The Indian pharmaceutical market is one of the largest markets in the globe, both in terms of production and consumption. Several changes have been made to the patent and competition law due to the increasing challenges in the pharmaceutical market that directly impact the profit margin of pharmaceutical manufacturers. To increase these margins, pharmaceutical product manufacturing firms employ a variety of strategies. This article investigates the concept of “product hopping” and compares it with the practice of patent evergreening.
What is Product Hopping?
Product hopping is a strategy used by ethical pharmaceutical manufacturers against the competition proposed to be created by the generics manufacturers. Such practice forces patients to adopt another branded drug of the company which is equivalent to the drug they were using earlier for the same category of disease. Branded pharmaceutical manufacturing companies use this strategy to shift their patients to another drug product that has a valid patent term, preferably much earlier before the expiration of the patent term of the parent/original drug product.
Product hopping is also known as ”Product switching”. It exists in two forms: a ”hard switch,” where the older product is removed from the market, and a ”soft switch,” where the older product is kept in the market alongside the new product. In either case, the brand focuses its marketing on the new product to limit the market for any generic versions of the old product1.
Product hopping is also called ”evergreening” or ”line extension”. It refers to a drug company’s reformulation of its product and the encouragement of doctors to prescribe the reformulated drug rather than the original product. A manufacturer engages in a ”product hop” by combining two actions: (1) reformulating the product in a way that makes a generic version of the original product not substitutable; and (2) encouraging doctors to write prescriptions for the reformulated drug rather than the original product, i.e., switching the prescription base from the original to the reformulated product2.
Product hopping occurs through one or more than one of several types of reformulations. One category involves new forms, which consist of switch from a capsule, tablet, injectable, solution, suspension, or syrup to another such form or extended-release capsules or tablets, orally dissolving tablets, and chewable tablets. For example, the makers of the antidepressant Prozac and cholesterol treatment TriCor switched from the capsule to tablet form, while anxiety-treating Buspar was switched from tablet to capsule.
A second type of reformulation involves changing molecule parts (known as ”moieties”) by adding or removing compounds. More technically, a manufacturer can switch from one ”enantiomer” (one of a pair of chemical compounds that has a mirror image) to another. For example, and foreshadowing the change discussed below from heartburn-treating Prilosec to Nexium, a manufacturer can switch from a chemical compound that is an equal mixture of each enantiomer, only one of which contains the active ingredient, to a compound that includes only the enantiomer with the active ingredient. Chemical changes also explain the switches from allergy medication Claritin to Clarinex, antidepressant Celexa to Lexapro, and heartburn medication Prevacid to Kapidex3.
A third category of reformulation involves a combination of two or more drug compositions that were previously marketed separately. Combinations have involved migraine-treatment Treximet (combining Imitrex and Naproxen Sodium) and high-blood-pressure medications Azor (Norvasc and Benicar), Caduet (Norvasc and Lipitor), and Exforge (Norvasc and Diovan)3.
Product hop can be understood by the very well-known branded drug product named Namenda IR (Immediate-Release), manufactured by Actavis for the treatment of moderate to severe dementia of Alzheimer’s type. In this case, Actavis replaced its twice-daily dosage of Namenda IR with a single-daily dosage of Namenda XR (Extended Release). Actavis developed Namenda XR long before its launch in the market and received a patent allowance and FDA (Food and Drug Administration) approval. However, Actavis launched Namenda XR just a few months before the expiration of the patent term of Namenda IR. After this launch of Namenda XR, the State of New York filed suit petition against Actavis’ product hop strategy and the Second Circuit found this strategy to be illegal and monopolistic. Actavis was asked to continue the production of Namenda IR. However, the decision of the Third Circuit was opposite to the lower court and favoured Actavis’ product hop strategy3.
Not only the variation in dosage administration but also variations in formulation, formulation administration, and formulation type have been adopted by branded pharmaceutical manufacturers under product hopping.
