Restricting inter partes review extends pharmaceutical monopoly power – that artificially raises drug prices.

Both Congress and the courts have worked to improve the patent system and address such concerns. In 2011, Congress passed the America Invents Act, 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 series of key decisions 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 previous R Street analysis explored issues with the Patent Eligibility Restoration Act, 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.

This analysis looks at another bill introduced by Sens. Coons and Tillis, along with Sens. Dick Durbin (D-Il.) and Mazie Hirono (D-Hi.): the Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act. The PREVAIL Act narrows the patent review process, making it more difficult to eliminate invalid patents that should not have been granted in the first place. More specifically, provisions in this act would restrict the use of inter partes review (IPR) proceedings at the PTAB—a process designed to facilitate challenges of weak secondary or continuation patents like those commonly used in patent thickets in the pharmaceutical sector.

Problematic IPR changes proposed in the PREVAIL Act include:

Limiting the parties that can challenge a patent. Under current law, anyone has the right to challenge the validity of a patent with the PTAB. The act would restrict this ability to those who have been sued or directly threatened with a lawsuit over a patent. This would exclude third parties like generic manufacturers, patient advocacy groups, civil society organizations, and others from challenging poor-quality patents unless they are direct parties to a dispute (i.e., sued or threatened to be sued by the manufacturer). These third-party groups, however, typically lack standing to engage in litigation, so without the PTAB, their voice may not be heard.

Limiting the number of potential challenges to any patent. Current law restricts a petition to the PTAB to 14,000 words. For a complex patent with many claims, this may not be sufficient. Yet the act proposes to go even further by limiting the number of petitions that may be filed, making it more difficult to effectively challenge a patent at the PTAB.

Increasing the burden of proof for demonstrating that a patent is invalid. The act would raise the evidentiary standard for invalidating patent claims at the PTAB, shifting from the current “preponderance of the evidence” standard to a “clear and convincing standard” that favors the patent holder in any challenge.

Reducing venues for challenging patents. The act includes requirements to choose a single forum for patent-validity challenges (either the PTAB or district court, but not both), which could complicate and potentially increase the cost of a patent challenge. Because PTAB trials are quicker and less expensive than adjudication in federal courts, limiting the PTAB’s role leaves litigation as the only option.

Not only would these proposed changes make attempts to invalidate patents more costly in terms of time and money, but they would also reduce the overall incentive to improve patent quality, as the risk of a patent challenge would be lower.

These changes would also embolden pharmaceutical companies to double down on the practice of creating patent thickets to wall off competition and generics. This is because the secondary patents that form patent thickets are typically of lower quality than a drug’s primary patent. (Primary patents cover the active ingredient, whereas secondary patents are typically related to elements like dosage, packaging, or delivery of a drug.) These secondary patents are currently more susceptible to challenge if they offer little therapeutic value above and beyond the original patent. The proposed act would make it more difficult to challenge these lower-quality, monopoly-extending patents, and the resulting broad patent protection of brand-name drugs would continue to block generic manufacturers from entering the market.

This would have a direct negative effect on consumers and the health care system as a whole. Without competition from generics, monopoly prices for the branded drugs would remain artificially high for a longer time, negatively affecting patients who rely on lifesaving or life-changing medication as well as the public and private health care insurers who share the costs of those medications. In fact, one study looking at just five drugs over 20 years found that eliminating generic competition of those drugs imposed $4.7 billion in annual costs on the U.S. health care system. Another study estimated that evergreened reformulations increased Medicaid spending by $9.35 billion from 2008 to 2016 alone.

Importantly, one empirical examination of drug pricing and patents found “a correlation between administrative patent challenge procedures, such as IPR, and lower drug prices due to generic entry.” This finding reinforces the importance of maintaining the current IPR process to deter lower-quality patents, enhance competition, and provide much-needed medication to patients and health care organizations at fairer costs.