Patent rights international public health orphan drugs

CHAPTER ONE: INTRODUCTION THE PROBLEM OF ORPHAN DRUGS In the pharmaceutical industry, orphan drugs represent a unique challenge for the utilization of economic utilitarian patent theory Patents are thought to induce innovation, such as research and development (R&D) into new drugs, by offering economic incentives in the form of a limited monopoly right over both the process used to create new drugs and the new product itself Generally, the pharmaceutical industry represents an ideal model for this traditional theory of patent law, and is seen as an obvious illustration for why the patent regime works However, some of the compounds that could be developed for orphan diseases are not eligible for patent protection because they are already known and are, therefore, not novel Market factors and the high cost of drug research and development, coupled with the fact that many forms of orphan drugs are not eligible for patent protection, thus results in a lack of innovation in orphan drugs Therefore, orphan drugs highlight the economic factors influencing drug R&D: the overall cost required to develop and test some drugs will not be outweighed by the (lack of) potential profit for pharmaceutical companies Absent the possibility of patent rights, there are simply insufficient incentives offered to induce the investment necessary to carry out research and development on most forms of orphan drugs As a result, pharmaceutical companies not have any real incentive (i.e neither patent monopolies nor a profitable market) to develop such drugs or to invest in the costs of clinical trials to bring them to market WHAT ARE ORPHAN DRUGS AND ORPHAN DISEASES? An orphan drug is the therapeutic treatment necessary to treat one of the rare diseases that are referred to as “orphan diseases.” Many orphan drugs have not yet been discovered, while others are known therapeutic treatments that have not been developed or clinically tested to bring them to market An orphan disease is defined as “a disease which has not been “adopted” by the pharmaceutical industry because it provides little financial incentive for the private sector to make and market new medications to treat or prevent it.” It is estimated that between 5000 to 7000 diseases have been classified as orphan diseases The term “orphan disease” is most frequently used to denote a rare disease in two respects The first is as a class of rare diseases suffered by a very small percentage of the population in Western nations, such as cystic fibrosis and hairy cell leukemia In the US, for example, any disease that affects less than 200,000 people is considered an orphan disease In the EU, conditions that affect not more than in 10,000 persons in the Community are classified as orphan diseases The second is a class of diseases almost wholly suffered by developing nations, including cholera, tuberculosis and malaria Ultimately, neither of these classes of orphan diseases represents a significant patient population on a global economic scale Neither population is considered a profitable market for pharmaceutical developers in the economics of drug development and little to no commercial research or investment is targeted at either type of orphan diseases David Duffield Rohde, “The Orphan Drug Act: An Engine of Innovation? At What Cost” (2000) 55 Food & Drug L.J 125 at 125 [Rohde] John J Flynn, “The Orphan Drug Act: An Unconstitutional Exercise of the Patent Power” (1992) Utah L Rev 389 at 390 [Flynn] EC, Commission Staff Working Document on the experience acquired as a result of the application of Regulation EC No 141/2000 on orphan medicinal products and account of the public health benefits obtained (Brussels: EC, 2006) [EC Working Document] The Orphan Drug Act, 21 U.S.C.§360 aa-ee (1998) [ODA] EC, Commission Regulation 141/2000 on orphan medicinal products, [2000], online: European Commission [EU Regulation] These two forms of orphan diseases can also be related to the three types of diseases identified in the WHO’s Commission on Macroeconomics and Health (CMH) report and also subsequently discussed in the WHO’s Commission on Intellectual Property Rights, Innovation and Public Health (CIPIH) report Type I diseases are those incident in rich and poor countries, with large numbers of vulnerable population in each Examples of these diseases are measles, hepatitis B, diabetes and cardiovascular diseases Many vaccines for Type I diseases have been developed in the past 20 years but have not been widely introduced into the poor countries because of the cost Type II diseases are incident in both rich and poor countries, but with a substantial proportion of the cases in the poor countries Examples of these diseases include HIV/AIDS and tuberculosis, where more than 90% of cases occur in the poor countries These diseases are often termed neglected diseases Type III diseases are those that are overwhelmingly or exclusively incident in the developing countries, including African sleeping sickness and African river blindness These diseases receive very little research and development, and essentially no commercially based R & D in rich countries These diseases are often termed very neglected diseases In relation to these three forms of diseases, Type I diseases would not be classified as orphan diseases These diseases occur in both rich and poor countries, so the patient population and economic potential for drug developers already exists As a result, many vaccines or other medical treatments have already been developed in response to such diseases Although a deficiency may exist regarding developing countries’ access to these medicines and vaccines, that issue in itself is separate from the underlying issue of drug research and development In contrast, Type II diseases and Type III diseases - the so-called neglected and very neglected diseases - would be classified as orphan diseases For the purposes of this research, there is little practical difference between Type II and Type III Commission on Macroeconomics and Health, Macroeconomics and health: investing in health for economic development (Geneva: World Health Organization, 2001) Commission on Intellectual Property Rights, Innovation and Public Health, Public health, innovation and