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TPP & BALANCED PHARMACEUTICAL PATENT SYSTEM

Prepared by José Luis Cárdenas T., LL.B., LL.M. & Ph.D. March 2012. TPP & BALANCED PHARMACEUTICAL PATENT SYSTEM. Theoretical Framework. Both innovation and health level are drivers of economic growth:

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TPP & BALANCED PHARMACEUTICAL PATENT SYSTEM

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  1. Prepared by José Luis Cárdenas T., LL.B., LL.M. & Ph.D. March 2012 TPP & BALANCED PHARMACEUTICAL PATENT SYSTEM

  2. Theoretical Framework • Both innovation and health level are drivers of economic growth: • intellectual property rights and especially patents foster innovation = economic growth/health. • Access to affordable pharmaceutical products plays a substantial role in the health level among all countries, which, in turn, it is another relevant driver of economic growth/health.

  3. Optimal level Economic Growth Access (+) Innovation (-) Access (-) Innovation (+) Welfare Loss Welfare Loss 0 Level of (Pharma)IP Protection

  4. Theoretical Framework • This scenario differs if the combined effect is measured within an economy of a developed country compared to a developing one: • Pharmaceutical innovation is basically concentrated in developed countries. So, the positive effect (contribution) of pharmaceutical innovation as a driver of economic growth is substantially higher for economies of developed countries than in non-developed economies, where the weight of the health level in the combined effect plays a more relevant role. • Additionally, pharmaceutical innovation is positively related to the burden of disease in developed countries but not to the burden of disease in developing countries, which also increases the weight of the health level in the combined effect vis-à-vis pharmaceutical innovation

  5. Reality … • The proper balance can not be determined ex-ante for a given economy. The existing level of pharmaceutical IP protection will be the result of an ex-post dynamic interaction between IP seekers (IP applicants/holders) and IP challengers, within a given IP landscape.

  6. Reality … • Among various advantages, private sector players may have better information than public agencies and courts, and will be encouraged to invest in prosecuting IP rights (patent seekers) / opposing pending applications and/or challenging granted IP rights (patent challengers), to the extent appropriate incentives are in place to reward those efforts.

  7. Reality … • A patent system will tend to reach an optimal level of pharmaceutical patent protection if symmetric incentives exist, which encourages both IP seekers and IP challengers to act (proper balance). • Only under such a landscape (with symmetric incentives) the dynamic interaction referred above will lead to an optimal level of pharmaceutical patent protection contributing to economic growth.

  8. Difficulties for reaching proper balance • Unjustified IP protection (IP Landscape) • Abusable IP protection • Economies of scale • Free-riding • Asymmetries of information

  9. Possible Solutions • Unjustified IP Protection Applying the balancing test • Abusable IP Protection Closing the gaps • Economies of scale consolidation of efforts • Free riding reward models • Asymmetries of info. mandatory disclosure

  10. Analysis of IP Rights Chapter of TPP: Critical Provisions • Subject matters [article 8, subpar. 1 and 2] • Patent term extension [article 8, subpar. 6(b)-(d)] • Abolition of pre-grant opposition [article 8, subpar. 7] • Data exclusivity [article 9, subpar. 2(a)-(d)] • Linkage [article 9, subpar. 5.(b)]

  11. Data Exclusivity for Biotech: Why a larger period? • Small molecules: • Many players • Low regulatory barriers • Significant price erosion • Biotech • Few players • High regulatory barriers • Less price erosion

  12. Why a larger data exclusivity period for biotech products: Price erosion (typically 80% of Pi) by biosimilars is less, compared to generics of small molecules??? Ag>Abs Price erosion 5 years data exclusivity for recovering R&D investment for small molecules, considering price erosion (typically 20% of Pi) by generics P pi A D 100% Abs pbs 80% E F Ag pg 20% B C 0 Generic launch T° B ased on “Emerging Health Care Issues: Follow-on Biologic Drug Competition”, Federal Trade Commission Report (2009)

  13. Warning! • The negotiated text is just the beginning … • Implementation is critical • Through unilateral measures your country will be pushed to include even IP provisions not agreed on!

  14. Conclusions • IP model contained in the draft IP Chapter doesn’t guaranteed a balanced pharmaceutical patent system: • Unjustified IP Protection; • Abusable IP Protection; • Free Riding; and • Asymmetries of Information. • To restore balance, these problems should be addressed!

  15. Thank you! Check complete version: http://www.asilfa.cl/contenido_farmaceutico.asp?id=989 Joseluis.cardenas@asilfa.cl

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