1. 1 Intellectual Property in the Innovative Pharmaceutical Industry *** June 12, 2006 Gregg C. Benson Assistant General Counsel – Intellectual Property 1

2. 2 Our business - discover, develop, manufacture and market leading healthcare productsOur business - discover, develop, manufacture and market leading healthcare products Our goal – to make products that improve the quality of life. We want to enable lives that are longer, healthier and more productive.Our goal – to make products that improve the quality of life. We want to enable lives that are longer, healthier and more productive. Three business segments:Three business segments: Human healthHuman health Animal healthAnimal health Consumer healthConsumer health About Pfizer

3. 3 Pfizer Research & Development Allergy & Respiratory Infection Diseases CardiovascularOncology Metabolic Diseases Gastrointestinal & Hepatitis Immunology Central Nervous System Inflammation Sexual Health and Urology Pain

4. 4 The ideal world: Unlimited resourcesUnlimited resources Unlimited healthcare accessUnlimited healthcare access Unlimited new health discoveriesUnlimited new health discoveries Unlimited new medicines to treat diseasesUnlimited new medicines to treat diseases Politics of healthcare

5. 5 Resources are not unlimitedResources are not unlimited Each new medicine is expensive to developEach new medicine is expensive to develop How expensive?How expensive? The real world $860,000,000

6. 6 $860,000,000$860,000,000 12-15 years of R&D12-15 years of R&D High likelihood of failureHigh likelihood of failure Bringing a new drug to market

7. 7 Drug discovery and development in cerebro in silico in vitro in homo in vivo

8. 8 The R & D process Phase I Phase II Phase III

9. 9 Net Cost: $860 Million Invested Over 15 Years 7,000,000 Screened 1,000 Enter Preclinical Testing 6 Enter Clinical Testing 1 Compound Success Rates by Stage 16 14 12 10 8 6 4 2 0 Phase II 100–300 Patient Volunteers Used to Look for Efficacy and Side Effects Phase III 1,000–5,000 Patient Volunteers Used to Monitor Adverse Reactions to Long-Term Use FDA Review Approval Additional Post- Marketing Testing Phase I 20–80 Healthy Volunteers Used to Determine Safety and Dosage Preclinical Testing Laboratory and Animal Testing Discovery (2–10 Years) Years New drug development – A risky and expensive proposition Source: Tufts Center for the Study of Drug Development Approved by the FDA 9

10. 10 Attrition Complex Disease Targets Too Long in Body Adverse Reactions Poor Absorption Low Levels in Body Not Effective Enough Not Sufficiently Selective Side Effects Unsafe Unstable Competition Impractical To Make MostCompounds DoNotBecome Do Not BecomeMedicinesMostCompounds Medicines

11. 11 With such high costs and risks, how does a company like Pfizer stay in business? Intellectual property protection Intellectual property

12. 12 Patent protection is limited Drug 0 15510 Discovery ExploratoryDevelopmentFullDevelopment PhaseIPhaseIIPhaseIII year 20 year patent term Idea P

13. 13 What happens when patents expire? Generic products enter the marketGeneric products enter the market To survive, we need new productsTo survive, we need new products

14. 14 What happens when patents expire? Salesincome R & D costs Years Initial Patent Expires 5 10 15 20 2530DiscoveryPhase DevelopmentPhase Shearson/Lehman Report FilePatent

15. 15 Comparison to generic industry Generic Cheap R & DCheap R & D Low risk of failureLow risk of failureInnovator Expensive R & DExpensive R & D High risk of failureHigh risk of failure

16. 16 Data exclusivity End result of R&D effort -- DATA Value?

17. 17 Data exclusivity Health authorities require submission of pharmacology, toxicology and clinical trials dataHealth authorities require submission of pharmacology, toxicology and clinical trials data These data are secret, confidential and belong to the companyThese data are secret, confidential and belong to the company

18. 18 Data exclusivity – TRIPs Agreement TRIPs Agreement requires that data be protectedTRIPs Agreement requires that data be protected Protection from:Protection from:  Disclosure to others  Reference by generic companies (limited time) TRIPs = Agreement on Trade Related Aspects of Intellectual Property Rights

19. 19 Data exclusivity - EXAMPLES For the following hypothetical examples: Company wants to develop a compound into a medicine to treat a diseaseCompany wants to develop a compound into a medicine to treat a disease Patent protection for the compound is not availablePatent protection for the compound is not available

20. 20 Data exclusivity Salesincome R & D costs 5 10 15 20 2530DiscoveryPhase DevelopmentPhase Data Exclusivity Expires HYPOTHETICAL EXAMPLE 1: COUNTRY THAT PROTECTS DATA Drug Approval

21. 21 Data exclusivity Salesincome R & D costs 5 10 15 20 2530DiscoveryPhase DevelopmentPhase HYPOTHETICAL EXAMPLE 2: COUNTRY THAT DOES NOT PROTECT DATA Drug Approval Generic Entry

22. 22 Summary Every medicine will one day be genericEvery medicine will one day be generic A healthy innovative pharmaceutical industry is necessary in order for there to be a generic industryA healthy innovative pharmaceutical industry is necessary in order for there to be a generic industry Without a healthy innovative industry there will be no new medicines:Without a healthy innovative industry there will be no new medicines: Not for usNot for us Not for generic companiesNot for generic companies Not for our childrenNot for our children