intellectual property rights (Geneva: World Health Organization, 2006) at 25 [CIPIH] diseases Both types would be included in the latter form of orphan diseases, those suffered almost wholly in developing countries With the exception of HIV/AIDS, there is still a considerable lack of research and development investment made into either Type II or III diseases, and a lack of incentive for drug manufacturers to so The other form of orphan diseases, those such as cystic fibrosis and hairy cell leukemia, does not fit into the three-type disease scheme developed by the CMH This is not surprising, as the CMH classification targets diseases affecting developing countries, while the other form of orphan diseases are those diseases neglected in Western nations THE ECONOMICS OF DRUG RESEARCH & DEVELOPMENT In general economic terms, the existence of orphan drugs is not completely unexpected The majority of pharmaceutical research and development in the world is undertaken by private sector pharmaceutical companies based in the US and Europe and most biomedical research involves drug development by the private sector The reason for this is clear: although this area involves enormous amounts of investment, it also has a great potential for high returns However, there are significant costs involved in bringing a new drug from the discovery process to placing it on the market This includes both the initial R&D investment for new drug discovery and the additional costs of bringing a drug through the regulatory approval process for safety and efficacy Generally, the high costs involved with drug development and regulatory approval have been used to justify the demand for stronger economic incentives, such as patent rights, to induce the research and development of new drugs For example, the Pharmaceutical Research and Manufacturers of America (PhRMA), representing the biopharmaceutical industry based in the US, reports an estimated $49.3 billion was invested in biopharmaceutical research and development in 2004 This means at least 10 percent of the sales in the pharmaceutical industry are spent on R&D The International Federation of Pharmaceutical Manufacturers Associations (IFPMA) estimates biotechnology companies actually spend more, as much as 40 to 50 percent of their revenue on R&D PhRMA, Pharmaceutical Industry Profile 2005, online: Pharmaceutical Researcher and Manufacturers America Shanker A Singham, “Competition Policy and Stimulation of Innovation: TRIPS and the Interface between Competition and Patent Protection in the Pharmaceutical Industry” (2000-2001) 26 Brook J Int’l L 363 at 373 [Singham] Figures vary greatly in this field, but the cost of bringing a new drug to market is estimated to range between US $500 million and 1.5 billion and to take between 10 – 15 years Out of ten approved drugs, estimates are between one to three 10 will recover the cost companies have invested to bring them to market 11 These figures support the contention that the biopharmaceutical industry is much more researchintensive than other international industries Expressed as a ratio of R&D expenditure to sales, biopharmaceuticals have an average research intensity of 13 percent 12 With these figures in mind, it is not surprising drugs for common diseases – such as asthma and hypertension – have been targeted by the pharmaceutical industry because they allow the manufacturer the opportunity to recoup its investment with a large potential market 13 In contrast, rare diseases with much smaller or less profitable potential markets offer no such economic incentives for investment into research and development IFPMA Asian Regional Conference on Intellectual Property, Innovation and Health (Singapore, August 23-24, 2006) Figures in the $500 million range are said to be outdated and now IFPMA estimates a range of between $1 – 1.5 billion US 10 International Federation of Pharmaceutical Manufacturers Associations, Encouraging Pharmaceutical R&D in Developing Countries (Geneva: IFPMA, 2003) at 16 [IFPMA R&D] 11 Susan Vastano Vaughan, “Compulsory Licensing of Pharmaceuticals Under TRIPS: What Standard of Compensation?” (2001-2002) 25 Hastings Int’l & Comp L Rev 87 at 105 12 This figure can be compared to other industries, such as the chemical industry, which has a research intensity of about percent IFPMA R&D, supra note 10 at 15 13 Rohde, supra note at 126 DIFFERENT FORMS OF ORPHAN DRUGS: SITUATION A & SITUATION B There are two different types of orphan drugs, and the distinction between them is important for the purposes of this research: one type of orphan drugs is patentable, while the other type is not eligible for patent protection It is the nonpatentable form of orphan drug that has largely been targeted by efforts such as The Orphan Drug Act (ODA), although the undeveloped but patentable form of orphan drug is also technically covered by such legislation However, orphan drug legislation has actually had little practical effect on the second type of orphan drug It should also be noted the distinction made here is not along the same lines as the distinction made between the two types of orphan diseases: those diseases which affect a small percentage of the population in Western nations or those diseases which are almost wholly suffered by developing nations That is, the first type of orphan drugs may apply to both developed and developing country orphan diseases So, too, may the second form of orphan drug apply to either developed or developing country orphan diseases, although the second form of orphan drug is usually associated with orphan diseases suffered in developing countries, such as tropical diseases Situation A First, there is the situation of orphan drugs that are ineligible for any patent rights, including product or process rights and second medical use patent rights 14 This is largely because these drugs/treatments, or any subsequent treatments, are already in the public domain and are therefore not novel 15 These drugs would either not be patentable (i.e they are natural substances or shelf chemicals), they are 14 That is, the new subsequent medical use of a drug is patentable in jurisdictions that accept second medical use patent claims, such as the EU under the concept of “Swiss claims.” 