preliminary findings, published in November 2008, claimed the patent system is being used anti-competitively by drug originator companies. But 72 per cent of respondents fear the enquiry will result in the “significant weakening” of patent protection for biotech companies, which will in turn deter funding and discourage innovation. The outcome of the Commission’s enquiry is expected this summer.

The research shows opinion is divided as to whether the Commission has any basis for investigating alleged anti-competitive practises, with 51 per cent believing that the enquiry has no justification whatsoever.

However, a clear majority argue against reform of the patent system by way of a solution. And 73 per cent dispute the Commission’s central claim that the way the patent system is used unfairly favours innovator companies over generics, with only 23 per cent supporting patent reform to help generics compete. While 80 per cent suggest that reforming the system in favour of generics may reduce healthcare costs in the short term, but will undermine drug innovation in the long term.  

The research shows that respondents take issue with a number of claims made in the Commission’s preliminary findings, particularly in relation to the extent of anti-competitive practises at play within the industry. In its November report, the Commission pointed to the average gap of three months between the expiry of originator patents and the market entry of corresponding generic alternatives as evidence of abuse. Yet 89 per cent pour cold water on this suggestion, claiming the time-lag does not automatically indicate that anti-competitive practices are taking place.

Those that took part in the research are not against the emergence of generic competition, with 75 per cent saying that the development of generic competition through the promotion of follow-on biologics poses more of a commercial opportunity than a threat to the industry.

Gareth Williams, partner at Marks & Clerk and co-author of the report, noted that the Commission acknowledges that patents provide an essential economic incentive for time- and cost-intensive research that would not otherwise take place.

“The biotech industry is yet to be convinced that the way the system is used is inherently anti-competitive. Understandably, they are nervous at the prospect of politicians tinkering with the system so as to achieve a wider social aim, and suggest this is not the best outcome of the enquiry.”

Williams added, “Patent law is complex and nuanced. Hasty reform could have unforeseen consequences that will hurt drug discovery, as well as punish other R&D-heavy industries that depend on the system.”

The EU Commission’s investigation comes at a time of crisis for the biotechnology industry. Where capital is available, the terms for funding have deteriorated in the last 12 months. Investors are demanding a greater equity stake, or increasingly securing their investment against underlying IP rights. Tellingly, 87 per cent believe it is the small biotechs, which undertake the most speculative R&D into new drug discovery, that are most at risk in the current market.

Williams said big pharma has made plenty of noise about the enquiry, but the Commission needs to consider the ramifications for the biotech sector, in particular the small players for whom this is the worst possible time to weaken patent protection. “It is grimly ironic that the authorities are considering how to restrict patent activity at the very point the industry finds its patents are the only way of securing the vital funding it needs”

Criticism of ‘rebalancing’ the patent system

The European Commission’s preliminary report was heavily critical of two of the primary ways that life sciences companies secure greater patent protection. The first of these is the use of secondary patents to protect future modifications of a drug, known as ‘evergreening’ by the industry. The second is in relation to patent ‘thickets’ – the use of multiple patents to protect numerous aspects of a single drug and its production.

Williams said it makes little sense to examine the use of patents in relation to anti-competitive behaviour since patents, by their very nature, grant time-limited monopoly rights. “Their purpose is in part to prohibit competition, where it would fatally undermine the economic case for developing an original product in the first place. The nature of drug development necessitates the use of secondary patents, as the process is often nebulous and uncertain. Research will often take new directions, and various modifications will be trialled. Rarely do companies know what their final, marketable product will look like.”

Williams also believes the Commission has taken a very heavy-handed approach to identifying patent thickets. “The report considers submissions of identical patents to differing national authorities as separate patents. Things like this hardly reassure the industry that any potential reform will be thoroughly considered or perceptive,” he said.

The advantages of a community patent

One of the few potential reforms which the industry would welcome from the Commission’s enquiry is the creation of a European Community patent, though few believe this is a likely outcome. Indeed, said Williams, “The much-debated Community patent may be the one substantial point of agreement that emerges from an enquiry that began with dawn raids on company offices.”