Patent rights international public health orphan drugs

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

CHAPTER ONE: INTRODUCTION

1 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 do 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

2 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.”1 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.2

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.3 In the EU, conditions that affect not more than 5 in 10,000 persons in the Community are classified as orphan diseases.4 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

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]

3

The Orphan Drug Act, 21 U.S.C.§360 aa-ee (1998) [ODA]

4

EC, Commission Regulation 141/2000 on orphan medicinal products, [2000], online: European

Commission <http://ec.europa.eu/enterprise/pharmaceuticals/eudralex/homev1.htm.> [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.5

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.6

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

5

Commission on Macroeconomics and Health, Macroeconomics and health: investing in health for

economic development (Geneva: World Health Organization, 2001)

6

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 do 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

3 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 2004.7 This means at least 10 percent of the sales in the pharmaceutical industry are spent on R&D.8 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

7

PhRMA, Pharmaceutical Industry Profile 2005, online: Pharmaceutical Researcher and

Manufacturers America <http://www.phrma.org>

8

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 billion9 and to take between

10 – 15 years Out of ten approved drugs, estimates are between one to three10 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 research-intensive 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

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 5 percent IFPMA R&D, supra note 10 at 15

13

Rohde, supra note 1 at 126

4 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 non-

patentable 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.14This 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

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

Situation B

Second, there is the situation of orphan drugs/treatments which would be patentable but simply do 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 do 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 do 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 do not offer pharmaceutical companies the opportunity to recoup their investment on R&D for these diseases, despite the

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

5 LEGISLATIVE INTERVENTION IN THE AREA OF ORPHAN DRUGS

The United States was the first country to explicitly recognize the need for legislative intervention targeting the issue 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 drug legislation also exists in various forms

in other countries around the world, including Australia, Japan, Singapore and the

European Union The EU Regulation on Orphan Medicinal Products (EU

Regulation)22 was passed in 1999, being based on the same premise as the ODA

An understanding of the issues surrounding the implementation of both the ODA and EU Regulation and the specific incentives offered to manufacturers by orphan drug legislation will assist in further understanding orphan drugs as they relate

to patent law and patent theory, especially in the case of Situation A orphan drugs

Overview of the US ODA: Orphan Drug Designation and Incentives

The ODA provides six areas of assistance for pharmaceutical companies developing orphan drugs The three primary incentives offered for drug development under the ODA are: (1) federal funding of grants and contracts for clinical trials of orphan products; (2) tax credits for clinical testing costs; and (3) the granting of an exclusive marketing right for the orphan drug for seven years In addition to the three main incentives, the ODA also provides for (4) assistance with investigations of orphan drugs (protocol assistance); (5) open protocols for getting the drugs to patients

who need them; and (6) the establishment of an Orphan Products Board for assisting drug manufacturers developing orphan drugs

A drug must first be designated as an “orphan drug” under the ODA for the incentives offered by the legislation to apply To be designated, the drug must be used

to treat a rare disease or condition – with thresholds in the US of a patient population

in which the disease affects less than 200,000 people For patient populations that exceed 200,000 people, the disease or condition must occur so infrequently in the US that there is no reasonable expectation for manufacturers to recover the cost of developing a drug for such disease or condition.23 This second method of designation under the ODA is referred to as the “reasonable expectation test.”

Overview of the EU Regulation: Orphan Drug Designation and Incentives

Like the ODA, the EU Regulation offers incentives for the research, development and placing on the market of designated orphan medicinal products24 in the form of (1) fee reductions; (2) incentives to support research; (3) protocol assistance; and (4) community marketing authorization in the form of exclusive marketing rights The marketing rights are considered the main incentive offered by the legislation Similar to the ODA, a drug must first be designated as an orphan medicinal product before the incentives become available for drug manufacturers

Designation as an orphan medicinal product requires a sponsor of the drug to establish that it is (1) intended for the diagnosis, prevention or treatment of an orphan disease affecting not more than five in 10,000 persons in the European Community when the application is made; or (2) that it is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition

in the EC and that without incentives it is unlikely that the marketing of the medicinal

product in the Community would generate sufficient return to justify the necessary investment In addition, a sponsor must show that no satisfactory method of diagnosis, prevention or treatment of the condition in question exists that has already been authorized by the EC.25

