Intellectual Property and Innovation … The Virtuous Cycle

Khaled MansourArea Managing Director, Janssen, Middle East, West Asia and Africa

The Value of Innovation

Innovation is important

• Pharmaceutical innovation has accounted for 73 percent of the total increase in life expectancy between 2000 and 2009

• Increases in life expectancy resulting from better treatment of cardiovascular disease alone have been conservatively estimated as bringing benefits worth more than $500 billion a year.

• According to Harvard health economist David Cutler, Virtually every study of medical innovation suggests that changes in the nature of medical care over time are clearly worth the cost.

Innovation isn’t easy or inexpensive

• Once a lifesaving drug or treatment exists, it’s easy to take it for granted.

• We sometimes forget the years of toil these things take to develop; the millions spent to bring a new drug or treatment from theory to actuality.

Innovation is Risky, Slow an Expensive

- New drug development takes an average of 10–15 years.- Innovation cost have risen from an av. of $800M per drug in 2003 to $2.6B in 2014

INDEFINITE

Drug Discovery

Preclinical Clinical Trials FDA Review Scale-Up to Mfg.

Post-MarketingSurveillance

ONE FDA-APPROVED DRUG

0.5 – 2 YEARS6 – 7 YEARS3 – 6 YEARS

NUMBER OF VOLUNTEERS

PHASE 1

PHASE 2

PHASE 3

5250~ 5,000 – 10,000

COMPOUNDS

PR

E-D

ISC

OV

ER

Y

20–100 100–500 1,000–5,000

IND

SU

BM

ITTED

ND

A S

UB

MIT

TED

The Virtuous Cycle of Innovation

| Nelson working document | March 2015 | Business Use Only

6

Discovery R&D

ReferenceProduct

IP Expires

GenericProduct

Clinical TrialsSafety & Efficacy

GenericDevelopment

Resources free

to Innovate

DocumentBioequivalence,

Quality & Integrity

The Value of

Intellectual Property

Importance of Strong IP Rights

United States, 52.6%

European Union, 25.9%

Japan, 9.9%

All Others; 7.3%

Asia,* 3.6%

China; 0.7%

U.S. Patents Granted in Pharmaceutical Technology, Selected Years 1997–2012,

Location of Inventor by Region/Country

IPR is the incentive to Invest and Innovate

Where do new drugs come from?

Biopharmaceutical IP Benefits Developing Economies

• Strong, positive, and well-recognized correlation between foreign direct investment inflows and reliable IP regimes1

• High-quality and high-quantity tech transfers leading to faster growth in domestic firms

• The presence of innovative pharmaceuticals provides increased benefits to a country’s economy and the health of its population: speedier drug diffusion3, decreased costs of hospitalizations and non-drug expenditures with new medicines4, and increases in longevity5

MYTH: “IP is Unfair to Developing Nations”

• FACT: Few of the approximately 400 drugs on the World Health Organization’s model essential drug list have ever been patented in the world’s poorest countries.

Intellectual Property Protection – Incentive for Innovation

Intellectual Property

Patent System Patent Enforcement

Regulatory Data Protection

• 3 Key Components of Effective IP Systems

– Patent System• Patentability Standards• Term of Protection

– Patent Enforcement• “Linkage”• Effective resolution of patent issues

before an infringing product is allowed to enter the market (including an effective judicial system)

– Regulatory Data Protection (RDP)• Protection independent of patents

that prohibits: (1) disclosure of commercially valuable data by governments; and (2) reliance on commercially valuable data for approval of third party products for a fixed time period

Conclusion

• Patients benefit most from IP rights – drug breakthroughs and advances.

• We can have both IP and access.

• But erosion of IP rights globally threatens to undermine future drug development.