The Key To Lowering Drug Prices Is Improving Patent Quality

from the patent-quality-week dept

This post is one of a series of posts we're running this week in support of Patent Quality Week, exploring how better patent quality is key to stopping efforts that hinder innovation.

Patents are increasingly a hot topic in drug price policy conversations. So much so, that one might wonder if this newfound attention is deserved. For example, a recent Senate Judiciary Subcommittee hearing examining anticompetitive conduct in prescription drug markets ended up focusing heavily on Pharma’s blatant abuse of U.S. patent laws. Indeed, it seemed at times that patent thicketing had eclipsed the many other anticompetitive “shenanigans” that Pharma uses to delay competition.

So why is there such a growing spotlight on patents?

First, it’s important to realize just how big the drug price problem is. Prescription drug spending remains a critical issue in the United States as millions of American patients and the U.S. healthcare system struggle to keep pace with the growing price tag for medical innovations with limited financial reprieve from low-cost alternatives. In 2020, the total US drug spending was estimated at $358.7 billion and the Centers for Medicare & Medicaid Services (CMS) projects national spending on healthcare to reach $6.2 trillion by 2028 – the bulk of the cost resting on shoulders of the federal government and American households (mainly through taxes and insurance premiums).

One of the key drivers of these rising costs are the habit of drug makers of blocking competition on older drugs that have proven themselves to be blockbusters. And the best modern strategy for doing that is creating a patent thicket. As Committee Chairman Senator Dick Durbin (D-IL) pointed out, “[T]he top-12 best-selling drugs in America each have an average of 71 patents and 78 percent of all new patents are for drugs that are already on the market.”

The reason behind this is two-fold. Older tactics have had successful antitrust cases filed against them, but patent thicketing is somewhat protected by the Noerr-Pennington Doctrine which states that (except for some limitations) people can petition their government even for anticompetitive reasons. That means it is up to the government to resist anticompetitive gaming of its regulations. The second reason is that the patent office is failing at just that. Dr. Rachel Moodie, vice president for Biosimilars Patents and Legal for Fresenius Kabi, a leading health care company, gave testimony stating, “[W]e see the U.S. Patent system as being an outlier now compared to other systems around the world… the way that the patent system is working right now is that it’s easy to circumvent certain rules that allow you to repetitively claim a similar invention over and over again.”

What is the result of this patent thicketing?

Drug manufacturer AbbVie has filed over 240 patent applications for a single drug, Humira, and received over 130 granted patents.  This patent thicket has allowed Humira to control the marketplace in the U.S., leading to Humira claiming the number 1 spot as the world’s bestseller since 2012 – while other countries have had access to more affordable biosimilars. AbbVie itself has had to cut prices by 80% in some markets due to competition.

AbbVie isn’t alone. A study by I-MAK found the practice of patent thicketing pervasive among the top 12 best selling drugs by revenue.

Just how big of a deal is patent thicketing?

The 2020 US revenues of just three drugs – Humira, Enbrel and Revlimid – represent 8.2% of total drug spending in that year. All three of these drugs should be facing competition now or be close to the end of their monopoly terms. They were approved in 2002, 1999, and 2005 respectively. Patent terms only extend 20 years and drugs have historically averaged a little over 14 years of protection on the market due to the length of the approval process (this includes patent term restoration passed by Congress to give some of this time back). Humira has a deal with biosimilar manufacturers that allows them to come to market in 2023, but Enbrel and Revlimid’s final patents don’t expire until 2029 and 2036. Add Imbruvica, a drug we could have seen competition this decade but won’t, and just those four drugs represent almost 10% of all US drug spending.

Competition, on the other hand, works when allowed to. A list by Fierce Pharma of the top 20 drugs by worldwide sales in 2020 indicates just how well competition works to lower the price of some of Big Pharma’s most sought after drugs. As competition from biosimilars and generics hits the marketplace, sales of the industry’s top performing drugs correspondingly drop. For example, as competition emerged against Johnson & Johnson’s ulcerative colitis drug, Stelara, the company had to cut its prices to remain competitive. The same report by Fierce Pharma also anticipates the number two drug, Keytruda, soon taking over the number one spot as Humira’s patent is expiring in 2023, opening it up to competition by biosimilars.

What does this have to do with patent quality?

Drug patent thickets are largely made up of low quality patents whose applications were only filed because of the benefit they provide in keeping competition away from top selling drugs. This means that any patent quality efforts are also efforts to reduce drug prices. For example, the USPTO’s inter partes review process (IPR) has been instrumental in cancelling low-quality patents and allowing new drug competition. This is one of the best tools created by the America Invents Act to cut through these dense patent thickets. IPRs were substantially weakened under the last administration, but a Congress that cares about drug pricing could restore and strengthen this tool to great effect.

Matthew Lane is the executive director of the Coalition Against Patent Abuse

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Filed Under: drug prices, patent quality, patent quality week, patents