On May 11th, the office of U.S. Food and Drug Administration (FDA) Commissioner Scott Gottlieb issued a press release discussing aspects of President Donald Trump’s plans to lower the prices of drugs prescribed to United States citizens. Commissioner Gottlieb noted that the agency was increasing its efforts to implement the Drug Competition Action Plan by removing market barriers to generic pharmaceuticals. The press release also indicated that the agency would be calling out the actions of specific companies it believes are abusing the system “to reduce gaming of statutory and regulatory requirements to help ensure that drug companies don’t use anticompetitive strategies to delay development and approval of important generic drugs.”
Commissioner Gottlieb’s statement cited the agency’s release last June of a list of off-patent, off-exclusivity drugs for which there are no generic equivalents on the market. The FDA’s efforts to get more generic drugs on the market has had a measurable effect on the patent landscape for pharmaceuticals, however. In 2017, the agency approved a record number of applications for generic drugs, marking more than 1,000 full or tentative approvals. This large number of generic drug approvals has resulted in a 60 percent increase in Hatch-Waxman litigation related to abbreviated new drug applications (ANDA) for generic versions of patented pharmaceuticals.
Political rhetoric on drug prices has also been ramping up over the past few months in ways that have further called into question the effects of patents on drug prices. During a November confirmation hearing for the now-Secretary for the U.S. Department of Health and Human Services (HHS), Alex Azar, the then-nominee has been quoted in news reports as saying that, in order to lower drug prices paid by Americans, “we have to fight gaming the system of patents and exclusivity by drug companies.” Then this February, the Council of Economic Advisers (CEA) issued a report entitled Reforming Biopharmaceutical Pricing at Home and Abroad. While the report was measured in its discussion on patent rights, even noting the effects that healthcare innovations have had on reducing patient costs, it includes data points which could cast a negative light on drug costs associated with patented pharmaceuticals.
Citing data published by the Organisation for Economic Co-operation and Development (OECD), the CEA reported that Americans pay more than 70 percent of patented biopharmaceutical profits among all OECD countries despite only accounting for 34 percent of the OECD’s total gross domestic product (GDP). That certainly could be used as a political talking point by those who are willing to neglect the CEA’s point on the positive effects patented innovations have played in reducing healthcare costs.
Among members of the news media, patents have been a popular whipping boy when contemplating why Americans pay higher drug prices relative to the rest of the world. Last September, business news publication Bloomberg published an article which was highly critical of pharmaceutical developer AbbVie’s patent protection of its arthritis drug Humira. The Bloomberg piece indicated that the thicket of patents covering aspects of Humira has allowed the company to maintain a monopoly over that particular drug even after the core patent expired; the Bloomberg author contemplated that this exclusivity flew in the face of the intentions of the Biologics Price Competition and Innovation Act of 2009. Last year, Congressman Lloyd Doggett (D-TX) had pushed government agencies like the National Institutes of Health (NIH) to exercise march-in rights, which gives the government the right to take action to regulate the licensing of any patents which were funded at least in-part by a governmental agency; coverage of Doggert’s efforts by NPR did not indicate that the NIH or any other agency had exercised these rights.
A spokesperson for the Pharmaceutical Research and Manufacturers of America (PhRMA) issued the following statement on intellectual property and regulations in the pharmaceutical space:
“Strong and predictable intellectual property rights and reliable legal and regulatory frameworks promote innovation and enhance competition; they give innovative pharmaceutical companies powerful incentives to invest in finding tomorrow’s cures and treatments.”
Meanwhile, the Chinese national government extended the period of exclusivity on pharmaceutical patents from 20 years up to 25 years. That extension is reportedly the result of U.S. efforts to address intellectual property violations committed by the Chinese government, but it does mark yet another aspect of patent law where the Chinese and U.S. systems seem to be photo-negatives of each other. For example, uncertainty regarding the patentability of software inventions which has been impacted by the U.S. Supreme Court’s decision in Alice Corp. v. CLS Bank has led in part to the recent decline of the U.S. patent system in international rankings. By contrast, China has been shoring up the patentability of software inventions by relaxing barriers to software and business method patents and streamlining the examination process for big data and Internet-related patents. The result has been that China is now outpacing the U.S. in startup funding for artificial intelligence, a sector of technology which is heavily reliant on software and will only become increasingly valuable in the years to come.
While China makes moves to embrace further innovation in the pharmaceutical sector by extending exclusivity for drug developers, the United States has evidenced an incredible amount of skepticism regarding the activities of pharmaceutical patent owners trying to protect their property. Nowhere has this been more apparent than with Allergan’s patent deal with the St. Regis Mohawk Tribe last year, which major news outlets have portrayed as an effort by Allergan to “game” the patent system. Allergan’s patents were already the subject of patent invalidity proceedings in U.S. district court but the fact that they dared to pursue a sovereign immunity defense of those patents at the Patent Trial and Appeal Board (PTAB) (a defense which had previously worked for state universities) has led to great skepticism. Politicians in DC went so far as to call for probes into that particular transaction and introduce a bill in the Senate specifically to abrogate sovereign tribal immunity in inter partes review (IPR) proceedings, as if Native American tribes shouldn’t be involved in tech licensing and should just stick to selling cigarettes and running casinos. All of this continues to tell a story that, if a patent owning entity wants to enjoy actual protections for patented intellectual property, that firm should be doing business in China before ever thinking about entering the U.S. market where they face incredible hurdles in protecting their innovative developments.