Patent Baristas

The New York Times had a great overview of the new tax boondoggle that is allowing the biggest drug makers to return as much as $75 billion in profits from international havens to the United States while paying a fraction of the normal tax rate.

The break is part of the American Jobs Creation Act, signed into law by President Bush in October, which allows companies a one-year window to return foreign profits to the United States at a 5.25 percent tax rate, compared with the standard 35 percent rate. See an overview here. Although any company with profits in other countries can take advantage of the law, drug makers have been the biggest beneficiaries because they can move profits overseas relatively easily. Not everyone thinks it’s a great idea.

As detailed, the money comes from years of using tax loopholes to shelter profits from United States taxes. Basically, drug companies claim that their profits come mainly from international sales, even though the prices of medicines are far higher in the United States and almost 60 percent of their sales take place in America. You do the math.

For example, Pfizer said that in 2004 it had only $4.4 billion in pretax profits in the United States, compared with $9.6 billion internationally, though most of its sales came in the United States. The company says that its profit margins on international sales were almost three times as high as on American sales. Let’s see … a three-month supply of 40-milligram tablets Lipitor costs $305 at Walgreens.com and an internet pharmacy in Canada lists it for $174. Hmmmm. Appartenly, they went to the same bookkeeping lesson as my brother.

Apparently, the I.R.S. lacks the resources to challenge the companies so drug companies collectively pay a federal tax rate of less than 15 percent on worldwide profits. Although the act is intended to create jobs, Pfizer announced it would cut its annual costs by $4 billion over the next three years (read: get rid of workers) while it repatriates at least $28 billion under the act.

And the nifty part is that after the break expires, companies will probably go back to stockpiling profits overseas as they wait for another tax holiday in a few years. Congress has already shown it’s willing to kow-tow to these companies.

MSNBC reported that the tax savings could run about $39 billion from the legislation. Money that won’t go to social security, roads, etc. I guess making the tax rates reasonable for everyone was out of the question.

Oh, by the way, the government proposes to pay for the tax breaks, estimated at $143 billion over 10 years, mainly by closing tax loopholes and cracking down on tax cheats. That’s you, my friend.

Fortunately, SUVs still get a break. The new tax bill reduces but doesn’t eliminate the tax break for SUVs. Autos generally do not qualify with one exception: Vehicles that weigh more than 6,000 pounds — which include most trucks, vans and SUVs. Great. Burn more fossil fuels and get a tax break.

And what’s with the name? How does a 650-page bill that bestows billions in corporate tax breaks get titled the American Jobs Creation Act? Nice title for something that contains little that requires or even encourages companies to hire workers. Sen. John McCain, R-Ariz., who did not vote on the bill, called it the “worst example of the influence of the special interests I have ever seen.” That would have been a better title for the bill.

The Patent Baristas need to lobby harder to get included in the next tax bill that comes around.

The annual meeting of the American Society of Clinical Oncology (ASCO) took place this past week in Orlando, FLA. Much of this meeting was dominated by industry giants such as Pfizer and Genentech. Although no magic bullets were revealed, the meeting does provide a forum for the smaller biotech companies to present their promising new drugs and also gives investors and others watching the industry an idea of what companies and technologies to keep an eye on.

“AP23573” – Ariad Pharmaceuticals This Cambridge, Mass.-based biotech’s new drug, AP23573, showed promising results among advanced sarcomas. AP23573 is an mTOR inhibitor, a popular class of drugs getting attention at big pharmaceutical firms such as Novartis. In a study with 51 patients from a mid-stage trial of AP23573, 37%, saw their cancers stabilize for at least six months. Three of those patients actually saw their tumors shrink. These results suggest that Ariad’s drug may have big potential.

“Acadopene” – GTx
GTx, founded by urologist Mitchell S. Steiner, is targeted to be the first drug firm aimed exclusively at men’s health–and, more specifically, at prostate cancer. Selective endrogen receptor modulators, or SERMs, including Eli Lilly’s Evista, block estrogen in some tumors, but also simulate estrogen-like effects, and are used to prevent osteoporosis in women. SERM’s have shown promise against breast and endometrial cancer as well. Steiner theorizes that estrogen may be a factor in the development of prostate cancer, and thinks that a SERM could keep the disease under control. In a phase II trial unveiled at ASCO, scientists demonstrated that GTx’s SERM, called Acadopene, reduced the chances of high-risk premalignant cells turning into prostate cancer by 48%. GTx is moving ahead with a phase III clinical trial in order to prove that the drug works for men.