15 If the subsequent or second medical use is not already known or in the public domain, it would likely be patentable and therefore not considered a Situation A orphan drug products whose patents have already expired or they are drugs already known and in the public domain through prior publication 16 This is the most important distinction (patentable vs unpatentable) between the two forms of orphan drugs (Situation A and Situation B orphan drugs), as it will have an impact on potential solutions used to address the problem I will refer to this type of orphan drug as Situation A Often, these drugs are already known to treat certain conditions (including a rare orphan disease) but the prohibitive cost of developing and receiving regulatory approval for the drugs prevents these treatments from being produced and put on the market by the private sector In the US, regulatory approval is a long and expensive process required by the Food and Drug Administration (FDA) before the drugs can be sold on the American market 17 In Europe, such approval is required by the European Medicines Agency (EMEA), the European agency similar to the FDA and responsible for the evaluation of medicinal products in the EU Due to the time and expense required to gain regulatory approval, such as FDA or EMEA approval, there is little incentive for drug companies to develop such drugs without the possibility of gaining either product or use patent protection Consequently, orphan drugs were simply not developed As Pulsinelli explains: The root of the orphan drug problem lies in the complex and costly FDA approval process … The FDA requires many difficult steps in a drug’s long journey from the laboratory to the pharmacy Once a drug with a potentially therapeutic effect has been found, it must first be tested on animals for both safety and efficacy This process is very time-consuming When the drug has passed the animal hurdle, it must then go through three levels of testing in humans to demonstrate again its safety and efficacy In many cases, post-marketing testing is required as well … [D]rug companies must then compile all of the information and submit it to the FDA to 16 Gary A Pulsinelli, “The Orphan Drug Act: What’s Right With It” (1999) 15 Santa Clara Computer & High Tech L.J 299 at 304 [Pulsinelli] See also Pulsinelli at note 27: “Researchers (often in universities) discovered the effect of many orphan drugs on their respective diseases, but without the Act, drug companies did not find these drugs worth developing or patenting The failure to file a patent application before publication resulted in the eventual loss of potential patent rights.” 17 Pulsinelli, supra note 16 at 301 obtain approval; … drug approval applications can be tens of thousands of pages long 18 Most drugs with large patient populations allow drug companies to recover their investment costs in developing and bringing the drugs to market, such as the aforementioned drugs for common diseases like asthma and hypertension However, orphan drugs don’t offer manufacturers the same incentives to develop these drugs This inevitability was explicitly recognized in the Preamble to the ODA, which stated: “There is reason to believe that some promising orphan drugs will not be developed unless changes are made in the applicable Federal laws to reduce the costs of developing such drugs and to provide financial incentives to develop such drugs.” 19 Without the possibility of patent protection, drug companies were vulnerable to certain types of competition For example, after a drug company invested in the clinical testing required to get US FDA approval of a drug, copycat drug makers who made no investment into testing and approval costs - could easily underprice them and sell the same product for less Thus, “without the assurance of a protected market, especially when the market itself was so small, the only reason to develop these drugs was as a public service.” 20 18 Ibid at 303 ODA, supra note at Preamble 20 Pulsinelli, supra note 16 at 304 19 Situation B Second, there is the situation of orphan drugs/treatments which would be patentable but simply not exist because there has been an absence of research into such treatments This is because the number of people who would require the drug is either so small as to be insignificant and/or such a group does not constitute a major market segment for drug companies This type of orphan drug is related to the two forms of rare, orphan diseases discussed previously For example, large populations of people suffer from malaria and tuberculosis in developing nations, but these populations not have the ability to pay high prices for drugs There are also diseases suffered by a small proportion of Western populations, such as cystic fibrosis and Lou Gehrig's disease, which require a cure or treatment I will refer to both types of these orphan drugs as Situation B, and the distinguishing characteristic of both is that these orphan drugs are (or would potentially be) patentable It is important to note the problem of orphan drugs in Situation B must be understood separately from the problem of insufficient access to medicine and treatments that already exist for certain diseases – Situation B refers to the problem of potential treatments that have not yet been developed and not exist Like Situation A, the problem presented by orphan drugs in Situation B is still a problem of incentivizing investment into drug research and innovation Unlike Situation A, however, incentives which are traditionally thought to be sufficient for inducing investment into such research – patent rights – would be available for Situation B Yet, despite the possibility of patent protection, there are insufficient incentives for drug companies to undertake R & D related to Situation B That is, patient populations in Situation B simply not offer pharmaceutical companies the opportunity to recoup their investment on R&D for these diseases, despite the 10 patent law also represents a flexible way of addressing some of the patent system’s so-called “shortcomings.” For example, proponents of patent reform have often suggested patent law ought to take a more flexible approach to determine patentability, thus eliminating the arbitrariness of the patent regime and the criticism that patents are a “one-size fits all solution.” As Johnson explains, “Patents are a remarkably crude mechanism for providing incentives to innovate…Virtually all patentable inventions in the US, whether paper-clip improvements or revolutionary molecules, are accorded a onesize-fits-all 20 year term of monopoly rights 166 Yet the advantage of this hybrid regime is it has the ability to address these “shortcomings” of the patent system without actually offering patent rights for inventions that not satisfy the criteria in patent law Eisenberg explains, “it is hard to fine tune the patent laws to meet the needs of the pharmaceutical industry when the needs of other industries are different.” 