Patent Term Matters

1. Patent Term Matters Term and Scope AIPLA 14 May 2009

2. Patent Term Matters James J. Kelley Ass’t General Patent Counsel Eli Lilly and Company Indianapolis, Indiana 46285 jim.kelley@lilly.com Vicki G. Norton Partner Duane Morris LLP San Diego, CA 92101-8285 vgnorton@duanemorris.com Jeffrey P. Kushan Partner Sidley Austin Brown & Wood Washington, D.C. 20005 jkushan@sidley.com Pamela Politis Patent Attorney Endo Pharmaceuticals Chadds Ford, PA 19317 politis.pamela@endo.com AIPLA Chemical and Biotechnology Sections

3. Motivation for This Session • Conference Speakers • “PTE = ½ day/day during testing phase + 1 day/day during review phase (≤5, ≤14)” • Due diligence observations • premature filings • protracted, non-strategic prosecution • RCEs, CIPs, TDs, extensions, late submissions • final rejections, not ready for appeal • pursuit of “scope” • no apparent concern about term • How does pursuit of “scope” potentially jeopardize >14-year effective patent term for drugs? AIPLA Chemical and Biotechnology Sections

4. How Much Does Term Matter? • One extra day of exclusivity for a $1B/year drug is $2.75 million. • Decisions that may affect patent term must be made carefully. • Example: • direct non-provisional US filing vs. • PCT followed 18 months later by US national filing • NPV for $1B/year drug – up to ~$150 million.1 2assuming 8% discount rate, 9-month difference in patent term (18 months ÷ 2), and complete loss of market at end of term AIPLA Chemical and Biotechnology Sections

5. Agenda Discussion Starters Jeff Kushan – PTA Jim Kelley – PTE and PTA Vicki Norton - Scope: Enemy of Term? The Impact of Recent Decisions Pam Politis – Strategy Questions Panel and Audience Discussion Questions May be Asked at Any Time AIPLA Chemical and Biotechnology Sections

6. 35 U.S.C. PTE Provisions • PTE is applied after PTA - § 156 (a) • PTE accrues only after patent issues - § 156 (c) • Lack of diligence deduction; ½ day per day; 14-year limit - § 156 (c) • Regulatory review period = testing phase plus review phase - § 156 (g)(1)(B)(i) and (ii), resp. • 5-year limit - § 156 (g)(6)(A) AIPLA Chemical and Biotechnology Sections

7. PTE = PTR • Drug Price Competition and Patent Term Restoration Act • Must “lose” patent term before it can be “restored.” • PTE “credits” • Regulatory review period minus any time during which there was lack of diligence; • ½ day per day from when the patent has issued and an IND has become effective until a complete NDA is submitted, plus • 1 day per day from when the patent has issued and the NDA is complete until the NDA is approved, • Total patent term restored ≤ 5 yrs • Total period of Effective Patent Term (EPT) ≤ 14 yrs AIPLA Chemical and Biotechnology Sections

8. Effective Patent Term (EPT) PTE “Credits” ½ day per day 1 day per day EPT (≤14 years) P PTE (≤5 years) D T R Expiry of 17- or 20-year term Patent Term Starts IND Effective Patent Issues NDA Complete NDA Approved Patent Expires Inputs: P = time from beginning of patent term to patent issue (“pending phase”) D = time from beginning of patent term until IND effective date (“delay”) T = time from IND effective date until NDA complete (“testing phase”) R = time from NDA acceptance until NDA approval (“review phase”) Output: EPT = time from NDA approval until patent expires AIPLA Chemical and Biotechnology Sections

9. Effective Patent Term (EPT) PTE “Credits” ½ day per day 1 day per day EPT (≤14 years) P PTE (≤5 years) D T R Patent Issues IND Effective Expiry of 17- or 20-year term Patent Term Starts NDA Complete NDA Approved Patent Expires Inputs: P = time from beginning of patent term to patent issue (“pending phase”) D = time from beginning of patent term until IND effective date (“delay”) T = time from IND effective date until NDA complete (“testing phase”) R = time from NDA acceptance until NDA approval (“review phase”) Output: EPT = time from NDA approval until patent expires AIPLA Chemical and Biotechnology Sections