Overview of the Singapore Medicines Act

In Singapore, orphan drugs are covered in the Medicines Act: the Medicines (Orphan Drugs) (Exemption) Order 26 Unlike the US or EU legislation, however, the Singapore Act addresses the importation and supply of orphan drugs without a product license rather than specific incentives for researching and developing such drugs Therefore, the Singapore legislation is not addressed to the issue of encouraging innovation in the pharmaceutical industry for orphan diseases, as no economic incentives are offered to encourage innovation In particular, there is no incentive such as the marketing exclusivity right offered by the ODA or EU Regulation

6 THE MARKETING EXCLUSIVITY RIGHT

Of all the measures of assistance offered by orphan drug legislation, only one

is particularly controversial: the marketing exclusivity right Marketing exclusivity is the main incentive offered to drug manufacturers by both the ODA and EU Regulation, and it has been the subject of much criticism and controversy regarding how far the incentives in this legislation ought to go In particular, the marketing exclusivity right has been criticized as an incentive that goes too far

Marketing exclusivity privileges are provided for in Section 527 of the ODA, which grants a drug manufacturer the exclusive right to market and manufacture a drug for a particular disease or condition for seven years Once the marketing exclusivity right is granted to an orphan drug under Section 527, the manufacturer of that drug has an assurance from the FDA that no other drug or treatment will be granted marketing rights for that particular orphan disease during the seven-year term

of the right

These rights are also offered in Article 7 and 8 of the EU Regulation Specifically, Article 7 grants community marketing authorization to a drug manufacturer for an orphan drug This authorization is granted under Article 8 in the form of market exclusivity for a term of ten years Once marketing authorization is granted, subsequent applications for marketing authorization for a similar orphan drug will not be accepted during the ten-year term of the right Hence, market exclusivity under the EU Regulation operates in the same way as marketing exclusivity rights under the ODA

Much of the criticism directed at marketing exclusivity rights is due to their broad scope, combined with few allowable exceptions to the exercise of these rights Specifically, marketing exclusivity rights can be characterized as stronger and wider

in scope than patent rights, with fewer and weaker exceptions to the infringement of the right provided for in either the ODA or EU Regulation For example, marketing rights makes no provision similar to the provisions in patent law for second medical use rights Neither do marketing exclusivity rights recognize the possibility of obtaining rights for new and useful improvements, such as the provision for improvements explicitly recognized in patent law There are also no exceptions for research or non-commercial experimental use or Bolar exemptions, unlike the major forms of exemptions from patent infringement recognized by most developed countries These exemptions help to indicate patent rights are narrower in scope than marketing exclusivity rights

7 ISSUES RELATED TO ORPHAN DRUG LEGISLATION

The US ODA and the more recent EU Regulation can be characterized as a success in many respects Both have resulted in a marked increase in the number of orphan drugs currently available on the market For example, in the decade before the ODA was passed, only ten orphan drugs were approved and developed Yet, since the ODA was passed in 1983, over 200 drugs and biological products for rare diseases have now been brought to market.27 In addition, more than 1238 orphan drug designations have been made by the FDA since the ODA was passed, a figure representing a ten-fold increase in the rate of orphan drug development since before the ODA was passed.28 Likewise, in the five years since the EU Regulation has been implemented, 458 applications for orphan designation were submitted, resulting in

268 products being designated which related to over 200 different rare conditions.29

However, a number of issues still exist regarding orphan drug legislation

Most prominent is concern over whether this legislation offers the most appropriate

incentives to encourage innovation and bring new therapeutic treatments to market

In effect, we must ask whether the ODA and EU Regulation accomplish what they set out to do, resulting in an increased dedication by all sectors to invest in R & D that targets all forms of orphan diseases Or should the success of such legislation be measured by numbers alone, with the obvious recognition that it has resulted in an increase of new orphan drugs currently available on the market

A simple examination of the increased figures would reveal both pieces of legislation do, indeed, accomplish what they have set out to achieve Yet still, very few orphan drugs have been developed which target the most unprofitable forms of

orphan diseases As a result, holes remain in this legislation, which indicate that further work can be done to incentivize investment into orphan drugs This is so despite the unequivocal statements made by proponents of this legislation that the ODA and its EU counterpart have been an overwhelming success