167 Instead, it may be easier to alter the drug regulation rules than the patent system, she says Of course, extreme flexibility allows examiners too much discretion and can lead to uncertainty for inventors For example, Johnson’s argument that the duration of patent rights should vary according to the complexity or social utility of the invention, is representative of this potential problem Johnson also recommends strengthening patent protection by lengthening the duration of patent rights in industries where patent protection is necessary to induce innovation, such as pharmaceuticals Obviously, Johnson’s recommendations represent a more extreme perspective of patent reform I would not go so far as to suggest patent law should accommodate more flexible criteria (i.e the lowering of the bar argument previously 166 Eric E Johnson, “Calibrating Patent Lifetimes” (2006) 22 Santa Clara Computer & High Tech L.J 269 at 270 167 Eisenberg, supra note 120 at 486 104 discussed), or that certain industries should benefit from a lengthened patent right However, the attempt at flexibility offered by these alternatives offers insight into a method of addressing the kind of subpatentable innovation we are considering for orphan drugs It is this idea of flexibility in patent law and the motivation for it that is most useful for the purposes of this research, rather than the actual alternatives suggested for patent law The practical fact is most innovation is incremental and cumulative.168 Some of this innovation will not be addressed by the patent system, yet may still be considered socially-useful According to Correa, the question to be asked is: “Does society benefit from such a flexible approach?” 169 In terms of a hybrid right for orphan drugs, my answer to this question is yes This question brings us back to one of the original goals of this research: attempting to find a meaningful solution to the problem of orphan drugs by drawing upon the principles of the patent regime and the social utility of encouraging this innovation 168 169 Dutfield, supra note 135 at 379 Correa, supra note 151 at 526 105 CHAPTER FOUR: CONCLUSION Before the introduction of orphan drug legislation, orphan drugs represented an entirely unprofitable patient population that was simply not targeted by new drug research and development Neither type of orphan diseases – both those diseases which represent a small percentage of the population in Western nations and those diseases which are almost wholly suffered by developing nations – were profitable enough to induce drug manufacturers into investing the considerable time, labour and expense required to address their cause One reason for this lack of R&D into orphan diseases was the high cost incurred in developing and bringing new drugs to treat such diseases to market Estimates for the cost of bringing a new drug to market range from US $500 million to 1.5 billion, taking on average between 10 to 15 years Thus, a disease representing either a small potential market or a large but entirely unprofitable market offered few incentives to induce this type of significant investment into R&D This was especially so where there was absolutely no opportunity for drug companies to even recover the costs of their investment, notwithstanding the total lack of opportunity for companies to make any profit With the high costs of drug development and lack of profitable market, it is therefore not surprising the pharmaceutical industry has largely focused on developing drugs for common diseases However, concentrating on these common diseases also resulted in a deficiency of research and investment into less common “orphan” diseases, creating a situation commonly referred to as “orphan drugs”: drugs addressing those diseases which have not been “adopted” by the pharmaceutical industry In purely economic terms then, the existence of orphan drugs and diseases is not unexpected Yet the almost complete dearth of R&D into orphan drugs created a 106 situation whereby drugs that were required by some portion of the population were simply not being developed or put through clinical trials to bring them to market Statutory intervention was necessary in order to offer some form of incentive for manufacturers to invest in orphan diseases The result was two main pieces of orphan drug legislation: the US ODA and the EU Regulation In 1983, the US was the first country to formally recognize the need for legislative intervention targeting the issue of orphan drugs Recognizing the lack of market incentives for orphan drugs, the ODA represented an attempt to offer pharmaceutical companies the necessary economic incentives to carry out research in developing and clinically testing orphan drugs Based on the same premise and objectives as the ODA, the EU Regulation was also passed in 1999 Of the two types of orphan drugs, Situation A orphan drugs was largely targeted by this legislative intervention Situation A orphan drugs are those drugs which are ineligible for any kind of patent rights, often because their use as a treatment is already in the public domain and therefore not novel In the absence of being granted patent rights, 170 orphan drug legislation offered a type of regulatory right for orphan drugs called exclusive marketing rights Marketing exclusivity rights award a drug manufacturer the right to produce an orphan drug as the exclusive treatment for a particular disease Importantly, the marketing right is an almost complete monopoly, as the marketing rights holder is essentially free from competition from any subsequent treatments that may be developed to treat the