In a perfect world, the system for conveying medications from their makers to patients should be designed to deliver the lowest-cost drugs. The system in the U.S. doesn’t even come close.
Insurers should provide the lowest-cost and highest-quality drug benefit for each plan, public or private. But they don’t.
Pharmacy benefit managers should use their volume buying power to obtain rebates that individuals could never obtain on their own and pass those rebates along to patients. But they don’t.
Pharmacists, who know the prices of the drugs in their stock and who see patients’ cost-sharing amounts at the cash register, should be motivated to provide their customers with information on how to find the best deal so they can afford their medicines. But they aren’t.
Doctors should make medication decisions that are in the best interests of their patients. But they often don’t.
All of this occurs against the backdrop of a national conversation to lower drug costs and a policy to expedite and encourage vigorous competition in the pharmaceutical industry through the rapid entry of generic drugs as soon as patents expire. But even though the vast majority of prescriptions are filled with generic drugs, rising prices on existing brand-name drugs and sky-high prices for new drugs are swamping the savings from generics.
Why isn’t the system working as it should?
Some experts believe the U.S. can rein in drug process with value-based pricing, which aims to tie the prices we pay for drugs to the benefits they provide, either in terms of longer life or better quality of life. Others call for dismantling pharmacy benefit managers. Still others want large groups like Medicare to negotiate with drug companies for better drug prices. While each of these might help, they cannot solve the problem alone. Why? Because they do not reach the heart of the problem. As I explain in my new book, “Drugs, Money, and Secret Handshakes,” the government itself is giving pharmaceutical companies the power they are wielding through overly generous drug patent protection. Effective solutions must address that problem.
Drug companies have brought great innovations to market. Society rewards innovation with patents, or with non-patent exclusivities that can be obtained for activities such as testing drugs in children, undertaking new clinical studies, or developing orphan drugs. The rights provided by patents or non-patent exclusivities provide a defined time period of protection so companies can recoup their investments by charging monopoly prices. When patents end, lower-priced competitors should be able to jump into the market and drive down the price.
But that’s not happening. Instead, drug companies build massive patent walls around their products, extending the protection over and over again. Some modern drugs have an avalanche of U.S. patents, with expiration dates staggered across time. For example, the rheumatoid arthritis drug Humira is protected by more than 100 patents. Walls like that are insurmountable.
Rather than rewarding innovation, our patent system is now largely repurposing drugs. Between 2005 and 2015, more than three-quarters of the drugs associated with new patents were not new ones coming on the market but existing ones. In other words, we are mostly churning and recycling.
Particularly troubling, new patents can be obtained on minor tweaks such as adjustments to dosage or delivery systems — a once-a-day pill instead of a twice-a-day one; a capsule rather than a tablet. Tinkering like this may have some value to some patients, but it nowhere near justifies the rewards we lavish on companies for doing it. From society’s standpoint, incentives should drive scientists back to the lab to look for new things, not to recycle existing drugs for minimal benefit.
I believe that one period of protection should be enough. We should make the legal changes necessary to prevent companies from building patent walls and piling up mountains of rights. This could be accomplished by a “one-and-done” approach for patent protection. Under it, a drug would receive just one period of exclusivity, and no more. The choice of which “one” could be left entirely in the hands of the pharmaceutical company, with the election made when the FDA approves the drug.
Perhaps development of the drug went swiftly and smoothly, so the remaining life of one of the drug’s patents is of greatest value. Perhaps development languished, so designation as an orphan drug or some other benefit would bring greater reward. The choice would be up to the company itself, based on its own calculation of the maximum benefit.
The result, however, is that a pharmaceutical company chooses whether its period of exclusivity would be a patent, an orphan drug designation, a period of data exclusivity (in which no generic is allowed to use the original drug’s safety and effectiveness data), or something else — but not all of the above and more.
Consider Suboxone, a combination of buprenorphine and naloxone for treating opioid addiction. The drug’s maker has extended its protection cliff eight times, including obtaining an orphan drug designation, which is intended for drugs that serve only a small number of patients. The drug’s first period of exclusivity ended in 2005, but with the additions its protection now lasts until 2024. That makes almost two additional decades in which the public has borne the burden of monopoly pricing, and access to the medicine may have been constrained.
Implementing a one-and-done approach in conjunction with FDA approval underscores the fact that these problems and solutions are designed for pharmaceuticals, not for all types of technologies. That way, one-and-done could be implemented through legislative changes to the FDA’s drug approval system, and would apply to patents granted going forward.
One-and-done would apply to both patents and exclusivities. A more limited approach, a baby step if you will, would be to invigorate the existing patent obviousness doctrine as a way to cut back on patent tinkering. Obviousness, one of the three standards for patent eligibility, says that inventions that are obvious to an expert or the general public can’t be patented.
Either by congressional clarification or judicial interpretation, many pile-on patents could be eliminated with a ruling that the core concept of the additional patent is nothing more than the original formulation. Anything else is merely an obvious adaptation of the core invention, modified with existing technology. As such, the patent would fail for being perfectly obvious. Even without congressional action, a more vigorous and robust application of the existing obviousness doctrine could significantly improve the problem of piled-up patents and patent walls.
Pharmaceutical companies have become adept at maneuvering through the system of patent and non-patent rights to create mountains of rights that can be applied, one after another. This behavior lets drug companies keep competitors out of the market and beat them back when they get there. We shouldn’t be surprised at this. Pharmaceutical companies are profit-making entities, after all, that face pressure from their shareholders to produce ever-better results.
If we want to change the system, we must change the incentives driving the system. And right now, the incentives for creating patent walls are just too great.
Robin Feldman is professor of law and director of the Institute for Innovation Law at UC Hastings College of the Law in San Francisco and author of “Drugs, Money, and Secret Handshakes” (Cambridge University Press, March 2019).