Generic Patent Games Endanger Alzheimer’s Cure

The recent failure of aducanumab, a drug being developed to treat Alzheimer’s, leaves in its wake substantial financial losses and deep disappointment.

Biogen and Eisai, the two companies testing the experimental medicine, spent nearly $3 billion on the effort. Despite this setback, billions more are being invested in other potential Alzheimer’s therapies. Dozens of startups, with funding from venture capitalists and companies like Biogen, are plowing ahead because when it comes to finding a way to delay or prevent Alzheimer’s, failure is not an option.

But if Congress doesn’t act, the funding for possible treatments for Alzheimer’s could be in danger. That’s because the same companies seeking to win the war against Alzheimer’s are under attack by a growing number of questionable challenges to the intellectual property (IP) by the generic drug industry – assaults which are driving down the market value of innovator firms and creating an environment where early stage firms are forced to spend money on lawsuits, not cures.

With the Hatch-Waxman Act of 1984, Congress intended to boost generic competition in the prescription drug market while protecting the incentive of branded companies to innovate. This was largely successful, with generics using the law to challenge and overturn illegitimate patent abuse; today, the generic share of the drug market is 90 percent as a result.

However, overlapping legislation has allowed generics to stretch the boundaries of reasonable patent challenges, often filing repeat challenges to legitimate IP.

Specifically, generic firms are exploiting a loophole in the America Invents Act (AIA) which was passed in 2012 to reduce the time and cost companies had to invest in fighting off dubious challenges to intellectual property. The AIA created a Patent Trial and Appeal Board (PTAB) which applies a lower standard of proof for invalidity than do federal court proceedings that were established to challenge drug patents under the Hatch-Waxman Act.

As a result, generic firms are using both processes at the same time to weaken patents. The generic industry asserts it needs two bites at the IP apple to increase the number of generic medicines.

However, the generic industry is not marketing medicines even when they are able to do so. While the Food and Drug Administration approved 1,600 generic drugs since January of 2017, more than 700—or 43 percent—are not for sale in the US, according to a new analysis by Kaiser Health News. Even more noteworthy: 36 percent of generics that would be the first to compete against a branded drug because of a patent challenge aren’t on the market either.

And yet, the number of PTAB biopharma patent challenges have soared from 30 a year to nearly 130. Moreover, nearly half of all patents are challenged by one or more generic firms in addition to pursuing federal court action.

The generic industry claims such challenges don’t affect investment because so few succeed. But as patent expert Joanna Shepherd points out: “Uncertain patent rights will lead to less innovation because drug companies will not spend the billions of dollars it typically costs to bring a new drug to market when they cannot be certain if the patents for that drug can withstand PTAB proceedings that are clearly stacked against them.”

A recent paper from the National Bureau of Economic Research found that holding a patent (and being able to defend it) increases the probability of securing venture capital funding by 53 percent, start-up job growth by 36 percent and start-up sales by 51 percent.

Similarly, companies facing a flurry of patent challenges are forced to spend less on developing new medicines in the here and now. When Acorda, an orphan drug company had its patents overturned by PTAB on Ampyra, the first medicine to improve the mobility of multiple sclerosis patients, it forced the company to reduce spending on new drug development. Acorda had to lay off 20 percent of its research scientists and immediately stopped development of two medicines.

When generic companies played by the rules of Hatch-Waxman the future value of patents allowed innovator companies to raise capital even as revenues quickly eroded after a brand drug went generic. But cheap and easy infringement is now the order of the day. Given the high risk and substantial investment required to find more effective treatments for Alzheimer’s, passing the Hatch-Waxman Integrity Act would seem to be a fair way to restore the equilibrium. The patent games now being played make it more likely that those of us who will be diagnosed with the disease will be out of options and out of hope.

Robert Goldberg is vice president at the Center for Medicine in the Public Interest.