STRATEGIC BALANCING OF PATENT AND FDA APPROVAL

PROCESSES TO MAXIMIZE MARKET EXCLUSIVITY

ABSTRACT
II. OVERVIEW OF PATENT AND FDA
The patentability of products is essential in the APPROVAL PERIODS
biotechnology field, for limited market exclusivity
compensates biotech companies investments in 2.1 Patent Approval process
research and development. The biotechnology
field also uniquely faces Federal Drug The average prosecution time for a US patent is
Administration (FDA) approval, which includes 3.4 years while the average biotech patent is 4.4
considerable additional expense and time issues a years. Patents require novelty, utility, and
biotech company must address. Although unobviousness. If the patent is granted by the
balancing the patent and FDA approval processes United States Patent and Trademark Office
may be complex, various strategies of patent (USPTO), then a 20-year monopoly is granted to
extension, of accelerating approval processes, the inventor in exchange for public disclosure of
and of prolonging generic drug companies the invention.
market entry can yield higher profit returns and
maximize value company value. 2.2 Preclinical Studies

Key Words United States Patent and Preclinical studies offer predictions and provide
Trademark Office (USPTO), Federal Drug safety data for initial studies in humans.
Administration (FDA), biopharmaceuticals, FDA Researchers use in vitro studies and animals with
clinical studies, New Drug Application (NDA), analogous genetic structure, pharmacodynamic
market exclusivity, generic market entry, responses, metabolic profiles, cellular receptor
Abbreviated New Drug Application (ANDA), interactions, and general physiology to humans.
patent term extensions, accelerated approval Preclinical studies vary on a case by case basis,
process. depending on the complexity and success of initial
research.
I. INTRODUCTION
2.3 Federal Drug Administration Approval
Biotechnology startups and their investors are Process
primarily concerned with optimizing the value of
the company. A companys value can be Federal Drug Administration (FDA) approval
measured by the quality and lifetime of its patents. usually requires 10 to 12 years of development
Longer patent terms produce longer market and 100 500 million dollars in development
exclusivity, which consequentially leads to costs. The FDA approval period is split between
increased profits and value. Patents are crucial to the clinical trials and New Drug Application
protect a companys ideas while FDA approval is (NDA) approval. During the clinical trials, the
necessary to legally market their products. This FDA uses test populations to study safety, dosage,
article addresses and outlines strategies to extend pharmacologic and metabolic effects, potential
patent terms and maximize market exclusivity side effects, and effectiveness of the product. The
while addressing FDA timing considerations. NDA process then comprehensively analyzes the
preclinical and clinical reports, applying a risk- considerations. If the innovating company begins
benefit analysis to determine if the product will FDA process before USPTO filing, then it runs
benefit the public at large. the risk of another company patenting the
invention before them. Consequently the
III. PROPER TIMING OF USPTO AND FDA innovating company would have to license the
FILINGS TO MAXIMIZE MARKET biopharmaceutical, losing royalties, market
EXCLUSIVITY exclusivity, and company value; or would have to
abandon the FDA process and forfeit millions
Large expenses accumulate throughout research, spent in research and development. Even if the
development, and FDA approval of a particular another company does not patent the
biotech product. A longer patent term provides biopharmaceutical, the innovating company must
extended market exclusivity, which allows a be careful not to disclose the invention, otherwise
company to recover its expenses and produce it has one year to file the patent before it becomes
profits. Every day of market exclusivity is a property of the public domain (internationally, the
potential profit for a pioneering company because patent application must be filed before disclosure).
generic drug companies capture 57.6% market Furthermore, issued patents drive FDA approval,
share upon entering the market. Therefore speeding up the process. Finally, filing patent
expedient and efficient USPTO and FDA approval applications and receiving approved patents will
is necessary to maximize company profits. attract investors that will provide the necessary
See Figure 1 capital to fund the costly FDA clinical trials.

