Biotechnology

Policy

Overview

At both the national and international level, IP protection is the primary public policy issue for the biotech industry. As an industry that poured more than $93 billion in 2013 into R&D (an increase of 5.1% from 2012) primarily for the purpose of generating patents through entirely new compounds or the improvement of existing ones (5), the biotech industry has a serious interest in strong international IP standards (1). While other forms of IP exist such as trademarks and copyright, patents have been the preferred IP in the biotech industry because they go beyond the expression of an idea, product, or process, offering more details into the very conception of each. Firms rely on patents to protect and validate their original work, and/or use patent licensing to access needed components or technologies owned by other firms. The importance of patents to biotech firms especially acute in the U.S., as U.S. biotech firms have been the most prolific patent seekers in the world with an estimated 60% to 70% of all biotech patents in all OECD countries being first issued in the U.S. (5). Due to the intrinsic nature of global trade in biotech products, and the fact that many biotech patent holders engage in some/multiple form(s) of international business, ensuring patent protections are upheld and that the authenticity of patents are legitimized at national and international level remains of crucial importance to the industry.

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State-Level Policies
Corporate Incentives

For every dollar in its state budget, North Carolina spends 3¢ on incentive programs for businesses each year (15).  The annual total of at least $660 million per year can be broken down into the following categories:

  • $395 million for sales tax refunds, exemptions or other sales tax discounts;
  • $202 million in corporate income tax credit, rebate or reduction;
  • $32.8 million in property tax abatement (15).

A number of firms in the biotechnology sector have taken advantage of the North Carolina state government’s generosity.  From 2004-2010, Merck received $41.2 million from the state in the form of Job Development Investment Grants (JDIG), Site Infrastructure Development Funds, and both Article 3J Tax Credits (3J) and William S. Lee Tax Credits (16).  Before being discontinued at the beginning of 2014, the Article 3J Tax Credit replaced the William S. Lee tax credits.  Specifically, the Article 3J provided credits for three specific activities: creating jobs; investing in business property; and investing in real property (17).  The credits could be used to offset as much as 50 percent of taxpayer’s state liability.

From 2006- 2010, the state of North Carolina awarded Quintiles seven separate grants totaling $31.6 million (10, 11).  Of those, the largest single financial incentive came in 2006, when North Carolina provided $28.5 million in money from a JDIG and the One North Carolina Fund.  Generally speaking, the JDIG is the most popular incentive employed by the NC government—it provides assistance to private enterprises that are looking to create new jobs in the state.  Quintiles promised to create as many as 1,000 jobs when it received its JDIG grant (18).  The assistance given to Merck and Quintiles represented the sixth and 10th highest amounts the North Carolina government has provided to any company since 2000 (16).

Other recent assistance provided to the biotechnology industry includes $13 million worth of tax credit provided to Bio-Pharm Incorporated, from 2008-2010, $10.6 million of tax credits to DSM Pharmaceuticals in 2008 and 2009 and $10.2 million of tax credits and a JDIG to Pharmaceutical Research Association in 2009 and 2010 (16).
Education & Workforce Development

Many of the major investments in North Carolina’s workforce has come from the Golden LEAF (Long-term Economic Advancement Foundation), a non-profit formed in the wake of a settlement between the state and the tobacco industry (19).  The Golden LEAF has funneled more than $70 million to the NC BioImpact consortium, which brings together a number of key actors in the biotech field, including community colleges, state universities, specialized training and education programs, the North Carolina Biosciences Organization, and the North Carolina Biotechnology Center (20).  In addition to the Golden LEAF money, NC BioImpact has received more than $13 million from industry donations.

The issue of training has been addressed with a number of strategic plans for growing the state’s biotech industry.  Historically, the emphasis has been on the importance of the statewide biomanufacturing training networks and strengthening the system of community colleges in order to address the long-term needs of rural areas suffering from job losses in other manufacturing sectors.  However, the state also has not ignored the premium that the biotech industry places on advanced degrees, strengthening degree programs offered at both N.C. State and N.C. Central University.

