SECOND OPINION: BIG PHARMA GAMES THE PATENT SYSTEM TO HIKE PRICES AND BOOST PROFITS — NOT ‘DRIVE INNOVATION’ OR ‘ENHANCE PATIENT ACCESS’

Drug Companies’ Anti-Competitive Gamesmanship Comes At Tremendous Cost To U.S. Health Care System And Contributes To Out-of-Control Prescription Drug Prices

Following a hearing earlier this month where lawmakers on the U.S. House Committee on Oversight and Reform blasted Big Pharma executives and exposed egregious examples of the industry’s anti-competitive tactics, the industry’s principal lobbying arm launched a messaging campaign claiming the current system for intellectual property protection of pharmaceuticals has “helped drive innovation and enhance patient access to breakthrough therapies.”

IP protections are, of course, critical for true breakthroughs and new inventions, but this campaign ignores Big Pharma’s rampant abuse of the patent system that has everything to do with hiking prices and boosting profits, and little to do with innovation. The effect of drug companies’ egregious behavior is to deny patients access to their medications and breakthroughs they cannot afford, not “enhance” access.

Gaming the system to undermine competition is a time-honored tradition for Big Pharma. Pharmaceutical companies have a long history of engaging in anti-competitive patent abuse schemes, like patent thicketing and product hopping, to hinder generic competition and maintain monopolies over their biggest money makers — without any new invention occurring.

In fact, a recent study from Avik Roy and Gregg Girvan of the Foundation for Research on Equal Opportunity (FREOPP) finds that ballooning spending on U.S. prescription drugs is being particularly driven by Big Pharma’s abuse of the patent system to undermine biologic and biosimilar competition. The report finds that despite representing less than one percent of U.S. prescriptions, biologic drugs account for nearly half of all drug spending. That’s because biologics face less competition from their generic equivalents, known as biosimilars, due to differences in how the marketplace is regulated and how Big Pharma games the system to undermine competition.

• One way Big Pharma is able to maintain monopoly power is through ‘patent thickets.’ By seeking a multitude of patents for marginal aspects of a biologic, brand name drug companies are able to create a ‘thicket’ of patents that can dramatically extend exclusivity periods — blocking cheaper generics, or biosimilars, from coming to market.
• Another way Big Pharma maintains monopoly power is through ‘submarining’ and ‘evergreening,’ in which a branded drug maker purposefully delays the filing and issuance of a patent in order to extend market exclusivity of drug for as long as possible.

Without action, the study’s authors estimate the anti-competitive nature of the biologic drug marketplace will cost American patients more than $30 billion from 2015-2029.

Meanwhile, a recent report from the House Committee on Oversight and Reform details “the specific tactics drug companies are using to raise prices, maximize profits, and suppress competition among other companies.” Key findings from the report include:

• “Celgene Relied Heavily On Taxpayer Funded Academic Research To Develop Revlimid, And Its Internal Pricing Decisions Appear To Have Been Unrelated To Past Or Future Investment In Research And Development.” (Staff Report, “Drug Pricing Investigation: Celgene And Bristol Myers Squibb – Revlimid,” U.S. House Committee On Oversight And Reform, 9/30/20)
• “Amgen Leveraged The U.S. Patent System To Limit Biosimilar Competition For Enbrel And Prevented U.S. Patients From Accessing Lower-Priced Versions Of The Drug Available To Patients In Other Countries,” And “Entered Into Settlement Agreements To Delay Entry Of Generic Equivalents” For Sensipar. “Internal strategy documents indicate that Amgen used minor changes to Enbrel’s design— including a new version of the injection device called Enbrel Mini with Autotouch—to drive sales and limit competition. For Sensipar, Amgen entered into settlement agreements to delay entry of generic equivalents. Amgen also attempted to gain additional market exclusivity for Sensipar by showing that it could be used in children, despite knowledge that the FDA was unlikely to grant approval.” (Staff Report, “Drug Pricing Investigation: Amgen – Enbrel And Sensipar,” U.S. House Committee On Oversight And Reform, 10/1/20)
• “Novartis Used Several Anticompetitive Tactics To Delay Generic Competition And Maintain Its Profits.” “First, Novartis undertook regulatory steps to extend its primary base compound patent on Gleevec for 26 months, from May 2013 to July 2015. Novartis also engaged in a practice known as ‘pay for delay,’ where the company struck a deal with the first generic entrant to delay entry of the generic by six months. Although the generic company had initially announced that it would price its generic 30% below the price of Gleevec, the generic company ultimately entered the market at a price just 6.4% lower than Gleevec’s price. Novartis executives hailed this high generic price in an email: “That’s good news.” Experts estimate that these strategies—a six-month delay for generic entry and then a six-month duopoly—resulted in $700 million in excess costs to payers in the one-year period from 2015 to 2016.” (Staff Report, “Drug Pricing Investigation: Novartis — Gleevec,” U.S. House Committee On Oversight And Reform, 10/1/20)
  • Gleevec’s Price Increases Were Not Justified By R&D. “Novartis reported to the Committee that it had no specific data on R&D expenditures related to Gleevec prior to FDA approval because ‘the Company no longer has access to the records reflecting the very significant Gleevec development spend by the Company prior to FDA approval.’ Novartis explained that, between 2001 and 2019, its Gleevec developmental costs exceeded $700 million— representing a tiny fraction of Gleevec’s net U.S. revenue during the same time period. For each year from 2009 through 2016, Novartis made more than it spent on Gleevec R&D combined during a 19-year period. Public documents also indicate that Gleevec’s preclinical R&D costs were almost entirely funded by grants from the National Cancer Institute and nonprofit organizations.” (Staff Report, “Drug Pricing Investigation: Novartis — Gleevec,” U.S. House Committee On Oversight And Reform, 10/1/20)

And while Big Pharma routinely tries to justify the IP status quo and out-of-control drug prices by pointing to research and development (R&D). The truth is:

Learn more about market-based solutions to hold Big Pharma accountable and lower prescription drug prices HERE.