same disease during the term of the right – either seven or 10 years in the US and EU, 170 As discussed, patentable drugs may also be granted exclusive marketing rights, but Situation B patentable drugs are rarely targeted by orphan drug legislation Recall that there were even proposals to require that drugs be unpatentable to receive orphan drug designation under the ODA In this way, marketing rights exist as a form of IP rights in lieu of the award of patent rights 107 respectively Being such a strong right, the award of marketing rights is considered the main incentive on offer under both the ODA and EU Regulation Other incentives offered under the ODA included federal funding for grants and contracts of clinical trials of orphan products; tax credits for clinical testing costs; protocol assistance for investigations of orphan drugs; open protocols for getting these drugs to patient groups who need them; and the establishment of an Orphan Products Board in the US In the EU, these other incentives also took the form of fee reductions; incentives to support research; and protocol assistance These incentives are uncontroversial and have been widely accepted by patients groups, drug manufacturers and legislators as fairly successful measures Unlike the other incentives offered by orphan drug legislation, the appropriateness of awarding the marketing right for orphan drugs has been called into question Specifically, whether marketing rights serve to induce innovation into orphan drugs in the most effective manner is an issue that must be considered Critics argue the marketing rights may go so far as to actually discourage innovation due to their over-broad scope, and the inherent uncertainty in the race to develop and be awarded exclusive marketing rights I have argued marketing rights are not the most appropriate or effective way to encourage innovation into the area of orphan drugs In particular, this is because the marketing right fails to include any of the “safeguards” and balancing of interests similar to those in the patent regime, such as policy exceptions to the infringement of the right for research or non-commercial use of a drug, Bolar exemptions, or rights for new and useful improvements While the other incentives offered by orphan drug legislation are fairly benign and uncontroversial, marketing exclusivity rights in particular fail to demonstrate the balancing of interests that play a fundamental role in the award of patent rights Indeed, such a balancing of 108 interests ought to play a fundamental role in the award of any private property rights, not least of all the marketing exclusivity rights This balancing of competing interests is the cornerstone of utilitarian philosophy, and it relates directly to an analysis of the social utility of the law Of course, this is not to suggest orphan drug legislation is entirely wrong or ineffective Legislation such as the ODA and EU Regulation is useful insofar as it explicitly recognized there were insufficient incentives available for drug manufacturers, a situation resulting in almost no investment being made in orphan drugs Likewise, the objective of such legislation was sound, as both statutes were designed specifically to spur innovation in the area of orphan drugs Certainly, incentives were needed to stimulate innovation and to incentivize investment into orphan drug R&D A starting point for this research was the assumption that this represented a valuable exercise and these were objectives which ought to be encouraged It would also be unreasonable to view orphan drugs as simply representing a failure of the market or of the pharmaceutical industry’s targeted R&D The pharmaceutical industry, like any other in the private sector, is governed by economic considerations There was little available in the way of market incentives to induce any private sector investment Without offering any additional incentives, orphan drugs could rather be viewed as a failure of the public sector to address such a situation Similarly, I would argue the inclusion of exclusive marketing rights in orphan drug legislation is a misguided and problematic attempt to address the problem of orphan drugs by way of legislative intervention While the objective of this legislation is important, the measures taken to implement it may just have the opposite effect in practice 109 In this light, alternative methods of encouraging innovation should be considered for the problem of Situation A orphan drugs It is important these methods not be based solely on the moral imperative, a mistaken attempt to make states and private industries provide humanitarian relief in this area, based only on their moral obligation to develop these drugs Instead, referencing the patent regime, the principles of economic utilitarian patent theory should be utilized in attempting to offer an alternative method of incentivizing orphan drug innovation Economic utilitarian theory is important because it focuses on the social utility of the law, and emphasizes the societal context of both the law and the rights created by it Specifically, economic utilitarianism often involves a cost-benefit analysis in the form of a balancing of divergent interests In patent law, economic utilitarian theory views the goals of patent policy as two-fold: to increase the dissemination of information and technology to the public domain and to encourage innovation by awarding an exclusive property right Modern patent law is considered to represent a constant balancing of these two competing interests, based on the fulfillment of criteria for the award of patent rights Economic utilitarian principles, and utilitarian theory in general, is not limited to patent law and theory These principles can potentially be applied to any form of law, including orphan drugs The ultimate goal of orphan drug policy is similar to patent policy, as it aims to encourage innovation into orphan drugs – in the form of new orphan drug development or by bringing already-known treatments through the regulatory approval process to market Orphan drug policy also uses the award of an exclusive property right to this, similar to the rights offered under patent law Accepting the goal of economic utilitarianism in this context is to encourage innovation (for