When a pharmaceutical company develops a new drug, it’s covered under patent protection, which means only the pharmaceutical company that holds the patent is allowed to manufacture, market and profit from the drug.

Typically, pharmaceutical companies own or have co-production and/or license rights related to many patents covering pharmaceutical and other products, their uses, formulations, and product manufacturing processes.

This article will explore why drug patents are important, examine a case study of how loss of exclusivity can impact a company, and preview some regulatory changes that may impact intellectual property rights in the near future.

Drug Patents & Exclusivity: What Are the Differences & How Do They Work?

According to the FDA, patents are a property right granted by the United States Patent and Trademark Office anytime during the development of a drug and can encompass a wide range of claims. Typically, the term of a new patent is 20 years from the date on which the application was filed in the US, after which point, generic versions of the drug that have been approved by the FDA can be marketed by other firms.

Two decades seems like a long time, but a developer’s 20 years of patent protection often includes many years during which a drug cannot be marketed because it has not yet been approved by the FDA. For instance, development and clinical trials might take so much time that drug developers are left with insufficient years of market exclusivity to recoup their costs.

This is where exclusivity comes in. In order to incentivize the development of new drugs, the FDA grants drug developers market exclusivity after a new drug is approved, during which time, no other firm is permitted to sell the drug, whether or not it is protected by a patent.

The length of time that FDA grants new drug exclusivity depends on the type of exclusivity. Types of exclusivity include:

Loss of patent exclusivity for a product is often followed by a significant reduction in sales as competitors gain regulatory approval for generic and other competing products and enter the market. Similar competition can be triggered by the loss of exclusivity for a biological product.

Read More: Inflation Reduction Act and the Impact on Biosimilars

Why Drug Patents Are Important

Unsurprisingly, pharmaceutical companies have strong opinions about intellectual property. According to Merck, intellectual property is an “enabler of access to innovative, quality-assured medicines and vaccines.”

The company explains: “Strong intellectual property systems are the cornerstone of innovation, catalyzing the investment needed to embark on the long, costly, and high-risk process of developing new and improved medicines and vaccines. Intellectual property systems not only reward innovation, but also allow scientists to build on each other’s discoveries and provide a framework for collaboration.”

Novartis adds, “Intellectual property (IP) rights are essential to our business as an innovative medicines company since they protect our innovation and investments in research and development, manufacturing and marketing of our products.”

Sanofi says, “We rely on our patents and other proprietary rights to provide exclusive rights to market certain of our products. If such patents and other rights were limited, invalidated or circumvented, our financial results could be adversely affected.”

Furthermore, lack of effective intellectual property protection for products is one of the primary considerations for pharmaceutical companies in limiting their operations in some countries. If a company can’t protect its patent somewhere, why would they take the risk of marketing their drug there?

Case Study: AbbVie’s Humira

 

In 2023, AbbVie experienced the loss of exclusivity (LOE) for Humira, a monoclonal antibody therapeutic that works by targeting TNF-alpha. Humira was granted FDA approval in 2002 for rheumatoid arthritis, but the biologic had since earned additional indications for Crohn’s disease and ulcerative colitis.

Although LOE is common in the pharmaceutical industry, what happened with Humira is significant because the therapeutic had a net revenue of $18.6 billion in the U.S. in 2022, which represented approximately 32% of AbbVie’s revenue.

Nine biosimilars entered the market in 2023 in direct competition with Humira, more than any other biologic on the market today. These included Amgen’s Amjevita, Celltrion’s Yuflyma, Boehringer Ingelheim’s Cyltezo, and Alvotech and Teva’s Simlandi.

As a result of this competition, global Humira sales decreased 32% in 2023. This decline had an impact on AbbVie’s financial performance in 2023. For the full year, the company’s worldwide net revenues decreased by 6% on a reported and constant currency basis.

Furthermore, according to a biosimilar report released by Samsung Bioepis in July, Humira’s market share dropped 13% to March 2024.

This example illustrates the impact loss of exclusivity can have on a major pharmaceutical company—and why drug patents and exclusivity are so crucial. Had the company lost exclusivity earlier, it may never have recouped its research and development costs for the drug.

The Future of Generics and Biosimilars

Several regulatory proposals have come down the pipeline that have the potential to impact intellectual property rights in the pharmaceutical industry moving forward. In general, governmental authorities are increasingly looking to facilitate generic and biosimilar competition for existing products through new regulatory proposals intended to achieve, or result in, changes to the scope of patent or data exclusivity rights and through the use of accelerated regulatory pathways for generic and biosimilar drug approvals.

Suggested Reading: 5 Biosimilar Manufacturing Strategies for competing in a post-patent expiry era.

On April 26, 2023, the European Commission (EC) adopted a proposal for a new Directive and a new Regulation, which represents the largest pharmaceutical reform in over 20 years.

The main objectives of the revision are to:

• Make sure all patients across the EU have timely and equitable access to safe, effective, and affordable medicines
• Enhance the security of supply and ensure medicines are available to patients, regardless of where they live in the EU
• Continue to offer an attractive and innovation-friendly environment for research, development, and production of medicines in Europe
• Make medicines more environmentally sustainable
• Address antimicrobial resistance (AMR) and the presence of pharmaceuticals in the environment through a One Health approach.

Sanofi called this proposal “concerning” because of its potential reduction of market exclusivity for orphan medicines; greater transparency of R&D costs; faster availability of generics and biosimilars; and more stringent obligations for the supply of medicines.

“If passed in its current form, the legislation could have a detrimental impact on access, innovation and competitiveness in Europe,” Sanofi said in its annual report.

The United States seems to be following a similar trend. In July, the Senate unanimously passed a bill aimed at limiting the number of patents drugmakers can introduce and making it easier for biosimilar competitors to enter the market.

The legislation specifically targets a practice that involves filing several non-innovative patents around a single drug in order to create an impenetrable “thicket” around the product, thereby extending its market exclusivity and ultimately delaying generic competition.

Hailed by some as a “potential victory for drug pricing reform,” the pharma patent reform bill could help promote generic and biosimilar competition for prescription drugs and lower their costs. However, sections of the bill drew objections from drug manufacturers.

Megan Van Etten, Deputy Vice President of Public Affairs at PhRMA, a trade group representing companies in the pharmaceutical industry in the United States, told FirstWord Pharma that the group has “concerns with Congress prohibiting innovators from enforcing lawfully granted patents.”

Furthermore, in December 2023, the Biden administration proposed a framework to guide government agencies on how to use march-in authorities if a drug’s price is considered too high. This proposal is aimed at high-priced drugs that rely on taxpayer-funded inventions.

According to NPR, activists have pushed the government for years to use “march-in rights” when a taxpayer-funded invention isn’t publicly available on reasonable terms. They claim the law allows the government to march in and license certain patents of high-priced drugs to other companies to sell them at lower prices. The pharmaceutical industry disagrees.

PhRMA’s Van Etten had this to say in response: “If finalized, this misinterpretation of the Bayh-Dole Act would have a devastating effect on public-private research collaborations and chill American innovation across industries such as tech, energy, defense and more. While repercussions would be felt by all who rely on collaboration with government-funded organizations to innovate, the potential impact on medical innovation, particularly for our most vulnerable patients and families waiting for new treatments and cures, is extremely concerning.”

As curbing drug prices remains a priority for many lawmakers, more proposals are sure to come. Especially as the presidential election approaches, the future remains uncertain.