In a 2012 report based on a sample of more than 4,500 biomanufacturing jobs in North Carolina, the North Carolina Biotechnology Center reported the following breakdown for the educational profile for employees: 16.7% had a high school degree or GED only; 12.6% had a high school degree of GED plus a certificate; 12.7% had an Associate of Science or an Associate of Applied Science degree; 43.3% had a Bachelor of Arts or a Bachelor of Science degree; 10.4% had a Master of Arts or a Master of Science (M.S.) degree; and 4.1% had a doctorate (21).  As a result of the academic qualifications of North Carolinians, firms are able to recruit locally for 90% of their hires (21).

Degree Programs
The BTEC program through N.C. State University and the BRITE program through N.C. Central University offer both Masters and Bachelor degrees as well as continuing education options.  The BTEC program recently added a Masters of Biomanufacturing degree and has an 82,500 processing plant in Raleigh that is billed as the only center in the nation that focuses on both education and research and provides pilot-scale cell culture and purification suite along with intermediate-scale unity operations and bioanalytical labs (21).  The BRITE program in Durham has a M.S. in Drug Discovery and a M.S. in Biomanufacturing.  At the bachelor’s level, 100% of graduates between 2008 and 2011 were either working in biomanufacturing or biotechnology or pursuing advanced degrees (21).

Community Colleges and Continuing Education
NC Bioimpact offers a number of continuing education courses for current professionals to improve existing skills or develop new ones.  The BTEC program offers short courses in analytical technologies, biomanufacturing, bioprocess development, and bioprocess engineering.  There are also online course offerings.  The BRITE program fills a similar niche, providing hands-on, customized training on a variety of subjects related to the biotech industry.

The North Carolina Community College System (NCCCS) describes its BioNetwork as a “statewide initiative … providing specialized hands-on training, curricula and equipment to develop a world-class workforce for the biotechnology, pharmaceutical and life sciences industries” (22).  The main focus of the BioNetwork in North Carolina is to promote industry by upgrading the skills of incumbent workers.  As part of this effort, the community colleges in the state train workers at all levels from top management to entry-level manufacturing workers.

In 2011, the BioNetwork trained 4,656 students and provided assistance for 24 training projects for businesses throughout the state (21).

The BioWork program operated through the state’s community colleges has been one of the most comprehensive platforms to prepare workers for North Carolina's growing biotechnology economy.  BioWork is a one-semester introductory course that is based on the training program developed by Novozymes in tandem with Vance-Granville Community College (21).  A diverse network of firms worked to develop a common curriculum to provide students with a base of knowledge that could be augmented by individual companies.  Since its beginnings, the program has evolved and been offered at a number of community colleges across the state, including Asheville-Buncombe Technical Community College, Durham Technical CC, Piedmont CC, Pitt CC, Vance-Granville CC, Guilford Technical CC and Fayetteville Technical CC.

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National Policy
America Invents Act 2011

The America Invents act is considered the most substantial legislative change to the US Patent and Trademark Office (USPTO) since 1952 (6). Signed in 2011 by President Barack Obama, the Act became effective on March 16, 2013. The most significant change to previously standing patent laws that the Act introduced was that did away with the system of simply proving ‘first inventor’ and replaced it with one of ‘first inventor to file.’ Under the old patent applications could be blocked by individual claiming first invention rights, however, now even if an inventor can prove they were the first to invent something, the first inventor to file a patent application will be awarded the patent.  The idea behind this being to simplify the patent application process by significantly reducing application disputes and to incentivize R&D led competition.  In addition, the Act also better aligned the U.S. patent system with international patent standards (7). Reflecting these intentions are various other important provisions passed with the Act (7):

  • 75% cost reduction for small business with less than four owned patents;
  • Extending grace period to protect patent rights for up to one year before effective filing date for inventors to negotiate with potential buyers without fear of losing their patent;
  • Definition of  ‘prior art’ changed to include non-printed disclosures, including oral disclosures, made available to the public anywhere in the world;
  • Provided prior art effect to US patent applications as of their foreign priority dates, thus eliminating the Hilmer doctrine (1);
  • Disbanded need for inventors disclose best mode to carry out an invention as a defense in post grant review or in infringement actions.

