Drug companies, including Pfizer, are wooing insured consumers by offering copay coupons, which reduce the amount of money that the latter must spend for a branded drug. These coupons are intended to discourage a patient from switching to a generic therapy. To redeem the coupons, consumers often must submit personal information that allows the firms to promote products to individual patients.

The coupons may help consumers, but they oblige plan sponsors, such as employers or state governments, to pay high prices for branded drugs when generic alternatives are available. Drug companies can prevent plan sponsors from knowing when enrollees have redeemed the coupons by processing them through a “shadow claims system,” according to a statement from the Pharmaceutical Care Management Association. Copay coupons will increase costs for these sponsors by $32 billion over the next decade, according to research from Visante.

At a time when state governments and private companies are pinching pennies, it’s hard to believe that they will allow drug companies to use these tactics for very long. Arrangements such as Pfizer’s agreement to manufacture generic Lipitor for Watson, in exchange for a share of net sales, seem comparatively more benign. Deals like this don’t appear to constrain patients’ choice or force payors to spend more than necessary for a given drug. They might be the “least bad” option for drugmakers without new blockbusters on the horizon.

The patent cliff is beginning to reduce Big Pharma’s sales figures as generic versions of branded drugs enter the market. Although FDA has remarked that pharmaceutical innovation is beginning to increase, not all companies are going to be able to market enough new drugs to make up for lost sales. So how will these vulnerable companies maintain their profits?

Producing vaccines could be a key strategy for firms that have invested in biopharmaceutical manufacturing capacity. Market research firm Kalorama Information reported that the world market for preventative vaccines rose from $22.1 billion in 2009 to $25.3 billion in 2010. It predicts that the market will grow at a compound annual rate of 9.3% during the next five years, thanks partly to sales in emerging markets.

The vaccine market generally is regarded as having two components: adult products and pediatric products. The pediatric market is the bigger of the two—it accounts for more than half of the total market and is growing at a faster rate than the adult market, according to Kalorama.

The growth in pediatric vaccines could spur the development of new drug-delivery methods—another go-to strategy for drugmakers facing the patent cliff. Kalorama predicts that the market for needle-free drug delivery methods will grow at an average rate of 15.1% from 2011 through 2016, when it will be valued at roughly $6.2 billion. More and more children, and needlephobic adults, might benefit from products such as patches and pen injectors.

The search for alternatives to injections could produce surprising results. Arizona Biodesign Institute has concluded three early-stage clinical trials using potatoes that carry vaccines against hepatitis B, E. coli, and the Norwalk virus, according to Kalorama.

These two reports confirm the growing importance of vaccines and new drug-delivery methods for the pharmaceutical industry. Companies with enough manufacturing muscle and scientific knowhow should be able to find creative ways to survive the coming welter of patent expirations. And their ingenuity will make life easier for patients, too.

The capsules, which are made of polymeric hydrogels, are hollow except for polymer chains that are linked to the interior of the shell. These chains divide the capsule’s interior into various compartments that could contain several active ingredients. Possible applications include cancer therapy and pain relief.

The researchers formed the capsules in a two-step process. First, they formed chains of a temperature-sensitive polymer without using a cross-linking agent. The absence of this agent causes the chains to dissolve at a certain temperature. Next, the scientists added a cross-linking agent to a second polymer to create a shell around the temperature-sensitive polymer chains. Cooling the microcapsule caused the shell to swell until it reached its stable size, leaving behind temperature-sensitive polymer chains that can act as hydrophobic drug carriers.

The scientists are still trying to determine the best way to load drugs into the capsules and the best way to trigger them to release the drugs. Even though the capsules are still being refined, they have the potential to become a useful drug-delivery tool. Polymeric microspheres, while not new to the drug industry, can be a versatile delivery method. The straightforward process for creating the capsules also could attract drugmakers’ attention. The Georgia Tech team’s work provides cause for optimism at a time when some observers lament the lack of innovation in the drug industry.

