The Importance of Patent Linkage

“Robust intellectual property (IP) protection is vital for biopharmaceutical innovation,” stresses a recently released report from Geneva Network, a UK-based public policy research and advocacy organization specializing in international intellectual property, health, and trade issues. The report – written by Geneva Network researcher Jack Ellis, a former Asia-Pacific editor of Intellectual Asset Management magazine – notes that “countries that want to build an innovation driven knowledge-based economy” need to embrace the concept of patent linkage for the pharmaceutical products in their market.

Under a patent linkage system, mechanisms are put in place to seek to ensure that patent-infringing drugs are unable to enter the market by receiving licensing approval and reimbursement prices under the National Health Insurance program. The original manufacturer is notified when an application is filed for a drug that potentially violates one of its patents, providing the opportunity for early dispute resolution before an infringing product reaches the market.

The aim, Ellis explains, is to “protect the IP rights and investment of the original innovator, while allowing the generic manufacturer to avoid becoming embroiled in costly legal disputes.” Because “different government agencies are responsible for the entirely separate processes of granting patents for new medicines and for approving new pharmaceutical products for market entry,” he notes, without patent linkage “too often regulators will grant marketing approval for a generic without regard to whether an applicable patent remains in force.”

Ellis cites Taiwan as a prominent example of a country where the authorities have come to realize “that allowing the routine infringement of IP rights by generic manufacturers is not good for the long-term future of the economy,” since it discourages investment in innovation in the crucial life sciences sector. As a result, over the past few years the Ministry of Health and Welfare, with support from the Taiwan Intellectual Property Office under the Minister of Economic Affairs, has devised a plan to “link the patent status of a medicine and regulatory approval of a generic, preventing the latter from gaining regulatory approval while the patent on the original version is still valid,” he writes.

Appropriate legislation to implement the system has been approved by the Executive Yuan and sent to the Legislative Yuan for deliberation. According to the Geneva Network report, the early resolution mechanism for patent disputes called for in the bill would be similar to the system in effect in the United States since 1984 when the Drug Price Competition and Patent Term Restoration Act (more commonly known as the Hatch-Waxman Act) was enacted.

Among the winners from implementation of patent linkage are the patients, says Ellis, who “benefit as they no longer run the risk of having to switch back and forth between different treatments that could have different side-effects and efficacy depending on the outcome of IP battles between innovators and generics.”

Although establishment of a patent linkage system in Taiwan has not been welcomed by many members of the domestic generic drug industry, Ellis makes the case that this step in fact represents a win-win opportunity that would benefit the generics makers as well as the originators. For the generics industry, “such a mechanism can give competitive advantages and assist them in avoiding infringement,” he argues. “It enhances predictability and transparency around the regulatory approval process by highlighting third-party patents that could prove an impediment to a generic company’s business strategy. This means that the generic manufacturer can reduce risk and allocate resources to products less likely to be halted by litigation, thereby creating efficiencies that impact positively on the bottom line.”

Further, by enabling the generics makers to gain a better understanding of the relevant patent landscape, patent linkage “encourages generic manufacturers to innovate themselves, moving the entire generic industry up the value chain,” Ellis observes. In that sense, the adoption of patent linkage will bolster the Taiwan government’s ambition to develop a strong domestic biopharma industry as one of the strategies for injecting new vigor into the Taiwan economy. It will also support development of the life sciences industry by giving multinational biopharmaceutical companies greater confidence that investment in Taiwan will not pose a risk to their intellectual property.

“An environment where patent owners feel confident that their IP rights are respected and enforceable is one in which they will be more comfortable investing,” Ellis maintains. “That in turn drives knowledge-based economic development – and demonstrates why countries pursuing growth should embrace patent linkage.”