The Role of Patents in the Pharmaceutical Industry

1. The Roleof Patents in thePharmaceuticalIndustry Regional Seminar on multilateral legal frameworkandpracticeof patent protection in thepharmaceuticalfield Peter R. Thomsen, IP Policy and Litigation Issyk Kul, May 27&28, 2014

2. The healthcare environment is undergoing unprecedented change Aging population The world’s population is aging. More healthcare treatments are needed, which is prompting payors to aggressively manage costs Unhealthy lifestyles Poor nutritional habits and sedentary lifestyles are increasing the prevalence of chronic diseases Emerging markets Economic growth in emerging countries is expanding access to healthcare Advances in science and technology New technological discoveries and trends are enabling the development of innovative medicines but also increasing the cost of innovation | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

3. Full range of healthcare options Different types of Drug businesses Environment Patient needs Innovative medicines Prevention Affordable options Selfmedication Originators Generics Over-The-Counter Vaccines | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

4. Originator Business • Innovative drugswithsubstance patent protection • Small chemicalentities • Biologics, e.g. antibodies • Requiringa prescription • Products available in pharmaciesandhospitals • All kindsofmostlypotentiallyseveremedicalconditions • Oncology • Cardiovascular • Antibioticsandantivirals | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

5. Generic Business • Drugs whichhave lost (compound) patent protection • Genericproduct also needsmarketingapprovalfromHealthAuthoritiesandneedstoshowtobesafeandequallyeffectivecomparedtooriginatorreferenceproduct • Drugs requiring a prescription • sincearound 10 yearsincluding follow-on biologicsorbiosimilars • Products available in pharmaciesandhospitals in the same wayoriginatorproductsareavailable | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

6. OTC(over - the - counter) • Drugs typicallywithout patent protectionorwith patent protectiononlyforcertainaspectsoftheformulation • Drugs requiringnoornolonger a prescription • Usuallyforlessseveremedicalconditions • painkiller • coughandcold • allergy • Products available in drugstoresandpharmacies | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

7. Vaccines • Products areantigenstostimulatethepatient’s immune response • Antigen itselfoften not patent protected • But formulation, adjuvants, productionprocesses, technologyandcombinationsare patent protected • Preventionagainstsevereinfectiousconditions, e.g. • Influenza, includingpandemic • Against «childrendiseases» • New generationofvaccinesagainst e.g. cervicalcancer • Nosignificantgenericactivity (so far) • Products available in pharmaciesandhospitals | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

8. Discovery and Development of a newdrug Cumulative cost per Medicine: 800M – 1.3B USD* *: J Dimasi & H G Grabowski, “The Cost of Biopharmaceutical R&D: is Biotech Different?” Managerial and Decision Economics No. 28 (2007): 469–79 ; J Dimasi, R W Hansen, and H G Grabowski, “The Price of Innovation: New Estimates of Drug Development Costs,”Journalof Health Economics 22 (2003): 151–185. | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

9. Market exclusivity provided by the basic „Active Ingredient“ patent 10 years Data exclusivity t = 0: Filing date of the basic “Active Ingredient” patent Prosecution for grant PTE/SPC: Patent Term Extension Marketing Approval (MA) Patent: 20 Years + Up to 5 Years Priority application (1 year) Generic entry Publication18 months Date of Launch Around 7 to 12 years 8 to 13 years Market exclusivity - First MA granted around 7-12 years after the filing date of the Basic Compound patent - PTE/SPC is aimed to compensate a patent holder for time during regulatory review when he/she could not exploit the invention being the subject of the patent | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

10. R&D intensityofpharmaceuticalsector Source: IFPMA | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

11. Patents • RegulatoryExclusivities Innovation in thePharmaceuticalandBiotechfieldtotallyrelies on sufficientprotectionbyIntellectual Property Rights | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