“CRx-026” – CombinatoRx
This small, privately held company comes with a pedigree. It was founded by several researchers who are interested in attacking disease from multiple directions, using multiple chemical pathways. Peter Elliott, who co-developed Millennium’s Velcade, a treatment for multiple myeloma, is now working on new drugs at Boston-based CombinatoRx. The company showed extremely early data of its first cancer drug, CRx-026, in a handful of patients, and a few seemed to be helped by it. The data are very premature, but CombinatoRx could be one to watch.

“Dasatinib” – Bristol-Myers Squibb
Novartis’ Gleevec was the first gene-targeted pill to show a marked effect in a cancer–in this case, chronic myelogenous leukemia. But Gleevec eventually fails for some of those patients, as new mutations make the cancer more complex–and resistant to the drug. This new drug from Bristol-Myers Squibb appears to help those patients. Several studies appeared to link Dasatinib to mutations in specific cancer genes.

The President’s Council on Bioethics has released a report that describes potential ways around the objections that have been raised against embryonic stem cell research. Because obtaining stem cells requires the destruction of a human embryo, many researchers find performing research with these cells ethically unacceptable.

Stem cells are unspecialized cells that can renew themselves for long periods through cell division. In addition, under the right conditions, they can develop, or “differentiate” to become cells with more specialized functions. Embryonic stem cells are “pluripotent,” or capable of differentiating. Under the right conditions, human embryonic stem cells will proliferate indefinitely without specializing or differentiating into specific cell types.

Earlier, President Bush limited the use of federal funds for stem cell research by Executive Order, as of Aug. 9, 2001, which put a restraint on U.S. labs so that they can receive federal funding to study only the 22 embryonic stem cell lines available and approved by the National Institutes of Health. Although millions of stem cells can come from each line, they will only contain the genetic diversity of a few individuals. [However, see CNN’s recent article on why the ban may be reversed.]

Now, the President’s Council report looks at four potential methods of deriving cells that would have all the therapeutic potential of embryonic stem cells, without the ethical objections. The methods include deriving stem cells from embryos that have stopped growing and are essentially dead, or finding ways to trick adult cells into behaving like embryonic cells. While none of these approaches is certain to work, the report encourages more scientific research on these alternatives.

Read the Report President’s Council on Bioethics: ‘Alternative Sources of Pluripotent Stem Cells’

You can also hear discussion about the report on NPR’s All Things Considered, May 15, 2005. The NPR Audio link can be found here.

According to the New York Times, two of the three research scientists on the council have “vigorously rejected” the report’s recommendations. Michael Gazzaniga, a professor of neurology at Dartmouth College, said the proposed alternatives are “high-risk gambles” and evade the question as to whether the United States should endorse embryonic stem cell research as it currently is done or whether the country will “remain hostage to the arbitrary views of those with certain beliefs about the nature of life and its origins”.

Janet Rowley, a cell biologist at the University of Chicago, said it is “totally baffling” to let healthy embryos die instead of using them to help other patients. The “sharp division” between scientists and bioethicists on the council is “unusual,” the Times reports. Council Chair Leon Kass said the council has a more balanced perspective, with more members who are “pro-life” than past councils, and that it is “more representative of the nation as whole.”

The dead-embryo idea draws on the fact that in fertility treatments, when many embryos are made in a test tube by mixing eggs and sperm, typically several embryos cease to undergo further cell division and can be regarded as dead. The council considers it possible that other cells might still be viable and could be salvaged for use as stem cells. Since use of tissues from cadavers is ethically acceptable, by analogy the use of viable cells from embryos regarded as dead should also pose no problem, it believes.

The second method deemed acceptable depends on the fact, basic to the technique for cloning animals, that when the nucleus of an adult cell is inserted into an unfertilized egg, the egg somehow makes the nucleus revert to an embryonic state. Presumably, there are chemical signals in the egg that enter the nucleus and reprogram its DNA. The council recommends finding these factors and using them to convert adult cells into stem cells.

On a related matter, the ban on federal funding for research has set off the Great Stem Cell Gold Rush, as states via for developing funding at the state level to concentrate the research in their own states. States all believe that they can bring lucrative companies and jobs to their state even though, despite all the excitement, no human therapies from embryonic stem cells have yet to be developed or tested.

