The new era of biologic regulation and patenting under the America Invents Act.

• Author: Rucker, David I.

1. Introduction II. THE REGULATORY HISTORY OF BIOLOGICS IN THE UNITED STATES A. The Biologic Control Act of 1902 B. The Pure Food and Drug Act and the Federal Food, Drug, and Cosmetic Act C. The Public Health Service Act D. Natural Source Biological Products and the Hatch-Waxman Act E. The Biologics Price Competition and Innovation Act (BPCIA) III. THE OLD AND NEW PATENT PROVISIONS RELEVANT TO THE BPCIA A. The First-To-Invent Filing System Under the Patent Act of 1952 B. The-First-To-File System Under the AIA C. Provisional Patents D. The Disclosure Requirement IV. THE ROLE OF MARKET EXCLUSIVITY IN PATENTS A. Market Exclusivity in the Biologic Industry B. The Defense for Market Exclusivity V. THE DANGER OF GRANTING MARKET EXCLUSIVITY FOR BIOLOGICS IN A FIRST-TO-INVENT SYSTEM AND THE NEED FOR MODIFICATION OF THE BPCIA A. The Rise of the Biomedical Industry B. Disincentives to Innovation in a Post-AIA Framework 1. Provisional Patent and Disclosure Disincentives 2. Market Exclusivity Disincentives C. Solutions to Protect Innovation in the Biologic Field 1. The Withdrawal of Market Exclusivity Upon Patent Invalidation 2. The Removal of Provisional Patents from Biologic Patent Applications VI. CONCLUSION I. INTRODUCTION

   In the pharmaceutical industry, regulation of biological drugs creates unprecedented challenges to the formulation of innovative patents in the intellectual property field. (1) Revenue once generated by these companies is now threatened by health care reform, increased competition, and government regulation in bringing new drugs to market. (2)

   Biological drugs are products manufactured "from living matter or manufactured in living cells using recombinant DNA biotechnologies." (3) They comprise a wide range of medical products including "vaccines, blood and blood components, allergenics, somatic cells, gene therapy, tissues, and recombinant therapeutic proteins." (4) Biologics are made of "sugars, proteins, or nucleic acids or complex combinations of these substances, or may be [from] living entities such as cells and tissues." (5) In the United States, these specialty drugs have become increasingly popular for their ability to treat medical conditions where conventional drugs fail. (6)

   Although drug sales are predicted to rise by more than four percent in 2014, (7) there still remains a looming threat to break-through innovations in the biomedical industry: the newly enacted Leahy-Smith America Invents Act (AIA). (8) The AIA makes extensive alterations to the U.S. patent framework by attempting to harmonize the U.S. system with international patent law. (9) It does this by changing the U.S. patent filing system from a first-to-invent standard to a first-to-file standard. (10) The new filing system provides "greater certainty for inventors that their patent will not be invalidated by someone [claiming] an earlier date of invention." (11)

   However, in the biopharmaceutical context, the AIA puts additional pressure on biomedical companies to patent biological inventions earlier in the research and development (R&D) process. The biotechnological industry is extremely competitive, and drug companies require a large amount of capital to research and develop innovative products. These funds are acquired from private investors, who prefer investing in companies with patent protected innovations. Without patent protection, venture capitalists are wary of providing capital because it might become too easy for competitors to undercut the biomedical company's market price with their own similar drugs. (12) Now that the U.S. patent filing system has changed from a first-to-invent standard to a first-to-file standard, biopharmaceutical companies will be forced to file provisional applications earlier in the R&D process, or risk pre-emption from competing firms, which could deter investors from providing capital to the business for future R&D of drugs.

   Therefore, pressure to avoid being pre-empted by competitors will cause biologic companies to file provisional applications prematurely, which will result in overly broad biological patents that fail to meet the 35 U.S.C. [section] 112 disclosure requirements. However, due to the unpredictable nature of biotechnology, the USPTO will likely approve many of these patent applications. Furthermore, market exclusivity, which is granted to biologic drugs approved by the FDA, will also exacerbate the situation by enabling biomedical firms to file overly broad patents on biologic drugs, and by allowing them to maintain their product monopolies in the field, even if their patents are later invalidated.

