Life Sciences Masters Panelists Say USPTO’s Controversial Anti-Pharma Rules are Unlikely to Progress

During IPWatchdog’s Life Sciences Masters program, which is taking place this week from Monday to Wednesday, panelists on the one hand breathed a sigh of relief that certain rule proposals considered most destructive to the industry seem unlikely to move forward, but on the other, lamented the overall negative tenor of the public debate around pharmaceutical patents today.

Rules Packages

Life Sciences Masters 2024 began yesterday with a panel featuring program sponsors Sherry Knowles of Knowles IP Strategies and Robert Sahr of Wolf Greenfield, joined by Jeffrey Depp of the University of Pittsburgh. Knowles kicked off the discussion with the observation that the pharmaceutical industry “has been considered pretty close to the devil” recently, pointing to legislation like the Inflation Reduction Act (IRA) and other proposals linking patents with drug pricing. Knowles listed 10 total blows the industry has been delivered in the last two years or so, including the U.S. Patent and Trademark Office’s (USPTO) proposed rule on terminal disclaimer practice; a draft rule on fee increases for continuation patents and terminal disclaimers; the National Institute of Standards and Technology (NIST) proposal on expanding march-in rights; and the Federal Trade Commission’s crackdown on patents listed in the Orange Book, among others.

With respect to the fee increases and terminal disclaimer rules packages, however, Knowles and fellow panelist Brad Pedersen of EnQuanta said on another panel Tuesday that Vidal has indicated these controversial proposals are dead in the water. According to Pedersen, Vidal strongly hinted during the recent American Intellectual Property Law Association (AIPLA) Annual Meeting that she will be closing out all of the open rule packages by the end of her term in January, and a deep dive into the Office of Management and Budget’s (OMB) website does not show either the fee proposal or terminal disclaimer NPRMs as pending work products. This probably means they won’t be finalized by the time Vidal leaves office, Pedersen said. IPWatchdog reached out to the USPTO to confirm the status of the rules packages but had not received a response as of the time of publication.

While this saves the industry the trouble of launching a lawsuit akin to the one Knowles did in 2007 as Senior Vice President and Chief Patent Counsel at GlaxoSmithKline to enjoin the Office from promulgating its Claims and Continuations rule package, Knowles said it’s still “kind of shocking that such a detailed package with examples of how to implement it” would be published by the Office if it wasn’t confident it was going to be finalized. The NPRM drew more than 300 detailed comments from the public as well, and many high-level people in the industry spent a lot of time on it, Knowles said. So, while Pedersen said he thought the package was more of a “lead trial balloon” from the beginning, Knowles said she thinks the Office was “hoping it would land.” But with a very large percentage of the comments opposing the changes and no indication of movement toward a final rule, it seems the industry may have won this battle for now.

The changes to fees impacting continuation and terminal disclaimer practice were issued prior to the Supreme Court’s decision in Loper Bright v. Raimondo, Knowles noted. That decision arguably changes the game for what some see as substantive rules. Commenters did not have a chance to address the SCOTUS decision before the deadline for comments.

Drug Pricing

Speaking on the Monday opening panel, Sahr said “there are fundamental misunderstandings about how drugs are developed” and that many of the narratives influencing policy decisions like the NIST framework on march-in rights come from those fundamental misunderstandings, such as what the government actually pays for. “The basic research doesn’t equate to the whole picture.” Sahr said. “Several inventions have to happen along the way to get from an idea to an actual physical thing.”

Furthermore, the NIST proposal “can’t really do anything effectively that the policymakers want it to do,” Sahr said. Even the proposal itself seems to acknowledge that price is only one factor to consider when deciding about marching in on patents. However, even just the possibility of marching in due to price “has a chilling effect,” Sahr added. “If the government can say at any time we’re going to march in, that creates uncertainty.”

Another troubling trend according to Knowles is that some universities have started to take drug pricing into their own hands, following NIST’s lead. Knowles said she has seen universities coming up with “affordable access plans” as part of their license agreements where the terms require the licensee to provide the university with a pricing plan within a certain number of months from approval to ensure access to least developed countries and low income patients. Time will tell whether companies will accept such terms, Knowles said.

Changing the Narrative

Another panel on Monday, moderated by Jon Putnam of Life Sciences Masters sponsor Competition Dynamics, looked at the “drug pricing conundrum” and why there is a perception that patents are to blame for high prices. While the United States undoubtedly has the highest list prices for drugs, Corey Salsberg of Novartis said the more accurate question is what value are we getting? “No one is talking about what the value is that a medicine delivers before saying the price is too high or too low,” Salsberg said. For example, criticism of the high price for Hepatitis C drug Sovaldi failed to recognize that the drug replaced a lifetime of hospital treatment for patients, Salsberg noted. Furthermore, list price is not what people ultimately pay, and net prices are fairly comparable internationally. The other benefit of paying more is having access to new drugs faster.

Retired U.S. Court of Appeals for the Federal Circuit Chief Judge Paul Michel, who also participated in the panel on Monday, said that there’s a political perspective to the drug pricing debate as well. “There are some individuals in the United States that have difficulty paying for the drugs they need,” Michel said. “It’s a problem that has enough emotional kick to get the attention of politicians. And when that plight is amplified by ideological groups, it takes on tremendous force.”

While Michel acknowledged the problem of the hypothetical person who “can’t afford the medicine she desperately needs” is very real, the solution “is for the society to step in and subsidize that person, not to wreck the patent system” that created the incentives to make that medicine.

But for politicians battling for votes and navigating an extremely complex web of U.S. healthcare players, the best solution is often to take on the easiest scapegoat, said Michel. Which, in comparison to the entire insurance and pharmacy benefit manager (PBM) industries, is usually the pharmaceutical industry. Whether the solution is likely to work or not is beside the point, said Michel. “The fact that [the proposals] may not do much good is kind of irrelevant because if it’s a PR battle for votes, efficacy is actually not that important.” The NIST march-in framework, for example, has yet to be implemented so it can’t be stopped with a lawsuit, but it’s already reportedly deterring investment, Michel noted. And fellow panelist Ratib AIi of Competition Dynamics, said that less than 3% of patents would actually be subject to the march-in proposal, and not all of those are associated with a high drug price. “I don’t think any of these proposals are well thought out or based on facts,” Ali added.

The way forward therefore seemingly comes down to educating lawmakers–and more importantly, their staff–on how the research, innovation and patent processes work, which Michel implored those present to do. “You hold the secret; the ability to educate policymakers and their staff,” Michel said. “I hope you will get in the act of helping to educate the advisors to the policymakers of America.”