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Intellectual Property in the Intellectual Property in the Innovative Pharmaceutical Innovative Pharmaceutical

IndustryIndustry

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June 12, 2006June 12, 2006

Gregg C. BensonGregg C. BensonAssistant General Counsel – Intellectual PropertyAssistant General Counsel – Intellectual Property

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• Our business - discover, develop, manufacture Our business - discover, develop, manufacture and market leading healthcare productsand market leading healthcare products

• Our goal – to make products that improve the Our goal – to make products that improve the quality of life. We want to enable lives that are quality of life. We want to enable lives that are longer, healthier and more productive.longer, healthier and more productive.

• Three business segments:Three business segments:

• Human healthHuman health

• Animal healthAnimal health

• Consumer health Consumer health

About Pfizer

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Pfizer Research & Development

Allergy & Respiratory

Infection Diseases

Cardiovascular Oncology

Metabolic DiseasesGastrointestinal & Hepatitis

Immunology

Central Nervous System

Inflammation

Sexual Health and UrologyPain

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The ideal world:The ideal world:

• Unlimited resourcesUnlimited resources

• Unlimited healthcare accessUnlimited healthcare access

• Unlimited new health discoveriesUnlimited new health discoveries

• Unlimited new medicines to treat Unlimited new medicines to treat diseasesdiseases

Politics of healthcare

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• Resources are not unlimitedResources are not unlimited

• Each new medicine is expensive to Each new medicine is expensive to developdevelop

• How expensive?How expensive?

The real world

$860,000,000$860,000,000

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• $860,000,000$860,000,000

• 12-15 years of R&D12-15 years of R&D

• High likelihood of failureHigh likelihood of failure

Bringing a new drug to market

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Drug discovery and development

in cerebroin cerebroin silicoin silico

in vitroin vitro

in homoin homo

in vivoin vivo

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The R & D process

Phase I

Phase II

Phase III

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Net Cost: $860 Million Invested Over 15 Years Net Cost: $860 Million

Invested Over 15 Years

7,000,000Screened

1,000Enter Preclinical

Testing

6Enter

Clinical Testing

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Compound Success Rates by Stage

Compound Success Rates by Stage

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14

12

10

8

6

4

2

0

Phase II100–300 Patient Volunteers Used to Look for Efficacy and Side Effects

Phase III1,000–5,000 Patient Volunteers

Used to Monitor Adverse Reactions to Long-Term Use

FDA Review ApprovalAdditional Post-

Marketing Testing

Phase I 20–80 Healthy Volunteers Used to

Determine Safety and Dosage

Preclinical TestingLaboratory and Animal Testing

Discovery(2–10 Years)

YearsYears

New drug development – A risky and expensive proposition

Source: Tufts Center for the Study of Drug Development

Approved by the FDA

Approved by the FDA

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Attrition

Complex Disease Targets

Too Long in Body

Adverse Reactions

Poor Absorption

Low Levels in Body

Not Effective Enough

Not Sufficiently Selective

Side Effects

Unsafe

Unstable

Competition

Impractical To Make

MostMost

CompoundsCompounds

DoDo NotNot BecomeBecome

MedicinesMedicines

MostMost

CompoundsCompounds

DoDo NotNot BecomeBecome

MedicinesMedicines

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With such high costs and With such high costs and risks, how does a company risks, how does a company like Pfizer stay in business?like Pfizer stay in business?

Intellectual property protection

Intellectual propertyIntellectual property

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Patent protection is limited

DrugDrug

00 151555 1010

DiscoveryDiscovery ExploratoryExploratoryDevelopmentDevelopment

FullFullDevelopmentDevelopment

PhasePhaseII

PhasePhaseIIII

PhasePhaseIIIIII

yearyear

20 year patent term

IdeaIdea

P

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What happens when patents expire?

• Generic products enter the Generic products enter the marketmarket

• To survive, we need new To survive, we need new productsproducts

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What happens when patents expire?

SalesSalesincomeincome

R & DR & Dcostscosts

YearsYears

Initial Patent ExpiresInitial Patent Expires

55 1010

1515 2020 2525 3030

DiscoveryDiscoveryPhasePhase

DevelopmentDevelopmentPhasePhase

Shearson/Lehman ReportShearson/Lehman Report

FileFilePatentPatent

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Comparison to generic industry

GenericGeneric

• Cheap R & DCheap R & D

• Low risk of failureLow risk of failure

InnovatorInnovator

• Expensive R & DExpensive R & D

• High risk of failureHigh risk of failure

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Data exclusivity

End result of R&D effort -- End result of R&D effort -- DATADATA Value?Value?

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Data exclusivity

• Health authorities require submission Health authorities require submission of pharmacology, toxicology and of pharmacology, toxicology and clinical trials dataclinical trials data

• These data are secret, confidential and These data are secret, confidential and belong to the companybelong to the company

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Data exclusivity – TRIPs Agreement

• TRIPs Agreement requires that data be TRIPs Agreement requires that data be protectedprotected

• Protection from:Protection from:

Disclosure to othersDisclosure to others

Reference by generic companies Reference by generic companies (limited time)(limited time)

TRIPs = Agreement on Trade Related Aspects of Intellectual Property Rights

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Data exclusivity - EXAMPLES

For the following hypothetical examples:For the following hypothetical examples:

• Company wants to develop a Company wants to develop a compound into a medicine to treat a compound into a medicine to treat a diseasedisease

• Patent protection for the compound is Patent protection for the compound is not availablenot available

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Data exclusivity

SalesSalesincomeincome

R & DR & Dcostscosts

55 1010

1515 2020 2525 3030

DiscoveryDiscoveryPhasePhase

DevelopmentDevelopmentPhasePhase

Data Exclusivity ExpiresData Exclusivity Expires

HYPOTHETICAL EXAMPLE 1:HYPOTHETICAL EXAMPLE 1:COUNTRY THAT PROTECTS DATACOUNTRY THAT PROTECTS DATA

Drug ApprovalDrug Approval

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Data exclusivity

SalesSalesincomeincome

R & DR & Dcostscosts

55 1010

1515 2020 2525 3030

DiscoveryDiscoveryPhasePhase

DevelopmentDevelopmentPhasePhase

HYPOTHETICAL EXAMPLE 2:HYPOTHETICAL EXAMPLE 2:COUNTRY THAT DOES NOT PROTECT DATACOUNTRY THAT DOES NOT PROTECT DATA

Drug Drug ApprovalApproval

Generic Generic EntryEntry

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Summary

• Every medicine will one day be genericEvery medicine will one day be generic

• A healthy innovative pharmaceutical industry A healthy innovative pharmaceutical industry is necessary in order for there to be a generic is necessary in order for there to be a generic industryindustry

• Without a healthy innovative industry there Without a healthy innovative industry there will be no new medicines:will be no new medicines:

•Not for usNot for us

•Not for generic companiesNot for generic companies

•Not for our childrenNot for our children