Whether the legislation serves to stimulate or hinder innovation of new drugs should also be considered This is the most significant question, especially when one considers the interaction between the regulatory regime for orphan drugs provided for

by the ODA and EU Regulation and the corresponding rights for pharmaceutical products offered by the patent regime The interaction between the two regimes is important: it indicates the emergence of a regulatory regime based on the grant of patent-like exclusive rights, which fails to include any of the safeguards built in to the patent regime Essentially, the marketing rights are a form of intellectual property protection, although it is a unique form of IP protection that seemingly does not exhibit any of the principles of IP policy This is also an important consideration because statutory intervention in the area of orphan drugs was originally based on the objective of increasing innovation 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 may go so far as to discourage

innovation due to uncertainty and the over-broad scope of these rights For example, the wide scope of marketing rights can prevent similar or incrementally different

30

See Robert A Bohrer & John T Prince, “A Tale of Two Proteins: The FDA’s Uncertain

Interpretation of the Orphan Drug Act” (1998-1999) 12 Harv J.L & Tech 365 at 370 [Bohrer] “The main purpose of the ODA is to stimulate innovation and to foster the development of therapeutically siuperior drugs for these smaller patient populations.”

products from entering the market, which may lead to a blocking effect on innovation Orphan drug policy also mirrors the fundamental goal of patent policy of incentivizing innovation, yet the marketing rights in orphan drug legislation fail to include any of the policy exceptions included in patent law Significantly, the very existence of these policy exceptions in patent law was based on the necessity of balancing divergent interests in order to safeguard the promotion of innovation

8 PROPOSED METHODS OF ADDRESSING INNOVATION IN ORPHAN DRUGS

The fact that this legislation was enacted to encourage innovation in the area

of orphan drugs, but may actually have the opposite effect, begs the question of whether a more effective innovation policy for the R&D of drugs targeting orphan diseases exists If so, what it would entail and how it would relate to the patent and regulatory systems already in place for pharmaceutical products must also be considered Certainly, incentives must be offered to encourage innovation into orphan drugs, without going so far as to discourage innovation by offering too-strong

incentives Yet any attempt to find the optimal method for inducing innovation into

such a problem is bound to fail, because it is unknown what exact amounts and types

of incentive lead to sufficient research and development in the field of pharmaceuticals “Statements to the contrary are mere acts of faith based on uncertain

or self-serving empirical evidence.”31 Indeed, quantifying such a relationship is a question better left to economists

It is also accepted that methods of inducing innovation exist 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 are: to encourage innovation by offering a limited property right over an invention, and to enrich the public domain by requiring the disclosure of that invention

31

Richard E Gold, “Biomedical Patents and Ethics: A Canadian Solution” (2000) 45 McGill L.J 413

at 423

In addition, it is clear that any proposal must not be founded solely on a moral argument or the “moral imperative” to solve the problem of orphan drugs For instance, the CIPIH states there is a moral imperative to address the issue of innovation targeting the diseases of developing countries They further suggest the moral imperative is backed by a legal imperative, linking the issue to human rights commitments made by governments around the world “In this context,” they argue,

“the relevant human right agreed in the International Covenant on Economic, Social and Cultural Rights (article 12.1) is the right of everyone to the enjoyment of the highest attainable standard of physical and mental health.”32

Previous moral arguments have failed, including ones similar to those in the WHO’s CIPIH Report, because they are couched only in the language of morality and human rights While there may be widespread sympathy for such an argument, and even international commitments made by countries with good intentions, human rights do not provide the foundation for a concrete legal obligation to address this problem These moral issues can and should be recognized, but they do not provide the foundation for effective policies that would target orphan diseases Nor is the moral imperative’s connection to a legal imperative, based on the idea of physical and mental health as a basic human right, an effective legal argument

Moreover, the moral imperative incorrectly treats the issues of access to essential medicines by poor countries and the development of new but necessary medicines that address such countries’ health concerns as one and the same As

already explained, these are two separate and very distinct issues: many of the

medicines required by developing countries to treat these diseases have patents that are already expired, but distribution problems in such countries make access to

32

CIPIH, supra note 5 at 21/22

medicines the salient issue Ultimately, the moral imperative simply does not take into account the actual nature of the patent system or the economics of the pharmaceutical industry As a result, suggestions based on values that form the basis of the patent system and reflected in the current market will go a long way towards effecting a more meaningful and realistic solution to orphan drugs than the moral imperative