California has passed Proposition 71, which provides $3 billion for stem cell research throughout the state over the next ten years ($350 million a year) and creates the The California Research & Cures Coalition, which has changed its name to The Foundation for Stem Cell Research, to administer funding. New Jersey established the New Jersey Stem Cell Institute, the first state-funded human embryonic stem cell research center and plans to introduce a $500 million bond proposal to continue to fund human embryonic stem cell research over the next 10 years. Similar activities are being proposed in Connecticut, Florida, Illinois, Maryland, Massachusetts, Minnesota, New York, Texas, Wisconsin, Pennsylvania, New Jersey, and Delaware.

It will be quite interesting to see how all these tax dollars sloshing around changes the landscape of research, perhaps further concentrating the research and related commercialization to just a few epicenters across the country.

The National Inventors Hall of Fame added its latest class of inductees for 2005. The new inductees include the inventors of Streptomycin and the photocopier along with Grammy-Award winner Les Paul, inventor of the solid body electric guitar in 1946.

The 2005 honorees are:

LIVING

C. Donald Bateman: Ground Proximity Warning System (GPWS);
Robert Gundlach: Modern photocopier;
Alec Jeffreys: Genetic fingerprinting;
Dean Kamen: AutoSyringe;
Les Paul: Solid-body electric guitar;
Leo Sternbach: Valium.

POSTHUMOUS RECOGNITION

Matthias Baldwin: Steam locomotive;
Clarence Birdseye: Frozen foods;
Leopold Godowsky, Leopold Mannes: Kodachrome color film;
Garrett Morgan: Gas mask, traffic signal;
Glenn Seaborg: Plutonium isolation;
Jacob Rabinow: Optical character recognition;
Selman Waksman: Streptomycin.

Inventors may be nominated by anyone for induction into the Hall of Fame, but they must hold a U.S. patent to be considered. The nominee’s invention must have contributed to the welfare of society and have promoted the progress of science and the useful arts.

The not-for-profit National Inventors Hall of Fame, located in Akron, Ohio, was founded in 1973 by the U.S. Patent and Trademark Office and the National Council of Intellectual Property Law Association.

The Baristas received a nice mention on the IPKat blog, noted for “fishing for IP stories for YOU” by Jeremy Phillips and Ilanah Simon from the Queen Mary Intellectual Property Research Institute. They write about copyright, patent, trade mark and privacy/confidentiality issues from a UK and European perspective. We get our updates from the Kats and recommend you give them a read, if you’ve not already.

Blue Cross/Blue Shield and other insurers have sued GlaxoSmithKline in a dispute over the generics market of Paxil. The insurers are alleging that Glaxo has been gaming the patent system to keep cheaper generic alternatives to the antidepressant off the market. Glaxo lost its patent on Paxil in 2003. They accuse Glaxo of violating federal and state antitrust laws and fraud laws and engaging in deceptive trade practices.

The lawsuit alleges that the drug company claimed to hold patents on scientific procedures that already were in the public domain and listed invalid patents with the U.S. Food and Drug Administration that kept other pharmaceutical manufacturers from making generic equivalents.

Since sales on a blockbuster drug can plunge 80 percent or more the first year after a generic competitor hits the market, drugmakers have an incentive to fend off generics for as long as possible. In addition, brand-name drugs can cost three times their generic equivalents, according to the Generic Pharmaceutical Association, even though the FDA insists there is no therapeutic difference between generics and name brands.

Drug companies have tried to release new “improved” versions, also newly patented, as patents on their original drugs expire. For example, when Glaxo lost its patent on Paxil, they came out with a new version that patients take just once a day, rather than twice. Paxil CR, a once-a-day “controlled release” drug that had $824 million in U.S. sales last year.

Another tactic is to release an over-the-counter drug when patents expire to hold on to market share as in the case of Schering-Plough, which release an OTC of Claritin, its blockbuster antihistamine, thus killing a lot of its generics market.

This doesn’t always work, of course, as in the case of Merck & Co., who tried to get approval for an over-the-counter version of Mevacor, a cholesterol-lowering drug, but the FDA turned it down.

See more here.

The Court of Appeals for the Federal Circuit (CAFC) heard arguments from Monsanto Corporation on the patentability of genetic markers, known as Expressed Sequence Tags (ESTs). (In re Fisher, Fed. Cir., No. 04-1465; May 3, 2005) Monsanto argued that its application should not have been rejected by the U.S. Patent and Trademark Office (USPTO) for not being useful. Reviewing a conclusion by the Board of Patent Appeals and Interferences that the patent applications failed to satisfy the utility requirement of 35 U.S.C. sec. 101, the court is looking at whether the application must disclose the utility of what is being marked by the markers or just the utility of the markers themselves.

