Americans spend on average about $1,300 per person per year on prescription drugs, which represents only about 13.3% of the total paid-for drugs in the US. Private insurers, Medicare, and Medicaid pay another 81.8%. These costs are higher in the US than in the rest of the world and the prices tend to rise about 5% per year (See R. Langreth, “Why Prescription Drug Prices in the US Are So High”, Bloomberg QuickTake, July 19, 2022.)
Why are drugs so expensive?
The Coalition Against Patent Abuse (CAPA), whose members include healthcare providers, consumer groups, patient advocacy organizations, free market advocates, and employers, asserts that drugmakers strategize to keep prices high by using patents to maintain perpetual monopolies over their products. In fact, The Initiative for Medicines, Access, and Knowledge (I-MAK), stated that drug companies file an average of 125 patent applications per drug and obtain an average of 71 patents per drug, according to a 2022 report entitled “Overpatented, Overpriced”.
Certainly, patents are important to pharmaceutical companies, as they regularly defend them in the courts. Most recently, Novartis AG plans to appeal a case to the U.S. Supreme Court to uphold the validity of US Patent No. 9,187,405, which is related to the multiple sclerosis drug Gilenya. If the Supreme Court declines to hear the case or if the Court decides that the patent is not valid, generic drugmakers such as HEC Pharma plan to launch their own similar drugs. If the patent is upheld, it will expire in December 2027.
Are pharmaceutical companies abusing the patent system?
A patent normally has a maximum term of 20 years from the earliest filing date. However, an applicant is not limited to one patent per product. The product itself, the process of making the product, the process of using the product, and the machine that makes the product may all independently be considered inventions. Moreover, Applicants sometimes file “continuation” applications to pursue aspects of the invention that weren’t protected in an earlier application. Generally, all the patents expire at roughly the same time.
Clearly, some companies have found ways to protect products beyond the 20-year timeframe. For example, the initial patent for AbbVie’s rheumatoid arthritis treatment Humira (US Patent No. 6,090,382) expired in 2016. However, Abbvie obtained an additional 132 related patents, giving the company protection until 2034. An antitrust case filed against the company in 2019 contended that Abbvie has established a patent thicket that violates the Sherman Antitrust Act, 15 USC Sections 1 and 2. The initial case was dismissed in 2020, and the decision was upheld on August 1, 2022. See Mayor and City Council of Baltimore v. AbbVie Inc, 7th U.S. Circuit Court of Appeals, No. 20-2402.
The practice of making small tweaks to a product to obtain a new patent is often called “evergreening”. USPTO patent examiners carefully review every patent application. The Applicant must convince the patent examiner that the “tweak” is new and not obvious.
Amgen’s original patent for its arthritis treatment, Enbrel, (US RE36755) expired in 2012. The assignee, Immunex Corporation, later licensed related applications from Roche Holding AG, issued as U.S. Patent Nos. 8,063,182 and 8,163,522. These patents afford Amgen protection in the US through 2029. Sandoz, which produces a biosimilar sold outside of the US called Erelzi, attempted to invalidate the patents, taking their case all the way to the Supreme Court (Sandoz Inc. v Immunex Corp., 20-1110, Supreme Court). Sandoz’s Petition for a writ of certiorari was denied on May 17, 2021.
What can be done?
In an effort to tackle the root of the problem, a bipartisan group of US senators led by Patrick Leahy and John Cornyn wrote to the USPTO Director Kathi Vidal on June 8, 2021, urging the director to crack down on “patent thickets”, which is defined in the letter as large numbers of patents that cover a single product or minor variations on a single product. The Senators note that obtaining multiple patents on one invention is contrary to 35 CFR 101, which indicates an inventor is entitled to a single patent on an invention. The Senators requested a Notice of Proposed Rulemaking or Public Request for Comments by September 1, 2022. In particular, they challenge the use of Terminal Disclaimers and continuation patents.
A Terminal Disclaimer requires the Applicant to disclaim the term of a patent that extends beyond the term of a related patent or application owned by the Applicant and requires the patents to remain co-owned. The letter suggested that the elimination of Terminal Disclaimers would result in fewer patents because applications currently subject to a Terminal Disclaimer would remain rejected as obvious.
Patent thickets tend to dissuade businesses from pursuing products with only borderline profitability because of the costs to identify the patents, negotiate licensing, and/or challenge the validity of each patent. It is possible that reigning in patent thickets will encourage more competition, bringing prices down. However, it would be best if Congress and the USPTO do not eliminate continuations, which would prevent inventors from legitimately protecting the many aspects of their invention.