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THURSDAY, MAY 28, 1981

THE WALL STREET JOURNAL

Publiebed since 1889 by
DOW JONES & COMPANY, INC.

Long Life to Patents

The words patent law" can hardly Je said to possess a life-or-death ring. Noi compared to words like penicillin or Salk vaccine. Yet the recent impact of the patent law on the drug industry could well be inhibiting those very kinds of discoveries.

Patents are a bribe: If you invest your time and money on risky endeavors, society will reward your success by granting you a temporary monopoly. U.S. patent laws confer a monopoly for 17 years during which the inventor can. presumably, earn a rate of return that makes the investment worthwhile. Society gets a reward too. of course; it gets an invention it might not otherwise have had.

This bribe is crucial to the drug industry. It's very costly, very time-consuming and very risky to develop a new drug. Currently, the process takes about 10 years, costs $70 million and has a failure rate of 90%. The promise of patent protection kept things humming until, in 1962, the thalidomide tragedy convinced every. body that new drugs needed more rig. orous testing. This in turn, meant more time elapsed before drugs could be brought to market.

Thus, the length of time between patenting a drug and getting FDA ap proval gradually ballooned from about one year, pre-1962, to over seven years now. In other words, drugs making their debut today have less than a 10 year monopoly life - not 17.

The telescoping of effective patent life has reduced rates of return to drug research and development. Industry studies show that over the past two decades. rates have been sliced in half. Since new products need anywhere from 12 to 19 years to generate R&D returns above 8?n, the current life span of less than 10 years looks especially grim. After all, prudent financial management could earn a bigger bang-for-the-buck by buying goverment long bonds. As it is, drug compa

nies have been diversifying into businesses like cosmetics and salad dress-, ings where returns are nearer to mar ket.

Falling rates of return have, quite naturally, translated into falling R&D. The ratio of R&D to sales has declined from 13 in 1962 to 8 in 1979. Moreover, this decline is mirrored in the decline in the number of new drugs: In 1960, the 3.5 billion drug industry brought forth 50 new drugs; in 1980, a 2 billion industry produced only 12 new medicines.

Other than the obvious implications of this drying-up of R&D, we might note one particular ill-effect-the impact of health care costs. Drugs are amazingły cost-effective. Consider two examples. Tagamet. an anti-ulcer drug, saves millions of dollars in sur gical costs a year and the advent of a new class of heart drugs, calcium blockers, (due out any minute) might totally eliminate coronary bypass surgery.

There is a simple way to help restore R&D incentive to the drug industry: guarantee the full 17-year protection by starting the patent clock ticking after FDA approval, not before. Companies need an assured time horizon to make investment decisions and they should, in the present cost cli. mate, be able to count on a full 17 years. Such a guarantee would reduce uncertainty over expected returns and cash flows, and, we hope, create the incentive to cure our hay fever.

Both the House and the Senate 'have bills to restore 17-year patent protection to the drug industry. We know that congressional action on pat. ent law reform will not excite the network news into prime-time coverage. But that doesn't make it unimportant and there is every reason to believe, as even the sternest free market economists do, that society's return on this kind of bribe is well worth the pay. ment.

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A tradition of disregarding patent infringement when it involves experimental use of an invention may be eroding for biologists

Some two dozen researchers at uni- wait until a drug's patent expires before ion where he uses "expansive language versities, companies, and government such tests begin, the original manufac. to define experimental use" are worty. laboratories recently received letters turer effectively gains a considerable ex. ing. Weseman says. from Johnson & Johnson warning them tension on the patent's lifetime. (Legisla- For example, Nichols wrote: "Bolar's that the use in research of particular cells tion now being drafted by Repre. intended use is solely for business reathat produce monoclonal antibodies may sentative Henry Waxman (D-Calif.) sons and not for amusement, to satisfy infringe the company's patent rights. would resolve some of these problems idle curiosity, or for strictly philosophiThe letter raises the tricky question of (Science, 27 April, p. 369).)

cal inquiry (and) is thus an infringethe extent to which patent law can be Roche's patent for Dalmane expired ment. ... We cannot construe the exused to restrict research uses of patented on 17 January 1984, but Bolar began perimental use rule so broadly as to products and processes.

