[Ip-health] Big Pharma Collides With Patent Reformers

Claire Cassedy claire.cassedy at keionline.org
Fri Jun 26 11:34:34 PDT 2015


Big Pharma Collides With Patent Reformers

The drug industry will be a major player in the upcoming debate on Capitol

By Dylan Scott
April 29, 2015

Congress is readying to make another run at overhauling patent litigation
law, and that means the pharmaceutical industry is mobilizing.

The drug companies (collectively known as "Pharma") are widely considered,
along with the biotech industry, trial lawyers, and university researchers,
among the biggest lobbying hurdles by those pushing for a bill.

The legislation aims to combat patent trolling, the cottage industry in
which companies accumulate patents and then threaten to sue other firms for
infringement, a practice that reportedly costs the U.S. economy as much as
$80 billion a year.

Lawmakers who support an overhaul seem to take it as a given that they'll
have to contend with the industry's influence. The House already introduced
a bill this session, and the Senate rolled out similar legislation

"They've been opposed in the past. They'll be opposed again, but I think
this time we're going to pass it," said Sen. Chuck Schumer, the No. 3
Democrat in the upper chamber and a cosponsor on the bill. "We've tried to
accommodate them, and we'll do our best to accommodate them, but we have to
stop the patent trolls."

Last year, a patent reform bill attracted substantial bipartisan support
and cleared the House with 325 votes. But the Senate's version stalled
after then-Majority Leader Harry Reid made it clear that the bill wouldn't
be brought up for a vote on the floor. The bill's supporters blamed
pharmaceutical and biotech companies as well as the trial lawyers—a key
Democratic constituency during the midterm election year—for its failure.

The industry and its trade association in Washington, PhRMA, would
certainly take issue with that version of events and will readily point out
the accompanying concerns of small business owners and university
researchers. In a Jan. 15 letter to Republican House Judiciary Chairman Bob
Goodlatte, who has since reintroduced his bill from last session, the group
said it could support a bill "that effectively curbs abusive practices in
patent litigation and, at the same time, neither undermines nor weakens
incentives for research and development of new medicines in the United

Pharmaceutical companies, the letter said, are particularly concerned that
the House bill's proposals to place more requirements on plaintiffs
bringing patent lawsuits and limit the discovery process in the early
stages of patent litigation would stifle legitimate claims.

"The ability to protect and enforce patent rights is absolutely essential
to sustaining investments in research and development, supporting the
millions of domestic jobs created by the biopharmaceutical industry and
providing patients with access to innovative new therapies to treat cancer,
heart disease and other serious illnesses," the letter said.

The pharmaceutical firms are facing off with another powerful lobbying
interest on the issue: the tech industry. The two have very different
relationships with the patent system that help explain why they appear on
opposing sides of the debate. Tech products tend to contain a lot of
individual patents, which make them susceptible to patent trolls; in a
recent high-profile example, a Texas jury ruled this year that Apple had to
pay more than $500 million because iTunes infringed on patents bought up by
a patent troll firm.

Drugs, on the other hand, tend to be much simpler from a patent standpoint,
exposing them less to trolling. At the same time, pharmaceutical companies
utilize patent lawsuits to defend their patents against generic companies
and competitors. It is a necessary element of their business model, said
Dan Mendelson, CEO of independent consulting firm Avalere Health. Drug
companies often spend huge sums of money to develop a drug, and the
strength of the patent helps determine how much of a return on that
investment they'll make (and can then, the industry argues, reinvest in
research for new medicines).

"It's price times volume times patent term," Mendelson said of how drug
companies make their money. "It's an immutable law."

That reality is also reflected in the data: The Wall Street Journal
reported in November that the number of lawsuits filed by brand-name drug
companies against generics had been notably higher in 2014.

"Pharma wants to defend key patents on billion-dollar drugs at all costs
and sees any threat to those patents as a war on its fundamental business
proposition," said Sen. Sheldon Whitehouse, a Rhode Island Democrat who
sits on the Senate Judiciary Committee, which oversees patent law. "They're
two very big industries, so there's a lot of banging and crashing back and
forth and a lot of ulterior motives sneak into what should be a fairly
simple proposition."

For that reason, those advocating for an overhaul are worried about
Pharma's influence in the upcoming debate. One lobbyist working for a
pro-reform group, who asked to remain anonymous as the already-contentious
discussions ramp up, said the industry seemed to be preparing to put up a
bigger fight this year.

"They do not want a bill. They say they want a bill. They say they want a
smarter bill," the lobbyist said. "But if you look at their actions over
the last several years, they want no bill. … They'll oppose anything.
There's nothing that you can give them that will make them support any bill
ever, period."

Nonetheless, one commonly floated compromise is some kind of carveout for
pharmaceutical companies in a patent reform bill that addresses their
concerns. Sen. Thom Tillis, the North Carolina Republican whose state is
home to the Research Triangle and its many life-science and biotech firms,
said he already has been hearing from those constituents about the
legislation and is interested in finding such a middle ground.

"We have to deal with the patent trolls and a lot of things that are
affected in the high-tech sector, but we have our life-science, biotech,
pharmaceuticals industry, particularly in North Carolina, and we've got to
make sure that we don't create more difficulty in the process " he said. "I
do think that there are unique considerations for high-tech that are
different from considerations for life sciences."

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