12. Usual Patent Filing Procedure maintain EAPO patent in upto 9countries PCT=Patent Cooperation Treaty: oneapplicationwith an optiontohave patent in 148 countries EAPO US BR P+30m PCT Grantedpatents JP AR Validate EP patent in upto38 countries EP P TW Granted patents F=P+12M + other non-PCT country EP= European Patent Convention: unifiedgrantingprocedureforupto38 countries | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

13. Typicalscopeof countries for a newcompound patent application | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

14. Types of Patents found in pharmaceutical industry Molecules • Pharmacologic compound or active metabolite • Protein, DNA, or antibody Processes • Manufacturing process • Purification method • Diagnostic processes Compositions/formulations • New compositions of two or more ingredients • New formulations (e.g., extended release, gel, patch) Other • Diagnostic tests • R&D-technology • Targets/biomarkers • Devices such as inhalers New Uses/Indications • compoundsforusetotreatdisease • methodsoftreatments • newpatient sub-groups • dosageregimen Specific forms of molecules • Enantiomers/Isomers • Polymorphs • Salts, Esters • Prodrugs C * A patent grants the right to exclude; right to market comes from other authorities (e.g., EMA) | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

15. Patent Regulatory Discovery research Development Regis-tration Market exclusivity Market competition Case example Diovan (R)– compound patent provides 16 years of market exclusivity in USA First Para IV challenge to compound patent Aug 07* Compound patentFeb 91 NDA sub-mission Dec 95 NDAapproval Dec 96 Expected Gxentry Sep 12 US Patent Expiry • Product, compound • Product, hydrates • Product, salts • Composition (Valsartan/Amlodipine) • Composition (Valsartan/HCTZ)** Jan 03 Jul 01 Jul 99 Jun 97 Patent extensions for delays*** Mar 12 • PTO FDA exclusivity Sep 12 • Pediatric indication * First Para IV filer converted later to a Para III ** 3 separate patents *** No FDA delay compensation due to maximum total effective patent life of 14 years Source: IMS, Evaluate Pharma, FDA Orange Book, interviews | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

16. Case Example: Cyclosporinmicroemulsion • Cyclosporinused in drugfor immune suppression after transplantation • Compound/indication patent forCyclosporinexpired 1995 • 1988 improvedformulationinventedwithmicro-emulsion • Formulationpatentsfiledandgranted Claims of Micro-emulsion patent: “1. A pharmaceutical composition comprising a cyclosporin as active ingredient, 1) a hydrophilic phase, 2) a lipophilic phase, and 3) a surfactant, which composition is an oil-in-water microemulsionpre-concentrate." | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

17. Case Example: Cyclosporinmicroemulsion (ctd) • Patenteeclaimed patent infringementby a genericproduct in developmentby IVAX called «Equoral(R)» CompositionofEquoral(R) i) Cyclosporin (9%); ii) Polyglycerol (3) oleate (30%); iii) Polyglycerol (10) oleate (30%); iv) Macrogolglyceratehydroxystearate (27%); v) Ethanol (15%); vi) Fatty acids (~1%); vii) [capsules only] D,L-( tocopherol (vitamin E, an antioxidant)(<1%). Lipophilicphase ? Surfactant Hydrophilicphase • GB High Court foundno separate lipophilicphasecomponentandonly 14% ofCyclosporin in micellessimilarto a microemulsion • Overall nooil-in watermicroemulsionand patent therefore not infringed! • Confirmed in Court of Appeal (Novartis v Ivax [2007] EWCA Civ971) | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

18. Two Objectives of IP-Functions • Protecting own R&D investments by obtaining and enforcing IP-rights • Ensuring Freedom-To-Operate against IP-rights of others | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

19. IPR Enforcementand Freedom-to-Operate • Enforcementof Patents in Court litigationverycommon • Toensure a certainperiodofexclusivity • Torecuperatehigh R&D costs • To push thirdpartiestotakelicenses (rare forpharmaceuticals, morecommonfor e.g. diagnostics) • Freedom-to-Operate • Tomakesurepatentsofothersare not infringed • Bylegallydesigning-aroundthepatents • Byinvalidatepotentially relevant thirdpartypatents | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

