Patent linkage and the TPP
Commercial considerations relevant to TPP
Geraldine Storton
Hospira Pty Ltd
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Overview
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Who is Hospira?
What is patent linkage?
Relative market sizes of TPP members
Patent linkage hypothetical financial analysis
Implications of patent linkage hypothetical for Hospira
Discussion
Conclusions
© Hospira, Inc. 2012
Our company
Improving the safety, cost and productivity of patient care
• World's Leading Provider of Injectable Drugs and Infusion Technologies
• Market leadership positions in:
– Generic injectable pharmaceuticals globally
– Biosimilars in Europe and Australia
– Medication management systems globally
• Distinguished 70-year history
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Pioneer in innovation and safety
Publicly traded since 2004
~$4 billion in annual revenues
Large, growing global markets
~15,000 employees, 13 manufacturing facilities
Headquartered in Lake Forest, Ill., USA
© Hospira, Inc. 2012
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Patent linkage and the TPP – what is patent linkage?
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• US FTAs - trend is to include “patent linkage” provisions requiring
patent linkage
• Patent linkage makes regulatory approval dependant on the
domestic patent position
• Patent linkage has been implemented in the US, CA and SG with
the following features
– Compulsory generic notification if intent to market pre patent
expiry
– Compulsory stay on regulatory approval if generic sued
– Stay is a very effective motivation to sue (equates to
compulsory litigation spend)
– US only provides generic market exclusivity
• US New Trade Policy 2007 proposes no inclusion of patent
linkage in FTAs
• Patent linkage in ex-US TPP countries will be detrimental to a
generic manufacturer’s ability to bring affordable, high quality
generics to market.
© Hospira, Inc. 2012
Patent linkage works when the market size is large, and
the pay-off from a single molecule is significant
Source: Business Monitor International, IMS Health
Compared to other countries in the TPP group, the annual market value
for pharmaceuticals in the US is significantly higher.
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*Note no data available for Brunei
© Hospira, Inc. 2012
Patent linkage - toward a hypothetical model
• HSP developed a hypothetical model to determine the
impact of patent linkage on generics industries in TPP
members
• Goal – to determine the commercial return on
“litigation” investment (if any) bearing in mind:
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Litigation costs
Market value of a product at patent expiry
Market share obtained
Degree of price discounting
Profit margin
Probability of success in litigation
Any “generic exclusivity” on offer
© Hospira, Inc. 2012
Commercial implications of Patent Linkage
Hypothetical – Results
The current GMiA estimated typical cost of litigation in Australia is $5M*. Using
typical industry ranges for market size, development cost, market share, price
erosion and margins a financial model was created.
This model did not return a positive profit for the generic manufacturer unless
the cost of litigation was low, or the exclusivity period was long.
Duration of exclusivity (yrs)
0.5
1
1.5
Cost to
litigate
(USD M's)
2
1
0.3
1.6
2.9
4.3
2.5
5
-1.2
-3.7
0.1
-2.4
1.4
-1.1
2.8
0.3
Green shading signifies a positive pay-off (i.e. The pay-off, including the cost of litigating, returns
a profit for the generic manufacturer)
A threshold value was determined to understand the market value of a drug
required to provide a positive return at USD 5M litigation cost and 0.5 years
Exclusivity. For the base case this was >USD 200M.
There are no injectable products* in Australia selling in excess of
$200 M pa.
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Source: Mean litigation cost estimates provided by GMiA. IMS data for number of molecules selling over $200 M pa
© Hospira, Inc. 2012
Commercial implications of Patent Linkage
Hypothetical – sensitivity analysis
For the base case USD 50M product, we varied the input parameters across
plausible ranges to understand the sensitivity of the model.
We found that with higher value inputs, a negative return is still expected at
Current litigation costs and 6 months exclusivity (as the US has).
B) Lower
estimate
0.5
Cost to
litigate
(USD M's)
Duration of exclusivity
1
1.5
2
1
-0.9
-0.7
-0.6
-0.4
2.5
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-2.4
-4.9
-2.2
-4.7
-2.1
-4.6
-1.9
-4.4
C) Upper
estimate
0.5
Cost to
litigate
(USD M's)
Duration of exclusivity
1
1.5
2
1
3.6
8.2
12.9
17.5
2.5
5
2.1
-0.4
6.7
4.2
11.4
8.9
16.0
13.5
There are only 13 injectable products* in Australia selling in excess
of $50 M pa.
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*Source: Legal Fee estimates from GMiA. IMS data for number of molecules selling over $50 M pa
© Hospira, Inc. 2012
Patent Linkage – Implications for Hospira
• Hospira conducted a hypothetical analysis of all of its
actual launched products in ex-US TPP countries in
the last 4 years.
• Under a patent linkage system with compulsory
litigation and generic exclusivity, none of the products
launched in the last 4 years would have had positive
financial return associated them.
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© Hospira, Inc. 2012
Patent linkage will not work in any country other than the US
• Patent linkage works in the US only because of the
size of the US market
– The size of the prize is incomparable
– The US is 50% of WW pharma market & totally
eclipses ROW pharma markets
• Patent linkage will be very problematic for every other
TPP member, including Australia
– The relative size of the market is significantly
smaller
– Compulsory patent litigation is cost prohibitive
– Generic market entry will be delayed or eliminated
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© Hospira, Inc. 2012
Patent linkage will not work in any country other than the US
• This generic entry delay (due to patent linkage)
will cripple government spending on
pharmaceuticals because it will:
– Deny the public timely access to cost effective
medicines
– Inflate health care costs
– Be detrimental to government’s ability to manage
spending on pharmaceuticals
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© Hospira, Inc. 2012
Conclusion
• Patent linkage in ex-US TPP countries will be
detrimental to a generic manufacturer’s ability to
bring affordable, high quality generics to market.
• The effect of patent linkage will be inequality in health
care:
– patent linkage will not affect access to affordable
medicines in the US, the US public will continue to have
access to these medicines, whilst the people of other TPP
members will not.
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© Hospira, Inc. 2012
Thank you
Geraldine Storton
Hospira Pty Ltd
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