(1) “The Hilmer doctrine, based on the 1966 CCPA case of In re Hilmer, holds that such an application is not citable as of its foreign priority date. That is, under the Hilmer doctrine, a foreign priority claim can be used as a shield against intervening prior art, but not as a sword against intervening inventions” (8).

Biologics Price Competition and Innovation Act 2010 (BPCI)

As part of the Patient Protection and Affordable Care Act, BPCI set in motion a streamlined way in which approve biological products that are deemed to be ‘highly similar’ (biosimilar) or ‘interchangeable to already FDA approved bio-products. The essence of this Act can be understood as an effort by the U.S. government to avoid industry monopolization by brand-name patents by making it easier for non-patent infringing, but comparable products/processes to be introduced into the market (generics) (9). Notwithstanding though, the Act simultaneously provides articles that simplify patent dispute procedures specifically for biologic products. Most importantly, the Act put into law that bio-related patents would be grated a period of 12 year exclusivity after patent approval date and that generic products applying for biosimilar/interchangeable patents would granted one year of patent exclusivity (10). These provisions effectively eliminated longstanding ambiguity within the industry on the length protection for biologics patents.

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International Policies
Trade Related Aspects of Intellectual Property (TRIPS)

In 2005 the World Trade Organization (WTO) updated its international patent policy within its 1995 agreement on Trade Related Aspects of Intellectual Property (TRIPS.) The updated patent legislation in the TRIPS agreement, which is still in effect at time of writing (March 2014), was intended to eventually extend patent protection uniformly across the globe through a delayed rollout to least-developed countries until as last as 2016 for some products. The effects of TRIPS implementation on developing countries, especially in regards to patent bylaws, have been and continue to remain highly controversial; particularly in the area of pharmaceutical, including biologic patents (12).

The TRIPS agreement represents perhaps the most far-reaching and distinctive development in the history of international intellectual property protection. It is one of 25 treaties and agreements on which WTO was founded, giving it legitimacy that no previous intellectual property rights (IPR) legislation can claim. Unintentionally, but nonetheless controversial from the outset, TRIPS is hoped to eventually, "unambiguously strengthen protection of IPR almost worldwide, a feat not achieved by any other single international treaty ever before," according to Jayashree Watal, a former TRIPS negotiator for India (2). More specifically, the WTO cites its philosophy on patents as one trying to, “strike a balance between the long term social objective of providing incentives for future inventions and creation, and the short term objective of allowing people to use existing inventions and creations” (11). The implications for developing countries, however, do remain ambiguous, particularly in the area of public health (13; 14). While developed countries can find many reasons to support the agreement, the needs of the developing world are often at odds with "unambiguously" strong IPR.

The TRIPS agreement established a plethora of new IPR standards, definitions, and conventions previously unprecedented in international property law (2; p.3). The agreement went even further, outlining a dispute settlement process with the possibility of trade penalties, parameters for domestic enforcement, and new categories of certain already established IPR. Under the agreement, pharmaceutical patents confer exclusive rights to the patent-holder whether the patent is on an actual product or process. The absence of discrimination between products and processes in most cases is an important difference between TRIPS and the previously existing patent regimes of certain developing countries with strong domestic generic pharmaceutical industries.(2)

Developing countries seeking to keep drug and crop production prices down to treat and feed their populations are qualified to certain, explicitly limited, exemptions from protection of certain patents. Exceptions to full patent protection are allowed under Article 31 "provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties" (3). Opponents point out that this caveat effectively nullifies the article, and indeed the meaning of unreasonable conflict with the normal exploitation of a patent has been widely interpreted, as evidenced by the high profile lawsuits against the South African and Brazilian governments.