Several developments in 2004, particularly concerns about Merck’s arthritis treatment Vioxx, led patients and lawmakers to question the safety of marketed drugs. FDA received a lot of public criticism for not being vigilant enough, and the agency responded by re-evaluating its practices.

“The FDA’s shift in recent years to an increasingly cautious, risk-averse posture toward new drug approvals has had the unintended consequence of reducing investment in life-sciences innovation due to the significant additional time, cost, and uncertainty it has added to the drug-development process,” said Leff in written testimony to the US House of Representatives’s Energy and Commerce Committee. Medical research “is exploding with potential,” he added, but FDA’s new caution makes it hard for investors to earn returns.

But drug-approval figures seem to undercut Leff’s argument. In testimony before the same House committee, Janet Woodcock, director of FDA’s Center for Drug Evaluation and Research, cited a trend toward greater first-cycle approvals for priority new molecular entities (NMEs). The average first-cycle approval rate for priority NMEs has increased from 46% in 1992 to 68% to date, she said. First-cycle approval rates for standard NMEs have also increased from an average of 30% to 38%, according to Woodcock.

Woodcock also countered claims that FDA approves drugs more slowly than EMA. “Of the 35 cancer drugs approved by FDA or the EMA from October 2003 to December 2010, FDA approved 32—in an average time of 261 days,” she said, citing an article in Health Affairs. In contrast, “EMA approved only 26 of these products, and its average time was 373 days.”

Drugmakers’ lack of approved new drugs might have many causes. Now that the low-hanging fruit has been picked, drug discovery itself has become harder. Although FDA is a fair target for criticism, I don’t think the agency can be blamed for quashing innovation. With appropriate funding, scientific expertise, and federal help, drugmakers should be able to develop the new products that keep them and their patients healthy.

The issues surrounding the patent-dispute case date back to 1988, when a California-based research company, Cetus, began to collaborate with scientists at Stanford University’s Department of Infectious Diseases to test the efficacy of new AIDS drugs. Mark Holodniy, a research fellow at Stanford at the time, was assigned to Cetus to conduct research and developed a PCR-based procedure for measuring the amount of HIV in a patient’s blood. Upon returning to Stanford, he and other Stanford employees tested the procedure, and Stanford secured three patents relating to the measurement process. Roche later acquired Cetus’s PCR-related assets, and after conducting clinical trials on the HIV quantification method developed at Cetus, commercialized the procedure. In his capacity at Stanford, Holodniy had signed an agreement assigning his interests to the university for inventions that resulted from his employment there and also had signed an agreement with Cetus, as part of gaining access for his research at Cetus, that assigned his interests to Cetus.

The crux of the case centered on whether Holodniy had the right to assign his interest to Cetus or whether the rights belonged to Stanford under the University and Small Business Patent Procedures Act of 1980 (i.e., Bayh-Dole Act), which established a framework for determining ownership interest in federally funded research. Stanford first sued Roche in 2005, and in 2009, a federal appeals court ruled that Stanford did not have grounds for patent infringement. The US Supreme Court ruling this week affirmed the lower court’s decision. Chief Justice John Roberts, who delivered the opinion of the court stated: “The Bayh-Dole Act does not automatically vest title to federally funded inventions in federal contractors or authorize contractors to unilaterally take title to such inventions.”

Although the opinion of the Court involved the specific contractual details of the case, including the timing of the agreements and whether research performed at the time in question was under federal funding, the ruling raises important issues in intellectual property rights, technology transfer, and the role of public and private funding in research, particularly in light of pending US patent reform. In today’s quest for innovation, pharmaceutical-based and other industrial-based research is increasingly reliant on partnerships between academia, the private sector (both large and small companies), and government. The financial interests of the private sector and universities in intellectual-property ownership are clear, but what is more murky is how to best marry those interests in a robust and equitable system of mutual benefit. Although cliched, the term “win–win” should be more than lip service, but something that is put into practice in the design and implementation of research, technology transfer, and the rewards of eventual commercialization. Current patent law or any pending reforms can create a framework, but ultimately, it is the specific parties involved in these academic–industy–government partnerships, which need to recognize and legitimize the symbiotic nature of their common efforts.