the benefit of society), applying patent theory principles in an attempt 110 to effectively address the problem of orphan drugs should not be too far-fetched Moreover, the award of marketing rights ultimately represents a form of IP protection over these drugs, albeit a different form of IP protection than the traditional types of IPRs Whether these rights are considered substitute patent rights or an analogous form of IP protection, using economic utilitarian IP theory to analyze the award of such an IPR is a useful exercise The best way to apply patent theory to orphan drugs is to start with a consideration of the social utility of the law, and the goal of incentivizing and promoting innovation for the benefit of society I have proposed the creation of a “Hybrid Right” for orphan drugs, to be offered as an incentive under orphan drug legislation instead of the exclusive marketing rights This hybrid right is preferable to marketing rights for several reasons, not least because, in replacing marketing rights, it would help to prevent a dangerous “anticommons” situation of over-expansive property rights Hybrid rights, based on the notions of intermediate and second-tier patent regimes, are not merely an attempt to evergreen patent rights or offer patents “through the backdoor.” Instead, a hybrid right is consistent with the social contract of patent law and represents a meaningful attempt to apply principles of patent theory to the problem of orphan drugs In terms of its social utility, the hybrid right would be awarded for incremental innovation that is beneficial for society Although awarding a patent right for incremental and subpatentable innovation would be inconsistent with the social contract of patent law, it does not therefore mean a weaker form of hybrid or intermediate right could not be used for these forms of lower innovation If an invention falls just short of patent rights, it does not follow the invention ought to not be encouraged or that it is not a socially-beneficial invention If an incremental or 111 subpatentable form of innovation is socially-useful, such as with the case of orphan drugs, it should be evident that the award of a limited form of right in return for the development of these drugs is also a socially-useful exercise The alternative to creating a hybrid right for orphan drugs is to leave these drugs as they currently exist under orphan drug legislation (i.e to leave the marketing exclusivity rights unaltered), or to lower the bar of patent law to incorporate them into patent law Offering a hybrid right for orphan drugs is certainly preferable to either of these alternatives To lower the bar of patent law, in effect allowing patent rights to be granted for inventions which not satisfy patent law’s stringent criteria, is a dangerous proposition Not only could this be viewed as a form of “evergreening” of patent rights, but it would also undermine the public-private boundary that is carefully balanced in patent policy Leaving the marketing exclusivity rights to exist unaltered would also affect the public-private boundary, in perhaps an even more profound way: the expansive marketing rights are weighted heavily in favour of private interests, leaving little room for other interests To summarize, the hybrid right I am proposing for orphan drugs should be granted like other second-tier or intermediate IPRs, but would operate in conjunction with the other incentives offered under the ODA or EU Regulation The term of this right should be seven years, in keeping with the average term of marketing rights under the EU Regulation and the actual term of the rights under the ODA I would also characterize the hybrid right as a negative right, consistent with general principles of property law and intellectual property law Although the practical effect of having a positive type of right may be much the same as having a negative type of right, the ideological differences between the two are significant It is an important distinction in terms of the principles upon which the award of the right is based, and awarding a 112 negative form of exclusive right is more in keeping with the objectives of this research and the social contract of patent theory Notably, the hybrid right should also be a proprietary right over the drug itself, not a right over the drug as the treatment of Disease X In an attempt to balance competing interests and to preserve the public-private boundary, this right must be balanced with the inclusion of policy exceptions for research and non-commercial use of the drug, so as not to discourage potential research Allowances must also be made for the recognition of useful improvements (as a quantifiable standard), to replace the overly vague and uncertain “clinical superiority” designation currently being used in orphan drug legislation Quantifying this standard, thereby allowing competitor drug manufacturers greater certainty for subsequent or concurrent orphan drug development, will also address the criticism that uncertainty in the award of marketing rights actually discourages subsequent innovation during the life of a drug’s marketing right Other elements of the hybrid right have also been developed in this research I have suggested criteria for designation as an orphan drug remain as it currently exists under both the EU Regulation and ODA As well, it is clear that a substantive examination process will be required to determine the legal validity of the claim Such a process will necessarily remain separate from the regulatory examination process for drug safety and efficacy, although the two spheres may sometimes overlap Aside from applying for drug designation, this process could also involve a substantive examination for applications made in relation to useful improvements Problems presented by a hybrid right for Situation A orphan drugs have also been discussed Theoretical difficulties arise when one views these intermediate rights as being inconsistent with traditional IP theory Specifically, granting such a right for 113 unpatentable orphan drugs could be criticized as evergreening patent rights or undermining the social contract of IP law It has been suggested that awarding such rights for unpatentable inventions may even stifle innovation by taking information