Merrill,

Thank you for bringing this bill to my attention.
I have several reservations about the incentive provision of the, all of which could have unfortunate unintended consequences, or, since we are talking about making drugs, bad side effects.

The proposed Lieberman incentive - which allows a patent holder to extend the patent life on any given product as a bonus for making a drug for Biodefence - amounts to a hidden tax. Hidden taxes are almost always wrong-headed. The govt is constitutionally required to provide for the nation's (bio)defense, and traditionally has funded defense out of general tax revenues. What is different about the Lieberman proposal is that the tax will be levied disproportionately on those who have a medical condition that requires them to take the high-priced patented drug instead of a less expensive generic version that would normally be available. Whether they can afford it or not - they will have no choice.

Let's take a real world example to see how this will work. In this example, let's assume that Pfizer decides to develop a drug for anthrax. Let's compare how Pfizer coule be reimbursed, or incentivized, under current market conditions vs Bioshield II.

Current: The govt. and Pfizer negotiate, in advance, an agreement whereby the govt commits to purchase a specified amount of drug at specified prices. This will guarantee a profit to Pfizer (cost-plus). This is known as advance purchase commitment (APC), and was actually done when the govt. purchased Cipro from Bayer after the Oct. 2001 anthrax scare.

Bioshield II (Lieberman proposal): Allows for APCs just like the current scenario. But, in addition, Pfizer has the option to extend the patent life on any drug it is marketing or planning to market, for five years. To take a concrete example, assume Pfizer decided to extend the patent on Celebrex for five years. This is a great windfall for Pfizer in return for helping defend our country while incurring a signficant opportunity cost ( the R&D dollars Pfizer spends on developing an anthrax drug would have been unrecoverable had it failed to make it all the way to the FDA approved stage). So, what's the problem?

Adverse Side Effects:
1. Look who actually pays. Everyone who has to take Celebrex will have to pay through the nose for an extra five years. Pfizer will reap financial rewards many multiples over what it spent to develop the anthrax drug - which will already be reimbursed at cost+ by the govt.
Why should the millions of our nation's citizens, mainly the elderly, who suffer from rheumatoid arthritis have to pay the bonus tax to Pfizer for the anthrax drug?

2. Bad news for generic drug makers. What about the generic mfgers who have spent millions of dollars developing generic Celebrex, only to find that their potential market approval date has suddenly been postponed for five years? This could be a devasting reversal to generic drug makers who were counting on this low margin but low risk revenue stream for survival.

3. Not just another "hidden" tax. The Lieberman proposal is similar to a mechanism in which the government, in return for the anthrax drug, charges a special sales tax on Celebrex, which it collects, and then distributes solely back to Pfizer (after the patent on Celebrex expires). By removing the govt as middleman, it removes the appearance of a tax from plain view. Hidden taxes are certainly expedient for politicians - but they are usually wrong-headed. In this case, the taxes are cynically being levied on the sick and aged, and will add unnecessary cost burdens to an already overwhelmed health care system in the US.

4. (Dis)incentives for everyone but Big Pharma. There is another worrisome aspect to the Lieberman proposal. The basic idea behind it is to provide added incentives to pharma to spur the innovative R&D needed to develop biodefense measures (drugs, vaccines, detection systems, etc). Most would agree, as do I, that financial incentives are needed to spur drug innovation. But the nature of the incentives and the manner in which they are distributed needs much more thoughtful consideration. Many experts who have studied the drug industry have concluded that, while Big Pharma sells most of the drugs on the market, much of the R&D that leads to new drugs is done outside Big Pharma. Where? In university labs, non-profit research institutes, and govt labs like the NIH, and more and more often these days in small or mid-sized biotech companies (which are getting gobbled up by Big Pharma). These entities usually are not in the business of selling drugs directly to the public. Instead, they innovate, take the high technology risks, and, in the case of biotech, gamble everything, on getting their drug to a stage where they can license their invention to Big Pharma.

So, why not just apply the Lieberman incentive to these other entities if they come up with an anthrax drug? The answer is that extension of patent life will most likely yield no or only an insignificant financial consideration. To see why is a little bit complicated but is worth trying to explain so people can see where the Lieberman proposal falls down on the incentive issue - which is the justification for the proposal.

Let's take a second real world example, where this time an anthrax drug is developed by a govt or biotech lab. Unlike the Pfizer example, above, the R&D support will most likely have come from a govt grant or some other non-profit source since these entities do not normally generate enough revenue to be profitable, and investors will not allocate cash for low profit, let alone non-profitable, activities. Let's further assume that the drug has completed early safety trials which showed that it is safe at doses that are believed to work in an anthrax-exposed or infected individual. (Note that performing efficacy studies in humans is impossible in the absence of anthrax-infected individuals - so the govt will have to take the risk that the drug will work based solely on animal model studies and pharmacokinetic studies in healthy hhuman volunteers). The govt. decides to purchase and stockpile this new drug, and agrees to reimburse the lab for all its R&D costs plus a premium (cost +). If the lab has no drugs that it is currently selling, and has no licensed patents to Big Pharma, then it the incentive does not work for them at all. What about the case where it has licensed some technology (a patent) to Big Pharma?