This issue of product hopping is debatable and revolves around two laws – intellectual property law and competition law. Patent law is a subset of Intellectual property law and protects innovative drug products. On the other hand, competition law forbids monopoly over a product by nurturing competition in society. However, increased competition motivates innovator(s) to develop novel and inventive products to keep them ahead of their competitors by delivering patented and higher efficacious drug products. It seems both systems act complementary to each other and are aimed at developing innovation, competition, and industrial commercialization.
Given the above scenario, there is a great need to establish a balance between patent protection and competition, however difficult it is to achieve. If we consider moral grounds and access to medicine by all, the focus on fostering competition prevails. Yet, practically, it seems difficult to foster competition given the decision of various courts against and in favour of product hopping.
The cost of the drug is also vital in deciding its fate of competition. Generic players are essential to society and help in controlling the price of pharmaceutical products of the branded drug manufacturer. Most consumers cannot spend exorbitantly on branded drug products and move towards substituted generic drug products. However, when a branded drug manufacturer adopts a product-hopping strategy, the pharmacist is unable to substitute branded drugs with generic ones.
Product hop includes instances where the brand manufacturer (1) reformulates the product in a way that makes the generic non-substitutable, and (2) encourages doctors to write prescriptions for the reformulated product rather than the original. Most of the time, branded drug manufacturers formulate strategies in a way that their products do not satisfy the above both conditions and their products overpass the scrutiny of competition law.
What is Evergreening of Patents?
A pharmaceutical research-based company, after developing a novel and innovative drug molecule faces several hurdles till the market launch of the innovative drug molecule as a drug product. After innovating a drug molecule, the first step for a pharmaceutical company is to file a patent application to lock priority and retain a monopoly over the innovative drug product. However, the period of monopoly starts after the grant of the patent, continuing for a total period of 20 years calculated from the earliest filing date of the patent application. The pharmaceutical company loses several years in patenting, clinical trials, and other regulatory compliances. The pharmaceutical company gets only a few years to reap the profit-fruit of the novel drug product. To reap the profit margins for a longer duration, the pharmaceutical company files another patent application with a minor modification or improvement of the parent patent application. This modified or improved version of the parent patent application is called a secondary patent application, and if such patent application converts into a granted patent, it is called evergreening of the patent due to the attached rights over the modified drug product4.
Secondary patents are part of “evergreening” used to extend monopoly protection on existing patented products. The term evergreening is used to represent a variety of strategies in the pharmaceutical industry. Some of the strategies are independent of patent strategy, but others depend importantly on secondary patents. For example, such secondary patents would provide a way for automatic injunctions against generic companies.
Secondary patents are a matter of interest for some companies; however, some of them are not in favour of allowance or grant of secondary patents since the secondary patents lack an actual inventive step. The trend of allowance of patents related to new medical use in Europe is also criticized. Many developing countries directly or indirectly are against the allowance of patents on new uses of known pharmaceutical substances. Some countries even allow patents on non-superimposable mirror images, i.e., enantiomers, and new forms of known compounds. Specifically talking, the Indian Patent Law does not allow such low-quality patents and forbids them by categorizing them as non-patentable under section 3(d) of the Patent Act, 19705.
Nevertheless, the implications of secondary patents have raised doubts in the minds of policy developers globally. The European Commission in its survey found that pharmaceutical companies use secondary patents only to prohibit generic pharmaceutical companies from entering the market despite knowing the weakness of their secondary patent to qualify as patentable subject matter5.
Similarly, the Federal Trade Commission of the United States of America has raised implications of secondary patents considered by courts and reflected in their decisions, making allowance of secondary patents difficult in the USA. Secondary patents on new use, combination, and new forms of known substances that do not increase efficacy are not patentable in India, setting an example for other developing countries.
Relation Between Product Hopping and Evergreening of Patents
Since both product hopping and evergreening focus on avoiding or delaying the entry of generic players in the market, they seem synonymous. On analysing from a different perspective, evergreening can be considered a sub-set of product hopping. There are many factors involved in the development and implication of product hop strategy, such as:
- Ultimate consumers, i.e., patients.