clinical trials long before that date. allow a violation of the patent laws in the A similar issue was raised recently in a Roche brought a patent infringement suit guise of 'scientific inquiry,' when that court decision concerning clinical testing against Bolar in July 1983. In October, inquiry has definite. cognizable, and not of a patented drug. The U.S. Court of the U.S. District Court in the Eastern insubstantial commercial purposes." Appeals for the Federal Circuit, which District of New York ruled in Bolar's "The biotechnology industry is sensinow hears all patent appeals, ruled that favor, but on 23 April 1984 that ruling tive to anything that affects what they do Bolar Pharmaceutical, a generic drug was reversed on appeal. Bolar currently best-research." Weseman continues. manufacturer, broke the law by testing is planning to petition the Supreme Court **If case law develops so that even in the its version of a drug made by Roche to review the case, says attorney Robert earliest stages companies must avoid Products before Roche's patent had ex- Marrow, who represents the company. patent infringement, it will really restrict pired. Some patent attorneys are con

their abilities and stultify their research. cerned that, if the ruling is interpreted

There's plenty to worry about." broadly, it could be used to restrict a The issue is how to

The recent actions by Johnson & variety of research activities.

define when experimental

Johnson could be another step toward Although Johnson & Johnson's warn.

restricting use of patents that is a cause

use is no longer entitled ings and the contest between Roche and

for more worry. Johnson & Johnson Bolar are not directly related, they both to an exemption from the

patent attorney Geoffrey Dellenbaugh address an area of patent law that is in a

patent laws.

has been sending out letters to researchconsiderable state of flux. The statutes

ers warning against the use of particular spell out in plain language how a patent

monoclonal antibody-producing hybrid. grants a 17-year monopoly to an inven- "From the scientific point of view, the omas, which the company has deposited tor, prohibiting others from making. us. real threat in the appeal court's deci. with the American Type Culture Collecing, or selling the invention. However, a sion) is it effectively prohibits any ex- tion (ATCC) in the course of obtaining tradition that began in the early 19th periments with a patented product if patents. "The fact that you have obcentury has usually exempled experi- it tends toward commercial develop- tained samples of these hybridomas from mental use of an invention from being ment," Morrow says. "This is a far- the ATCC in no way grants you any right construed as infringement. The issue at reaching opinion that could) negate the or license under our patents in the Unit stake now is how to define when experi- experimental use exception, unless it's ed States or other countries," one of the mental use of patented technology be. for pure amusement."

letters, sent to a researcher at the Na. comes commercially threatening to an Morrow's interpretation is something tional Institutes of Health (NIH), says. inventor and therefore no longer is enti- of a worst-case reading of the opinion "Your use of these hybridoma samples tled to that exemption. Some resolution handed down by Judge Philip Nichols, may constitute infringement of one or of this ambiguity will be vital to the Jr. But other attorneys are also speculat- more of these patents. regardless of biotechnology industry, which is so ing about how far his opinion goes in this whether the thus-produced antibody is heavily dependent on basic and near. direction. "The experimental use excep- subsequently used or sold." basic research activities.

tion is not gutted." says Jorge Goldstein, About two dozen researchers from The contest between Roche and Bolar a patent attorney for a Washington, universities, companies, and governhas been closely watched in the pharma- DC. firm that represents a broad spec. ment research institutions including NIH ceutical industry. Early in 1983 Bolar trum of corporate clients (but with no are involved so far. The letters were sent began an etfort to get federal approval to direct stake in the Roche-Bolar contest). out because of the concern that people market Aurazepam hydrochloride, the “But for a company to argue that it's might use the cells in a way that infringes active ingredient in Roche's highly suc- just doing research,' won't fly if it has a the patent and deprives us of sales of cessful sleeping pill, whose trademark is substantial commercial purpose." antibodies,” explains Dellenbaugh. The Dalmane. Although the safety of this The ruling may not be a serious in- cells can be obtained from ATCC at a drug already was established, the Food road" on the experimental exception to nominal cost, whereas Johnson & Johnand Drug Administration requires a ge

patents, says James Weseman, a patent son's subsidiary, Ortho Diagnostics, is neric drug manufacturer to prove it can attorney with a San Francisco law firm marketing the antibodies (for research meet the same standards. However, if with biotechnology company clients. But and diagnostic purposes) to make a prof. the generic manufacturer is forced to certain passages in Judge Nichols' opin- it. The company quite naturally would the right know-how undoubtedly can was to inform people of the possible legal make the antibodies-from the compa- consequences. We intend, in appropriate ny's cell lines, obtained perfectly legally circumstances, to protect our rights." from ATCC-—more cheaply than they Dellenbaugh says. The question, as with can be bought.

