Extending patent exclusivity directly drive up prices

Wayne Brough, 5-23-2024, "Bad Patents Keep Drug Prices High," R Street Institute, – Adi WH

Skyrocketing prescription drug prices remain a pressing political issue. that a large majority of voters in both parties support efforts to reduce drug prices, and President Joe Biden’s reelection highlights his administration’s efforts to do so under the .

A major factor driving higher drug costs is the patent system, which grants pharmaceutical manufacturers a 20-year exclusive right to “make, use, sell, and import” their products. Although the government originally the patent system to “promote the Progress of Science and useful Arts,” many patents are now deployed to protect and extend monopoly power. In the case of pharmaceuticals, are regularly implemented to keep competitors and low-cost generics out of the market for as long as possible to maximize the profits of blockbuster drugs. Given this ongoing misuse of the patent system, any proposed changes to patent policy must be evaluated carefully to ensure that they deter, rather than reinforce, such practices.

With this need in mind, this analysis assesses recently proposed patent legislation. It explains the strategies pharmaceutical companies use to prolong their drug patents, outlines measures lawmakers and the judiciary have taken to limit such practices, and considers how proposed legislation could undermine these efforts.

“Gaming” the System

Pharmaceutical companies have become adept at “gaming” the patent system to extend exclusivity and monopoly power to maximize profits. Tactics like “” (making minor modifications to existing drugs to obtain additional patent protections), “ (filing many different patents on different aspects of a single drug), and “” (introducing a new version of a drug as a patent is expiring and encouraging doctors, pharmacists, and patients to switch to the updated version) are commonly used to extend monopolies even after the key patent expires.

Celgene’s blockbuster cancer drug Revlimid is a prime example of this practice. Although a key patent , the drug will not see real competition in the marketplace until 2026. This is because Celgene, now a subsidiary of Bristol Myers Squibb, has been able to prolong the drug’s exclusivity by creating a patent thicket around it. The company filed for an additional 206 patents on the drug—. The costs of such patent thickets can be substantial to consumers and the health care system: The price of Revlimid  from $6,000 per month in 2002 to $24,000 per month in 2022, resulting in a total estimated cost of  for Americans.

Getting Patents Right

The strategic use of patent thickets in the pharmaceutical sector raises important questions about the role of patents and how to ensure that the patent system functions as a tool to support invention and innovation rather than to protect monopolies. The ideal patent system should include two key elements: (1) a process to ensure that the patents that are granted are truly warranted and (2) a mechanism to expeditiously challenge and remove invalid patents when they do make it into the system. This is more daunting than it may appear. In 2020 alone, the U.S. Patent Office received more than , and a previous report estimated that patent examiners had, on average, only  to review a patent. Low-quality and overly broad patents may be erroneously granted under these constraints, so we must have a process in place to efficiently challenge them.

Both Congress and the courts have worked to improve the patent system and address such concerns. In 2011, Congress passed the , which, among other things, established a new Patent Trial and Appeal Board (PTAB) in the U.S. Patent and Trademark Office. The PTAB was designed to curb excessive patent litigation by providing a more expeditious administrative review process for weeding out low-quality patents. The Supreme Court has contributed to this effort by addressing the question of what is patentable in a  issued over the last 17 years.

Problems with PREVAIL

Unfortunately, recent bills introduced in Congress have the potential to undo these efforts and revert to a more litigious patent system that is easier to exploit and less conducive to innovation. A  explored issues with the , which was introduced by Sens. Chris Coons (D-Del.) and Thom Tillis (R-N.C.) and would expand the definition of what is patentable in ways that could deter invention and innovation.