out of the public domain in favour of awarding private rights However, these arguments are tenuous at best They fail to account for the fact that this information is already protected by an expansive, even stronger right than the one I am proposing: marketing exclusivity rights Moreover, the marketing rights embody less of the balancing of interests that is a fundamental exercise in the process of awarding private rights over information Over-broad rights can hinder future innovation and the award of any private property right will result in some information being taken out of the public domain However, the hybrid right is preferable to the award of marketing rights and represents an alternative attempt to effectively incentivize orphan drug innovation One unanswered questions remains, and that is whether the hybrid right is an acceptable and useful incentive in terms of its practical effect That is, whether the hybrid right would be accepted by legislators, lobbyists, the public health sector and the private pharmaceutical industry in practice I believe the hybrid right is a superior incentive to the marketing right in both theoretical and practical terms The award of a hybrid right would address much of the criticism directed at marketing rights: the over-broad scope of the rights, the ability for manufacturers to collect multiple orphan drug designations (and monopolies) through “salami slicing,” and the lack of publicprivate balance in the award of such rights That the hybrid rights are less expansive, with provisions for policy exceptions included, would also address the criticism aimed at the “blockbuster” drugs: those orphan drug which turn out to be immensely profitable while maintaining their market monopoly Much of the criticism of orphan 114 drugs stems from the dissatisfaction with the exclusive and wide-scope of the marketing rights, and the resulting monopoly it awards the rights holder Although the issue of blockbuster drugs has not been a major theme in this research, the market monopoly problem is further compounded when a drug turns out to be immensely profitable, such as the AZT drugs for AIDS patients Of course, there is always a possibility that some companies in the pharmaceutical industry would prefer the winner-takes-all approach of marketing rights Expansive private rights are appealing to some companies who not view the ambiguity and uncertainty in the award of marketing rights as a potential problem for their own R&D One can imagine manufacturers currently holding marketing rights may be reluctant to see any change to the substance of the right itself, because the marketing rights are entirely beneficial to rights-holders There could also be criticism that altering the substance of the marketing rights to hybrid rights may offer too little of an incentive for drug manufacturers, in effect leading to a situation such as that which existed before orphan drug legislation was enacted However, it must be noted that such arguments would likely be motivated by self-interest, largely by manufacturers currently holding marketing rights Other manufacturers would actually benefit from the substantive change of enacting hybrid rights, fostering both competition and further innovation in the market Introducing hybrid rights in place of marketing rights would also address the criticism that the winner-takes-all race is a waste of resources that can be very hard on the loser, 171 a contention supporting the argument that such a race is also a significant disincentive for other drug manufacturers Hybrid rights would also encourage subsequent innovation that improves upon original orphan drugs, similar to the way competitors 171 Pulsinelli, supra note 16 at 321 115 are free to build on the discovery and make incremental, non-obvious improvements to competitive products in patent law In contrast, the ODA and EU Regulation simply restrict “comparable products from treating the subject disease, thus stifling competition and setting the stage for monopoly pricing.” 172 Drug manufacturers should support the hybrid right and the certainty of having a quantifiable standard to apply to their own R&D efforts in the case of subsequent treatments being developed for orphan diseases In the case of hybrid rights for useful improvements, more drug companies should be willing to invest in orphan drug R&D with the implementation of unambiguous standards and less threat of litigation Also preferable is the elimination of the winner-takes-all approach of marketing rights: in a race to develop these medical treatments, only the first drug to be designated will be awarded marketing rights, a significant disincentive for manufacturers to even make an initial investment for orphan drug development when other companies are involved in similar R&D Furthermore, adopting a more balanced approach to awarding IP rights for orphan drugs, such as the award of hybrid rights, is preferable to other suggestions that have been made for orphan drug reform One such proposal has been a shared exclusivity right to allow different drug companies filing for designation and approval within a certain length of time of each other to both be granted seven years of market exclusivity 173 For example, Rohde has suggested some concept of shared exclusivity be incorporated into orphan drug legislation “to prevent the waste and attendant economic disincentive that occurs when the limited resources of more than one firm are committed to the development of comparable products.” 