Even though it’s five decades old, this New York Times op-ed by economist Milton Friedman reads like a modern-day strategy memo for the pharmaceutical industry. Simply put, Friedman intones that in a free market it is a business’ duty to prioritize profits above all else.
Pharmaceutical companies have embraced this doctrine and then some, transforming the U.S. patent system into a tool to extract maximum revenue out of the American healthcare system at any cost.
Our latest study, released last week, shows just how much the pharmaceutical industry’s manipulation of the patent system costs patients and society at large.
The Burden of Patent Thickets
The study exposes the profound impact extended patent protection has on limiting biosimilar competition and maintaining high drug prices for patients and payers. Our research finds that a staggering $158 billion in revenue has been amassed by drugmakers after the expiration of primary patent protection on just four biologic drugs: Humira, Avastin, Rituxan, and Lantus. Key findings from our analysis of the four drugs found:
- Thanks to extending patent protection, the four biologic drugs analyzed in the report enjoyed an average of 19.4 years of market monopoly following their commercial launch before encountering biosimilar competition.
- These years of extended protection are especially profitable, as all four biologic drugs earned significantly higher revenues per year after the expiration of their primary patent protection. The drugs averaged $6.2 billion per year during the period of extended patent protection versus $2.4 billion in the primary patent period.
- During the period of extended patent protection for these four drugs, total U.S. sales more than doubled in less than half the time compared to revenues generated during the primary patent protection period.
Unfortunately, these four drugs are just the tip of the iceberg. But, a better understanding of the full cost of patent abuse and the burden it places on the shoulders of patients and payers is a necessary step towards stopping patent manipulation and solving the drug pricing crisis.
What we’re doing
In a big moment for patent reform, the FTC threw its hat in the ring this month by issuing a policy statement condemning pharmaceutical companies that improperly list patents in the FDA’s Orange Book in order to delay generic competition. Ahead of the FTC’s statement, I addressed the Commission and Chair Khan in a public FTC meeting to recommend that the agency join the USPTO and FDA collaboration on the issue.
The FTC’s attention on the Orange Book is welcome and timely. It comes on the heels of the report we published with American Economic Liberties Project that highlighted the importance of weeding out ineligible Orange Book patent listings as well as Senator Warren and Representative Jayapal’s letter last month to the FDA requesting they address improper patent listings.
In another positive step forward against high drug prices, the HHS included a reasonable pricing provision in its $326 million funding agreement with pharmaceutical company Regeneron for the development of new Covid-19 treatments. As I told STAT, this price consciousness is important but HHS should make the contract public since transparency is essential in public/private partnerships.
As the fight to for affordable and accessible tuberculosis drugs continues, I joined author John Green – whose viral video put a harsh spotlight on Johnson & Johnson’s patent abuse – on the An Arm and A Leg podcast to discuss how companies use various patent strategies to prolong their monopolies.
In part 1, I discussed how this phenomenon was practiced and mastered here in the U.S. first before being exported around the world. In the second episode, I recollect my journey of coming to work on patents and access to medicines in India back in 2004 (where we helped lay the foundation for the recent decision by the Indian Patent Office to reject J&J’s secondary patent on bedaquiline) and why we founded I-MAK.
I also want to highlight that NYU Law wrote a wonderful piece on my co-founder, Priti Krishtel’s, journey to making drugs more affordable and her extensive work to reform the patent system. It captures Priti’s and I-MAK’s journey to date and the long and winding road we have traveled.
Relevant news rundown
South Africa’s competition authorities are showing their muscle by investigating Johnson & Johnson’s patent evergreening on the controversial and expensive tuberculosis drug bedaquiline. It’s a powerful example of how governments can step in to regulate illegitimate patents and yet another win for South Africa access-to-medicines activists (after their massive victory compelling the South African government to disclose its Covid-19 vaccine contracts). Credit to Fatima Hassan and the inspirational team at the Health Justice Initiative.
Last month, Rep. Ro Khanna exposed just how flimsy (and, in his words, shameful) Johnson & Johnson’s lawsuit aimed at blocking Medicare from negotiating drug prices is. As he points out, J&J isn’t suing the U.S. government because there’s any “taking” going on. The drugmaker is taking legal action because it stands to reap the benefits of the patent thicket that AbbVie has built and employed to thwart generic competition on Imbruvica for an additional 5.3 years, during which AbbVie will generate an additional estimated $13.8 billion.
Rebecca Robins wrote a great piece in The New York Times explaining how patent manipulation has driven outrageous prices for inhalers. Especially interesting here are the comments readers left – featuring a good mix of patient voices and industry insiders sharing their experiences with high drug prices and patents.
Looking at some of the progress made this month reminds me of the Strengthening Competition blueprint we released nearly two years ago. The blueprint is part of our Participatory Changemaking model, in which we laid out the need for a whole-of-government approach to achieving patent reform in order to tackle soaring drug prices. Seeing the FTC policy statement this month — alongside the first steps to increase collaboration between the FDA and USPTO — is heartening, as solving a problem as entrenched as patent abuse cannot be relegated to any one agency.
We just hosted another Participatory Changemaking convening last week, gathering diverse stakeholders from across industry, advocacy, academia and government agencies in D.C. to talk about policy solutions for patent thickets. I look forward to sharing the results here soon.