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AbbVie Proves Masterful at Playing Drug Patent Game

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·3 min read
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Chicago-area pharmaceutical giant AbbVie Inc. (ABBV) is following the same winning strategy with its new cancer treatment that it did with its drug Humira, which is forecast to reach record-shattering cumulative sales of $240 billion by 2024.

Its plan? Build an impenetrable wall around the new Imbruvica, which is used to treat B cell cancers, via creative--some would say manipulative--use of the patent system.

AbbVie has become known as the master builder of patent walls, according to an article in Endpoints. "Its work on Humira has been both legendary and extraordinarily controversial, encircling a cash cow that can be milked without any generic rivals butting in until 2023 -- as new and better drugs come along to outperform the copycats to come," wrote the article's author, John Carroll.

The Initiative for Medicines, Access & Knowledge discovered through databases that AbbVie has filed 165 patents for Imbruvica, 88 of which have been granted. As a result, the company will now get an added nine years of patent exclusivity for the market it shares with Johnson & Johnson (JNJ).

I-MAK estimates that the bonus period will help make Imvbruvica the fourth largest drug franchise in the world by 2024, generating revenues of $9 billion. That's a lot of money going into the company coffers and, by way of trickle down, to investors. Good for them, not so much for other constituencies. In fact, it's expected to cost the system an additional $41 billion.

But you have to hand it to the folks at AbbVie. Like a lot of pharmas, they've learned how to game the system. Extending the period of marketing exclusivity has become part of nearly every major pharmaceutical company's business strategy.

When AbbVie was spun out of Abbott Laboratories (ABT) in 2013, everyone recognized the big prize was Humira and its long period of exclusivity. CEO Richard Gonzalez knew he had to do everything possible to boost revenue and get new drugs in the pipeline. The Humira cash helped AbbVie fund its $63 billion acquisition of Allergan, which was completed in May. AbbVie says the deal will give the company new growth opportunities in neuroscience and a global aesthetics business.

University of California law professor Robin Feldman said in an article in Pharmaceutical Technology that patents are meant to last a limited time, after which competition should drive down drug prices. Instead, she said, "drug companies pile new protections on to their drugs to extend the protection cliff." She found that nearly 80 percent of drugs associated with new patents are not new drugs, but existing ones, and almost four in ten of all drugs on the market had additional market barriers through further exclusivities.

Disclosure: The author holds no positions in any of the companies mentioned in this article

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This article first appeared on GuruFocus.