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 role in explaining different values and priorities in society and intellectual property rights are no exception to this As Hettinger explains, “property institutions fundamentally shape a society.”33

The term “intellectual property rights” (IPRs) refers to legal property rights which are granted over certain non-tangible items or products of the intellect, within a national boundary or jurisdiction Put differently, WIPO defines intellectual property

as any creations of the mind Mainly, this includes copyright, trademark and patent rights, as well as trade secrets and confidential information It also includes geographical indications, industrial designs, and layout designs of integrated circuits.34 The Agreement on Trade-Related Aspects of Intellectual Property 35

(TRIPS Agreement) includes copyright, trademark, geographical indications, industrial designs, patents, layout designs of integrated circuits and the protection of undisclosed (confidential) information under the intellectual property protection member states are obligated to respect.36

Like traditional property rights, IPRs are negative rights, allowing the holder the right to exclude others from possessing or using such items, ideas or products

WTO, Marrakesh Agreement Establishing the World Trade Organization: Annex 1C: Trade-Related

Aspects of Intellectual Property Rights, online: WTO

<http://www.wto.org/english/tratop_e/trips_e/t_agm0_e.htm> [TRIPS]

36

Ibid at §§1-7 covers the nature of IPRs

These rights are confined to a specific territory, leading to exhaustion of the rights outside of such territory, a complicated and controversial issue that is nevertheless outside the scope of this research

Patent Rights

In particular, patent rights are most important for the 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 of TRIPS Specifically, Article 28 gives a product patent holder the right to prevent third parties not having the owner’s consent from making, using, offering for sale, selling, or importing for these purposes that product.37 After the statutory period of a patent’s life, usually 20 years, the invention

is considered part of the public domain and the patent rights expire Thus, any person can exploit or make use of the invention after a patent’s expiration, commercially or otherwise

In patent law, an invention must meet three broad criteria in order to be considered patentable subject matter An invention must be novel, non-obvious and useful; failing to meet any of these criteria will mean a patent is invalidated and will not be granted These requirements for patentable subject matter are also reflected in Article 27 of the TRIPS Agreement Article 27 specifies that patents are available for

37

Ibid at Article 28 Rights for process patents are similarly worded: “where the subject matter of a

patent is a process, to prevent third parties not having the owner’s consent from the act of using the process, and from the acts of: using, offering for sale, selling, or importing for these purposes at least the product obtained directly by that process.”

any inventions, whether products or processes, in all fields of technology, provided they are new, involve an inventive step and are capable of industrial application.38

These three requirements are greatly significant in considering the subject of orphan drugs and patentability in general For example, what is considered to already

be part of the prior art is an important standard for patentability in terms of novelty

A patent will not be granted if an invention is not novel: novelty exists when an invention does not form part of the “state of the art” or “prior art,” i.e when the invention has not already been published or used Such an assessment involves a comparison between the invention and other products or processes which have already been disclosed through prior publication or prior use.39 Prior art, a term used synonymously depending on the jurisdiction with the term “state of the art,” is

“defined very broadly to include all matter that is available anywhere in the world

before the priority date of the invention.”40

The concepts of novelty and the prior art, for example, are covered under section 102 of the US Patent Act.41 A person will not be entitled to a patent for an invention under Section 102 if it was (a) known or used by others in the US, or patented or described in a printed publication in the US or a foreign country, before the invention thereof by the applicant for patent or (b) for an invention that was patented or described in a printed publication in the US or a foreign country or in public use or on sale in the US, more than one year prior to the date of the application for patent in the US.42

38

TRIPS, supra note 35 at Article 27: patentable subject matter Note that for the purposes of Article

27, the terms "inventive step" and "capable of industrial application" may be deemed by Member states

to be synonymous with the terms "non-obvious" and "useful" respectively

39

Anne Fitzgerald & Brian Fitzgerald, Intellectual Property In Principle (Sydney: 2004, Thomson

Lawbook Co.) at 283 [Fitzgerald]

