For pharmaceutical innovators, the real value of a patent portfolio lies in how effectively it extends market exclusivity

A pharmaceutical product derives its value from its period of market exclusivity – the period in which the innovator can market the product without generic or biosimilar competition. It therefore follows that the longer the period of market exclusivity, the longer the length of the monopoly, and the greater commercial value that can be derived from the pharmaceutical product.

Of course, big pharma knows this.

But all too frequently, it’s a small- to mid-size innovator company that makes the pivotal, early decisions on patent protection. These decisions primarily focus on what to protect, when to file, and in what jurisdictions. Eventually, when the innovator company prepares to sell or license to big pharma, its intellectual property (IP) will be subject to a thorough due diligence process This is a rigorous assessment, and will include an evaluation of the innovator company’s patents.

Yet, the evaluation is not just about the patent’s subject matter, scope, and jurisdictions covered. It will also include an analysis of each patent’s term of protection.

It all boils down to this – “what is the period of market exclusivity?”

Big pharma will want a number. Depending on who you speak with, seven years of market exclusivity appears to be a magical number. In practice, the period of market exclusivity necessary to make selling or licensing to big pharma attractive will depend on the size of that market (i.e., predicted year-on-year revenue). This means that the period of market exclusivity must be sufficient for big pharma to recoup the costs of the original investment, plus some.

With this in mind, innovators must be strategic in developing layers of strong, commercially relevant patents. Not one, not two, but many patents that protect various commercial aspects of the pharmaceutical product. Together, these patents serve to create a barrier that must be carefully traversed for a generic or biosimilar product to launch on the market. Ideally, challenging the validity of these patents, or the risk of infringing these patents, will be too great of a deterrent, meaning the generic or biosimilar will simply not launch onto the market until the expiry of the patent term. Hence, the period of patent protection, or patent term, is a good indicator of the period of market exclusivity.

So, what can an innovator do to develop layers of strong, commercially relevant patents?

What, when, and where to file remain central considerations.

Composition of matter patent filings

The earliest patent filings are typically directed to the pharmaceutical product per se (i.e., the molecule) and are referred to as composition of matter patent filings.

In the small molecule field, this can be once a series of ‘hit’ compounds is identified, during structure-activity relationship (SAR) and PK/PD optimisations to capture optimised compounds, and once settled on the ‘lead’ compound – the clinical candidate.

The timing of a composition of matter patent filing typically comes down to disclosure pressures – generally, any disclosure of the compound to the public will render a subsequent patent filing as lacking novelty.

A critical disclosure point arises with the commencement of clinical trials. As details of the clinical trial are published, including the pharmaceutical product, dosing regimen, and relevant clinical end points, a patent application must be filed prior to publication. Any patent application in this instance can draw upon the clinical trial protocol to develop prophetic examples that can be included to support the patent application. As a result, the commencement of clinical trials is often the very latest by which an innovator must seek patent protection of the compound that will form its pharmaceutical product. And with it, the clock begins on the composition of matter 20-year patent term.

Of course, we know pharmaceutical development is a necessarily protracted process. Following initial clinical trials, estimates suggest it takes roughly six to 10 years for product development, manufacturing, and regulatory process before the pharmaceutical product will reach the market. This development time eats into the composition of matter patent term – even if the term has been extended under available mechanisms – and often just a few years of patent protection to the pharmaceutical product per se will remain at the time of market launch.

Big pharma will push back on this. And it’s largely inevitable.

Follow-on patent filings

It’s at this point that an innovator’s layers of strong, commercially relevant patents come to the fore, and their value is realised.

It arises through targeted follow-on patent filings, which capture key commercial aspects of the pharmaceutical product – polymorphic forms, synthesis and manufacturing processes, dosage optimisation, formulation development, patient sub-population selection, and medical uses.

While the timing of the filing of these follow-on patents remains dictated by necessary disclosures, the subject matter of these follow-on patents is often not realised until much later in pharmaceutical development.

Key trigger points include CMC activities and clinical trials:

• Do CMC activities establish an advantageous manufacturing protocol of the pharmaceutical product that will be near impossible for a competitor to circumvent?
• Has scale-up manufacturing resulted in a pharmaceutical product with low levels of impurities that a competitor may not be able to avoid?
• Is a polymorphic form particularly stable?
• Does the pharmaceutical product require a specialised formulation for delivery?
• Does the stage IIb clinical trial reveal an advantageous dosing regimen of the pharmaceutical product?
• Has the phase III clinical trial shown any particular effectiveness of the pharmaceutical product in a target patient sub-population?

Capturing this, or related, subject matter in follow-on patent filings will result in a multi-faceted, and layered, patent portfolio that offers strong patent protection of the relevant commercial aspects of the pharmaceutical product – and with it, an extended market exclusivity period.

Big pharma will expect to see this.

It is no longer feasible for an innovator to enter negotiations with big pharma armed with only one or two early composition of matter patent filings that expire in a handful of years. It will not suffice.

But a follow-on patent is only of real value if it provides strong protection of a commercially relevant aspect. Big pharma will be wary of weak follow-on patents, being patents that are difficult to enforce, invite validity challenges, or don’t adequately protect a relevant commercial aspect.

It must also be appreciated that not all follow-on patents are of equal value. Typically, the value of a patent is tied to its strength, which will depend on its susceptibility to a validity attach, its ability to be ‘worked around’, its scope of protection, and the relevance of that protection to the commercial activities. For example, can a competitor substitute a component of the claimed formulation for another equivalent component? Is the reproducibility of the polymorph ensured? Is the claimed patient sub-population capturing a patient demographic of market significance?

An innovator must be selective with the filing of follow-on patents, understand their strength, and be able to convey the commercial value.

Complementary, and essential, mechanisms for extending market exclusivity

Patents are not the only means by which market exclusivity may be achieved.

An innovator should also consider:

• Are regulatory and data exclusivity provisions available?
• Is it possible to seek orphan drug or paediatric designation?
• Have the relevant regulatory steps been taken to strengthen and help preserve practical market exclusivity by triggering procedural protections against competitor entry?
• Does the patent filings support listing in the US Orange Book or foreign equivalents?
• Will the pharmaceutical product be vulnerable to price negotiation under the US Inflation Reduction Act?

These are just some examples of the host of considerations that an innovator must timely address during product development.

The value of a pharmaceutical product lies in its market exclusivity

The take home message is simple: a strong, layered patent portfolio that offers patent protection of various commercial aspects of the pharmaceutical product will extend market exclusivity. Consequently, it will drive an increase in the value of the pharmaceutical product.