Let's assume that the lab that developed the anthrax drug is a biotech company that previously licensed an exciting new drug for cancer to Big Pharma. Let's further assume that Big Pharma is selling the drug today. Generally, the biotech company will receive a royalty on its patent in the form of a low, usually single digit % of the revenue that Big Pharma takes in from global sales. So, if the biotech patent holder (or Big Pharma licensee) chooses to take out a patent extension on the cancer drug, the Big Pharma partner will get a major financial reward for having made absolutely no contribution to the innovation of either the anthrax drug or the cancer drug. The patriotic biotech company that developed the anthrax drug, at high financial risk, gets a very small fraction of what the Big Pharma licensing partner gets.

But the inequity is even worse. The opportunity cost to the biotech of making an anthrax drug (the "sunk" R&D costs of making a new drug) is relatively huge compared to that of Big Pharma, where the cost of funding one more R&D project can be diluted over a much larger R&D annual budget.

In practice, the low incentive to biotechs results in a disincentive for them to participate in the development of non-profit drugs for biodefense. The relatively high opportunity costs for drug development in the biotech industry will preclude these highly innovative drug but cash-poor drug discovery teams from participating in Bioshield to the same extent as the less innovative but cash-rich Big Pharma companies.

In summary, the Lieberman proposal, while trying to achieve an important outcome, could hardly be more wrong-headed. The idea that it was drafted without input from the pharma lobby is hard to believe. But, if true, it attests to the effectiveness that the Pharma lobby has had over the years in brain-washing our political leaders and, more worrisome, their bright young staffers, who seem so eager to draft legislation that is so favorable to Big Pharma.

Philip Statler (I may have goofed on the name) wrote that "The thefts of the poor are obvious, but the thefts of the rich are noiseless and unobtrusive. The rich steal from us when they bribe their clients, or suppliers, or government officials, and add the costs to their products".

We all need to be alert to and skeptical of govt proposals that strategically are designed, whether intentionally or not, to give more wealth and influence to those who already have most of it.
-je

Posted by: John Erickson at May 14, 2005 02:57 PM

Wild Card Patent: Analysis

There is some interest in, and wildly misleading information about, the "wild card" patent proposal that appears in BioShield II.

A wild card patent provision has been included in each of the previous three bills we've introduced, including S. 666 (March, 2003). The version of it included in BioShield II is quite different than the previous versions. The criticisms of the earlier version of the wild card incentives are obsolete and those who continue with these criticisms squander their credibility.

Rationale for the Wild Card: The wild card incentive is included in the bill for only one reason: HHS may find that it needs to deploy this incentive to encourage the private sector to develop new countermeasures for one or more of the bioterror pathogens, toxins or infectious diseases. The goal of the wild card patent incentive is to ensure that with regard to each countermeasure development project, the government is able to recruit at least one company with a track record of successfully bringing products through the FDA regulatory process. The government may also recruit some small companies that have never successfully brought a product to market, but any strategy that relies entirely on the small companies to develop these countermeasures is not a serious strategy.

The industry’s reluctance to undertake these projects: It is clear that the biopharma industry and their investors are extremely reluctant to undertake research and development of these Bioterror and infectious disease countermeasures. Without the wild card patent as an incentive, the government may well fall far short of the goal of establishing a robust biodefense and infectious disease industry. This is a very dangerous risk. If there were any other means to ensure that these companies would take up this research (risking their own capital), there would be no reason to propose the wild card incentive.

Alternatives to the Wild Card: It is incumbent of the opponents of the wild card incentive to propose an equally effective market incentive to that being proposed in the wild card. If they have a proposal, we could substitute it for the wild card patent. To date, no alternative has been proposed. We hear again-and-again from industry that the wild card is the most powerful incentive we could deploy to stimulate development of bioterror and infectious disease countermeasures.

Consequences of failing to secure development of countermeasures: It is urgent that we develop these Bioterror and infectious disease countermeasures. The consequences of not securing the development of these countermeasures may be catastrophic. For example, if we have no countermeasure to prevent or treat an emerging infectious disease such as Avian Flu, millions or even tens of millions of Americans might die. If we fail to find an anti-viral to kill the AIDS virus in those who are infected or a vaccine to prevent its transmission, perhaps a hundred million more might die. If we fail to develop a new class of broad spectrum antibiotics, we might see a “post-antibiotic” era where people die of common infection diseases caused by multi-drug resistant pathogens. These consequences drive the need for a realistic and effective market incentive, such as the wild card extension.