The pharmaceutical and biotechnology industries are gearing up for another round of debates on patent reform as the US House of Representatives begins consideration of proposed legislation. Last month, the US Senate, overwhelming passed a bill, The America Invents Act (S. 23), a major piece of patent-reform legislation. The bill, which received bipartisan support, has divided business concerns, including the pharmaceutical industry.

According to a recent Wall Street Journal article, the Senate bill brings the US into line with other countries by establishing a system that grants patents to the inventor that is the “first to file” with the US Patent and Trademark Office (PTO) as opposed to the current US system that has a “first-to-invent system,” which some businesses say results in too much litigation.The bill also allows PTO to keep its fees from patent reviews and processing, a measure that is hoped will help reduce the backlog in patent applications at the PTO.

In a press release issued Mar. 31, 2011, Jim Greenwood, president and CEO of the Biotechnology Industry Organization, supported the introduction of a House bill, the America Invents Act  (H.R. 1249), which is similar to the patent-reform bill passed by the  Senate last month. “The America Invents Act is a clear improvement over prior House versions of patent-reform legislation,” said Greenwood in the release. “We are pleased that the legislation will end, once and for all, the diversion of fees collected by the US Patent and Trademark Office, allowing the agency to use all of its fees to hire more examiners, reduce the backlog of pending applications, and make other improvements to its operations. We also commend the inclusion in the bill of many other reforms that will improve the patent system and enhance patent quality, including transition to a ‘first-to-file’ system, the elimination of other subjective elements of patent law, and a new supplemental examination proceeding for use by patent owners.”

Although supportive of the bill, BIO had some misgivings. “BIO has serious concerns with several significant changes made in the House bill regarding the inter partes review system. Taken as a whole, these changes would make it easier to bring frivolous challenges to patents, harder for patent owners to enforce them, and more likely that patent owners will find themselves in duplicative and costly patent-related proceedings,” said BIO in its statement. “These changes negatively alter the carefully crafted balance between patent owners and accused infringers that was achieved in the Senate bill, a bill that won support not only from 95 Senators, but from a wide range of industries, universities, and small businesses across the spectrum of American innovation.” BIO also expressed concerned about the inclusion of broader prior user rights in the House bill and said that this issue, coupled with the inter partes review changes, “could set back efforts to pass meaningful patent reform this year by undermining the broad coalition of American innovators currently supporting patent reform.”

The Pharmaceutical Research and Manufactures of America (PhRMA) did not offer a specific statement on the House measure, but offered its support for the recently passed Senate bill. “As the bill moves forward, we hope that members of the House of Representatives will share in that commitment and approve a bill that mirrors the Senate’s commitment to innovation, “ said PhRMA President and CEO John Castellani in a Mar. 9, 2011, PhRMA press release.

Meanwhile, the Generic Pharmaceutical Association (GPhA), which had earlier criticized the Senate bill, offered its concern over the House bill for weakening measures relating to inequitable conduct defense. “GPhA has strong concerns about Section 11 of the pending bill relating to the supplemental examination of patents. The proposed language would significantly weaken the inequitable conduct defense, compromise the integrity of the current patent process, add unnecessary workload to the US Patent and Trademark Office, and impact the ability of generic manufacturers to bring lower-cost generic drugs to the market. While we strongly support measures to protect the integrity of the patent process, we also believe that Americans should have timely access to lower cost generic versions of brand medicines,” according to a Mar. 31, 2011, GPhA statement.