The public furor over TRIPS' strict protection of pharmaceutical patents and their adverse effect on public health in developing nations has caused some NGO's and activists to actually question the legitimacy of the agreement (4; 13; 14). Widespread and longstanding international criticism of the agreement ultimately led to what is known as the Doha Declaration in 2001, an affirmation of the primacy of public health over intellectual property standards. Meanwhile, countries like Brazil have invoked TRIPS provisions for protection of public health to combat their HIV/AIDS epidemics with massive generic drugs programs. As more developing countries reach the end of their grace period before TRIPS implementation, the fight over IPR and flexibility for governments of countries with public health crises is likely to remain at the forefront of the biotech industry's international public policy concerns.

(2) It should be noted that not all "processes" in the general sense are subject to patents under TRIPS. Surgical processes, for instance, cannot be patented. While the TRIPS agreement implicitly distinguishes between "processes" which can be patented and "diagnostic, therapeutic, and surgical methods" which cannot be, the parallels between the two categories are unmistakable. A particular method of heart surgery cannot be patented, while a particular process of producing a heart disease drug can be patented.

References
  1. Biotechnology Industry Organization. Retrieved March 19, 2014 from www.bio.org
  2. Watal, J. (2001). Intellectual Property Rights in the WTO and Developing Countries. Kluwer Law International: Netherlands, p.6.
  3. World Trade Organization. TRIPS Agreement. Retrieved March 18, 2014.
  4. Oh, C. (2001, June). "TRIPS, Patents and Access to Medicines: Proposals for Clarification and Reform," Third World Network Briefing Paper.
  5. Phillips, J. (2013). “Biotechnology in the US.” IBIS World Industry Report NN001.
  6. Hurst, N. (2013). “How the America Invents Act Will Change Patenting Forever.” Wired. Retrieved March 18, 2014.
  7. USPTO. “Global Impacts of the AIA.” Retrieved March 18, 2014.
  8. Brinkerhoff, C. (2011). “The Disharmonious Loss of The Hilmer Doctrine.” PharmaPatents. Retrieved March 18, 2014.
  9. FDA. “Implementation of the Biologics Price Competition and Innovation Act.” Retrieved March 18, 2014.
  10. U.S. Senate.Biologics Price Competition and Innovation Act.”
  11. Retrieved March 18, 2014.
  12. WTO. “Philosophy: TRIPS Attempts to Strike a Balance.” Retrieved March 18, 2014.
  13. Deere, C. (2009). “The implementation game: The TRIPS agreement and the global politics of intellectual property reform in developing countries.” Oxford University Press: Oxford.
  14. Smith, R., Correa, C. and Oh, C. (2009). “Trade, TRIPs and pharmaceuticals.” The Lancet, 373(9664): 684-691.
  15. Sykes, A. (2002). “TRIPS, Pharmaceuticals, Developing Countries, and the Doha ‘Solution’” Chicago Journal of International Law, 3: 47–68.
  16. NY Times. 2012. “United States of Subsidies: North Carolina” Retrieved February 21, 2014 from www.nytimes.com/interactive/2012/12/01/us/government-incentives.html#NC
  17. Good Jobs First. Subsidy Tracker. Retrieved March 14, 2014 from www.goodjobsfirst.org/subsidy-tracker.
  18. NC Department of Commerce. “Thrive in North Carolina.” Retrieved March 14, 2014 from www.thrivenc.com/incentives/financial/tax-credits/article-3j-tax-credits.
  19. Office of the Governor, State of North Carolina. 2006. “Gov. Easley Announces 1,000 New Jobs for Durham County.” Retrieved March 14, 2014 from http://durhamchamber.org/wp-content/uploads/2011/07/quintiles.pdf.
  20. Golden Leaf Foundation. “Golden Leaf.” Retrieved March 17, 2014 from www.goldenleaf.org.
  21. NC Biotechnology Center. “Workforce Development.” Retrieved March 17, 2014 from www.ncbiotech.org/workforce-education/workforce-development.
  22. NC Biotechnology Center. (2012). “Window on the Workplace 2012.” Retrieved March 17, 2014.
  23. NC Community College System. Retrieved March 17, 2014 from www.ncbionetwork.org
  24. Battelle Technology Partnership Practice. 2013. “2012 Evidence and Opportunity: Impacts of the Biosciences in North Carolina.” Retrieved March 14, 2014.

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