IP News from the States

Patent reform poised to help boost economy

Published: August 21,2011. Washington,

With the debt-ceiling crisis over for now, President Obama has tried to turn the conversation to “new jobs, higher wages and faster economic growth.” Among the developments that could spur such improvements, the White House says, are tax cuts for the middle class, congressional approval of stalled trade deals and – yes – patent reform.

“Through patent reform,” Obama proclaimed, “we can cut the red tape that stops too many inventors and entrepreneurs from quickly turning new ideas into thriving businesses.”

Patent reform may not seem an obvious consideration, but the president is right. In the six decades since its last overhaul, the patent system has become creaky. It struggles under an enormous backlog, takes far too long to approve legitimate patents, and paradoxically at times blesses weak ones that undermine serious innovation and expose legitimate inventors to costly damages after their products have gone to market.

A patent reform bill poised for final approval in the Senate would go a long way toward curing these problems. Patents are now given to those “first to invent”; this approach not only is out of step with the rest of the world but also invites challenges to legitimate innovations that have already gone to market. Once dubbed the Patent Reform Act by its lead sponsors, Sens. Patrick J. Leahy, D-Vt., and Orrin G. Hatch, R-Utah, the America Invents Act institutes a “first inventor to file” model that creates a clear standard – the date on which a patent is filed – and brings certainty to the process. The bill also strengthens the ability of third parties to call into question weak patent applications and to challenge those that have been approved. The path for such challenges is clearly defined and is governed by strict but fair time limits so as not to build in unreasonable delay.

The legislation being considered unfortunately weakens an important funding change that would have ensured needed resources for the perennially beleaguered U.S. Patent and Trademark Office. The patent office traditionally has been forced to turn over the filing fees it collects to Congress, which has habitually shortchanged the agency and used the money elsewhere. As originally drafted, the patent reform legislation would have allowed the office to keep all filing fees and would have exempted it from the appropriations process. The House strenuously objected and redrafted the provision. As it stands, filing fees will be deposited in a reserve fund meant for the PTO – but there are no guarantees lawmakers will not dip into it for their pet projects. The change is unfortunate, but it is a small price to pay for passage of a broad package of changes that should lift burdens that for far too long have stood in the way of innovation and economic growth.

Santarus and Depomed Announce New U.S. Commercialization Agreement for GLUMETZA Prescription Products

Santarus to have

broadened rights and responsibility for

GLUMETZA

SAN DIEGO & MENLO PARK, Calif., Aug 22, 2011

Santarus, Inc. SNTS +3.60% and Depomed, Inc. DEPO +0.80% today announced that they have entered into a new commercialization agreement for GLUMETZA(R) (metformin hydrochloride extended release tablets) under which Santarus will assume broad commercial, manufacturing and regulatory responsibilities to replace a promotion agreement that the companies entered into in July 2008. Under the new agreement, Santarus will record revenue from GLUMETZA sales in the U.S. effective September 1, 2011 and over the next few months Depomed will transition most U.S. commercial activities for GLUMETZA to Santarus including managed care contracting, pricing, certain manufacturing activities and distribution.

In addition, Depomed will transfer to Santarus the New Drug Application (NDA) for GLUMETZA and Santarus will be responsible for the product's pharmacovigilance activities in the U.S. Depomed will have an option for expanded rights to co-promote GLUMETZA to physicians not called on by Santarus.

Under the terms of the new commercialization agreement, Santarus will pay Depomed royalties on net sales of 26.5% in 2011, 29.5% in 2012, 32.0% in 2013 and 2014, and 34.5% in 2015 and beyond. Santarus will pay no additional sales milestones to Depomed that were required under the prior promotion agreement. The new agreement provides for a reduced minimum spend obligation for Santarus for promotional expenses and streamlines the oversight of the brand. In addition, Santarus will reimburse Depomed for 70% of its future costs in ongoing Paragraph IV litigation for GLUMETZA. If Depomed elects to co-promote GLUMETZA, Santarus will be obligated to pay a royalty of 70% of the net sales attributable to prescriptions generated by Depomed's called on physicians over a pre-established baseline.

"We are pleased to expand our commercial activities for GLUMETZA, a product that we believe has significant potential in the type 2 diabetes market," said Santarus president and chief executive officer Gerald T. Proehl. "After promoting GLUMETZA for almost three years, our commercial organization is eager to manage contracting and pricing to maximize the potential for the brand. Given our focus on the GLUMETZA brand and the internal resources we have allocated to its promotion, it makes good business sense to transition certain manufacturing activities, distribution and ownership of the NDA for GLUMETZA to our organization. We also believe this agreement will result in greater financial value for both Santarus and Depomed."

He added, "We are moving forward with new eVoucher and savings card programs for GLUMETZA, which we plan to introduce in the coming months. We believe these new programs will significantly increase patient access to our products for adult patients with type 2 diabetes by reducing the out-of-pocket cost for GLUMETZA to a level roughly equivalent to a Tier 1 copay for patients with commercial insurance."

Depomed president and chief executive officer Jim Schoeneck said, "This is a good deal for both companies. For Depomed, it should add meaningfully to our bottom line and should lead to further growth in revenues for Depomed as Santarus grows the franchise. We have a great deal of confidence in the Santarus team and their ability to take on expanded commercial activities for GLUMETZA. This transaction allows our commercial, regulatory and manufacturing teams to focus energies on the successful launch of GRALISE(TM) (gabapentin), our once-daily formulation of gabapentin for the management of postherpetic neuralgia, while also providing us the option to promote GLUMETZA with our new sales force."