Patenting and patent challenges in South Korea after introducing a patent linkage system

South Korea introduced the patent linkage system in 2015 as part of the implementation of free trade agreements with the United States. Under the patent linkage system, patenting and patent challenges are critical factors when introducing generic drugs into the market. This study assessed trends in brand-name drugs’ patenting and generics’ patent challenges in South Korea after the introduction of the patent linkage system.

Patenting of brand-name drugs

In the United States, an increased number of patents and a prolonged nominal patent term of brand-name drugs were observed after the introduction of the patent linkage system [25,26,27]. In contrast, some interesting trends in the behavior of brand-name drug manufacturers were noted in South Korea. First, the number of brand-name drugs listed their patents in the K-Orange Book did not increase during the study period. The mean number of brand-name drugs approved from 2012–2015 was 91.6, whereas that of brand-name drugs approved from 2016–2019 was 69.0. Second, the mean number of patents listed in the K-Orange Book per brand-name drug slightly increased during the study period. Mean numbers of patents per brand-name drug approved in 2012 and 2019 were 1.72 and 2.00, respectively. The nominal patent term sorted by the approval year was maintained during the study period.

These findings could be explained by characteristics of the patent linkage system in South Korea [2, 9]. In the United States, manufacturers may list additional patents in the Orange Book after market approval of the brand-name drug. However, patents granted after market approval were not eligible to be listed in the K-Orange Book in South Korea. Furthermore, the timing of patent information submission to be listed in the K-Orange Book is specified within 30 days of the date of market approval. In a similar vein, K-Orange Book is managed with audit and examination by the MFDS [2, 9]. Sometimes, the regulatory authority deletes irrelevant patents in the list. It is noteworthy that the US authority could not amend or delete patents in the Orange Book on its own.

Although patenting of brand-name drugs did not increase in South Korea, some findings help explain the behavior of brand-name manufacturers. The patenting was related to the characteristics of brand-name drugs. The number of patents was larger for biologics and drugs introduced by foreign manufacturers compared to that of chemicals and drugs introduced by domestic manufacturers. Thus, we could expect that the nominal patent term of these drugs would be longer than their counterparts. However, the nominal patent term of biologics and drugs introduced by foreign manufacturers was shorter than that of their counterparts. The difference in the nominal patent term indicated variations in the developing and/or patenting strategy of brand-name drug manufacturers. The nominal patent term was measured by a year difference between the date of marketing approval and the date of the last expiring patent. The date of the last expiring patent was associated with the filing date of the patent, implying that the manufacturer introducing biologics and foreign manufacturers filed the patent earlier than did their counterparts.

Surge in patent challenges of generic drugs

Generics’ patent challenge is another interesting topic under the patent linkage system [28, 29]. We found that the patent linkage system caused a surge of patent challenges in South Korea. Brand-name drugs challenged by generic manufacturers were rare in South Korea before 2015, when 9-month exclusivity under the patent linkage system was introduced. However, 63 brand-name drugs were challenged by generic manufacturers in 2015, implying that the patent linkage system caused a surge of patent challenges. Generic manufacturers waited to obtain 9-month exclusivity as the reward for a successful patent challenges. In a similar vein, types of drugs challenged by generic manufacturers were expanded with the patent linkage system. Before 2015, drugs in injection form and drugs with statutory exclusivity were not the main subjects of patent challenges. However, some patent challenges against these drugs occurred after introducing the system.

Despite the surge in patent challenges right after the introduction of the patent linkage system, patent challenges in South Korea are still less frequent than in other countries. We calculated the portion of brand-name drugs that experienced patent challenges. Of 575 brand-name drugs approved from 2012–17, only 94 (16%) were challenged by generic manufacturers. In other words, 15.6 brand-name drugs per year experienced patent challenges in South Korea. The US FDA has released information about the “Paragraph IV challenge.” In the United States, the number of brand-name drugs experiencing challenges ranged from 52–65 per year for the same study period (2012–17) [30]. Health Canada annually updated information on “Notice of Allegation,” similar to “Paragraph IV challenges” in the United States. For the same study period, the number of brand-name drugs that received “Notice of Allegation” ranged from 105–176 per year in Canada [31].

Factors affecting timing of patent challenges

We applied an event history model to elucidate factors in patent challenges. With this empirical approach, we confirmed that additional patenting was associated with timely patent challenges. Patents for an active ingredient are positioned at high hierarchies, whereas patents for formulation are positioned at low hierarchies [32]. We could not identify the characteristics of patents in this study. However, it is reasonable to assume that additional patenting is associated with patents at low hierarchies. Given this, we could conclude that challenges against patents at low hierarchies are initiated by generic manufacturers in a timely manner in South Korea. In addition to patent hierarchies within brand-name drugs, we found patent hierarchies between brand-name drugs. Patents for biologics and injectable drugs were not likely to be the subjects of patent challenges. However, patents for chemicals and drugs with statutory exclusivity were more likely to be subjects of such challenges. Patent challenges against biologics and/or the entrance of biosimilars into the market is a debatable issue in pharmaceutical policy [33, 34]. We confirmed that biologics had more patents than chemical drugs. However, biologics were less likely to be challenged by generic manufacturers in a timely manner.

As demonstrated in this study, patents at lower hierarchies caused patent challenges by generic manufacturers. The question becomes, why do so many brand-name manufacturers list their weak patents in the K-Orange Book? Researchers explained that even patents at lower hierarchies could make the patent portfolio stronger and that a patent portfolio could discourage generic competition [14]. They become additional barriers for generic manufacturers to enter the market. Defeating both patents is required for generic manufacturers to introduce generics to the market. Generic manufacturers should search for, evaluate, and challenge both patents and obtain a favorable decision that both patents are invalid and/or not infringed on in court. Furthermore, the patent linkage system requires generic manufacturers to notify brand-name manufacturers that they will introduce generics contending that the patent is invalid and/or not being infringed. Thus, brand-name manufacturers could cope with patent challenges more effectively.

We found that increased market size was an abbreviating factor in patent challenges, implying that manufacturers’ expectation of profits might play a role in the decision-making for a patent challenge. The result from this empirical approach is in line with the literature. A questionnaire survey was conducted to identify factors encouraging patent challenge in South Korea [35]. Employees of domestic manufacturers responded that market size, expectations for winning the trial, and the possibility of market approval were the most influential factors in deciding patent challenges. These results shed light on the rarity of patent challenges in South Korea. The limited number of patent challenges might be associated with manufacturers’ low expectation of profit when they market generics. The market share of generics is small in South Korea, even though the price of generics is comparatively high [36]. More specifically, the market share of generics based on volume and value in South Korea has been reported to be lower than that in the United States or Canada [37]. In a similar vein, employees at domestic manufacturers argued that the economic incentive incurred by initiating patent challenge was smaller than the economic disincentive incurred by not initiating a patent challenge [35].

Limitations

This study has several limitations. First, this study investigated brand-name drugs that listed their patents in the K-Orange Book. Brand-name drugs might not list their patents in the register, implying that patenting and patent challenges outside the patent linkage system were not included in this study. Second, this study could not identify patents according to their hierarchies. In South Korea, patents on drug substance, composition, dosage form, and pharmaceutical use are eligible to be listed. Identifying and categorizing these patents might provide a valuable opportunity to fully understand the effect of the system. Third, as abovementioned, provisions related to patent linkage have a degree of ambiguity, and the patent linkage systems in selected countries have variations [2]. Thus, results from this study are not currently generalizable to other countries. However, experience from South Korea could shed light on understanding the impact of the patent linkage system on patenting and patent challenges.

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