Introduction to patents in the pharmaceutical industry

Hello, my name is Dr. Jonathan Atkinson from HGF in Leeds. I have a degree and a Doctorate in Chemistry from Oxford University. My doctoral thesis was sponsored by Glaxo, the pharmaceutical company and concerned the synthesis of morphine-type alkaloids. I'm a European patent attorney, and a Fellow of the Royal Society of Chemistry. Today, I'm going to talk to you about, an "Introduction to patents in the pharmaceutical industry".

So, today's aims, are to understand why patents and other IP rights are important in the pharma industry. The value of some drugs can be enormous. An example of this, is the well-known drug Viagra. In a further example, is the well-known drug Lipitor. Both of these drugs were worth more than a billion dollars a year in turnover, for the companies that owned them. We're going to understand the types of subject matter that can be covered by patents because many things besides the drug itself can be patented, and then finally, we're also going to understand the basis for identifying and challenging pending and granted patent rights, and the reason for this, is that patents aren't always valid and enforceable so they can be challenged if problematic.

So, let's dive a little deeper into the subject; and just for your amusement, that's me on the left in the picture.

Why are patents important in pharma? Drug discovery is a time consuming and expensive process, and patents enable the recovery of research and development costs. Only about one in 10,000 or less compounds, that are discovered in the laboratory, actually make it to the clinic, and most approved drugs are relatively easy to reverse engineer, once they've been discovered. So, the analogy is a bit like a cake recipe. It's very easy to make a cake, once you know the recipe. But, actually coming up with that original recipe is the hard part. So, the issues are that we need to reward innovation because without innovators, there would be no new products. In fact, antibiotics are a very good example of the need to reward innovation. The reason there is so little development currently in the antibiotic field, and the reason that there are problems around anti-microbial resistance currently, is due to the fact that the prize, the reward for developing an antibiotic is relatively low, at the moment. This is because there's a general consensus that it's not a good thing to prescribe antibiotics widely at the moment, and there are very good scientific reasons for this. However, this does not help the person that has developed and brought to market an antibiotic because the policy of trying to avoid prescribing antibiotics widely, means that it's hard to recoup revenue for this product. The consequence of this is that companies are looking to produce drugs in more profitable areas, such as cancer, and hence there is little antibiotic development at the moment. It can therefore be seen that there is a need to provide an incentive and a reward for developing drugs. The patent system forms part of this incentive, along with a host of other non-patent measures. Most healthcare systems rely on generic products to provide medicines at affordable prices and the cost of medicines can actually be prohibitive. There is a need to balance a reasonable return for pharmaceutical company that has originated a new drug, against the efficient use of funds by health authorities in order to maximize the patient benefit. This balance is actually a political balance of interests, between having a healthy pharmaceutical industry, which is developing new drugs on the one hand, and on the other hand, the need to maximize the use of public money, to buy as many drugs and treat as many patients as possible. While we can recognize the value of IP as an asset, indeed, it can be a very valuable asset, on a company's balance sheet, certain companies values can largely be attributed to IP. A good example of this is a recent initial public offering, on Nasdaq in the U.S., in which a company was floated for about $500 million based primarily on its IP assets, as it's an early stage pharmaceutical company. So, the value of IP as an asset can be realized in terms of a company's own exploitation to generate revenue, by making and selling a product under the patent. It can also be recognized as a potential out-licensing opportunity, or as a saleable asset. Equally, there is value in IP in enabling a company, to prevent a competitor from gaining a market share in the same field. The company would have blocking patents covering their own, and possibly their competitors technology in such a circumstance. A further important issue, concerns freedom to operate, commonly designated FTO, even without having its own patent protection. A company might suffer under the competitor's patent, which could stifle product development. In this scenario, it would be necessary then, for the company to take a license for the competitor, or alternatively to seek ways of challenging the competitor patent in order to remove this obstacle.