Balancing act for new drugs
This is because even if a company receives a patent for a drug, the company cannot bring it to market without approval from the relevant Food and Drug Administration (FDA). To pass the FDA review, clinical trials are needed for a new drug and they can take between six and seven years.
By the time the drug hits the market, the patent may only have a few years of protection left. In light of this, in the US the Hatch-Waxman Act was enacted in 1984 to allow for the patent term to be extended under certain conditions and to provide a new form of protection known as ‘data exclusivity’.
Data exclusivity refers to the protection of a drug’s clinical data, which is submitted to the FDA for market approval. Under data exclusivity rules, for a certain period of time data cannot be relied on by other companies to obtain market approval, unless they have the data owner’s authorisation. However, other companies are not precluded from generating their own data to obtain market approval.
For example, in the US and Taiwan, a new molecular entity (NME) is given five years of data exclusivity. However, after those five years are up, other companies can apply for marketing approval using the same data and thereby avoid the costs associated with generating their own data, so such data exclusivity doesn’t prevent other companies obtaining market approval. It can, however, slow them down, in order to incentivise the original patent owner.
"For drugs involving improvements that are not significant enough to allow patent protection, seeking data exclusivity may be the way to go."
The cost of developing a new drug is high and most drug innovators make determinations on the likelihood of obtaining patents before investing further time in, and money on, clinical trials. If patent approval seems unlikely, they usually won’t invest the considerable time and money needed to conduct multi-phase clinical trials.
As a result, potentially beneficial drugs may never come to market.
A drug patent application may be denied for various reasons, including because early research results for the drug may fail to prove its therapeutic efficacy; because it fails to meet the utility requirement; because the disclosure of earlier research means it is not novel; and because a minor improvement to an existing drug may not meet the non-obviousness requirement.
Due to the limitations resulting from patentability requirements, companies may forgo pursuing patent protection for some new drugs.
In such an environment, the data exclusivity mechanism allows potentially beneficial drugs to receive another type of IP protection and be brought to market. Therefore, for drugs involving improvements that are not significant enough to allow patent protection, seeking data exclusivity may be the way to go.
According to article 40-2 of the Taiwanese Pharmaceutical Affairs Act, an NME is given five years of data exclusivity in Taiwan. In order to be eligible for data exclusivity, market approval must be sought through Taiwan’s FDA within three years of the NME’s initially being approved for marketing in any other country.
Although other generic pharma companies may apply for market approval after three years of data exclusivity by referring to the same data, market approval for other generic companies won’t be issued until the exclusive five years are up.
Therefore, the provision of the Pharmaceutical Affairs Act provides a balance between rewarding the owner of exclusive data and simplifying the procedure for other generic companies to obtain market approval for the same drug.
Candy Chen is the managing partner at Tsai, Lee & Chen. She can be contacted at: ckchen@tsailee.com.tw
Vivian Chen is a patent attorney at Tsai, Lee & Chen. She can be contacted at: info@tsailee.com.tw
