KEI and T1International comments on the prospective grant of an exclusive license to Inversago Pharma, Inc

On August 20, 2018, KEI and T1International filed comments to the NIH regarding the prospective grant of an exclusive license to Inversago Pharma, a firm headquartered in Canada.

According to the Federal Register notice 83 FR 38707, the NIH exclusive license “will be granted worldwide and in a field of use not broader than human therapeutics for type I diabetes and its comorbidities diabetic nephropathy, chronic kidney disease, diabetic retinopathy, and peripheral and autonomic neuropathy.”

A PDF of the comments filed today are available here: KEI-T1International-NIH-InversagoPharma-20aug2018.pdf

The prospective licensee in this case, Inversago Pharma, already holds a license to several NIH-owned inventions related to “CB1 receptor mediating compounds”, according to information provided in the Inversago Pharma website and a previous Federal Register notice 80 FR 66015 from October 28, 2015. The geographical scope for that license, which was executed in April 2016 according to Inversago, was also “worldwide” but the field of use was for the development of therapeutics for “obesity, type 2 diabetes, fatty liver disease and liver fibrosis in humans.”

The new exclusive license the NIH proposes for Inversago does two things. First, the NIH will effectively expand the field of use for all of the patents noticed by the NIH in 2015, so that the inventions can be used to treat type 1 diabetes. Second, the NIH includes several new granted patents or patent applications, which will also be licensed to treat type 1 diabetes.

Aside from a press release by Inversago stating that the company had secured $7 million in financing, there are no publicly available reports of the efforts or investments done by Inversago to bring into practice the inventions covered in the first license agreement. The NIH has not provided an explanation of whether and how the prospective exclusive license noticed in 83 FR 38707 will expand the existing exclusive license between the NIH and Inversago; nor has it provided an explanation of how the NIH has determined that expanding the exclusive license granted to this company is a reasonable and adequate incentive to induce development, given the existing obligation to bring the inventions to practical application for type 2 diabetes.

KEI and T1International oppose to creating a monopoly on the NIH-owned inventions for type 1 diabetes at least until the NIH provide an explanation for two questions: whether the NIH is satisfied that Inversago is, in fact, on track to bring the inventions licensed in 2016 to practical application? And if so, what is to be gained by granting an exclusive license to Inversago for use to treat type 1 diabetes?

In the event that the NIH does indeed seek to execute an exclusive license for type 1 diabetes uses, for the patents noticed in 2018, KEI and T1International propose several conditions on the exclusive license:

1. No discrimination against US residents in pricing

We ask that the NIH include language in the proposed exclusive license to ensure that the prices in the U.S. for any drug, vaccine, medical device or other health technology using the inventions are not higher than the median price charged in the seven countries with the largest gross domestic product (GDP), that also have a per capita income of at least 50 percent of the United States, as measured by the World Bank Atlas Method.

We consider this a modest request to protect U.S. residents, who paid for the R&D that created the licensed inventions.

2. Reduce term of exclusivity when revenues are large

In addition to an external reference pricing test, we propose that the exclusivity of the license in the U.S. should be reduced when the global cumulative sales from products or services using the inventions exceed certain benchmarks.

Given the modest cost of acquiring an NIH patented invention, the amount of money the developer needs in sales to justify additional investments in R&D is reduced, as compared to cases where a company developes or acquires the technology from non government sources.

This request is consistent with the statutory requirements of 35 USC § 209, which requires that “the proposed scope of exclusivity is not greater than reasonably necessary to provide the incentive for bringing the invention to practical application.”

One possible implementation of revenue benchmarks is as follows: exclusivity will be reduced by one year for every $500 million in revenue equivalents, earned after the first $1 billion, where revenue equivalent is defined as global cumulative sales plus market entry rewards as well as government grants or tax credits, for the product or products using the invention. However, the NIH could choose different benchmarks, so long as the limits on exclusivity address the requirements of 35 USC 209, that the incentive is “not greater than reasonably necessary.”

3. Developing countries

We are concerned that several NIH-funded inventions are not accessible in developing countries, due to prices that are high and not affordable in markets where per capita incomes are significantly lower than the United States. For this reason, we ask the NIH to limit the exclusivity in the license to countries that have per capita incomes that are at least 30 percent of the United States.

We also ask the NIH to reach out to the Medicines Patent Pool (MPP), in order to enter into an agreement that gives the MPP an option to negotiate non-exclusive open licenses for the inventions in developing countries.

4. Transparency

The licensee should be required to file an annual report to the NIH, available to the public, on the research and development (R&D) costs associated with the development of any product that uses the inventions, including reporting separately and individually the outlays on each clinical trial. We will note that this is not a request to see a company business plan or license application. We are asking that going forward the company be required to report on actual R&D outlays to develop the subject inventions. Reporting on actual R&D outlays is important for determining if the NIH is meeting the requirements of 35 USC § 209, that “the proposed scope of exclusivity is not greater than reasonably necessary to provide the incentive for bringing the invention to practical application.” Specifically, having data on actual R&D outlays on each clinical trial used to obtain FDA approval provides evidence that is highly relevant to estimating the risk adjusted costs of bringing NIH licensed inventions to market.