   As a result, the new rules will induce the production of poorly constructed patents that fail to fully and completely characterize biological products. (13) These non-innovative patents will be susceptible to validity challenges, but competitors will not contest their validity due to regulatory provisions under the Biologic Price Competition and Innovation Act (BPCIA). (14)

   This Comment explores the unanticipated effect the AIA will have on biological patents under the BPCIA starting March 16, 2013, and the need for modification of the BPCIA to maintain innovation in the biopharmaceutical field. Specifically, there are two viable ways to safeguard innovation in the biologic field: (1) by modifying the BPCIA so that market exclusivity is withdrawn upon invalidation of a biological patent, or (2) denying biological inventors the ability to file provisional patents.

   Part II of the paper presents background on the regulatory history of biological patents in the United States. Part III describes the patent provisions (pre-AIA and post-AIA) relevant to analyze the BPCIA. Part IV defines the role of market exclusivity in patents. And, Part V explains the dangers of granting market exclusivity to biologics in a first-to-invent system, and viable solutions to ensure continued innovation in the biomedical industry.

2. THE REGULATORY HISTORY OF BIOLOGICS IN THE UNITED STATES

   Regulation of biological products began in the nineteenth century when pharmacies became the common source for medicine. (15) It was during this time that the use of vaccines in the United States became prevalent, and governmental agencies and public laboratories began providing vaccination services to the general public. (16) However, regulation of drugs was thought to be a state responsibility, rather than a federal matter. (17) It was not until the 1890s that the federal government became significantly involved in "vaccination science and policy." (18)

   Before federal oversight existed, the popularity of biological treatments enticed private entities to manufacture vaccines and antitoxins at a scale never seen before. (19) Many small firms engaged in dishonest behavior, such as providing fake smallpox vaccines, and producing contaminated batches of medicine sold to the general public. (20) These drugs caused the death of thirteen children, and consequentially, Congress's foray into biologic regulation. (21)

   1. The Biologic Control Act of 1902

      In 1902, Congress passed the Biologic Control Act in response to tetanus contamination of smallpox vaccines and diphtheria antitoxin that killed many people. (22) The 1902 Act enabled the federal government to exert jurisdiction over "viruses, therapeutic serums, toxins, antitoxins, or analogous products", such as biologics, that were intended for the "prevention and cure of diseases of man." (23) These categories of biologics represented immunologic agents, and "Congress ... select[ed] these ... substances out of particular concern for immunologic, allergenic, and ... [possible] contagious side effects." (24)

      The 1902 Act also gave the federal government the power to monitor the production, labeling, and interstate traffic of biologics. (25) However, the Act did not allow the government to regulate biologic products directly. (26) Instead, regulatory powers were granted to the Hygienic Laboratory, which is the precursor to the National Institutes of Health (NIH). (27)

      In addition, the 1902 Act set groundbreaking precedents in the U.S. by modifying common law notions of punishment for intentional and reckless conduct, by instead favoring "pro-active safety measures" for entities, and by also becoming the first "premarket approval statute." (28) Therefore, companies wishing to market biological products needed their manufacturing facilities to pass federal inspection before they could market their drugs to the public. (29)

   2. The Pure Food and Drug Act and the Federal Food, Drug, and Cosmetic Act

      Four years after the Biologics Act of 1902, Congress enacted the Pure Food and Drug Act (PFDA) to prevent the adulteration and misbranding of food and drugs. (30) However, the PFDA "did not include any controls over manufacturing establishments, unlike the pre-existing Biologics Act." (31) As a result, there was no form of premarket control over new drugs to ensure their safety before entering the market. (32)

      To alleviate the problem, Congress passed the Federal Food, Drug, and Cosmetic Act (FDCA). (33) The law gave the federal government power to regulate food, drugs, medical devices, and the entities that manufactured and distributed such products. (34) It also "required [manufacturers] to submit evidence of a new drug's safety to the government in a premarket new drug application (NDA)" before the manufacturers could sell the drug. (35) Furthermore, the FDCA broadened laws regarding adulteration, and added "drugs or medical devices that were contaminated, manufactured, or held in conditions under which such product might become contaminated or degraded." (36)

   3. The Public Health Service Act

      Several years after the FDCA's enactment, the Public Health Service Act (PHSA) was approved by Congress to control the manufacturing process of biologics. (37) In addition, the Biologics Act was also reenacted. (38) However, Congress altered the biologics statute by adding mandatory...