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Priority review vouchers: A potential windfall for TTOs when negotiated into license

By Jesse Schwartz
Published: June 7th, 2023

A detailed article on negotiating priority review vouchers into pharma license agreements appears in the May issue of Technology Transfer Tactics. To subscribe and access the complete article, or for further subscription details, click here.

More than 15 years ago, Congress created a way to incentivize development of drugs designed to treat neglected diseases that affect mainly developing countries. Those who did so would win a prize: a voucher that could be used to get priority review from the Food and Drug Administration (FDA) for a different drug — for example, one that might have the potential to become a blockbuster.

In the intervening years through extension and broadening of the program, more than 50 priority review vouchers (PRVs) have been granted. And their value has been consistently high for the simple reason that those who receive the vouchers can sell them to others at whatever price the market bears to use on the review process for whatever drug they wish.

For TTOs licensing drugs and drug candidates, the priority review voucher system creates the potential for a huge windfall if a PRV is granted and then sold — but only if that eventuality is negotiated into the license agreement. Adding some language to any pharma-focused agreement is a practice TTOs should probably adopt — before they lose out on what can be tens or even hundreds of millions in PRV value.

For the companies that use them, PRVs offer three potential sources of value:

  • Reaching the market earlier, which essentially involves the time value of money and can be worth hundreds of millions for a drugmaker.
  • Remaining on the market longer, because in addition to launching earlier, a drug in most cases would have the same patent expiration date as it would without expedited FDA review.
  • Gaining competitive benefits that come from launching before a similar drug from another company.

Some companies clearly see value and are willing to pay for it. In 2014, for example, Regeneron Pharmaceuticals Inc. and Sanofi SA became the first to purchase a PRV — paying $67.5 million — and then used it to obtain priority review of Praluent, an injectable used to reduce the risk of heart attack and stroke. The following year, AbbVie paid $350 million for a PRV that was redeemed in 2019 for upadacitinib, a slow release tablet for rheumatoid arthritis. Some stabilization seems to have arrived in the last four years, as sale prices that were made public for PRVs generally ranged between $95 million and $110 million.

For TTOs, the question involving vouchers is a forward-looking one because they typically sign agreements that license their basic research to others, who then may develop a covered drug that is eligible for a PRV. If the licensee sells its PRV, the challenge for a TTO is being able to anticipate that eventuality and reap some of the reward based on the earlier contribution of the basic research. On this point, approaches vary.

Many licensing agreements involving TTOs use a percentage basis to determine how much the original research contributed to the eventual product that qualified for a PRV — and possible eventual resale. However, arriving at the correct percentage is subject to a wide range of variables, according to several who have been involved with licensing agreements that cover PRVs.

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