Use of the wild card incentive: The wild card incentive is only available to firms that enter into BioShield contracts. HHS awards these contracts; firms cannot self-select to become eligible for the incentive. In each contract, HHS is given the authority to decide if, when and under what conditions a wild card incentive will be awarded. In some cases it may not be necessary to deploy this incentive to secure the development of a countermeasure and, if so, we should certainly not deploy it. But if this is the incentive that is needed to secure development of a needed countermeasure, then HHS will have this option in its portfolio . The firm that enters into the contract only qualifies for the incentive if the company successfully develops the countermeasure that we need to protect the public from the Bioterror or infectious disease agent.

Balancing the costs: BioShield II bill defines the HHS decision-making process for deploying the wild card incentive. The legislation requires the HHS Secretary to weigh the following factors:
1. the nature of the terror threats to be countered and the importance of developing the countermeasures in question to respond to such threat;
2. the difficulty, risk, and expense likely to be associated with the development of such countermeasure;
3. the existence or non-existence of practical alternatives to the countermeasure to be developed;
4. whether review of the safety and effectiveness of the countermeasure product will require reports from clinical investigations of the countermeasure product;
5. whether the countermeasure product will contain an active ingredient (including any ester or salt of the active ingredient) which has not been approved in another application under section 505(b) of that Act (21 U.S.C. 355(b));
6. whether the countermeasure product is clinically superior to a previously available drug, antibiotic drug, biological product or device; and
7. the impact of the patent extension on consumers and healthcare providers.
The cost to consumers is clearly a relevant factor in this decision. But it’s also relevant to consider the danger posed by the disease agent and the difficult, risk and expense of the research. With regard to each development project, the HHS calculation will be different. The deployment of the wild card incentive is not automatic. There is no across-the-board rule for all BioShield contracts.

If the wild card is deployed as an incentive, under the bill “up to 2 years” can be offered in patent extensions. There is no flat 2 year incentive. HHS could determine that no wild card incentive is needed or appropriate or up to two years is needed. If the company must undertake development of a whole new class of antibiotics, or a cure for AIDS, then HHS might well determine that the full two year bonus is needed and appropriate.

The wild card incentive is only available in BioShield contracts that lead to the development of a new product, not relabeling of an existing product.

Under BioShield II the HHS Secretary will have a variety of incentives to deploy. Tax incentives to offset the cost of the research and form capital for small companies are available. If the company successfully develops the countermeasures, the government will buy it on terms set in the contract, liability protections are available and the firm might qualify for a wild card incentive. HHS will have to fashion each package of incentives to match the demands of the project, its urgency, and the difficulty of recruiting firms to risk their capital to develop the countermeasure.

Weighing costs and benefits of patent extensions: The Congress has, of course, weighed the costs and benefits of patent extensions before. We have enacted an incentive for companies to conduct clinical trials to prove that drugs can be safely administered to infants and children. The pediatric exclusivity period, by any measure has been huge success. Hundreds of drugs have undergone the difficult and expensive process of testing to determine if and how previously approved drugs can be administered safely to infants and children. If a company is willing to conduct such trails, it automatically qualifies for a general six month extension of the patent on that product or the original data exclusivity period for the drug. This six month extension is granted because Congress recognized that companies in almost all cases will not recoup the costs of doing these time consuming, complicated and expensive clinical investigations. Simply put, the amount of revenue that will be generated by a drug through additional sales to infants or children is not significant enough to induce these companies to do the clinical testing.

If we grant a six month extension for relabeling an existing product, who can argue that it is inappropriate to grant up to a two year extension of a patent if the company develops a new anti-viral that kills the AIDS virus in those who are infected by it? Or a malaria vaccine when there are 400 million people with malaria? Or an antiviral to protect us from Avian Flu, which has a 70% lethality rate (compared to a 1.8% lethality rate for the 1918 pandemic flu that killed 25-100 million people)? Or a new class of antibiotics?

This is the cost/benefit calculation HHS will have to make. And this is the cost/benefit calculation those who oppose the wild card patent need to make. They can argue that the costs to consumers of the wild card extension are too great as compared to the costs of these dread diseases. It can argue that the benefits of securing the development of a cure for AIDS are always less than the cost to consumers of the patent extensions. It can make these arguments and they clearly fall of their own weight. There are values and causes more important than the cost to consumers of patent extensions. Securing pediatric labels has already been found by the Congress to be one of them and BioShield II proposes another one even more compelling.

Choices to make: It's all about choices. These are the kinds of choices we make every day in the Congress. Should we enact a tax incentive, should we promulgate a regulation, or should we go to war in Iraq? We make choices and there are often difficult calculations about whether the course of action is worth the costs. Have we paid too high a price? Is this the most efficient and fairest way to proceed? What are the costs of inaction?

