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Drug Patents: Realigning Incentives for Innovation and Accessibility

Prescription drug costs remain a top voter concern approaching the 2020 elections. In a recent poll released by the Bipartisan Policy Center and conducted by Morning Consult, 57% of voters selected prescription drug costs as a significant challenge.  One area which has received relatively limited attention amongst policymakers is the role of the patent practices which delay competition and impact the affordability of pharmaceuticals.  It’s a topic that BPC is paying close attention to and discussed during a recent drug patent event.

Prescription drugs for previously untreatable diseases have been helping patients to live longer, have a higher quality of life, and in some cases, be cured of disease. The processes necessary to develop a new drug, conduct clinical trials, obtain approval from the Food and Drug Administration, and bring it to market can range anywhere from $160 million to over $2 billion, depending on which sources and studies are used for estimates. There is considerable financial risk for a company to invest in developing a drug and successfully bringing it to market. In the United States, the risk incurred for developing a new drug is rewarded with 20 years of market exclusivity in the form of a patent for the successful drug.

The right provided by the patent grant is, in the language of the patent law and of the grant itself, “the right to exclude others from making, using, offering for sale, or selling” the invention in the U.S. When patents end, lower-priced competitors should be able to jump into the market and drive down the price. This doesn’t seem to be happening.

The U.S. pharmaceutical sector is thought to be a market-based system that relies on competition to produce optimal outcomes based on price, quality, and accessibility. However, it is questionable if market forces truly work in this area of the pharmaceutical industry. Between 2005 and 2015, at least 74% of the drugs associated with novel patents issued were not new ones coming on the market but rather existing ones. Of the roughly 100 best-selling drugs, nearly 80% obtained an additional patent to extend their monopoly period.  

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Anticompetitive Behaviors

Another, similar, practice is that of “patent-thickets”, which affects biological drugs (referred to as biologics) in particular. Biologics – drugs such as Humira® and Avastin® – are large-molecule drugs requiring sophisticated, resource-intensive technologies for safe and reliable production. Biologics are among the most expensive drugs in use due to the advanced technology required to safely make them, and some believe, due to monopolies created by multiple patents on one biologic. The process of making biologics involves more steps and a higher level of complexity, which allows the opportunity for brand biologics companies to patent more of those steps. Brand biologics companies often file dozens of new patents on biologics in order to force a generic company to file suit against each of them, delaying a generic competitor from coming to market.

The most common tool to combat these different types of anticompetitive patents has been to sue branded firms under antitrust law. Determining whether a patent is invalid is a costly and lengthy legal process for competitor companies and for the federal government when involved in antitrust lawsuits. All the while, competition for incredibly expensive drugs is slowed or stopped, causing the consumer (whether an individual patient or the state or federal government) to spend extra thousands and millions of dollars for brand name drugs.

The Case for Drug Patent Reform

The case for drug patent reform in U.S. legislation and easier access to lower priced drugs is pressing. A pending bipartisan bill, S. 1416 (116), by Sens. John Cornyn (R-TX) and Richard Blumenthal (D-CT) would authorize the Federal Trade Commission to sue drug companies if they use tactics like pay for delay or product hopping  — all in order to delay cheaper copies of the medication. A similar bill in the House, H.R. 3991, by Reps. Hank Johnson (D-GA) and Martha Roby (R-AL), would limit the number of patents that the brand-name manufacturer can assert in litigation in order to streamline the litigation process.

In addition, the CREATES Act, signed into law by President Trump on December 20, 2019, enables generic and biosimilar drug companies to more easily obtain the samples of brand drugs necessary to develop their products. This legislation is particularly applicable to biologics. Until now, a brand biologic could opt to decline making enough quantities of a biologic necessary to develop a competitor biosimilar. Biosimilar companies are now permitted to bring civil action against brand biologic companies for doing so. The Congressional Budget Office estimates CREATES will save the government about $4 billion over 10 years.

Given the continued concern of the American public with respect to the affordability of drugs, we expect additional bipartisan discussion and debate amongst policymakers in Congress on this issue in 2020.