Unpatentable Drugs and the Standards of Patentability, by Ben Roin (Harvard Law), is older than most articles I blog about (published in 2009), though too young to be a classic. But in rereading it for an article I'm working on, I decided it is worth a quick post, especially for those who missed it when it first came out. Roin's basic claim is simple but important: "the standards by which drugs are deemed unpatentable under the novelty and nonobviousness requirements bear little relationship to the social value of those drugs or the need for a patent to motivate their development."
Roin argues that the patentability requirements reward the invention of drugs, not their development. But just because the public has access to a chemical structure in a novelty-defeating publication does not mean that the public can benefit from that drug. Due to the "hair-trigger approach" to novelty, some disclosures may be sufficient to defeat novelty but insufficient to secure a patent (e.g., they do not satisfy the disclosure or utility requirements), so "a new drug can become unpatentable before anyone ever has a chance to patent it." (This is less true for method-of-use patents, although these are often considered weaker than patents on the molecule itself, as I mentioned last week.) Similarly, the nonobviousness requirement has the "perverse effect" that "the more likely it appears that a new drug will be successful, the less likely it is to be patentable." As Roin notes, "the patent system is largely incapable of distinguishing unimportant me-too drugs from drugs of significant medicinal value, and there is little reason to trust that the drugs deemed 'obvious' under current law would not provide great benefit to society." (Perhaps these drugs would be patentable under a cost-benefit or "inducement standard" approach to nonobviousness?)
Roin interviewed a number of pharmaceutical industry executives, who confirm that pharmaceutical companies rigorously examine the patentability of drug candidates before investing in clinical trials. Only in unusual cases (such as for some orphan drugs) will a drug be developed without strong patent protection. And the public has little record of the unpatentable drugs that are screened out of development—or the corresponding welfare losses. But, Roin argues, simply changing patent law to make these drugs patentable "might open the door to abusive patenting strategies."
One solution would be more government-sponsored clinical trials on promising but unpatentable drugs, but Roin argues that we are unlikely to see the "dramatic overhaul of the current system for financing pharmaceutical R&D" that would be necessary for this approach. Roin also notes that the "potential value [of unpatentable drugs] is often known only to the pharmaceutical companies that chose not to develop them." (Perhaps pharmaceutical companies should receive some reward for disclosing this information?) And he cites the government's lack of success in promoting finasteride to prevent prostate cancer after a National Cancer Institute study found a 25% reduction in prostate cancer in men over 55. He argues that "[p]ublicly funded research of this sort is often slow to influence physician practices," and that "[w]hile a pharmaceutical company would likely have greater success in promoting finasteride, none of them have an incentive to fund studies that would resolve lingering questions about the drug's safety." (Perhaps the government should invest more resources in the science of communicating health information?)
Roin concludes that the best solution is to extend the FDA-administered regulatory exclusivity period before generic competition is allowed for new drugs (currently up to 5 years plus the approval time for the generic). While the optimal exclusivity period is difficult to calculate, Roin argues that it is probably longer than the current period "because pharmaceutical companies continue to screen drugs with weak patent protection out of their pipelines." He suggests that the best system would allow the FDA to tailor exclusivity to the varying R&D costs for different drugs, so that longer and more expensive clinical trials would receive more protection—unlike in the patent system, where "the longer a drug is in development, the shorter its effective patent life becomes, even though the need for protection is likely greater." (Note that the patent term extensions allowed under Hatch-Waxman only partially address this problem.) The FDA could also withhold the exclusivity period unless there is evidence that a drug is better than older drugs (not just better than a placebo), discouraging the development of me-too drugs.