3.1 Beginning with Preclinical Studies 3.3 Publication of Innovation

After the initial idea, preclinical studies should be In addition to in vitro and animal data, safety
the first step in the USPTO/FDA processes. measures, and predicted dosage, the FDA requires
Biotech patents regularly require experimental demonstration through review of scientific
evidence to satisfy the utility requirement. literature before FDA clinical trials can begin. As
Although researchers can concurrently conduct mentioned above, the required publication by the
preclinical studies during patent approval process, FDA should be disclosed after the patent has been
basic in vitro and animal testing effectively filed, or the company runs the risk of missing the
support the patent claims. Regarding the FDA, one-year deadline for patentability.
preclinical studies are the rate limiting step for
later FDA clinical development because clinical 3.4 Initiating the FDA Approval Process after the
trials cannot begin until there are sufficient Patent Issues and after Preclinical Studies
extrapolation predictions for human testing.
Therefore, preclinical studies should be preformed It is advantageous to immediately begin FDA
as soon as possible to expedite the FDA and clinical trials immediately after patent prosecution
USPTO processes. with the USPTO and preclinical studies have
commenced. However a complex issue is to
3.2 Filing Patent with USPTO accurately time preclinical studies to end before or
concurrently with patent issuance. Each day
The largest obstacle for patent applications is the preclinical studies extend past the issuance date,
utility requirement. Occasionally an applications FDA approval is potentially delayed and the
utility may not be clear enough without FDA innovating company loses opportunity to exercise
approval. Therefore it is good practice to market exclusivity.
emphasize practical functionality in the
application, along with substantial preclinical 3.5 Asserting Market Exclusivity after FDA
evidence. Approval

Nevertheless patent approval strategically Once the FDA has approved the
should come before FDA trials in view of certain biopharmaceutical for US consumers, the
innovating company enjoys market exclusivity for took 10 12 years, the Hatch-Waxman Act allows
the rest of its patent term. Strategically written generic companies to use the Abbreviated New
patents will effectively and efficiently protect Drug Approval (ANDA) process to gain approval
against product infringement by other companies. within six months.
Including capturing exclusive profits from their The requirements for a generic company
product, the innovating company should build to file an ANDA application are they must 1)
reliance on its products to secure its market share show that the proposed generic drug is the same
once the patent term ends. as, or bioequivalent to, an FDA approved drug; 2)
certify that the approved drug was protected by a
IV. EXTENDING THE PATENT TERM AND patent; and 3) the applicant does not use a method
MARKET EXCLUSIVITY AFTER THE of producing the proposed generic drug that is
PATENT TERM ENDS protected by a method of production patent.
Because a production method patent
Once the patent term ends, the innovating can be separate from a drug composition patent,
company loses its market exclusivity privilege as a tactful patent strategy is to file the production
generic manufactures enter the market. There method patent a few years after filing the
however are processes to extend the life of a composition patent. Therefore although the
patent term through patent term restoration. composition would be public domain, the
Additionally, the innovating company still enjoys production methods term would still be running
market exclusivity while generic manufactures and thus be protected. Put simply, a generic has
undergo their required FDA approval process. access to the product itself, but does not have
Finally, there are strategic defenses delay generic rights to produce the product according to the
market entry. The methods to increase market patented method. This strategy is even more
exclusivity are crucial to maximizing overall effective with biopharmaceuticals than with
profits. traditional chemical pharmaceuticals because of
the complexity of macromolecules. While there
4.1 Patent Term Restoration may be more than one method to synthesize a
chemical compound, allowing competitors to
The USPTO grants patent extensions to design around the method of production patent, it
compensate for delays in USPTO examinations is difficult to engineer around complex
and prosecution that extend past three years. Thus microbiological systems. Thus, a delayed
the average 1.4 years past the three year mark production method patent can extend market
during prosecution may be tacked onto the 20 year exclusivity of a biopharmaceutical by protecting
patent term. its production.*

Another method of patent extension, due 4.3 Delay Through the Metabolite Defense
to the FDA approval process, is under the Drug
Price Competition and Patent Term Restoration The metabolite defense can be used to stall
Act of 1984, also known as the Hatch-Watchman generic market entry. Metabolites are the
Act. The act provides a maximum 5-year metabolized derivatives of the original structure,
extension, and is limited to a 14-year term from formed after being introduced into and processed
the time of FDA approval. The calculation of by the body. The strategy is to file patents for the
extension is complex and depends on patent metabolites in years subsequent to the filing date
prosecution and approval factors. of the main patent. Once the generic version is
marketed, the innovating company holding the
4.2 Blocking Generic Manufacturers ANDAs metabolite patent can bring a patent infringement
claim against generic company because the
After the innovating companys patent term generic company will be making products that
expires, generic companies can begin their FDA inevitably become infringing products once
approval process on their generic drug equivalent. digested by consumers. While the metabolite
While the innovating companys FDA approval defense has never actually prevailed in court, the
litigated dispute can delay the generics market begin, and if it wanted to change its process it
entry for up to six months. This extended market would have to repeat clinical trials again.
exclusivity leads to increased profits by the However with a well characterized biotech
innovating company. product, a company can immediately begin FDA
clinical trials once it has the product and improve
4.4 Delay Through Raising Citizen Petitions the manufacturing process at a later date.