GPhA also voiced its opposition to the supplemental examination measure in the House bill. “Unfortunately, proposed language in H.R. 1249 includes a provision on ‘supplemental examinations’ that would allow a patent holder to ask the PTO to reconsider or correct information that was not in existence when the original patent was granted,” GPhA continued in its statement. “In other words, the bill as drafted would allow a patent holder to ‘cleanse’ its patent, even if the patentee engaged in deceptive or inequitable conduct to obtain the patent. It is clear to GPhA that this language could be interpreted as allowing patent applicants to use the cleansing procedure even if they previously withheld or misrepresented information with the intent to deceive the PTO during the patent application process.It is imperative that Congress enact good public policy that encourages patent applicants to be truthful and honest when prosecuting the original patent and that the proposed cleansing language would weaken the integrity of the patent process. For these reasons, we urge the Committee to modify the provision before the full bill moves forward.”

Patent reform has been long overdue in the US. The Senate bill represented a six-year journey in getting legislation passed. But reservations for specific measures within the proposed House legislation means that concrete patent reform is still in the making.

Pfizer’s decision to close its R&D unit in the United Kingdom is a harbinger of things to come, to hear Shire’s Chief Executive Angus Russell tell it. Major pharmaceutical companies won’t be able to sustain their traditional levels of R&D expenditure because “there just hasn’t been the productivity in research and development that there was 10 years ago,” he told the UK’s Sunday Telegraph.

Russell’s prescription? Imitate Shire, which actively buys promising treatments in Phase II and III clinical trials, rather than funding a large R&D operation. The strategy seems to have paid off. Since 1999, the company’s staff has grown from 400 to 4100 employees. And Shire’s revenues have increased by a compound annual growth rate of 16% since 2003.

R&D will remain important to the industry, but it may have to become more efficient. Fortunately, government officials and academics already are trying to boost the productivity of this traditionally idiosyncratic process. The National Center for Advancing Translational Sciences (NCATS), soon to be established by the National Institutes of Health, will consolidate various research efforts and use robotic screeners to identify promising chemicals. And the Massachusetts Institute of Technology (MIT) has developed ranking algorithms that predict drug candidates’ success or failure more consistently than traditional algorithms.

A year ago, I would have doubted the viability of Russell’s strategy of cherry-picking other companies’ research. But the founding of NCATS and the development at MIT are beginning to persuade me that R&D can be improved, and that drug companies conceivably could choose to focus on manufacturing. Here’s hoping that smarter R&D is possible, and that it will yield new products that can improve the health of patients and the industry alike.

Gladys Mensing sued PLIVA (Zagreb, Croatia), alleging that metoclopramide, which she took to treat diabetic gastroparesis, gave her tardive dyskinesia, a neurological movement disorder. As required by federal rules, the labels for generic metoclopramide matched those of the innovators, which did not warn about tardive dyskinesia while Mensing was taking the medicine. The US Food and Drug Administration ordered such warnings to be added in February 2009.

A federal judge threw out Mensing’s lawsuit, saying that it was preempted by federal regulations requiring the labels to match. The Eighth US Circuit Court of Appeals overturned this decision, however. “The generic defendants were not compelled to market metoclopramide,” the appeals court said, according to the Associated Press. “If they realized their label was insufficient but did not believe they could even propose a label change, they could have simply stopped selling the product. Instead, they are alleged to have placed a drug with inadequate labeling on the market and profited from its sale.”

It would seem unfair to punish PLIVA after it had marketed its product according to federal regulations. But the Eighth Circuit Judge raises a crucial point: ethical considerations should have stopped PLIVA from selling its drug if it knew that the label was insufficient. But how much did PLIVA know about metoclopramide’s potential side effects?

The fact that FDA originally approved the drug without a warning, only to add it later, reminds me of the controversy surrounding GlaxoSmithKline’s (GSK, London) Avandia. During a 10-year period after the drug was approved, more than 47,000 people taking it needlessly suffered a heart attack, stroke, heart failure, or death, according to one study. It would be wrong to blame the unfortunate adverse events entirely on FDA for approving the drug; the agency may not have gotten all of the relevant data. Senate investigators concluded that GSK did not share with regulatory authorities clear indications that Avandia increased heart risks.

