The use of inter partes review (IPR) to challenge patents has grown significantly since its initiation in September 2012. In the first four months of IPRs, the USPTO received 97 petitions. In the parallel months of 2014, 578 new petitions were filed. Not surprising: as statistics go for invalidating patents, the IPR process scores high – so much so that the US Patent Trial and Appeal Board (PTAB) has had to defend itself from allegations that it is a “death squad” for patent rights.

From the viewpoint of a potential challenger, it would seem IPRs effectively clear the path of potentially impeding patents. Yet only around 8 percent of petitions are in the pharmaceutical area. Why are the numbers so low?

One reason may be that the Hatch-Waxman framework governing challenges to generic drugs relies on district court litigation to start the clock for approval; the framework does not take into account use of IPRs to achieve the same goal. In Hatch-Waxman litigation, the generic company asserts that the branded pharmaceutical’s patents are invalid or will not be infringed by the generic drug. To obtain a 30-month stay on the generic’s approval, the branded pharmaceutical company must file an infringement action in district court. Subsequent court rulings then determine whether the generic company can lawfully launch its drug before the patents expire and whether the first generic company to file its FDA application will be rewarded with 180-day market exclusivity. This statutory framework does not include a mechanism for challenging patents by IPR, so such challenges remain in district court. A second reason for the slow start to pharmaceutical-related IPRs may be that the industry has taken a wait-and-see approach as the first IPRs make their way through the process.

We can divide IPRs into two stages. First, the PTAB decides whether the challenger has shown a reasonable likelihood that it would prevail in showing the unpatentability of the patent claims in view of elected prior art. If not, the IPR terminates. However, if this hurdle is passed, the IPR is instituted and proceeds to trial, where the PTAB makes a final determination on validity. The above table shows the status of pharmaceutically related IPRs with a filing date on or before March 31, 2015 and their status as of May 12, 2015.

Of the challenges that have reached the institution decision point, the PTAB instituted review on two-thirds of the petitions (43 of 64 total). However, a look at the type of patent claims at issue in these IPRs adds more color to the picture

Pharmaceutical patent claims typically fall into a few defined categories: (1) the chemical structure of a drug; (2) formulations of the drug; (3) methods of administration and treatment (e.g., dosing regimens, diseases treated); and (4) drug combinations. Generally, the latter three categories concern drugs whose chemical structure is already known. A majority of the pharmaceutical IPRs are focused on these types of claims and also constitute the majority where PTAB review is instituted. Of the 64 petitions considered for institution to date, eight concern patents for new chemical structures. The PTAB denied institution to all eight petitions. In contrast, the PTAB instituted the IPRs for 35 of the 56 petitions relating to patent claims for known drugs.

The overall picture suggests IPRs may have a more limited application for pharmaceuticals. For the first filer of a generic small molecule drug, the Hatch-Waxman process will continue to play out in district courts to ensure award of the 30-month stay and 180-day first filer exclusivity. It is likely only subsequent filers will use the IPR process to gain market access. Moreover, the IPR success rate on challenging patents directed to new drugs is low. Thus, it is only after these central patents expire or are invalidated in district court that IPRs become expedient to challenge follow-on patents.

Patent challenges for biosimilar drugs may be more amenable to IPRs. Current biosimilars are largely directed at drugs where patents on chemical structure have expired and only follow-on patents remain. Also, the first filer market exclusivity incentive only applies to a subset of biosimilars designated as interchangeable. Currently, FDA approval is proceeding in two steps, with drugs clearing the biosimilar approval first and going back for interchangeable status only later. In this manner, the patent challenges may be already addressed in either IPRs or district court before exclusivity comes into play. Additionally, recent court battles over the process for challenging biosimilars in district court suggest IPRs may be a faster, easier route.1

As more patents make their way through IPRs, the balance of how the pharmaceutical industry selects between IPRs and district court litigation will likely evolve.