The HHS determination regarding the wild card is the same. Is it worth the cost to consumers -- paying a higher price for a drug for an additional six months to two years because a product's patent is extended — if this is the only way we can secure the development of a countermeasure to a dread disease? There are legitimate costs on both sides — the costs to consumers vs. the costs to infected individuals who have no options. If there is no other way to recruit the best companies to conduct this vital research, and the wild card patent is the key to securing the deal, then is this too lucrative an incentive to deploy?

An incentive for results, not process: It is important to remember that the wild card patent is only awarded if the company does, in fact, successfully develop the countermeasure. No company receives any bonus if it fails to develop the countermeasure. This is an incentive for results, not an incentive for process. In fact, the whole idea of BioShield is to shift the risk to the company — with its investors paying for the research — in exchange for substantial benefits if, and only if, the company produces a product. If the company fails to produce the countermeasure, it and its investors lose all that they invested. This is no windfall. In fact, it's the cheapest way for the government to proceed. It doesn't have to pay for failures and cost overruns. It pays only for success and products.

Entrepreneurs model: Interestingly, this model - we call it the "entrepreneurs model" — is the only one that will work with the successful biotech and pharmaceutical companies. These companies — and their investors — believe and fear that if the government funds the research, the government will — rightly — believe that it can set the price for the product and likely will own and control any patents coming out of that research. Successful companies are not interested in contracts where the research is funded by the government, and this degree of control will be exerted. (Even in cases where the company took all the risk and paid for all the research, this situation can put the company at risk of government expropriation – as we saw when during the Anthrax attack in October 2001 HHS threatened to steal the patent for Cipro if the company wouldn’t sell it at ¼ the market price; this case explains why companies are so reluctant to engage in this research and development.) This is the defense contractor model, which the biotech and pharmaceutical industries have no interest in. Instead, these companies base investment and development decisions on the risks they take and the rewards set by the market. This is the model that is most likely to induce successful companies to risk limited capital and resources in development of new countermeasures. Placing the wild card patent on the goal line is an innovative and powerful way them to conduct research that they would otherwise find unattractive.

Mechanism of the wild card: Let me review briefly how the wild card would work in practice:
1. The government must decide which therapeutics it wants to procure. It can have a short list or a long list.
2. Let's say it decides to procure an anti-viral that kills the AIDS virus in those who are infected. Given the inevitable resistance that has or will develop to the current AIDS products, this is an urgent project.
3. It then issues an RFP for companies to bid on this contract.
4. The HHS Secretary will state in the RFP whether the government is offering a wild card patent as an incentive based on the criteria cited above.
5. The wild card can only be made available for the development of a new medicine, not for relabeling an existing medicine.
6. It can only be used as an incentive for the development of a medical countermeasure that is a “countermeasure,” defined as a “a vaccine and related delivery system, anti-infective, antibiotic or combinations there¬ of, therapy, microbicide, diagnostic technology, drug, biological product, chemical, or other technology that is subject to applicable provi¬sions of this Act, the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), or the Virus-Serum-Toxin Act (21 U.S.C. 151 et seq.), and that prevents infection with, or the spread of, or the directly diagnose, treat, or prevent the pathological effects of infection with, bodily harm from, or the spread of, a biological or chemical agent or toxin on the list described in subsection (f), including treatments for address¬ing excessive bleeding and other trauma fol¬lowing a terrorist attack.” So it does not apply to treatments for psychological effects of a terror attack or infectious disease outbreak.
7. HHS has discretion to offer "up to 2 years" as a wild card incentive.
8. In some cases the Secretary will decide that no wild card patent is needed and none will be offered as an incentive. In other cases, the Secretary might decide that the full two years is needed and appropriate.
9. Let's say in the case of the AIDS anti-viral the Secretary determines that saving the lives of a hundred million people is worth the full two year wild card.
10. Companies bid on the contract and the government selects a company to develop the countermeasure.
11. The company goes to work, diverts its research scientists to discovery, development, testing and evaluation of the new countermeasure, and spends million dollars of its own capital in developing the product.
12. Within 180 days of entering into this contract, the company must specify which patent it would extend if it becomes eligible for the extension upon successfully completing the research. This is an irrevocable election. The company retains the option to restore the term of a patent (see below) rather than to extend the term of a patent, but if it elects to utilize the extension, the patent it has identified is the only one it can extend. This gives generic pharmaceutical firms advance notice of the possibility that a patent might be extended, which enables them to plan the rollout of generic products.
13. The only patents that can be extended with the Wild Card are ones that the company owned at the time it entered into the BioShield contract. This prevents a large company from acquiring the company with the contract and applying the Wild Card to the large company’s patent.
14. BioShield does not fund this research. BioShield provides a market if the company risks its own capital to develop the product and is successful. BioShield is focused on results, not process. It shifts the risk to the companies in exchange for a specified reward for productivity.
15. Let’s say the company successfully develops the countermeasure and completes the contract. It’s developed an anti-viral that kills the AIDS virus. And it secures FDA approval for this product.
16. Then it is paid under the terms of the procurement contract and it secures the liability protections for that product.
17. It also earns the right to elect whether it wishes full patent term restoration on the patent for the therapeutic (see below) or the wild card incentive which can be applied to any patent in the company’s portfolio.
18. The company may well choose the patent term restoration rather than the wild card. It all depends on what patents the company has in its portfolio and what market opportunities beyond the procurement exist for the countermeasure. Typically a company would claim the wild card if it has a valuable patent that has two or three years to run and it’s clear that the wild card would be valuable. Other companies won’t have any similar patent and will choose the patent term restoration rather than the wild card.
19. The patent term restoration option ensures that the delays that arise between the time the patent is granted by the Patent and Trademark Office and FDA marketing approval is not lost to the company. The patent term runs during this time. Under existing law, only a fraction of the patent term can be restored. Under our draft BioShield II bill, the entire delay associated with regulatory review will be restored. This is not a bonus; it’s restoration of time lost due to delays in the FDA approval process.
20. If the countermeasure developed under the contract has a dual use, and it has no other patent in its portfolio to which the wild card would be useful, the company might well elect the patent term restoration for the countermeasure rather than the wild card incentive.
21. Let's say the company elects the wild card rather than the wild card incentive.
22. The company is not permitted to buy or license in a patent to which to apply the wild card. It has to be a patent derived from its own research and development.
23. Let's say the company has a patent on a branded product that has 2 years left on its current patent. It would qualify to add two years to that patent.
24. How much this will cost consumers depends on the competition that product faces and the differential in price between it and a generic version of that product.
25. The company is not permitted to win the wild card more than once and apply it more than once to the same patent.
26. And, of course, if the patent is invalidated by a generic company through litigation under the Hatch-Waxman system, the wild card extension will have no value because the patent will not block the generic from selling its copy of the product. But this is an inherent part of the risk that the company that elects to pursue a wild card patent must assume.