A large proportion of the DNA in the mammalian genome does not appear to encode any known protein. Within the genome are genes (sections of DNA that encode proteins) that are transcribed to form mRNAs, which are in time translated to produce proteins. Within the genome are ESTs, short random fragments of DNA that are isolated from mixed mRNAs and converted back to cDNAs. Because each EST is related to an mRNA, it must represent the part of a gene which encodes a protein. Using known techniques the location of the EST on the genome can be determined. Related are SNPs, sites in the genome in which there is variation among the population of one base in the sequence, which are often in the regulatory regions (promoters) rather than in coding regions of the genome. ESTs and SNPs are important because of their potential use in understanding genetics and diseases. If a certain population with a certain condition is found to have the same SNP, that may be significant. The production of a particular protein associated with a condition may be investigated through a corresponding EST.

The PTO found that the ESTs claimed in the application failed to meet a standard for “credible, substantial, and specific” utility implemented in 2001. This case is a test of the new utility standard, which the PTO implemented because of the concerns of the National Institutes of Health and other research organizations, that patents on ESTs could entangle later genomic research and technology. This is also a test of the patentability of “research tools” or technologies that are primarily used to advance other research.

Opponents of EST patents have argued that permitting EST patents will encourage researchers to search for and patent ESTs rather than focus on characterizing full-length genes. It has also been argued that allowing the patenting of ESTs will disproportionately favor large pharmaceutical companies and that patenting ESTs will inevitably lead to costly disputes. Another argument is that too many EST patents will increase licensing complexity and costs, and lead to grave market inefficiencies. Proponents of EST patents have argued that, at one time, the electronics and computer industries faced similar objections, yet patent protection in those industries actually spurred innovation and lead to better and/or less expensive products.

Monsanto is arguing that the PTO had erred in claiming that the utility of ESTs depends on knowledge of the characteristics or function of the gene sequences that the ESTs correspond. Monsanto argued there are other uses for the tags not requiring a knowledge or interest in the corresponding gene sequence and that, for example, the mapping is desired to establish a statistical correlation between identified sequences and plant traits identified by cross breeding, arguing that the utility requirement is satisfied for every tag that is properly disclosed. The USPTO, however, argued that Monsanto’s application asserted no specific, “real world” utility for the claimed ESTs. Judge Rader specifically asked if the PTO had not “set the bar too high,” suggesting that valuable sequence information might go undisclosed and would be retained as trade secrets. The USPTO then asserted that DNA fragments require further research and discovery to be useful, comparing EST patent applications to “raffle tickets.”

The CAFC’s decision is expected later this year. We’ll keep you posted.

See a nice detailed description of the issues at the Patently-O blog.

Yes, its been somewhat of a slow week on the bio/pharma patent news front. So what to write about that is still patent related?

Boeing Co. engineers have found a way to increase the size of those claustrophobia-inducing aircraft lavatories. Yes, a more spacious bathroom on airplanes. Mind you, I am a petite 5 feet 4 inches, and I felt cramped, so given the size of the general population, wasn’t this obvious? How did they get a patent on this? Where’s the patent quality police. Come to think of it, there was a long-felt yet unfulfilled need.

This past Tuesday, the U.S. Patent and Trademark Office granted Boeing Co., a patent for a bathroom that expands into passenger doorways between cabins when a plane is in flight.

This extreme makeover/airplane bathroom edition promises to provide passengers more room for changing clothes, diapers and “refreshing themselves,” the patent says, without taking up more room in the passenger cabin — a concern for many nearly bankrupt airlines which need to squeeze in every possible “seat,” so to speak.

During take-off, landing and while a plane is on the ground, the lavatories would be locked into tight compartments to give passengers and crew ample room to board and exit the aircraft.
Once in flight, the lavatories would rotate into the emergency doorways via giant turntables, their sinks connected to the aircraft’s innards via flexible plumbing lines.

The patent also addresses one likely passenger fear: that the giant lazy susan might accidentally swing shut, trapping an occupant. “(D)uring a turbulent flight, a suitable locking mechanism (e.g., latches, etc.) can be provided,” the patent states. Can’t wait to try this one…..