The novelty requirement differs from the non-obvious requirement because it

is not a qualitative assessment of the invention Rather, it is a method for patent examiners to assure patent rights are not granted for inventions which already form part of the public domain The novelty standard is also related to the traditional rationale for granting patent rights As Bently explains, “the public is willing to pay the costs (or monopoly profits) of patenting if, and only if, they are able to get access

to information that would have otherwise not been available to them.”43

The prior art and novelty are significant in terms of the first type of orphan drugs, Situation A, because the novelty requirement and prior art standard prevent a patent from being granted for orphan drugs if they are already known to treat a certain disease Due to the wide scope of the prior art standard, any invention or discovery in the public domain anywhere in the world will be excluded from patent protection, including known therapeutic treatments for orphan diseases In this instance,

Situation A orphan drugs that are already known to treat a certain disease are also

ineligible for second or subsequent 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

Domestic and International Aspects of Intellectual Property

It is important to note that intellectual property law, notwithstanding the existence of international intellectual property institutions and agreements, still remains a matter of domestic jurisdiction for each state Each state may determine for itself the strength of intellectual property rights and what such IPRs will specifically entail, according to the needs and interests of that particular jurisdiction As such, certain variations will exist from jurisdiction to jurisdiction regarding the exact nature

of the rights granted over intellectual property For example, the specific criteria which must be satisfied in order to obtain a patent, and the legal tests developed to help determine when these criteria are met, will vary as between different jurisdictions

In light of this, three related points should be made regarding the domestic/international dimensions of intellectual property law First, the existence of international intellectual property agreements, such as TRIPS, have created an

international minimum standard for intellectual property protection that is both

imposed on and enforced in all member countries TRIPS is part of the mandatory institutional framework established under the WTO during the Uruguay Round and is binding on all WTO members.45 The practical effect of such an agreement has been to create a harmonization of intellectual property rights world-wide As a result, although countries may increase the strength of their intellectual property rights, often referred to as “TRIPS-plus” levels of IP protection, rarely will a country be permitted

to decrease or weaken their levels of IPRs Only in the most extreme cases are

exceptions made for less intellectual property protection than that provided for in

TRIPS, such as the grace period granted to least developed countries for a delayed

45

Susan K Sell, Private Power, Public Law: The Globalization of Intellectual Property Rights

(Cambridge: Cambridge University Press, 2003) at 8

onset of compliance with TRIPS standards and public health/morality exceptions for all countries

Second, because intellectual property is now an issue firmly embedded within the arena of international trade, there are also spill-over effects on the domestic nature

of IPRs in the form of bilateral trade agreements and international treaties For example, the United States has been quite successful at promoting “TRIPS-plus” levels of IP protection because their Office of the United States Trade Representative (USTR) has taken a pro-active stance on promoting intellectual property rights in its bilateral trade agreements The result of these bilateral agreements has been an increase in levels of IP protection, with added trade and commerce benefits offered to countries in return This can be seen in the recent US-Singapore and Australia-US Free Trade Agreements Thus, any recommendations made to effectively target the problem of orphan drugs must also take into account these additional dimensions of intellectual property law

Third, and more generally, patent law derives a number of common principles from patent theory These principles are already reflected in many patent regimes in Western countries, as well as in the TRIPS Agreement itself These principles and related theories pertaining to patent law are most important for the purposes of this research Despite the fact that technical specifications 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 policy These issues

largely remain non-legal in nature and outside the scope of this research, although critics of stronger IPRs often highlight the conflict between considerations of a moral

or 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 certain inventions where it is necessary to protect the ordre public or public morality within their territory This includes protecting human, animal or plant life or health or where it is necessary to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by the law of that State.46

As Barton explains, many people believe IP rights and TRIPS standards of stronger IP protection for developing countries is a moral issue, because such countries often don’t immediately reap the benefits of implementing TRIPS levels of

IP protection.47

IP rights are nowadays generally treated as economic and commercial rights,

as is the case in TRIPS, and are more often held by companies rather than

individual inventors But describing them as “rights” should not be allowed

to conceal the very real dilemmas raised by their application in developing

countries, where the extra costs they impose may be at the expense of the

essential prerequisites of life for poor people.48

Another moral issue related to orphan drugs and patent rights is the issue of access to medicines, which many patients’ rights advocates have argued is a basic

