One of the hobbies of Dr. Yehudah Livneh, general patent counsel at Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), is running in marathons. He compares the extended race to his job at Teva. "As in a marathon, so in the patent department, you don't start running straight away, and the preparations are many," says Livneh. "You have to maintain a certain pace, because you get nothing if you go full speed ahead. Here too, there is planning and work over several years, there are no quick fix solutions. This job is not for anyone looking for instant satisfaction," he adds.
Nevertheless, Livneh does find a difference between running a marathon and managing a patent department. The latter requires a team effort by all the staff, unlike the solitary run. Livneh's department is part of Teva's legal division, and comprises 130 people, 75 of whom are based in Israel. "We've grown phenomenally, the department has doubled within a less than a year," says Livneh. More than 90% of the department's staff hold at least bachelor's degrees in life sciences, and the team also includes doctors, pharmacists, and lawyers.
"We train patent lawyers, as there's a huge shortage in the field," Livneh explains. "There are 250 patent attorneys in the whole of Israel, half of them in our field. I want around 100 patent attorneys in my department, so I have to train them." Livneh says the first class in a course run by Teva recently graduated and a second is now underway. Another reason that Teva trains patent attorneys itself is that its requirements are different. "The standard patent lawyer knows how to write a patent to protect other people's inventions," explains Livneh. "In my opinion, that is just a small part of the job. The more significant part is to look at other people's patents, assess them, and decide when to attack and when to challenge them. A large portion of these patents should never have been registered in the first place."
Teva is the world's largest generic drugs company and at the end of 2007 it had 162 abbreviated new drug applications (ANDAs) in the pipeline, worth a total of $92 billion on the basis of IMS data. Teva has first-to-file rights on 42 of the drugs, worth a total of $36 billion. The role of the company's patent department is, in fact, twofold. It has to protect the patents on Teva's original products, and at the same time, find holes in other companies' patents.
How does the department actually work? "We have information specialists with scientific backgrounds who search for patents," Livneh explains. "A patent is registered on a new invention, and we don't take it at face value. We look through the literature to find out what was known before the patent was registered, and if, for instance, an article was published on the subject a year before the registration, the patent is invalid. Sometimes you have to combine two different articles."
Globes: How do you decide which patents to challenge?
Livneh: We are, first and foremost, a commercial company. The market is the force that chooses the products. I can challenge a patent and get it disqualified, but if there's no market for the product, who cares? Why go to all the effort?
To this end, the patent department works together with other departments at Teva, such as R&D. Livneh notes that the patent department staff meet their counterparts in R&D, "not just daily, but several times a day," to protect their inventions, and make sure "they don't fall into a trap and violate the patents of another company," he says.
“Initially, we assess when the optimal entry to the market will occur, assuming that all the product’s patents are valid,” says Livneh. “Then we see whether we can bypass the patent. You don’t have to always get the entire patent disqualified - one can, for instance, tell R&D to use a substitute, say magnesium instead of calcium, to bypass the patent.” Naturally it isn’t always that simple. “There are different kinds of patents. Essentially, generic companies go onto the market with a product with the same active ingredient, in a product which is bioequivalent,” says Livneh. “If there’s a patent on the active ingredient, I can’t bypass it, and I can try to attack it instead. If there are patents covering a formula, which includes an active ingredient and secondary ingredients, you can try and attack the patent with other secondary ingredients. You need to understand where the primary patent lies. This is where we fit in, on the front between science and law.”
Another front where the patent department is active, is the intense battle between innovative companies (ethical product manufacturers) and the generic companies, headed by Teva. “One of the major ills of the drugs industry today is that innovative companies are investing a tremendous effort to block generics, even greater than the effort they put into the production of new drugs,” says Livneh. “The number of new drugs is falling by the year, and on the other hand, great efforts are being spent on the registration of irrelevant patents and other ruses designed to block generics. The innovative companies are producing lawsuits instead of drugs,” says Livneh, adding that Teva is currently involved in more than 200 legal actions and objection procedures worldwide.
