Doc,
I think this move on generics is unlikely to have much impact - most of the pharma haven't actually engaged in the extreme delaying tactics this is aimed at.
Here's a piece from Reuters that also takes this position:
Reuters
Little pain for drug majors seen from new US rules
Monday October 21, 3:53 pm ET
By Jed Seltzer
NEW YORK, Oct 21 (Reuters) - The introduction of new rules intended to speed cheaper drugs to market will chip away only slightly at the huge iceberg of intellectual property defenses big drugmakers use to protect their products from generic competition, analysts said.
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The new regulations, proposed by U.S. President George W. Bush
on Monday, pushed down stocks of large drug companies, such as Pfizer Inc. (NYSE:PFE - News) and AstraZeneca Plc (London:AZN.L - News) while lifting shares of generic firms Barr Laboratories Inc. (NYSE:BRL - News) and Teva Pharmaceutical Industries Ltd. (NasdaqNM:TEVA - News)
But some analysts said the rules, which would scale back the patents that drug companies use to prevent generic versions of their medications, are not likely to significantly hurt the financial condition of large drugmakers.
The rules would limit a company's ability to draw out the process for approving a generic by limiting companies to just one patent challenge rather than several.
Drugmakers often list patents in the U.S. Food and Drug Administration's Orange Book of additional patents on existing drugs and use them to block generics, with each patent potentially triggering a 30-month delay while the legal system sorts out the dispute.
Even though the new rule would eliminate the possibility for multiple 30-month delays to copycats, it would not end drug companies' ability to trigger the initial 30-month delay.
Most drugmakers use the current provision only to initiate one 30-month delay, and they rarely expect to win in court during that time. They simply hope to draw out the process, reaping additional sales each day generics are delayed.
"The drug companies haven't won many victories in the courtroom of late," said Girish Tyagi of Thomas Weisel Partners. "So I don't think the new rules change anything relative to revenue expectations."
Ira Loss, an analyst with Washington Analysis, said he expected brand-name drug makers to mount a legal challenge to the portion of Bush's proposal that would limit patent holders to one automatic 30-month delay to a generic drug application.
The drug industry argues that it needs hefty profits from its monopolies to plow back into the development of groundbreaking drugs. Some estimates put the costs of developing a new drug at a whopping $800 million.
TRYING TO ELIMINATE FRIVOLOUS PATENTS
One aspect of the new rules restricts the type of patents drug companies could use to block generics, and may speed cheaper copycats to market by eliminating what many consumer groups and insurers now call frivolous patents.
Under the plan, which mirrors legislation passed by the Senate this year but stalled in the House of Representatives, drug companies would not be able to file late patents, or "submarine" patents, in the Orange Book just before the original patent protection expires.
And new patents could no longer be obtained for what some have called dubious reasons, such as new packaging methods or for "metabolites" -- substances the drug changes into when the body breaks it down.
Bristol-Myers Squibb Co. (NYSE:BMY - News) in late 2000 and early 2001 used a metabolite patent to delay the introduction of generic versions of its anxiety drug BuSpar.
But only one or two companies have really stretched the patent laws under the 1984 Hatch-Waxman Act to use several patents that cover tangential aspects of the drugs, said analyst David Moskowitz of Friedman, Billings, Ramsey.
"For the rest of Big Pharma, these companies defend their patent estates pretty diligently, but for the most part do not engage in these aggressive, 11th-hour patents that trigger an additional 30-month stay," Moskowitz said.
Therefore, the new regulations, if adopted after a public comment period, might simply limit patent protection to the duration of the original patents placed over a drug.
"I think this just keeps things on schedule rather than speeds things up," said analyst Ian Sanderson of SG Cowen.
REFOCUS ON RESEARCH
The new rule would encourage big drugmakers to devote their resources toward research and development of new drugs rather than legal expenses, analysts said.
"This type of reform is probably good for the industry long-term in that it places the premium and the onus for evaluating a pharma company on research productivity," said analyst Jason Fox of H&R Block Advisors.
"We would much rather see R&D productivity than legal department productivity."
The industry has been criticized in recent years for basing supposedly "new" drugs on older ones, simply tweaking or repackaging them to infuse marketing appeal and extend patent protection.
"The real benefit I see is that pharmaceutical companies have to move beyond the legal aspects of product life extension to perhaps clinical and efficacy based aspects," said Tyagi. (additional reporting by Lisa Richwine in Washington)
Peter |