174 In a way, implementing hybrid rights would also incorporate principles of shared exclusivity 172 Rohde, supra note at 136 Pulsinelli supra note 16 at 325 174 Rohde, supra note at 143 173 116 into orphan drug legislation The ultimate result of allowing hybrid rights to be awarded for different drugs – and not merely awarding rights for the sole treatment of a disease – also allows drug manufacturers a form of shared exclusivity rights The shared exclusivity would only operate insofar as one or more treatments would be allowed onto the market as treatments for the same disease; however, the hybrid rights are also exclusive rights over the orphan drug itself The holder of the hybrid right could still potentially apply for an additional right for subsequent treatments or uses of the same drug that are later discovered Another proposal that has been made is to change the term of the marketing exclusivity rights, for example from seven years in the US to four Although this may address the issue of weighing too heavily in favour of private interests, it does little to change the fact that marketing rights ultimately not exemplify the economic utilitarian theory embodied in patent law The award of a hybrid right is certainly preferable to this proposal As Bohrer explains, a common concern among different regimes in the award of private rights is whether the item or invention makes a substantial and independent contribution, or whether it is merely an attempt to profit from the exploitation of an earlier inventor’s contribution 175 The hybrid right I am proposing also addresses this concern, as the award of such rights involves a qualitative assessment and the fulfillment of certain criteria Ultimately, the main purpose of both the ODA and EU Regulation was to stimulate innovation and to foster the development of therapeutically superior drugs 176 for patients who require them The adoption of a hybrid right that embodies that same economic utilitarian reasoning should therefore be applied to this principal 175 176 Bohrer, supra note 30 at 414 Ibid at 370 117 objective of orphan drug policy in order to encourage more efficient innovation Essentially, the marketing rights in the ODA and EU Regulation represent a form of intellectual property protection that does not embody the principles of IP theory; the creation of hybrid rights for orphan drugs is an attempt to correct this incongruency 118 [...]... outside of the patent regime, including already-existing orphan drug legislation and public sector funding and involvement in R&D in public health However, I propose that the patent regime and economic utilitarian patent theory offer useful principles and goals that can be utilized in an attempt to encourage innovation into Situation A orphan drugs Those twin goals of economic utilitarian patent theory... in each country’s domestic patent legislation may vary, patent theory retains an important role in attempting to address the problem of orphan drugs Issues Related to Patent Rights Significantly, patent rights are also the most controversial type of IPRs in several respects These controversies include such divergent interests as morality, human rights, economic efficiency, international trade and legal... classic orphan disease, and the overwhelming public sentiment which followed 30 intellectual property rights and public health Merely one facet of this discussion is the WHO’s CIPIH, a committee comprised of experts with divergent backgrounds and experience, with a mandate of examining how intellectual property rights might affect public health 50 Critics have questioned the appropriateness of a public- health. ..possibility of patent rights Like Situation A orphan drugs, Situation B also illustrates the general problem of how to incentivize investment into R&D for new drugs However, this research will focus primarily on Situation A orphan drugs 11 5 LEGISLATIVE INTERVENTION IN THE AREA OF ORPHAN DRUGS The United States was the first country to explicitly recognize... purposes of this research: an understanding of the patent system is crucial in order to discuss its relationship to orphan drugs Patent rights are exclusive rights granted to an inventor over an invention for a limited period of time, in exchange for the necessary and sufficient disclosure of what that invention is Like other IPRs, patent rights are also negative rights – a principle reflected in Article 28... medical use patent rights 44 Thus, one of the problems presented by Situation A orphan drugs is the fact that, absent the possibility of being granted a patent over the drug, there is no real incentive to produce such drugs 43 Bently, supra note 40 at 444 In some jurisdictions to accept second medical use patent claims, a novel application of a drug to an orphan disease would potentially be patentable... of orphan drugs, and the ODA was passed in 1983 in order to “encourage research, development and marketing of orphan drugs for treatment of rare diseases.”21 Recognizing the lack of market incentives for orphan drugs, the ODA represented an attempt to offer pharmaceutical companies the necessary economic incentives to carry out research in developing and clinically testing orphan drugs Currently, orphan. .. in orphan drugs, resulting in an increased availability of such medicines to benefit society 30 This mirrors the ultimate goal of patent law: to increase innovation in order to benefit society I would suggest that marketing exclusivity rights in particular are not the most appropriate manner of inducing innovation into new orphan drugs, especially for Situation A orphan drugs For one, marketing rights. .. human rights nature and the enforcement of IPRs, especially patent rights However, morality and IPRs are not always mutually exclusive interests: in some cases, patent law has found ways to accommodate public morality considerations into its legal framework One such case is the ordre public or public morality exception contained in Article 27.2 of TRIPS, which allows Member states to exclude from patentability... and realistic solution to orphan drugs than the moral imperative 22 CHAPTER TWO: PURPOSE AND FUNCTION OF THE PATENT SYSTEM 1 INTELLECTUAL PROPERTY REGIMES AND PATENT LAW In order to understand how a solution addressing orphan drugs could draw upon the principles of the patent regime, it is important to understand the nature of current intellectual property regimes Property rights generally play a fundamental ... domestic patent legislation may vary, patent theory retains an important role in attempting to address the problem of orphan drugs Issues Related to Patent Rights Significantly, patent rights are... health: investing in health for economic development (Geneva: World Health Organization, 2001) Commission on Intellectual Property Rights, Innovation and Public Health, Public health, innovation... any patent rights, including product or process rights and second medical use patent rights 14 This is largely because these drugs/ treatments, or any subsequent treatments, are already in the public