In summary, if the government doesn't offer the wild card, or if the company doesn't bid, or if the company doesn't successfully develop the product, the wild card is never awarded to that company. Similarly, if the patent to which the wild card is applied is invalidated, there is no cost to the consumer. Whether any wild card is possible is determined by the HHS Secretary based on a weighing of the three criteria quoted above, which include the cost to consumers and health care providers.

What does the wild card cost consumers? As you can see it’s quite impossible to estimate with any precision what the wild card incentive might mean to consumers. There are too many variables to make any claims about which patents might be extended and how much this might raise prices for consumers. Any hard claims you hear about the cost of the wild card are speculation. In fact, it's hard to imagine how CBO would score the incentive. It might raise costs for Medicare and Medicaid, but it's extremely difficult to say how much.

Variables in estimating the total cost to consumers: Following is a summary of the variables in estimating the cost to consumers of the wild card.
1. How many countermeasures does HHS seek to be developed?
2. How often does it make the wild card available?
3. What is the length of the wild card offered?
4. Which companies bid on these contracts? What patents are in their portfolio to which the wild card might be applied?
5. Which companies win the contracts? What patents are in their portfolio to which the wild card might be applied?
6. Do the companies successfully develop the product?
7. Do the companies elect the wild card or the patent term restoration?
8. To which patent is the wild card applied?
9. How many years does that patent have to run? How much will consumers save when the product goes off patent?

It is quite likely that any cost to consumers will arise many years form now as we will see substantial delays in the HHS RFP process, in the bidding process, and in the countermeasure development process. These projects can take 5-10 years, or more to complete.

So, it is quite impossible to make any overall calculation of the cost to consumers of the wild card — or when these costs might arise. Those who assert claims about the cost of this incentive are squandering their credibility.

Beneficiaries: The beneficiaries of the wild card patent extension are the individuals who will be protected against an infectious disease –a group that could run into the tens or hundreds of millions. The costs of a Bioterror attack or an infectious disease outbreak could run to a trillion dollars or more. The companies that risk their capital and successfully develop the countermeasure — and their investors — are beneficiaries. The costs are born by the consumers of the product to which the wild card patent is expired — a small subset of all consumers — and health insurance companies that provide coverage to these consumers. (These health insurance companies might experience catastrophic expenses if SARS or Avian Flu hit America and we have no medicines to use to stop the outbreak.) The costs are also born by generic drug manufacturers and their investors, who will have to wait up to two years to bring a generic copy of that product to market. BioShield II asks HHS to weigh these benefits and costs.