- Physicians, i.e., Doctors and their prescriptions.
- Hospital administration/management.
- Pharmacists in/outside the hospital.
- Compliance with the regulations of regulatory bodies.
Evergreening results in the grant of a secondary patent with minor improvements, and the subsequent product launch without any additional strategy. On the contrary, product hopping works on the following strategies after the grant of a secondary drug patent:
- tie-up with generic players (using reverse payment) to prevent generic drug entry into the market.
- tie-up with doctors/physicians to prescribe only secondary patent drugs to patients only.
- tie-up with hospital administration to advertise the benefits of secondary patent drugs.
- tie-up with pharmacists not to substitute secondary patent drugs with generics and offers them good rewards based on sales of the secondary patent drug products.
Independent secondary patents increase the patent term enjoyed by a drug and a pharmaceutical company becomes more inclined towards allowance of a secondary patent instead of distribution or sales5.
Secondary patents are more susceptible to invalidation than chemical compounds patents and therefore, categorized as weak patents. However, some innovators are against this view. Previous empirical work concludes that secondary pharmaceutical product patents with non-active ingredients that can increase patent life are more prone to patent challenges, i.e., invalidations or oppositions in the USA. A study by the European Commission also concluded that secondary patents are involved in more litigation by generic manufacturers and generic companies have high success rates to obtain a decision in their favour in cases involving secondary patents5.
Despite such perception susceptibility of secondary patents, if invalidated, such patents still yield significant benefits for pharmaceutical companies. More risks and expenses are attached to a patent in the litigation phase, which exponentially increases with the number of patents. Said patent litigation may take several years to resolve (EP matters take three to five years, and Indian matters take three to eight years on average). In the United States, a secondary patent automatically provides a 30-month stay on generic approval under the Hatch-Waxman Act, also known as The Drug Price Competition and Patent Term Restoration Act. Secondary patents do not stop the generic competition indefinitely but may delay the entry of generic companies for several years, protecting and continuing the innovator’s revenue for a certain period5.
Furthermore, generic manufacturers without having much incentive and with limited resources adopt litigation as a tool to challenge or invalidate weak secondary patents so as to process them through rigorous patent examinations. This strategy allows only genuine innovation to get a patent grant or allowance certificate. All these incidents and loopholes contained thereof can help to understand the reasoning behind introducing Section 3(d) under the Patent Act by a developing country like India5.
The scope for generics manufacturers may increase up to 36% for new medicines in the USA since only 64% of medicines have patents claiming a chemical compound. The USA has signed new trade agreements and is under process for a new treaty of Trans-Pacific Partnership to limit or bar allowance of secondary patents in line with India5.
Section 3(d) of the Indian Patent Act makes it difficult for a drug or composition of a drug that has undergone modest modification to get patent protection, therefore, limiting the scope of product hopping in India. However, Section 3(d) does not stop medicines or chemical compounds from obtaining patent protection in India. Yet, the anti-competitive nature of product hopping prevents generics from entering the market. The developing economy and push by the government to promote generic or brand-substituted medications may further limit the scope of product hopping in India.
1 Drug Pricing and Pharmaceutical Patenting Practices (https://www.everycrsreport.com/reports/R46221.html)
2 Michael A. Carrier, Product Hopping, Journal of Commercial Biotechnology (2017) 23(2), 52–60.
3 Tobin Klusty | A Legal Test for the Pharmaceutical Company Practice of “Product Hopping” | Journal of Ethics | American Medical Association
4 Kapczynski A, Park C, Sampat B (2012) Polymorphs and Prodrugs and Salts (Oh My!): An Empirical Analysis of ‘‘Secondary’’ Pharmaceutical Patents. PLoS ONE 7(12): e49470.
5 Kapczynski A, Park C, Sampat B (2012) Polymorphs and Prodrugs and Salts (Oh My!): An Empirical Analysis of ‘‘Secondary’’ Pharmaceutical Patents. PLoS ONE 7(12): e49470.