20. Generic Erosion Curves after Generic Entry Product B | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

21. Importance of First-to-Market for a Generic product | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

22. Ensuring Freedom-To-Operate (FTO) Process Patent 1 Formulation Patent Compound Patent Marketed product Process Patent 2 • If Development / TechOps would select “direct” approach (red): probably being held infringing 3 patents • Patent Function: • Identifying a way through and around protection of third party patents! • Cannot design around compound patent (covers every form, use, production of compound) | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

23. Successful Designing Around Third Party Patents • Process and intermediate patents: find an alternative manufacturing process that is not likely to be held infringing • Indication patents: consider carving-out of labeling and marketing authorization • Formulation patents: find an alternative formulation that meets regulatory requirements (Bioequivalency) but is not likely to be held infringing | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

24. Example for successful Designing Around : Cefuroxime Axetil • GSK held patent on special formulation of cefuroxime axetil having a film-coating: • Gx developed a Cefuroxime Axetil tablet being bioequivalent but having a non-film coating • Gxproduct was launched well before expiry of film-tablet GSK patent and | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

25. Example for successful Designing Around • GSK sued and asked for a preliminary injunction (PI) • Court refused PI and Gxcould stay on the market • GSK withdrew claim on patent infringement of film-coating tablet Successful design-around! | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

26. Comparison of Glaxo and Sandoz Tablet • Glaxo tablet-coating embodiment • film-forming agent • Sandoz tablet-coating embodiment • No film-forming component | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

27. Comparison of Glaxo and Sandoz Tablet (contd) | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

28. Main tools for dissolving patent conflicts • Patent infringementlitigationstartedbypatentee in viewofactualor imminent launchof an allegedlyinfringingproduct • Request forDeclaratoryJudgementof Non-infringementstartedbyallegedinfringer • Revocationactionstartedbypotentiallyallegedinfringer • Administrative route, e.g. opposition • Court route • Formal linkagebetween patent statusandabilityofHealthAuthoritiestoissuegenericmarketingauthorization («patent linkage») | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

29. Key elementsof strong IP-regime • Complying with standards set by international agreements • TRIPS, PLT and PCT, Paris Convention, Madrid Agreement/Protocol • Limited Exclusions from Patentability, e.g. for biotechnological inventions • Efficient procedures to examine and grant patents and trademarks • Strong Court system allowing effective enforcement of IP-rights • availability of timely preliminary measures • Enforceability of court decisions • Ideally specialized IP-Courts • Possibility to have patent validity re-examined • Availability of Trademark protection | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

30. Key elementsof strong national IP-regime (contd) • Willingnessoflocalauthoritiestocombatagainstcounterfeiting • Customs • Regulatory Data Exclusivity • Sufficientlylongperiod • toprotectregulatorydatafrombeingdisclosedandbeingreferredtobyunauthorizedthirdparties • Possibilitytoobtain patent termextensionstocompensateforregulatorydelays • E.g. forupto 5 years | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

31. Conclusions • Different drugbusinessesusepatents in different ways • Establishing and maintaining strong national IPR-regimes is essential to ensure that companies can continue to undertake the costly and risky R&D process to develop next generations of innovative medicines and vaccines • Intellectual property rights can also stimulate technology transfer and building of technical skills within developing countries and fuel economic growth • Robust national procedurestoobtainandenforce IP-rights such aspatents, trademarksandregulatorydataexclusivity • Also forgenericsectorefficientmechanismstodecide on patent disputesareimportant , e.g. on non-infringementorvalidityofgrantedpatentsin theinterestof legal andbusinesscertainty • Many barriers exist that prevent access to healthcare and medicines, including lack of sustainable financing and inadequate infrastructure and supply systems. It is critical to address the entire health system in order to improve health outcomes | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals

32. Thank you for your attention… Questions? peter_r.thomsen@novartis.com | Practice of Patent Protection in Pharma | P.R. Thomsen | May 27, 2014 | Role of Patents for pharmaceuticals