As a countermeasure, the generic companies have banded together in a number of organizations in the US, Europe, and the rest of the world. Livneh helped set up some of these organizations, and he is currently intellectual property coordinator in the International Generic Pharmaceutical Alliance. But despite the united front, Livneh sees the generic companies’ battle with the innovative companies as a “David vs Goliath” contest, and notes, “In Washington, for example, there were more than 500 lobbyists working on behalf the innovative companies in 2006. Generic companies had fewer than 10.” Do the generic companies have a preference for a particular party in the White House? “Generics is one of the solutions to the health budget crisis in the US, and both the Democrat and Republican parties acknowledge this,” Livneh answers diplomatically.
A good law for Teva
The Drug Price Competition and Patent Term Restoration Act of 1984, usually referred to as the Hatch-Waxman Act, regulates generic activity in the US, and a number of amendments were made to it at the end of 2005. The law grants, for example, a period of exclusivity for a product to the first generics company to challenge the patent on it. "In the past, some generics companies abused the exclusivity," says Livneh. "They reached agreements with innovation companies, didn't bring products onto the market, and prevented other companies from marketing them. The law now sets out certain conditions under which a company can lose exclusivity. This is good for Teva," he adds, "which always brings products onto the market. But there are side effects as well - you have to take care not to lose exclusivity because of the terms of the law. In general, we welcomed the amendments to the act."
There are instances where Teva decides to make an at-risk launch, even though the legal process is still ongoing. Such was the case with Wyeth's slow-release gastro esophageal reflux disease (GERD) drug Protonix. After the US District Court for the District of New Jersey turned down Wyeth's request for a temporary injunction delaying the launch of Teva's generic version by three days at the end of 2007, Teva went ahead with an at-risk launch, bringing vast quantities of merchandise onto the market. The company also raised its guidance for 2007 following the move. Teva halted the marketing of its generic version of Protonix in January to allow time for talks with Wyeth.
How does Teva decide when to make an at-risk drug launch? "This is a serious decision," Livneh explains. "We usually look at the early stages of the hearing and study the verdicts on the injunctions - on which law was the rejection of the injunction based, and decide whether it would wise to make an at-risk launch. There are many shades, it's not black or white. You have to take a decision in an environment of uncertainty, since the outcome of the legal process is uncertain."
Teva has made two acquisitions since the beginning of 2008 - CoGenesys Inc. for $400 million and Bentley Pharmaceuticals Inc. (NYSE: BNT) for $360 million. The acquisition of CoGenesys takes Teva into a new strategic field, biogenerics. This is a field which is growing at almost three times the rate of synthetic chemical-based drugs, and totals $70 billion a year.
How will the entry into biogenerics affect the patents department?
"It's the same system, but the patents are written differently, and require a different type of expertise. Luckily, I worked at a biotechnology company for 10 years and I did my doctorate in the field as well. I joined Teva before they had thought about biogenerics, and I was one of those who pushed in that direction. The time has now arrived and we're ready."
How much room is there for creativity in your job?
"A lot. Creativity is in the Jewish people's genes, and it can also be seen in patents - how to register a patent that can't be attacked, how to attack other people's patents. It is a highly creative field, one of the most exciting. I take people full of creativity who worked in laboratories and studied life's well-kept secrets, and seat them behind a desk with a lot of paperwork. It sounds frustrating but on the contrary - it's the same work, but instead of conducting experiments with fluids and test tubes, we conduct experiments with a computer and paperwork. I've been in the field for more than 25 years, and the day I find it bores me, I'll leave. That hasn't happened yet, I've never had a boring day. Every day there are new things, different developments, policies we're not familiar with, different patents and lawsuits, biogenerics. It's such an interesting world, and it is constantly progressing."
A badge with no honor
Every year, at the end of April, the Office of the US Trade Representative (USTR) publishes its annual report on the status and level of protection by its trading partners of US companies’ intellectual property. In recent years Israel has been placed on the USTR’s “Priority Watch List.” Israel, says the USTR, “appears to have left unchanged its intellectual property regime that results in inadequate protection against unfair commercial use of data generated to obtain marketing approval.”
“Why do we appear on the same list as China?” asks Livneh, and answers, “because Teva is the world’s largest generics company, so we get special treatment. The US authorities get information from the reports filed by innovative companies in the US. Their goal is to cripple Teva and enact laws against it.”
What effect has the report had?
“There has been no direct effect, but it has made headlines. There’s always a good deal of whining, why have we been lumped together with all the pariahs? and calls for changes to the legislation.”
Published by Globes [online], Israel business news - www.globes-online.com - on April 23, 2008
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