Risks of insufficient incentives: In the end, the Congress will have to determine if the wild card patent is needed as an incentive. In this choice, it is appropriate to ask, "How much risk are we willing to take for not providing sufficient incentives to get the job done? What are the consequences of miscalculating? We've already seen that enactment of BioShield I was not remotely sufficient. Will we take the risk that BioShield II is not sufficient? How many years can we afford to experiment to determine how powerful the incentives have to be? What risks do we run if this means we have no therapeutic options to protect ourselves against new and emerging disease threats?

It’s all about choices: In the end, the Congress will have to choose. The issue is straightforward: How important is it that we secure the development of these countermeasures, it is necessary to deploy the wild card incentive to ensure that this work is done, and is it worth the cost to deploy this incentive to get it done? It's a simple dose-and-response choice. What dose of incentives is needed?

Excerpts from BioShield II

Definition of “Countermeasure”
“The term ‘counter¬measure’ means—
‘‘(A) a vaccine and related delivery system, anti-infective, antibiotic or combinations there¬ of, therapy, microbicide, diagnostic technology, drug, biological product, chemical, or other technology that is subject to applicable provi¬sions of this Act, the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), or the Virus-Serum-Toxin Act (21 U.S.C. 151 et seq.), and that prevents infection with, or the spread of, or the directly diagnose, treat, or prevent the pathological effects of infection with, bodily harm from, or the spread of, a biological or chemical agent or toxin on the list described in subsection (f), including treatments for address¬ing excessive bleeding and other trauma fol¬lowing a terrorist attack;
‘‘(B) a therapy, diagnostic, or piece of equipment that may be used to detect, treat, or prevent bodily harm that may be caused by the use of biological, chemical, nuclear, or radio¬logical material as a terror weapon or by an in¬fectious disease;
‘‘(C) a qualified countermeasure, as de¬fined in section 319F–1; or
‘‘(D) a security countermeasure, as defined
in section 319F–2.

Certification of Eligibility for Wild Card patent Extension
“(i) IN GENERAL.—An entity, prior to the date it has successfully developed a countermeasure product, may request that the Secretary determine if the entity is en¬titled to receive an extension of the term of an eligible patent under section 158 of title 35, United States Code (as added by sec¬tion 331), and the duration of any such ex¬tension.
(ii) FACTORS CONSIDERED.—The Sec¬retary shall consider the following factors in making the determinations specified in clause (i)—
(I) the nature of the terror threats to be countered and the im¬portance of developing the counter¬measures in question to respond to such threat;
(II) the difficulty, risk, and expense likely to be associated with the development of such countermeasure;
(III) the existence or non-existence of practical alternatives to the countermeasure to be developed;
(IV) whether review of the safety and effectiveness of the counter¬measure product will require reports from clinical investigations of the countermeasure product; and
(V) the impact of the patent ex-tension on consumers and healthcare providers.
(iii) LIMITATION.—The Secretary may determine that an extension under this sec¬tion is available only if the countermeasure product involved—
(I) contains an active ingredient(including any ester or salt of the ac¬tive ingredient) which has not been approved in another application under section 505(b) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(b)); and
(II) is superior to a previously available drug, antibiotic drug, bio¬logical product, device, detection tech¬nology, or research tool.
(iv) LIMITATION ON EXTENSIONS.— Any extension authorized by the Secretary shall not exceed 2 years, and shall not be less than 6 months, in duration.
(v) WRITTEN DETERMINATION.—The Secretary shall provide an entity that re¬quests a determination under clause (i) with a written determination on the eligi¬bility of that entity for a patent term ex¬tension under section 158 of title 35, United States Code (as added by section 331), and the duration of any such exten¬sion.
(vi) EFFECT OF SECTION.—The Sec¬retary shall promulgate regulations to give effect to this section.
(B) WRITTEN NOTICE OF ENTITY DEVEL¬OPING COUNTERMEASURE.—
(i) IN GENERAL.—Not later than 180 days after entering a contract with the Secretary of Health and Human Services
under section 319F–1 or 319F–2 of the Public Health Service Act (42 U.S.C. 247d–6a or 247d–6b) or with the Sec¬retary of Homeland Security under section 512 of the Homeland Security Act of 2002 (as added by section 101) for the procure¬ment of a countermeasure for which the Secretary of Health and Human Services or the Secretary of Homeland Security, as appropriate, has determined that a patent extension is available under section 158 of title 35, United States Code (as added by section 331), the entity that enters such contract shall notify such appropriate Sec¬retary of the patent that would be ex¬tended if such entity received a certifi¬cation under section 301(b)(4)(A).
(ii) PUBLICATION OF INFORMATION.— The Secretary of Health and Human Serv¬ices, with respect to a contract under such section 319F–1 or 319F–2 of the Public Health Service Act, or the Secretary of Homeland Security, with respect to a con¬tract under such section 512 of the Home¬land Security Act of 2002, shall publish in
the Federal Register the information pro¬vided in a notification received under clause (i).
(iii) IRREVOCABLE ELECTION.—An submission of a notification by an entity under clause (i) shall constitute an irrev¬ocable election of the patent extended under section 158 of title 35, United States Code, except that such entity may elect to restore the term of the eligible pat¬ent under section 156a of title 35, United States Code, instead of extending the term of the patent under such section 158 on the basis of the successful development of the countermeasure.
(C) CERTIFICATION AS TO SUCCESSFUL DEVELOPMENT.—With respect to an application for certification submitted by an entity in ac¬cordance with the terms of the agreement for procurement described under paragraph (2)(C), the Secretary or the Secretary of Homeland Se¬curity, as appropriate, shall—
(i) determine if the entity has success-fully developed the countermeasure in¬volved;
(ii) provide the notice required under subparagraph (B);
(iii) approve or deny the application for certification; and
(iv) notify such entity of and publish such approval or denial, and the reasons therefore.
(D) EFFECTS OF CERTIFICATION.—If the Secretary or Secretary of Homeland Security certifies the application of an entity under para¬graph (3)(A), such entity—
(i) shall receive payment under the contract described in paragraph (2)(C);
(ii) may utilize the patent restoration and extension protection under section 156a and 158 of title 35, United States Code (as added by section 331);
(iii) may utilize the marketing exclusivity provisions of section 505(c)(3)(E) and 505(j)(5)(F) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(c)(3)(E) and 21 U.S.C. 355(j)(5)(E)); and
(iv) may utilize the liability protections described under this title (and the amendments made by this title).

