Unpredictability in Patent Law and Its Effect on Pharmaceutical Innovation

In recent years, the major innovator pharmaceutical companies have experienced two pronounced and significant trends: a decreasing output of innovative new drugs and cutbacks in research and development (R&D) investment. The two phenomena probably are not unrelated and raise significant concerns for a society intent upon providing affordable health care for an aging population. While the root causes of these trends are complex and diverse, we should not overlook the critical role patents play in creating the necessary incentives for the substantial investment required to develop pharmaceutically-interesting chemical compounds into actual drugs and to take them through the clinical trials necessary for Food and Drug Administration (FDA) approval. In a recent presentation, Robert Armitage, Senior Vice President and General Counsel for Eli Lilly and Co. (Lilly), identified the high level of unpredictability in today's patent law as a significant impediment to the development of new medicines. This Article discusses various forms of unpredictability in patent law and how they impact innovators, particularly in the pharmaceutical sector, and provides some ideas for addressing the problem. Part II of this Article summarizes the current R&D crisis confronting the pharmaceutical industry and the accompanying drop-off in innovative output from this important technological sector. Part III explains Mr. Armitage’s “view from industry,” which attributes a significant causative effect to unpredictability in the patent system. Part IV provides two Lilly case studies involving generic challenges to two of the company’s important drugs, Gemzar and Strattera, in which the company has suffered as a result of this unpredictability. Part V identifies three distinct forms of unpredictability in patent law: unpredictability caused by the proliferation of loosely defined standards rather than bright line rules; unpredictability associated with long-delayed clarification of critical and identifiable ambiguities in patent law; and perhaps worst of all, unpredictability that occurs when courts adopt a new interpretation of legal doctrine and apply it retroactively, to the detriment of the investment-backed expectations of patent owners. Part VI discusses how Con-