to protect its commercial interests develop a market for its patented oclonal antibodies. Researchers Id like to use those antibodies (some sem are to T cells, which are part of mmune system). And scientists with

the Roche versus Bolar ruling, is "How **The reason we wrote those letters far does that extend?" he adds. "If

DOD Springs Surprise on Secrecy Rules

Pentagon officials have moved to resolve a major issue in
eir dispute with university scientists about government
forts to control militarily sensitive research. The Depart-
ent of Defense (DOD) has decided to abandon its search
ra formula to govern so-called gray areas of research-
search which is not classified but is deemed militarily
eful. Under the proposed policy, federally supported
ndamental research would be treated on an either-or
sis as classihed or unclassified.
The immediate reaction from academic observers is that
: decision has the merit of creating a clearly defined
licy. Whether the new policy will satisfactorily resolve
: controversial issue of prepublication review of nonclas-
ed but sensitive research, however, is far from clear.
e debate on scientific communication has caused divi.
ns among policy-makers at the Pentagon and there is
ne skepticism about how fully the new policy has been
epled along the chain of command. A major issue is the
rking definition of fundamental research under the new
icy and, therefore, what research will be covered. Some
servers suggest that under the proposed policy. the
ilagon would put more and more types of research into

classified category
for more than a year, DOD's effort to find forms of
tection short of classification for gray-area research has
na major sticking point for Pentagon policy-makers and
versity ofhcials debating the lightening of controls on
intific communication (Science, 3 June 1983, p. 1021).
ently there had been signs of a split in opinion within
tagon ranks, with DOD under secretary for research
engineenng Richard D. De Lauer identified as ques.
ing the creation of a new category of controls on
arch (Science, 4 May, p. 471). But the decision caused

se among outsiders.
testimony at a House hearing on 24 May, deputy
etary for research and engineering Edith W. Martin

that DOD othcials had decided not to pursue the area concept" because the option had proved to be are complicated than it had seemed," and the trade. unclear." anin's comments at the hearing were the first public tion of the decision. In a brief summary of the new iy, which did not appear in her prepared testimony, described it as a draft policy" that is still under ission in DOD and in other federal agencies. To a tion, however, she replied that she expected the y to be accepfed in substantially its present form and ply to fundamental research sponsored by all federal cics response to a question of when and why the decision made from Representative Doug Walgren D. Penn.) chaired the hearing. Martin said that the possibility of

taking the classification-nonclassification approach" had been considered from the beginning of DOD deliberations on the matter and, after discussions extending over more than a year, the conclusion evolved to adopt the classification alternative. This occurred 3 or 4 months ago, but was being enunciated publicly for the first time at the hearing.

The policy statement made available at the end of the hearing is as follows: It is the policy of this administration that the mechanism for control of fundamental research in science and engineering at universities and federal labora. tories is classification. Each federal government agency is responsible for: a) determining whether classification is appropriate prior to the award of a research grant or contract and, if so, controlling the research results through standard classification procedures, b) periodically reviewing all research grants or contracts for potential classification. No restrictions may be placed upon the conduct or reporting of research that has not received national security classification.

The face-off between the universities and the Pentagon over gray area research dates from the publication in 1982 of the Corson report, a National Academy of Sciencessponsored study. "Scientific Communication and National Security," headed by Cornell University president emeritus Dale Corson. The study defined the research universities' concern about the problem. Corson appeared at the hearing and raised the issue of what he called "creeping grayness," noting that "There appears to be growing interest on the part of sponsoring agencies to extend the concept of grayness to ever more areas." But Corson and other university and industry witnesses by no means confined their criticism to the gray-area problem. By and large, they were most concerned with the application to research of legislation designed to control the export of militarily useful equipment and materials. In particular, they criticized the use of such legislation to restrict foreign nationals studying or working here.

Government witnesses were scheduled last at the hearings, but Martin did not deal directly with the criticisms by earlier witnesses. In effect, she trumped them with her announcement of the policy decision. There was no real exchange on the testimony since it came after a long session punctuated by intermissions for roli-call votes on the House floor and the Pentagon party had to depart for another engagement

With details of the new policy unavailable. let alone information on interprelation and implementation, a wait. and-see attitude seems to dominate in the universities. But a snap reaction among knowledgeable observers is that the effect of the decision may be to return the debate on gray. area research to where it was before the Corson report.

JOHN WALSH

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