Wild Card Patent Extensions
EXTENSION OF PATENT TERMS RELATING TO COUNTERMEASURE PRODUCTS.— (1) IN GENERAL.—Chapter 14 of title 35, 19 United States Code, is amended by adding at the 20 end the following:
‘‘§ 158. Extension of patent terms relating to countermeasure products
‘‘(a) DEFINITIONS.—In this section, the term—
‘‘(1) ‘countermeasure product’ means a counter¬measure, as that term is defined in 319F–3(a)(2) of the Public Health Service Act, that is a—
‘‘(A) new drug or antibiotic drug, as those terms are defined in section 201 in the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 321), containing an active ingredient (including any ester or salt of the active ingredient) which has not been approved in another application under section 505(b) of that Act (21 U.S.C. 355(b));
‘‘(B) device, as that term is defined in sec¬tion 201 in the Federal Food, Drug, and Cos¬metic Act (21 U.S.C. 321); or
‘‘(C) biological product, as that term is de¬fined in section 351 of the Public Health Service Act (42 U.S.C. 262);
‘‘(2) ‘designated product’ means a drug, anti¬biotic drug, or device, as those terms are defined in section 201 of the Federal Food, Drug and Cosmetic Act (21 U.S.C. 321), or a biological product, as that term is defined in section 351 of the Public Health Service Act;
‘‘(3) ‘eligible patent’ means a patent that at the time the eligible entity entered into the contract to develop such countermeasure product, was owned by or licensed to that eligible entity, and claims a des¬ignated product, an active ingredient of a designated product, a method of making or using a designated product or a method of making or using an active ingredient of a designated product;
‘‘(4) ‘eligible entity’ means a natural or legal person that has—
‘‘(A) successfully developed a counter¬measure product;
‘‘(B) been certified as being eligible to re¬ceive a patent term extension under this section by section 301(b)(4)(A)(i) of the Research Act;
‘‘(C) been certified as having successfully developed a countermeasure under section 301(b)(4)(C) of the Research Act; and
‘‘(D) entered into a contract for the sale of the countermeasure product under section
319F–1 or 319F–2 of the Public Health Service Act (42 U.S.C. 247d–6a or 247d–6b) or sec¬tion 512 of the Homeland Security Act of 2002; and
‘‘(5) ‘Research Act’ means the Project Bio-Shield II Act of 2005.
‘‘(b) PATENT TERM EXTENSION.—The term of an el¬igible patent shall be extended for the period determined by the Secretary of Health and Human Services in a cer¬tification under section 301(b)(4)(A)(i) of the Research Act, in addition to the term which would otherwise apply except for this section, if—
‘‘(1) an application under subsection (c) is sub¬mitted to the Director by either the owner of record of the patent or its agent on or before the date spec¬ified in subsection (c)(3);
‘‘(2) the patent has not been previously ex¬tended under this section, or under section 156 or 156a;
‘‘(3) the applicant has provided written notice and the Secretary has published such information as required under section 301(b)(4)(B) of the Project BioShield II Act of 2005;
‘‘(4) the patent has not expired before the date that the application is submitted;
‘‘(5) the term of no other patent has been ex¬tended based on the certification being relied upon by the eligible entity to request extension of the pat¬ent; and
‘‘(6) no other patent that claims the designated product, an active ingredient of the designated prod¬uct, a method of making or using a designated prod¬uct or a method of making or using an active ingre¬dient of a designated product has been extended under this section or under section 156a.
‘‘(c) ADMINISTRATIVE PROVISIONS.—
‘‘(1) IN GENERAL.—To obtain an extension of the term of a patent under this section, the owner of record of the patent or the agent of the owner shall submit an application to the Director.
‘‘(2) CONTENT.—An application filed under this section shall contain—
‘‘(A) a description of the approved counter¬measure product and the Federal statute under
which regulatory review occurred;
‘‘(B) the identity of the eligible patent for which an extension is sought under this section;
‘‘(C) the identity of the eligible entity and the applicant (if different from the eligible enti¬ty);
‘‘(D) the identity of the designated product to which the eligible patent relates;
‘‘(E) information concerning the certifi¬cation specified in section 301(b)(4)(A)(i) of the Research Act being relied upon as the basis of the extension being requested;
‘‘(F) information indicating that the entity owned or licensed the eligible patent at the time it entered into the contract to develop the countermeasure product; and
‘‘(G) such other information as the Direc¬tor may require including to establish that the applicant meets the requirements of this sec¬tion.
‘‘(3) SUBMISSION OF APPLICATION.—An appli¬cation under this section shall be submitted to the Director within 60 days after the date of the certifi¬cation specified in section 301(b)(4)(C) of the Re¬search Act that is being relied upon to request ex¬tension of the patent that is the subject of the appli¬cation.
‘‘(d) IRREVOCABLE ELECTION.—The submission of an application under this section is an irrevocable election of the application of this section to the patent that is the basis of the application. A patent that has been the basis of an application made under this section may not be the subject of an application made under sections 156 or 156a.’’.
(2) TECHNICAL AND CONFORMING AMEND-MENT.—The table of sections for chapter 14 of title 2 the end the following:
‘‘158. Extension of patent terms relating to countermeasure products.’’.