46

TRIPS, supra note 35 at Article 27.2

47

Note that proponents of TRIPS, including most developed countries using the “free riding” argument

to discourage IP piracy, argue developing countries stand to gain more benefits from their inclusion in the WTO than they would be sacrificing with higher levels of IP protection Such trade-offs include increased levels of foreign direct investment and foreign trade They also argue that membership in the WTO is not compulsory

48

Commission on Intellectual Property Rights, Integrating Intellectual Property Rights and

Development Policy (London: Commission on Intellectual Property Rights, 2002) at 7 [Barton report]

human right In fact, much of the lobbying which led to the ODA being passed was done on behalf of people suffering from rare and unprofitable diseases, who pressed the US government for legislative intervention According to Pulsinelli, one of the major forces behind the ODA was the National Organization for Rare Diseases (NORAD), led by its chairperson, Abbey Meyers.49 The movement lobbying for orphan drug legislation therefore framed their argument as a moral issue, pressing for legislative action because it affected the general health and welfare of a portion of the

US demographic Of course, this moral argument can also be seen on a larger scale in recent discourse regarding the right of access to medicine for AIDS drugs in Africa

The controversial nature of patent rights has also put them at the forefront of public discourse, largely due to the recent inclusion of intellectual property rights within the rubric of international trade law This has brought many issues previously unrelated to intellectual property policy, such as trade and commerce, into the realm

of patent law While a comprehensive understanding of the aforementioned issues is too vast in scope to be fully discussed in this thesis, there are certainly aspects related

to the problem of orphan drugs and the attempt to address it with a meaningful solution For example, the pharmaceutical industry has itself suggested the creation of

an international treaty on tropical diseases to address Situation B orphan drugs This treaty would likely be included in an area such as international trade, yet it would still relate to, and must also remain consistent with, patent law and other pharmaceutical regimes

That patent rights are indeed at the forefront of public discourse is reflected in the multitude of non-governmental organizations, government departments and private industry players that are involved in a discussion such as that surrounding

49

Pulsinelli, supra note 16 at 305 Pulsinelli also notes an event that catalyzed the passage of the ODA

was an episode of a popular television program in March 1981 which dealt with a boy with Tourette’s syndromes, a classic orphan disease, and the overwhelming public sentiment which followed

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 oriented international organization such as the WHO examining IPRs, especially in relation to other international organizations, such as WIPO However, the fact that a massive health organization like the WHO has created a committee with such a mandate should suggest the enormous scale of this issue: IPRs touch significantly on other areas of life, from world trade to human rights

Certainly, inducing innovation into research and development and addressing peoples’ basic needs by providing them with orphan drugs are issues fraught with moral and political values A starting presumption for this thesis is the fact that such

issues represent valuable principles and, further, they are principles that ought to be

2 THEORIES OF INTELLECTUAL PROPERTY LAW

Theorists often use different justifications to explain the existence and award

of intellectual property rights and, more generally, for the justification of property rights as a whole Of these, three pre-eminent theories are most often referred to regarding the granting of property rights and, by extension, the granting of IPRs These are the natural rights theories, personality theories, and utilitarian theories In relation to the patent regime, a form of utilitarian theory called economic utilitarianism is the most widely accepted justification for patent rights

However, not all scholars would agree that property theories in general are easily extended to encompass intellectual property rights The intangible nature of intellectual property is also related to a general questioning of the suitability of private legal rights over such objects Notably, Hettinger has criticized the traditional justifications for intellectual property rights because, unlike tangible real or personal property, the very characteristics of intellectual property make it something that all people could use and possess concurrently “The burden of justification is very much

on those who would restrict the maximal use of intellectual objects.” In contrast to intellectual property rights, he argues, a person’s right to exclude others from possessing and using a physical object can be justified only when such exclusion is necessary for that person’s own possession and unhindered use. 51

Notwithstanding such criticisms, property theory is applied by extension to intellectual property rights with a minimal amount of intellectual effort Though intangible, IPRs share many of the same characteristics of traditional property rights

Like property, legal theorists view IP as the legal relationship a rights-holder has with

the object in relation to the rest of the world, and not necessarily with the object itself

51

See Hettinger, supra note 33 at 35: “The characteristic of intellectual objects grounds a strong prima

facie case against the wisdom of private and exclusive intellectual property rights.”