Similar to raising the metabolite defense in court, 5.3 FDAs Expanded Access Exception
an innovating company can file a citizen
petition with the FDA, which raises safety Using Treatment-IND and compassionate use
objections with the particular biopharmaceutical. single-patient protocols, companies can market
Although the majority of petitions are rejected by unapproved therapies that are undergoing clinical
the FDA or withdrawn by companies, the petition trials when no satisfactory alternatives are
delays the FDA review staff from and generic available. If the product is appropriate for the
market entry for 6 months or more. healthcare environment, marketing products
concurrently with FDA clinical trials can
V. AVENUES TO ACCELERATE THE significantly increase profits.
INNOVATING COMPANYS MARKET
ENTRY THROUGH USPTO AND FDA 5.4 FDAs Accelerated Approval Process
EXCEPTIONS
The accelerated approval process allows
5.1 USPTO Petition to Make Special marketing products to patients with serious or life-
threatening conditions. A biopharmaceuticals
One procedure to shorten the USPTO process is to approval may be accelerated if there are adequate
make the application special, in which the and well-controlled clinical trials that ascertain the
USPTO examiner will process the special patent biopharmaceuticals clinical outcome will provide
application before all other categories of a considerable therapeutic benefit over existing
applications. The USPTO provides special therapies.
provisions for biotech inventions that allow a
biotech patent to have special status. To qualify VI. UNIQUE EXAMPLES OF HOW
for a petition to make special, the company must PHARMAGENOMIC INVENTIONS
be a small entity, which is a company with RELATE TO USPTO AND FDA TIMELINES
fewer than 501 employees or a nonprofit
organization. The petition must also state that the 6.1 Systems Biology
patent applicants technology will be significantly
impaired if a patent examination is delayed. If the Systems biology currently is in the initial stages of
situation calls for special status, the FDA approval biotechnology converging with information
process can be started earlier and can result in technology software. The systems biology field
extended market exclusivity. primarily deals with programmable software for
analyzing biological interactions and structures.
5.2 FDAs Well Characterized Because the software processing does not directly
Biological/Biotech Products affect the human body, system biology inventions
would not have to go through the FDA approval
The FDA can assign a biopharmaceutical as a process. It would however have to go through the
well characterized biotech product if its identity, standard patent approval process.
purity, potency, and quality can be substantially
determined and controlled. This status allows a 6.2 Biosensors
company to alter its manufacturing technologies
as long as it can produce the same product. In the As a concept, biosensors can be broadly defined
past, a company had to establish a fully developed as a sensor to detect biological activity at either
process for the product before clinical trials could molecular or macroscopic levels. As technology
advances, biosensors are being used in
microarrays to monitor hybridization or can be
implanted in vivo. FDA examination is only VII. CONCLUSION
necessary if the biosensor it will directly affect a
human system. If a biosensor is used for in vitro There are multiple opportunities and strategies to
research, it will not have to undergo FDA increase market exclusivity for a patents term.
approval. There are also many possible pitfalls in evaluating
the USPTO and FDA timelines. Timing is critical
6.3 Future Integration of Bioinformatics into FDA for the economic fate of small biotech companies
Trials developing novel therapies. A diligent and
detailed patent prosecution team is necessary to
In the near future, bioinformatics will efficiently balance the multiple USPTO and FDA concerns,
speed up FDA clinical trials. Industry reports while maximizing the opportunities to extend
predict cutting out about 4 years from the FDA patent terms and market exclusivity.
approval process. Establishing an FDA
bioinformatics infrastructure will potentially lead * The passage of Greater Access to Affordable
to many subtle implications, such as how the Pharmaceuticals Act (GAAPA) is still pending,
Hatch-Waxmans 14-year limit will adjust to the which would strike out the third requirement for
shorter FDA process. Nevertheless, the increased ANDA filing and eliminate the use of the ANDA
period of market exclusivity will be an incentive blocking strategy mentioned above. Furthermore
to develop new therapies. passage of this act would introduce a 30-day
deadline to register patents with the FDA after
Along with cutting approval time, approval, or be barred from civil actions for patent
discovery and development costs are predicted to infringements. It is important that for a company
decrease by $137 million dollars per drug. This to work with a patent prosecution team that is
will likewise provide further incentives for drug aware of the most current implications of statutory
companies to attempt to bring new therapies to the and judicial implications.
marketplace.
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