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Sep 14, 2015
 |  BioCentury  |  Politics, Policy & Law

IPR battles

Who's winning and who's losing at IPR so far

A bipartisan backlash against the pricing of specialty drugs has eroded the biopharma industry's political support, leading members of Congress to question whether efforts to exempt drug patents from the inter partes review system would protect innovation or simply prop up profits.

While BIO and PhRMA may achieve an IPR carve-out, recent decisions by the U.S. Patent and Trademark Office suggest that retention of the IPR process would not be an unmitigated disaster for biopharma innovators.

Biopharma companies have to contend with two separate types of risks from IPR: investors using the process to manipulate stock prices, and drug companies seeking to accelerate or facilitate competition, for example from generic or biosimilar drugs.

On the valuation front, the first few hedge fund IPR petitions did send stocks down, but reactions to subsequent IPRs have been muted.

And on the competition front, IPR challenges have had little success in knocking out drug patents in the small number of cases that have gone to trial. Even the most adamant opponents of the process say it is unlikely to completely clear the path for competitors.

The IPR process is, however, clearly changing the IP landscape, creating new risks for patent holders and opportunities to clear paths for competition.

Even as BIO and PhRMA have launched a vigorous battle to insulate biopharma from IPR, individual innovator companies - along with manufacturers of biosimilar and generic drugs - are increasingly turning to the procedure as a relatively cheap, fast alternative to traditional litigation (see "Parting Ways," page 7).

The generic pharmaceutical industry, health insurance industry, pharmaceutical benefit managers, consumer groups and some conservative Republican activists are fighting to retain IPRs on drug patents, arguing that the system is working precisely as Congress intended when it created the system in the 2011 America Invents Act.

BIO is enlisting patients in its fight against IPR, coordinating sign-ons to a letter from patient groups to Congress supporting the drug industry's IPR exemption request (see "Enlisting Patients," page 3).

Congressional carve-out

BIO and PhRMA have informed committees in the House and Senate that they will oppose pending patent reform bills - the Innovation Act (H.R. 9) and the Patent Act (S. 1137) - unless they exempt drug patents from the IPR process. The bills are strongly supported by the IT industry because they would sharply limit the ability of patent trolls, which own patents they have no intention of putting into practice, to extract payments from manufacturers.

IT companies also strongly favor processes that allow them to quickly and cheaply invalidate patents, and have successfully opposed all efforts to impose major global changes to IPR.

Having failed to persuade Congress to modify IPR across the board, the drug industry is seeking a carve-out as the next best alternative, said Tom DiLenge, BIO's general counsel and head of public policy.

He noted that the Hatch-Waxman Act, which created special timetables and procedures for patent challenges by generic drug companies, set a precedent for treating patents on drugs differently than those on other products.

DiLenge told BioCentury that legislative proposals intended to prevent hedge funds from filing IPRs are not acceptable to the biopharma industry because they are not likely to be effective. Efforts to craft language preventing hedge funds from having legal standing to file IPRs will inevitably have "so many loopholes" that people like hedge fund manager Kyle Bass could get around them, he said.

Bass has filed at least 32 drug patent IPR petitions, and the hedge fund Ferrum Ferro Capital LLC has filed one petition with the USPTO seeking to invalidate drug patents.

In any case, BIO doesn't think anyone should be able to use IPR to invalidate a drug patent.

Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) and several members of the committee have publicly said they are willing to consider adding a drug industry IPR carve-out to S. 1137, but they have not made any commitments. Grassley has also expressed strong support for facilitating the rapid entry to the market of generic and biosimilar drugs.

Senate support for the carve-out seems to be based on fear that opposition from BIO and PhRMA could siphon votes away from S. 1137, rather than enthusiasm for the industry's arguments...

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