The accepted concept that property is a right and not a thing is perhaps even more

suitable, then, for the intangible nature of intellectual property – where there is often

no “thing” in existence Instead, intellectual property is a legally and socially-created concept: a regime of private property rights granted over intangible objects

Of course, it should also be remembered that any discussion of property law and its distinguishing features is inherently value-laden Indeed, property law

“incorporates a series of critical value judgments, reflecting the cultural norms, the social ethics and the political economy prevalent in any given community.”52 In order

to completely understand the nature of these rights, it is essential to understand why such rights are granted in the first place

52

Kevin Gray & Susan Francis Gray, The Elements of Land Law, 4th ed (London: Oxford University Press, 2006) at 102 [Gray]

3 NATURAL RIGHTS THEORY

One of the starting points for justifying all property law is the labour or natural rights theory of property Simply put, this theory posits that people should be entitled

to the fruits of their labour: anything a person creates through his labour or effort ought to be, in turn, rewarded with a property right According to natural rights philosophers, property rights were natural rights because they were rights willed by God.53 This is referenced in the Bible, where it is said that “whatsoever a man soweth, that shall he also reap.”54 Most commonly, John Locke’s labour theory is used as the proponent for this type of justification Locke stated property was originally owned in common by all men, but that men had a natural right to appropriate this common property for their own private use where they themselves had laboured to create it In the case of land, Locke stated: “As much land as a man tills, plants, improves, cultivates, and can use the product of, so much is his property He by his labour does,

as it were, enclose it from the common.”55 This theory has also been extended to intellectual property rights to include mental labour, or products of the intellect

A natural rights approach to property law is inherently flawed in many respects, and it is a dangerous view to espouse It is a flawed theory because it is centred on individual entitlement, and the idea that property rights are so pre-eminent

to be ordained to the individual by God himself It is a dangerous argument, because the language of entitlement is a slippery slope, and it can just as easily be used by either pro-patent or anti-patent ideologies For example, individual entitlement and the principles of natural rights theory can be used to support the argument for expanding the scope of patent protection, which is inherently a pro-patent argument In contrast, natural rights theory can also be used to support the argument of individual

entitlement to medicines still protected by patent rights, an argument normally espoused in the context of anti-patent philosophy While these two arguments

ultimately represent positions diametrically opposed to one another, it is the content of

the message that remains the same “I am entitled to X right; therefore, I should receive it.”

The notion that legal rights are not created by society nor by the government but rather inherited directly from and ordained by God is by now also extremely antiquated, and has been largely dismissed This assertion simply does not make any sense from an intellectual point of view: legal rights, by their very nature, are socially-constructed, and do not exist in isolation from the state and society Rather, these rights only exist once the state and society choose to both recognize and enforce them

It is also worrisome that any person or entity should feel they are naturally and automatically entitled to such strong legal rights Interestingly, proponents of stronger intellectual property rights, and patent rights in particular, have couched their arguments in “entitlement” terms of the natural rights theory with increasing frequency This is part of what many scholars have referred to as the increasing

“propertization” of society or the “maximalist” rights culture

Natural rights theory has thus been rejected by most current Western jurisprudence, especially in regards to the patent system Patent law has explicitly rejected the assertion that patents serve the function of merely being a reward for labour: this is why patent law requires an invention to satisfy the three criteria in order

to obtain a patent right Patents are not simply granted because an effort was made, and there is no natural entitlement to a patent right for any invention created by man

In his judgment on the Harvard Oncomouse case,56 Justice Bastarache explained this

56

Harvard College v Canada (Commissioner of Patents), [2002] 4 S.C.R 45 [Harvard Mouse]

principle when he stated he disagreed with the suggestion that an invention “includes

‘anything under the sun that is made by man’ … Parliament did not define

“invention” as ‘anything new and useful made by man.’ [In doing so], Parliament signaled a clear intention to include certain subject matter as patentable and to exclude other subject matter as being outside the confines of the [Patent] Act.”57

