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Price Caps, Other Hazards Face Developing-Region Patent Bids

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By Randy Osborne
Staff Writer

CHICAGO – Navigating the patent landscape in developing countries is hard enough, and made even trickier by such moves as the one made earlier this month by El Salvador, which passed a law that cut prices by at least 30 percent for more than 6,000 medicines, and as much as 60 percent for the most common therapies.

So said members of a panel on managing intellectual property in such territories during the BIO International Convention.

"If the drug actually gets to market and has value, you'll wish you had filed in Uganda and everywhere else in the world, no matter how weak the patent system may be in that place," said attorney Edmund Pitcher, partner with Goodwin Procter in Boston.

"On the other hand, the cost of omnipotent filing worldwide, for any well-run small company, is unsustainable," he said. "You must set priorities. You just can't do it. What I advise, typically, depending on the budget, is to file in countries where you get a reasonable bang for the buck, where the patent system is not outrageously expensive, and where there is respect for patents. You need not go everywhere."

One place it might not have done much good to go is El Salvador, which put into effect something called the General Medicine Law, a price-slashing measure approved by the Legislative Assembly in February. The idea is to give poverty-stricken people access to medicine in a country known for its particularly high drug prices.

Biotechs have been slavering over the prospects for profit from Latin America. Deutsche Bank estimated the region will have four of the top 20 pharmaceutical markets by 2015. Most countries there are expected to grow their pharmaceutical markets by more than 10 percent annually from 2011 to that year, compared to less than 3 percent for the U.S. and 1 percent to 4 percent for Western Europe. (See BioWorld Today, June 4, 2012.)

"Much of the growth in Latin America will revolve around biosimilars, as several countries see the follow-on biologics as a way to meet the demand of expanding populations and the need for affordable biologics," according to the recent BioWorld Data report, The Biosimilars Game: A Scorecard for Opportunities, Threats and Critical Strategies.

What will it mean for such efforts if others in the region follow the lead of El Salvador, Central America's smallest and most densely populated country?

"You don't want to throw money away," said the panel's moderator, Una Ryan, managing director of Golden Seeds, an angel investing group in Silicon Valley focused on women-led companies.

"The patents must support the mission, must support the value that you're trying to put into the company," Ryan said, but "founders and inventors who get so emotionally involved" they lose sight of the point. "There are times when the money is well spent, and there are times when it's just . . . no return," she said.

On the matter of El Salvador and price caps for drugs – especially, how to choose which of the developing countries might be safer in this regard – panel member Yves Rebeill, president and CEO of Research Triangle Park, N.C.-based Scynexis, was stumped.

"I don't know if I can answer that question," he said, adding that the problems faced by drug companies selling in El Salvador likely will not be limited to that country, which means the intellectual property and marketing nets should be cast wider.

Ruth Atherton, associate general counsel at the Bill & Melinda Gates Foundation, urged audience members to "keep in mind that planning your patent strategy isn't something you should be doing the night before you're filing your patents. You do have a window of time to think about it, but it's very important to think about those factors which are not specifically intellectual property-relate, but have massive impact on your ability to sell and develop worldwide," such as the situation in El Salvador.

There, activists and the left-wing party known as the Farabundo Marti National Liberation Front squared off against drugmakers, one side claiming the right to medicine for all, and the other alleging that its economic freedom to operate was hamstrung by price caps.

Goodwin Procter's Pitcher said we "are in an era, in my opinion, where patents – particularly in the health care industry – are more politicized than they have ever been in history. In the U.S. alone, the Hatch-Waxman Act and the generics industry have grown [by] leaps and bounds over the last 20 years. You see pressures on pricing of drugs all over the world. There is a lot of sentiment that these patent owners are getting a windfall that is unfair and incorrect, and we've got to stop them somehow. Patents are under stress all over the place."

As for shelter, the Gates Foundation's Atherton said, "it really does go back to your cost of goods and your original structure for your therapeutics. Keeping those at bay early, making those early decisions to assure your production is efficient and effective and your cost of goods is low" can help offset El Salvador-type surprises.