10. Effective Patent Term (EPT) PTE “Credits” ½ day per day 1 day per day EPT (≤14 years) P D < 0 PTE (≤5 years) T R IND Effective Patent Term Starts Patent Issues Expiry of 17- or 20-year term NDA Complete NDA Approved Patent Expires Inputs: P = time from beginning of patent term to patent issue (“pending phase”) D = time from beginning of patent term until IND effective date (“delay”) T = time from IND effective date until NDA complete (“testing phase”) R = time from NDA acceptance until NDA approval (“review phase”) Output: EPT = time from NDA approval until patent expires AIPLA Chemical and Biotechnology Sections

11. Attorney Influence Over EPT Variables • No control: T, R • Some influence: D– time between start of patent term and start testing phase • Most influence: P – time to issue patent P EPT D T R Patent Term Starts IND Effective Patent Issues NDA Complete NDA Approved Patent Expires AIPLA Chemical and Biotechnology Sections

12. Survey • 48 human drugs that qualified for PTE (no devices or animal products) • Sources • USPTO site • US patents • Federal Register AIPLA Chemical and Biotechnology Sections

13. Survey Results – Averages P = time from beginning of patent term to patent issue (“pending phase”) D = time from beginning of patent term until IND effective date (“delay”) T = time from IND effective date until NDA complete (“testing phase”) R = time from NDA acceptance until NDA approval (“review phase”) EPT = effective patent term, i.e., time from NDA approval until patent expires AIPLA Chemical and Biotechnology Sections

14. Survey Results – Ranges P = time from beginning of patent term to patent issue (“pending phase”) D = time from beginning of patent term until IND effective date (“delay”) T = time from IND effective date until NDA complete (“testing phase”) R = time from NDA acceptance until NDA approval (“review phase”) EPT = effective patent term, i.e., time from NDA approval until patent expires AIPLA Chemical and Biotechnology Sections

15. An EPT “Mountain” – PTE Only AIPLA Chemical and Biotechnology Sections

16. Topographical View AIPLA Chemical and Biotechnology Sections

17. AIPLA Chemical and Biotechnology Sections

18. EPT Observations • The longer the testing (T), the smaller the “plateau.” • Longer prosecution (P) and greater delay (D) lower likelihood for 14 years. • Length of prosecution (P) has least effect when D=0, that is, when patent term starts at the same time that clinical testing starts. • Length of review (R) has little to no effect when T = 4-6 years, but longer review (R) lowers likelihood for 14 years when T = 8-10 years. AIPLA Chemical and Biotechnology Sections

19. PTE Summary • Must have a patent before PTE “credits” accrue – therefore want to issue sooner than later. • Realizing this will affect drafting, filing, and prosecuting strategies: • Longer prosecution => less EPT • Earlier patent filing => less EPT • Longer development time => less EPT • If short development times (<~4-5 years), then less concern about prosecution time. AIPLA Chemical and Biotechnology Sections

20. PTE and PTA § 156 (c) The term … shall be extended by the time equal to the regulatory review period for the approved product which period occurs after the date the patent is issued, except that- … (3) if the periodremaining in the term of a patent after the date of the approval of the approved product … when added to the regulatory review period as revised under paragraphs (1) and (2) exceeds fourteen years, the period of extension shall be reduced so that the total of both such periods does not exceed fourteen years; AIPLA Chemical and Biotechnology Sections

21. 156(c)(3), 154(b), 156(a) EPT (≤14 years) PTA PTE (≤5 years) Expiry of 17- or 20-year term Patent Term Starts IND Effective Patent Issues NDA Complete NDA Approved Patent Expires 156(c)(3) if the period remaining in the term of a patent after the date of the approval of the approved product … when added to the regulatory review period as revised under paragraphs (1) and (2) exceeds fourteen years, the period of extension shall be reduced so that the total of both such periods does not exceed fourteen years AIPLA Chemical and Biotechnology Sections

