I.P. Blog: Patent Rejection Stifles Pharmaceutical Innovation

By Jill StarbuckPellegrino & Associates

Patents prove extremely valuable for pharmaceutical companies. In fact, without a patent, Pfizer likely would not have enjoyed billions in revenue for Lipitor. (The Lipitor patent was the most profitable patent in the world to date.) Patents provide exclusive rights for a fixed period to the inventor or the inventor’s assignee, giving inventors the ability to exclude others from the market. As a result, drug companies can charge a premium to make up for the time and money spent on researching and developing a new drug. These companies can also receive up to treble damages for infringement when a competitor is found willfully infringing.

However, patents have expiration dates. Thus, the pharmaceutical industry continues to face challenges as patents for lucrative brand name drugs expire. These expirations force the industry to find innovative ways to remain competitive. But the pharmaceutical industry’s troubles do not end there. Along with patent expirations, patent rejections make business complicated for pharmaceutical companies. Unfortunately, these rejections continue to make headlines. For instance, India recently rejected a patent application for the Novartis cancer drug Glivec, and the United States ruled the AstraZeneca asthma drug Pulmicort Respules patent invalid.

Rejected patents have a significant financial and strategic impact on patent owners. Patents are expensive to acquire, costing thousands of dollars to prosecute, and these costs rise dramatically if an application includes foreign jurisdictions. Therefore, when a patent is rejected, an applicant loses money invested on legal and patent-related fees in pursuing the patent. Also, when a patent is rejected, the owner (pharmaceutical company) faces fierce competition from companies that specialize in making and selling generic drugs at a cheaper rate than the original versions. Generic drug makers can easily make generic versions since patents disclose specifics regarding the innovation (drug). Therefore, generic drug makers essentially have the formula in front of them. Rejected patents make it easier for generic drug companies to get to the market faster because they don’t have to wait for a patent to expire.

Compared to expired patents, rejected patents cause a much larger blow to pharma companies. While expired patents create challenges of their own, companies at least enjoy the benefits of those patents for a certain length of time. Therefore, they can try to prepare themselves for the consequences of an approaching expiration date. For rejected patents, pharma companies immediately lose invaluable time, money, and competitive advantages. However, countries that reject patents may suffer future consequences themselves. For instance, pharmaceutical companies may not be willing to offer drugs in the future or invest in resources on research and development in those countries. This can create a disadvantage for those countries and their citizens when innovation becomes nonexistent. Without innovation, these countries won’t have the ability to provide better medication or combat specific diseases, which decreases the overall quality of life for the citizens of those countries.

Without patents, drug companies cannot maintain a sustainable competitive advantage over other companies, and they have no incentive to develop breakthrough treatments. Thus, they may be less likely to invest in major R&D projects that could make the difference for individuals suffering from medical conditions that have limited or no treatment currently available. Patents are key to providing companies with the appropriate rights when developing new and revolutionary treatments and technology.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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