The US Supreme Court has also recognized the limitations of patentability in

Diamond v Chakrabarty,58 which involved the patenting of a live, human made micro-organism Although the court did eventually hold such a micro-organism to be patentable under the US Patent Act, Chief Justice Burger also explicitly stated it should not be suggested “that section 101 has no limits or that it embraces every discovery.”59 By extension, neither of these judgments is consistent with the natural rights theory of IPRs – that any invention deserves a patent, so long as some amount

of human labour or effort has gone into its creation

4 PERSONALITY THEORIES: “IDEALIST PHILOSOPHY”

Second, there are the personality theories of property law Philosophers such

as Kant and Hegel have been attributed with the notion that property exists only where an individual has asserted his will on it To loosely summarize these theories, they promote the idea that private property rights are necessary for the satisfaction of some basic human needs It is argued a person can not exist until they become a property owner, either in their own eyes or the eyes of another person For example, Hegel felt that appropriating property for a person’s private use is “one of the primary ways in which an individual may objectify himself as he has the freedom to use his property in any manner in which he sees fit.”60 As Fisher explains, intellectual property rights can therefore be justified under this theory “either on the ground that they shield from appropriation or modification artifacts through which authors and artists have expressed their "wills" (an activity thought central to “personhood”) or on the ground that they create social and economic conditions conducive to creative intellectual activity, which in turn is important to human flourishing.” 61

Though these theories do not hold much ground in current legal philosophy, it

is also immediately apparent that, from an intellectual property perspective, such a philosophy would be less relevant to patent rights than it would be to copyrights and trademarks That is, copyright and trademarks, along with an author’s accompanying moral rights, would fit with the theory of personhood and personality in property rights better than the patent system Even so, this theory can ultimately be disregarded in favour of a utilitarian theory of intellectual property rights

a choice to maximize utility or happiness.62 John Stuart Mill was another utilitarian philosopher, and his form of the philosophy was known as Qualitative Utilitarianism Mill’s theory of utilitarianism focused on the type or quality of pleasure/happiness

Utilitarianism is a philosophy that emphasizes the societal consequences of a person’s individual actions It is one answer to the question, “what ought a man to do?” and it requires a person to consider the effect of his own choices on the community.63 There is little emphasis on individuals (other than on a personal moral accountability level) compared to society; this emphasis on society also recognizes that property rights are a socially constructed right This is a reasonable presumption,

62

Otherwise known as the “greatest happiness” principle Science for the human good,

“Utilitarianism,” online: Clarion University

<http://www.clarion.edu/academic/adeptt/bpcluster/utilitarianism.htm>

63

Henry R West, “Utilitarianism,” online: Utilitarianism

<http://www.utilitarianism.com/utilitarianism.html>

as property rights do not exist without their legal recognition and enforcement by the state

The utilitarian philosophies of Bentham and Mill, and the “greatest good for the greatest number of people” principle, are now considered rather outdated and nearly impossible to quantify However, moderate versions of the theory have developed, particularly in the field of economics and legal jurisprudence In jurisprudence, utilitarian philosophy emphasizes that the law should be made to

conform to its most socially useful purpose Most utilitarians agree that a law's

usefulness or utility can be defined in terms of its ability to increase happiness, wealth, or justice in society This principle is also reflected in current patent law and theory

Another development in utilitarian philosophy has been economic utilitarianism, which is often characterized by a cost-benefit analysis For example, the award to inventors of exclusive property rights in the form of a patent is most often discussed in the language of economic utilitarianism In this theory, the goals of patent policy are said to be two-fold: to increase the dissemination of information and technology to the public domain and to encourage innovation by awarding an exclusive property right These goals represent the social utility of patent law The proper policy will strike a balance between these two competing interests, thereby allowing policy-makers to balance the rights of the inventor against those of society at large The benefit of disclosure and encouraging innovation is considered to outweigh the costs of allowing a monopoly right of a patent for 20 years This balancing represents the cost-benefit analysis of the law undertaken by policy makers and the courts

The economic utilitarian analysis of intellectual property is useful as it allows for this balancing of the interests and recognizes the social benefit of having such a

regime A literal example of this was the approach taken by the framers of the US

Constitution where it stated: “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”64 Utilitarian theory also predominates in most other Western patent systems, including those in Canada, Singapore and Europe, and

in international agreements, such as the TRIPS Agreement For example, Canada’s Patent Act is loosely based on the US Constitution’s patent provisions, and Singapore’s Patents Act is largely based on UK patent law These twin goals are also embodied in Article 7 of TRIPS, which describes the objectives of the Agreement:

“The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.”65