22. Incorrect Interpretation of 156(c)(3) EPT (≤14 years) PTA PTE (≤5 years) Expiry of 17- or 20-year term Patent Term Starts IND Effective Patent Issues NDA Complete NDA Approved Patent Expires 156(c)(3) if the period remaining in the term of a patent after the date of the approval of the approved product … when added to the regulatory review period as revised under paragraphs (1) and (2) exceeds fourteen years, the period of extension shall be reduced so that the total of both such periods does not exceed fourteen years AIPLA Chemical and Biotechnology Sections

23. PTE and PTA • Does the 14-year limit apply to both PTE and PTA? • Statutory language seems clear – No. • But, will the USPTO take a different interpretation, as in Wyeth? • No cases yet. • Some could be in process now. AIPLA Chemical and Biotechnology Sections

24. PTE and PTA • PTA vs.PTE • PTE • want to issue sooner, to start accruing “credit” sooner • only ½ day per day during testing phase • PTE • want to issue later, but without incurring deductions • 1 day per day AIPLA Chemical and Biotechnology Sections

25. PTE and PTA • Poor correlation between pendency and PTA – see Patently-O blog, March 14, 2008 • Average PTA = ~1.1 years over-all • Longer for pharma & biotech patents covering products? Longer for such patents that receive PTE? • No data yet (Wyeth and other cases) • No patents that obtained PTE also obtained PTA, yet • PTE data are very delayed (2-3 years from approval) • Only 2 patents in survey were filed after May 29, 2000 and neither qualified for any PTA. AIPLA Chemical and Biotechnology Sections

26. PTE and PTA Summary • PTA will extend PTE-extended patent term beyond 14 years. • But, will USPTO take a different view? • Must be very careful not to lose PTA after lengthy prosecution • e.g., lost appeal, RCE, TD • could jeopardize both PTE and PTA AIPLA Chemical and Biotechnology Sections

27. Back up Slides AIPLA Chemical and Biotechnology Sections

28. PTE and PTA 35 U.S.C. § 156 (a) The term of a patent … shall be extended … from the original expiration date of the patent, which shall include any patent term adjustment granted under section 154(b) if …. AIPLA Chemical and Biotechnology Sections

29. Requirement for Patent Issue 35 U.S.C. § 156 (c) The term of a patent eligible for extension under subsection (a) shall be extended by the time equal to the regulatory review period for the approved product which period occurs after the date the patent is issued, except that- AIPLA Chemical and Biotechnology Sections

30. Deductions, Partial Credit, 14-year Limit 35 U.S.C. § 156 (c) … (1) each period of the regulatory review period shall be reduced by any period [in which diligence was not exercised]; (2) after any reduction required by paragraph (1), the period of extension shall include only one-half of the time [described in 35 U.S.C. § 156 (g)(1)(B)(i) – i.e., from IND to NDA]; (3) if the period remaining in the term of a patent after the date of the approval … exceeds fourteen years, the period of extension shall be reduced so that the total of both such periods does not exceed fourteen years AIPLA Chemical and Biotechnology Sections

31. “Regulatory Review Period” 35 U.S.C § 156 (g) For purposes of this section, the term "regulatory review period" has the following meanings: … (1)(B) The regulatory review period for a new drug, antibiotic drug, or human biological product is the sum of – • (i) the period beginning on the date [an IND] became effective … and ending on the date an [NDA] was initially submitted, and • (ii) the period beginning on the date the [NDA]was initially submitted and ending on the date such [NDA] was approved. AIPLA Chemical and Biotechnology Sections

32. 5-year limit 35 U.S.C. § 156 (g)(6) A period determined under any of the preceding paragraphs is subject to the following limitations: (A) …, the period of extension determined on the basis of the regulatory review period … may not exceed five years. AIPLA Chemical and Biotechnology Sections