U.S. Losing Patent Edge, but Biotech Still Shines, for Now
By Marie Powers
Compared to foreign entities, the U.S. already has lost its leadership position in technology transfer in terms of overall patent applications and patents issued by the Patent and Trademark Office (PTO). Moreover, the U.S. return on research expenditure is declining by 10 percent annually, signaling an important call to action.
That's the conclusion of an analysis conducted by RHT Consulting, of Leesburg, Va., based on a comprehensive review of patent applications, patent grants in relation to gross domestic product (GDP) and job creation in relation to higher education and federal research spending across every major industrialized country.
RHT projected that the U.S. pharmaceutical industry will lose its leadership position to China, on a per-capita basis, in 2029. If indexed to GDP, the nation's big pharma industry will lose its leadership to China in just three years "because GDP has a 14 percent growth rate in China but the population growth is only 0.5 percent," explained Rosemarie Truman, the consulting firm's CEO and president.
Either way, if current growth continues, the U.S. will fall behind China in pharmaceutical innovation, she added.
The silver lining is that the U.S. continues to lead in biotech for the foreseeable future, regardless of the forecasting method – a finding that suggested opportunities as well as risks.
Truman's global technology transfer assessment was developed "mainly out of intellectual curiosity" following a project for the Office of Technology Transfer at the National Institutes of Health (NIH) to develop a roadmap to meet the changing needs of the biomedical industry and to optimize the transfer and commercialization of technology developed with federally sponsored research, which focuses on biomedical innovation. The NIH is responsible for 22 significant biomedical products approved by the FDA, Truman pointed out, including the agents Synagis (palivizumab, MedImmune LLC) and Taxol (paclitaxel).
Results of the NIH engagement prompted Truman to lead a project with researchers from Maryland and New York to expand the analysis to a global scale. They used multiple datasets, where available, and triangulated their analysis to ensure accuracy. The team examined metrics such as patent growth rates and effectiveness and the ratio of imports and exports between the U.S. and other countries. They applied RHT's benchmark model to data gathered from the Association of University Technology Managers, the National Institute of Standards and Technology, the National Science Foundation and other organizations to assess the efficiency, effectiveness, innovation and overall performance of U.S. technology transfer.
The researchers also used data from the United Nations Educational, Scientific and Cultural Organization and the World Bank to examine research expenditures and to assess the impact of technology transfer performance in relation to changing demographics.
The findings were stunning. Truman and colleagues concluded the U.S. already lags in both patent applications and patents issued around the globe, with Japan the leading country and the BRIC nations – Brazil, Russia, India and China – growing 176 percent faster than the U.S. in applications and 403 percent faster in issued patents.
U.S. residents are filing more applications in foreign patent offices, but conversions to issued patents are declining.
The growth of U.S. patent applications is 6 percent; however, the growth in patents issued is just 3 percent compared to China's 17 percent patent application growth rate and 13 percent issued growth rate.
"Obviously, BRIC countries started with a smaller patent base on which to grow," Truman told BioWorld Today. "However, growth has been unrelenting since 2001."
Within the U.S., foreign inventors now file the majority of applications with the PTO and have the most issued patents – a trend that began in 2007. Based on trends the researchers observed, in 12 years China will surpass the U.S. in the volume of USPTO patents filed and issued. (See chart.)
In the life sciences, China is poised to overtake the U.S. not only in pharmaceuticals but also in medical devices within 15 years and in diagnostics within 25 years.
Without a change in course, the U.S. is likely to cede even its biotech leadership to China by the late 2030s.
"There is a $2.3 trillion opportunity for the U.S. if we were to become best in class," Truman said. "We need to see China as a serious contender in the global innovation arms race. Our analysis shows that the U.S. can't just be best in class to remain a global innovation leader. We need to break the mold and do even better than best in class."
Ironically, those findings come as some in Congress seek changes to the patent system, opposing the granting of the monopoly power of a patent to publicly subsidized biotech products. (See BioWorld Today, May 1, 2012.)
In addition, the biotech world and the larger life sciences industry are just beginning to grapple with the long-term implications of two major Supreme Court decisions this spring. In March, the court's unanimous decision in Mayo Collaborative Services Inc. v. Prometheus Laboratories Inc. reversed an appellate court ruling that held personalized medicine-type claims patent-eligible because they cover a "determining" step, which includes the extraction and measurement of metabolite levels from a patient sample.
The Supreme Court said that step "simply tells doctors to engage in well-understood, routine, conventional activity previously engaged in by scientists in the field." (See BioWorld Today, July 6, 2010, and March 21, 2012.)
A week later, the court left many personalized medicine claims in patent limbo by remanding The Association for Molecular Pathology v. Myriad Genetics Inc., telling an appellate court to reconsider a challenge to Myriad Genetics Inc.'s claims on the BRCA1 and BRCA2 genes used in breast and ovarian cancer diagnostics. (See BioWorld Today, March 27, 2012.)
To expose some of the factors that hinder research commercialization in the life sciences, Truman's team took a deeper dive into the data.
They surveyed 500 life sciences companies to understand their perceived and latent needs. RHT also benchmarked the health of the life sciences industry in each U.S. state, in universities and in federal labs.
The benchmarking exercise revealed that, despite a 2 percent increase in investment in federal lab research programs, technology licensing declined by 9 percent. Universities invested an additional 4.9 percent in their research operations but generated only 3.8 percent growth in start-ups, licenses and options.
Not only did commercialization activity fall behind additional research spending, but additional benchmarking revealed that life sciences start-ups also fell short in moving discoveries to market.
"What's painfully obvious is that, across the board in life sciences – device, diagnostics, biotech and pharma – 87 to 99 percent of companies are not generating revenue," Truman said.
"Typically, the people running these start-ups have a medical or scientific background. They're absolutely brilliant in their specialty area, but many have challenges raising dilutive and/or nondilutive capital. They are not surrounded by a team that can help them perform due diligence on their portfolio to present a package that's compelling to an investor," she noted.
Competitiveness is hindered, Truman continued, when potentially transformative technologies cannot attract capital because the start-up team fails to demonstrate a strong understanding and produce rigorous analysis around success factors such as market size, growth rate and penetration. For example, a company developing a treatment for a neglected tropical disease such as malaria must be able to prioritize and articulate its commercial strategy if a large portion of the target population cannot access or afford the medication, she pointed out.
Increasingly, life sciences companies also must prioritize their investments in areas with collaborative opportunities, both in terms of science and funding.
"No drug gets to the market these days without a large amount of collaboration," Truman observed.
She advised small biotechs to look for federal priorities – assets sought for the strategic national stockpile, defense priorities or NIH critical needs – when assessing pipeline development. Other priority areas include those on the World Health Organization's unmet need list, orphan diseases and global health threats.
Biotechs always should consider opportunities to snag a priority review voucher, Truman added.
"Some successful biotech companies we analyzed were able to bootstrap themselves through priority funding," she said. "They might have a broad spectrum Gram-negative [candidate], but they focused on a specific disease area for the military, attracted millions of dollars for one Gram-negative disease and were able to develop a drug that addresses much more than that single disease."
Due diligence analysis in the life sciences industry is challenging, Truman conceded, with "three times the amount of rigor required than in other industries because of the number of variables that can cause failure," she said. "However, I rarely see companies perform that kind of due diligence."
Such oversight results, she added, in biotech products that don't become commercialized and a national investment in life sciences that is squandered.
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