Issues of great consequence to Connecticut’s biopharmaceutical industry are percolating at both the state and federal levels.

Revisions to the state budget were front and center this week, with lawmakers scaling back tax increases adopted this spring that weakened incentives for research and development investments by biopharma companies.

In Washington, the U.S. Senate budget reconciliation process created a vehicle for both industry advocates and opponents to raise a host of issues that will loom large in 2016.

Patent reform

Perhaps the greatest missed opportunity of 2015--and the greatest hope for 2016 for biopharma--is fixing the U.S. patent system.

While comprehensive patent law overhaul in 2011 brought many needed changes, it created too many ways to raise uncertainty about issued patents. This has resulted in higher legal costs, tighter capital, and less research activity for biopharma companies.

Focus has been on reining in misuse of the mechanisms for contesting patents, including:

  • Curbing abuses by “patent trolls”
  • Reforming an arcane administrative procedure called “inter partes review”

Patent trolling

Patent trolling is when individuals or groups try to extort settlement payments from businesses based on infringement of a patent with little real value or importance.

Many times the actions amount to blackmail, but companies often choose to settle rather than fight the claims in order to avoid the time and expense of litigation or to battle public perception that may be skewed by the lawsuits.

Unlike technology companies that routinely face a multitude of patent trolls because of the complexity of their products (with multiple patented parts), the threat to biopharma companies and university technology transfer departments isn’t so much from patent trolls as being defined as a patent troll when protecting their intellectual property from true infringement.

This twist is at the heart of why it has proved to be so difficult for Congress to reach a consensus on the issue.

Inter partes review

Inter partes review was meant to streamline the procedure for challenging patents by creating an administrative alternative to bringing a patent holder to court.

Instead, inter partes review has essentially created two fronts to bring actions against patent holders, which has lengthened the review time for a patent’s validity.

Worse, it has allowed hedge funds to use inter partes review to call into question a company’s patent rights, causing a decline in the company’s stock price, which the fund exploits by short-selling the company’s stock.

Pricing

In addition to patent bills, a series of federal bills aimed at biopharma companies and the pricing of their medicines became part of the Senate reconciliation process.

  • Promoting importation of medicines was advanced but, as so often in the past, derailed over very real concerns about ensuring the safety and efficacy of medicines sourced from an array of non-U.S. Food and Drug Administration regulatory jurisdictions.
  • Proposals to amend Medicare Part D to permit Medicare’s direct negotiation with biopharma companies on pricing were set aside, seen as unlikely to result in any meaningful savings but potentially restrict patient access to medicines.
  • Bills to reduce data “exclusivity”—the period during which other companies may not use an innovator company’s clinical data for drug approval purposes--did not, as well, find support.

There appears to be a fairly solid understanding that while such measures may, in the short term, cause some lower priced generic drugs to come to market, longer term they could undermine new medicine R&D.

The focus on pricing was unfortunate because it was misplaced: Medicines account for only 10% of healthcare spending, a portion of the healthcare dollar that has remained remarkably stable for 50 years.

Instead, Congress should examine what’s behind the other 90% of the nation’s healthcare costs, and remember that medicines reduce overall healthcare expenditures.

Each additional dollar of spending on medicines results in a 20% reduction in other health care spending, such as reduced hospitalizations and surgeries, says the Congressional Budget Office.

For more information, email or call CBIA Bioscience Growth Council chair Paul Pescatello (860.244.1938) | @CTBio