Distorted Drug Patents: Does the U.S. Legal System Steer Researchers Away From Drugs that Take a Long Time to Develop?

Does the U.S. legal system steer researchers away from drugs that take a long time to develop?  That’s the question asked and answered in a new research paper authored by our friend Erika Lietzan, Associate Professor of Law at the University of Missouri School of Law, and Kristina M.L. Acri née Lybecker, Assistant Professor in the Department of Economics & Business at Colorado College.

Titled “Distorted Drug Patents,” and scheduled for publication in the Washington Law Review, Erika and Kristina have scoured and mined—and we mean really scoured and mined—Patent Term Extensions (“PTEs”) (or Patent Term Restorations if you prefer) awarded under the 35 U.S.C. § 156 between September 1984, when the Hatch-Waxman Amendments were enacted, and April 1, 2018 to come to some interesting conclusions.

But before we get to those conclusions, here’s a bit of the set-up (you need to read the entire article to get the full flavor):

This Article focuses on the relationship between the patent incentive and drug innovation, adding an empirical dimension relating to the length of drug patents that has been lacking in the scholarship to date.  It focuses on the fact that the patent incentive does not work the same way for medicines as it does for other inventions—because a separate body of federal law bars the inventor from marketing the invention for sometimes half—or even more—of the patent life. That is, federal regulatory requirements “distort” the patent. . . .

This Article [examines] empirically the relationship between research and development timelines, on the one hand, and effective patent life, on the other hand.  It fills a conspicuous gap in our knowledge.  Few scholars have considered patent term restoration from an empirical perspective, none has used a dataset of this size and scope, and none has addressed the questions this Article addresses.

Erika and Kristina flesh out four conclusions from their analysis that stand out.

First, a longer clinical period is associated with a shorter final effective patent life (meaning after restoration), and a longer period between patent filing and start of clinical trials is associated with a shorter final effective patent life.  Although the magnitude of the impact is small, the results are strongly statistically significant, confirming the hypothesis that longer premarket research and development programs lead to shorter effective patent life, even with patent term restoration.

Second, application of the five-year cap on patent term restoration makes it less likely the final effective patent life will come close to the 14-year outer limit envisioned by Congress in 1984. Again, the magnitude of the impact is small, but the results strongly statistically significant.

Third, there is generally no relationship between the therapeutic category in which a drug falls and the drug’s final effective patent life.

Fourth, certain aspects of the drug patent itself play an important role in determining its final effective life.  In the 1990s Congress changed how patent terms are calculated.  In 1984, a patent lasted for 17 years from its issuance date.  Now a patent lasts for 20 years from its application date.  And if the patent relates to an earlier-filed patent, the (“child”) patent term lasts for 20 years from the earlier (“parent”) patent application date.  In 1984 policymakers chose to permit restoration of child patents, because these patents issued and therefore (under the patent law at the time) expired later, and restoring them would lead to a longer effective patent life.  When Congress changed the patent term in 1994, it did not consider the impact on patent term restoration.  And in this dataset, when the 20-year rule applies, having “child” status decreases effective patent life — the opposite of what lawmakers intended in 1984.Erika and Kristina take no position on the optimal length of drug patents (or the optimal period of exclusivity in the market for drugs), but they note that their findings may have implications for scholars and policymakers who question the need for multiple patents covering the same product.

Erika and Kristina take no position on the optimal length of drug patents (or the optimal period of exclusivity in the market for drugs), but they note that their findings may have implications for scholars and policymakers who question the need for multiple patents covering the same product.

Longer premarket trials mean shorter effective patent life—but not by much.  In 1984, policymakers chose to allow drug companies to select later-issued patents for patent term restoration.  The ability to select a later-issued child patent for restoration may have therefore mitigated the distorting effect of the premarket regulatory regime.  But Congress effectively undid the 1984 decision, ten years later, without reflection.  The change has made it important for companies to pick laterissued original patents to achieve the same result as intended in 1984—fourteen years of effective patent life.  But these patents generally do not cover the drug’s active ingredient; they cover other aspects of the drug.  Some scholars refer to non-active-ingredient drug patents as “secondary” patents — though they are simply patents, like any other — and a growing body of literature criticizes these patents.  But policymakers selected a 14-year target for effective patent life target in 1984, and the findings here suggest that later-issued and later-expiring original patents may now be essential to hitting that target.

Coming in at 62 pages (including 14 pages of appended materials) on a complex topic with a lot of data to consider, “Distorted Drug Patents” requires some investment of time; but it’s definitely time well spent.