The Avandia story illustrates that, despite its best efforts, FDA cannot yet completely protect us against drugs’ harmful side effects. The belated modification of the metoclopramide label indicates to me that the drug entails a significant risk of causing tardive dyskinesia. Given that FDA sometimes fails to mandate that drugs carry adequate warnings, I think that patients who can demonstrate that approved drugs have harmed them should have legal redress. I look forward to seeing how the Supreme Court decides this case.

Genzyme shareholders don’t like sanofi’s offer and are unlikely to pressure CEO Henri Termeer to accept it. sanofi should offer more money, Fabrice Seiman, portfolio manager of Lutetia Capital and a Genzyme shareholder, told The Wall Street Journal. A fairer price would be $75–80 per share, Seiman said.

Genzyme’s shareholders are not the only ones to consider sanofi’s bid too low. “Investors value Genzyme higher than the current offer from sanofi,” Michael Obuchowski, chief investment officer at First Empire Asset Management, told Bloomberg. sanofi may be alone in considering $69 per share a good price.

A disagreement about the value of Genzyme’s efforts to correct manufacturing-quality violations at its Allston, Massachusetts, plant has prevented the companies from agreeing on a share price. Nor have the companies seen eye to eye about the potential of Campath, a new product that Genzyme wants to market to treat multiple sclerosis.

An acquisition could be a boon to sanofi, which will soon face generic competition for major products such as Plavix and Taxotere. Buying Genzyme would help sanofi develop a pipeline of biopharmaceuticals and establish its position on the increasingly important large-molecule playing field.

Because no alternative bidder has emerged, sanofi might think that if it bides its time, Genzyme’s shareholders ultimately will give in. I think this is a miscalculation. The shareholders’ consensus has held strong for two months. I don’t see it dissolving during the next six weeks in the absence of a sweeter deal.

sanofi could compromise by agreeing to pay Genzyme compensation according to the future performance of Campath. The companies’ financial advisors recently discussed this idea, but it has not borne fruit so far, according to The Wall Street Journal. Driving a hard bargain might backfire for sanofi, and offering a higher price per share now could keep the company from losing more money in the future.

MDLinx, which aggregates medical articles for doctors, recently surveyed 500 American primary-care physicians. Almost 95% of them said that their patients had rationed or skipped medications during the past six months because of concern over their finances or insurance coverage. “Patients are having to take their medications every other day,” Dr. Delbert Morales of Greenbelt, Maryland, told MDLinx. “For some medications, I write double the strength and have them cut [the pills] in half so medication will last longer.” Another doctor complained that restrictive insurance formularies soon will force physicians to prescribe drugs from the 1980s.

Such dire straits might make patients feel like they have nowhere to turn, but some public officials are trying to address the problem. Governor Brian Schweitzer of Montana is asking the Centers for Medicare and Medicaid Services for permission to provide Medicaid drug discounts to all citizens of his state. Montanans who enrolled in Schweitzer’s program voluntarily could save as much as 55% on the retail price of their drugs. Citizens with private insurance could decide to pay their insurance copay or the Medicaid price, whichever was lower. The program also would cover senior citizens whose Medicare coverage had run out. What’s more, the program would immediately reduce the amount of money that senior citizens in the doughnut hole would have to pay for their medications.

Drugmakers may consider Schweitzer to be a thorn in their side. The governor has criticized the industry’s pricing and accused it of dodging taxes. But it is hard to disagree with his assertion that “no one should be forced to make decisions about whether or not to buy medicine.” It would be in the industry’s interest to cooperate with Schweitzer’s program if it is enacted. Price discounts likely would increase a company’s drug sales, which would be a boon to manufacturers with expired or expiring patents. And any drugmaker that agreed to negotiate discounts with Montana would earn the respect and goodwill of patients across the country. I think patients would remember companies who gave them a reason to be thankful, even after the current crisis ends.