Annual Report
Part B of title III of the Public Health Service Act (42 U.S.C. 243 et seq.) (as amended by sections 202, 1401, 1631, 1901, 2101, and 2102) is amended by insert¬ing after section 319F–8 (as added by section 1631) the following:
‘‘SEC. 319F–9. ANNUAL REPORT.
‘‘(a) IN GENERAL.—
‘‘(1) SUBMISSION OF REPORT.—Not later than January 1, 2006, and each January 1 thereafter, the Secretary shall submit to the appropriate com¬mittees of Congress, and make available to the pub¬lic, a report concerning the implementation of sec¬tions 319F–4 through 319F–8 and the amendments made by title III of the Project BioShield II Act of 2005.
‘‘(2) CONTENT OF REPORT.—Reports under paragraph (1) shall include—
‘‘(A) an assessment of whether the incen¬tives provided for under sections 319F–4
through 319F–8 and such amendments are sufficient, as determined by the Secretary, to in¬duce the biotechnology, pharmaceutical, device, and research tool industries to modify their on¬going research priorities and devote manage¬ment and scientific talent to researching the de¬velopment of priority countermeasures, detec¬tions equipment, diagnostics, research tools, or drugs intended to directly prevent or treat the pathological and physiological effects of expo¬sures to biological, chemical, nuclear, radio¬logical, and other emerging bioterrorist threats and infectious diseases;
‘‘(B) an assessment of whether such incen¬tives are sufficient, as determined by the Sec¬retary, to address the sensitivity of such indus¬tries to the possibility of challenges to their prices and patents and the terms of sales that may arise when the Federal Government is an oligopoly or monopoly purchaser;
‘‘(C) an assessment of whether such incen¬tives are likely to lead to the development of countermeasures and implementation through the qualified clinical countermeasures delivery centers to prepare the United States in the event of the use by terrorists and others of bio¬logical, chemical, nuclear, or radiological weap¬ons against military or intelligence, Govern¬ment, and civilian population of the United States;
‘‘(D) an assessment of whether such incen¬tives will lead to the development of research tools;
‘‘(E) an assessment of whether such provi¬sions are achieving the goal of securing the United States from bioterror attacks and infec¬tious disease outbreaks;
‘‘(F) an assessment of whether the incentives of the Project BioShield II Act of 2005 are being abused by sponsors seeking ex¬panded market protection for non-counter-measure products based on the development of countermeasures that are marginally useful or that require minimal research and development efforts;
‘‘(G) an accounting of the additional healthcare costs to consumers, healthcare pro¬viders, and government payors due to the appli¬cation of the marketing protection incentives of such Act;
‘‘(H) a description of how such incentives for private sector research relate to the provi¬sion of public funding for the development of countermeasures; and
‘‘(I) recommendations to increase or de¬crease the effectiveness of such incentives.

Posted by: Chuck Ludlam at May 20, 2005 01:57 PM