Amanda Forys, MSPH: Let’s move on and talk about biosimilars and litigation. The Patent Trial and Appeal Board (PTAB) has been playing a role in patent disputes over biologics and biosimilars. This role has been growing. What is the PTAB, Ha Kung? Can you give us some information on that? Why is it becoming increasingly involved in patent disputes over these products?
Ha Kung Wong, JD: Contrary to popular belief, it’s not a low-caloric drink from the 1970s. It actually is a trial court in the PTO (Patent and Trademark Office). It hears and decides contested proceedings and other things. It came about from the Leahy—Smith America Invents Act (AIA). The AIA was passed into law in September of 2011. It kind of created 2 different types of contested proceedings that are interesting to us in biosimilars— the IPR process, which is the inter partes review, and the PGR process, which is the post grant review.
The interesting thing about this is that it allows for someone to challenge patents outside of the court system. You might think, Do we really need another venue for that? And at least for the AIA, the answer was yes. They shifted the balance a little bit when they created these processes. There are a number of things that are different than when you go into litigation. When you go into litigation with a patent, you have a presumption of validity. If you go into the PTAB, you have no presumption of validity. They start from a neutral stance. And when you go into the PTAB, there’s a lower burden to proving invalidity. You only have to show “by preponderance of the evidence”—so, 51%. That will get you an invalid patent. It will allow you to invalidate a patent. In a district court, it’s what I call 70%, but it’s clear and convincing evidence—somewhere around 70%, 75%. So, there is a significant gap there. You can be invalid in the PTAB but not invalid in district court. We’ve seen that. The Federal Circuit and the Supreme Court have looked at that, and they’ve deferred to the PTAB. So, this is a very dangerous thing for patent owners, and we’ve seen that play out over time.
The other aspect of the IPR and PGR process is that they’re both statutorily limited to 18 months, from the date of the petition to the final decision. Now, that may sound like a long time, but litigation can take a long time—usually more than 18 months. This is a very short time period. And, more importantly, it’s limited to just invalidity. There are no infringement issues. So, as a patent holder, you have no ability to raise any issues concerning infringement of a new product that’s coming in the market. And 1 step further than that, you don’t even need to have standing. Anybody can do it. I could do it, you could do it, anybody could do it. You could just walk in and say “I want to challenge that patent,” and we’ve seen that. We’ve seen that from a number of hedge fund managers who’ve come in and tried to manipulate the stock price by filing a bunch of IPRs against patents that are owned by pharmaceutical companies.
It is a little bit of a dangerous area. At the beginning, there were a lot of IPRs coming through the PTAB. The cancellation rate was astronomical. Up to 80%, 90% of claims that were challenged were being cancelled in the PTAB. The former chief Federal Circuit judge, Randall Rader, actually called it the death squad. Any patent that went in there was basically not going to get out unscathed. Now, along the biosimilar path, we haven’t seen as many of these IPRs, yet. They’re starting to grow. In 2015, there were about 10. In 2016, there were maybe 10 or 11. In 2017, we’ve seen over 3 times that number already, to date. So, this is exploding, as far as biosimilars and biologics are concerned.
What does that really mean for biosimilar patents? That’s kind of yet to be determined. We’re not really sure. When you look at the overall numbers, the cancellation rates have started to come back in line with what you want. They’re down to around 60% for all technologies, and for the Orange Book, small molecule technologies, they’re about 50/50. And then, in the biologics and biosimilar space—and this is for a very small sample size—they’re about 50/50, as well. This could mean that life science patents are just generally harder to invalidate because of the unpredictability of the science as compared to the electrical and mechanical fields, but it’s unclear. What we do know is that there are 30 biosimilar IPRs currently pending. And with the short time frame, they are going to get decided on soon. We are going to have a lot more data. I got a lot of these data from biologicshq.com, which follows the statistics. The numbers are small now, but after those decisions come out, I think we’re going to know a lot more about it.