America’s Overspend: How the Pharmaceutical Patent Problem is Fueling High Drug Prices

The American health system is poised to incur $55 billion in excess costs from pharmaceutical companies' strategies to delay competition on three drugs

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EXECUTIVE SUMMARY

This analysis of three high-cost drugs for cancer and hepatitis C reveals that anti-competitive strategies by branded pharmaceutical companies are driving excess costs to American payers and patients. Product lifecycle management, whereby branded companies obtain unmerited patents to delay competition, is the primary strategy identified and evaluated by this study. A related strategy is “pay-for-delay”: branded companies pay generics to stay off the market, a symptom of underlying unmerited patents and misaligned incentives in the patent and regulatory systems. The following three multi-billion dollar blockbuster drugs were all found to have questionable – and likely unmerited – patents that are providing excess exclusivity periods.

These unmerited patents and related anti-competitive strategies permit patent holders to delay competition from generic equivalents by decades, which in turn keeps prices artificially high for healthcare payers and taxpayers:

  • Revlimid® (lenalidomide): Unmerited patents enable a minimum exclusivity period from 2019 through 2028. Payers are projected to spend $45 billion in excess costs for the drug within this period, prior to the first generic product entering the market.
  • Sovaldi® (sofosbuvir): Unmerited patents will prevent competition from now through 2034, when final patents held by Gilead Sciences expire on the drug. Payers are projected to incur $10 billion in excess costs.
  • Gleevec® (imatinib): In the one-year period from 2015-16, approximately $700 million dollars in excess costs were passed onto payers as a result of a pay-for-delay deal cut by Novartis to a generic company in exchange for delaying the entry of generic imatinib.

This analysis found that the American health care system is poised to incur $55 billion in excess costs in the next 15 years on these three drugs alone due to unmerited patents blocking generic competition.

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