SECOND OPINION: BIG PHARMA ONCE AGAIN TRIES TO DEFEND THE PATENT ABUSE STATUS QUO

Oct 23, 2024

Eli Lilly Opinion Column Reiterates Debunked Arguments on Innovation as Brand Name Drug Makers Invest in Blocking Competition from More Affordable Options

In an opinion column published last week, Eli Lilly Chief Scientific Officer Daniel Skovronsky, M.D., Ph.D. argues the patent system is functioning and that lawmakers ought not to interfere with it. This defense of the status quo papers over Big Pharma’s egregious abuse of the patent system designed to block competition, extend monopolies, and keep prescription drug prices high — and the impact on patients and the U.S. health care system.

This is not the first time Big Pharma has tried to defend the patent abuse status quo, that blocks competition from more affordable options and costs patients and the U.S. health care system billions of dollars each year. In June, a spokesman for the pharmaceutical industry’s principal trade group similarly claimed, “the status quo lets companies innovate while allowing for eventual competition from cheaper generics and biosimilars.”

Let’s get a Second Opinion on several of the claims made in Skovronsky’s column:

Claim: “Patents are essential to incentivize R&D.”

Rebuttal: True. But patent abuse is not. Studies have shown that Big Pharma has invested boldly in advertising, profits and overhead in recent years – more so than research and development (R&D). In addition, the pharmaceutical industry is increasingly pursuing secondary patents, or patents for aspects of a drug other than its active ingredients, as a tactic to further delay competition. In other words, they’re increasingly focused on patent strategies designed to block competition by gaming the system – and less on actual innovation.

Applying The Patent Abuse Playbook to Blockbuster GLP-1s for Weight Loss

Eli Lilly’s new blockbuster category of weight loss drugs known as GLP-1s, or glucagon-like peptide 1 receptor agonists, grew out of a category of medicines originally designed for treating diabetes.

A February 2024 analysis published in JAMA Network found brand name drug makers marketing these GLP-1 weight loss drugs are increasingly utilizing device patents to build patent thickets around these products to create and elongate periods of monopoly pricing power — despite the drugs effectively being older diabetes medications repackaged for a different indication.

In other words, Big Pharma isn’t protecting actual innovation, but gaming the patent system to block competition, keep prices high, and boost profits.

The authors of the analysis state in their conclusion, that the “removal of these patents may substantially reduce barriers to generic entry by decreasing the number of patents that generic firms must contest ahead of [U.S. Food and Drug Administration] approval.” Without this competition, “prices for GLP-1 receptor agonists will remain high for many years, reducing access for patients and raising health care costs.”

Investing In Advertising and Stock Buybacks, Not R&D

$56 Billion: A 2021 report from the House Oversight Committee found that over the last five years, the top 14 drug companies spent almost $577 billion on stock buybacks and dividends – $56 billion more than on research and development during that same time span.

$36 Billion: A 2021 study from America’s Health Insurance Plans (AHIP) found Big Pharma continued to spend more advertising and selling its products than investing in R&D during the COVID-19 pandemic. The study found that “[o]f the 10 drug manufacturers examined, 7 of them spent more on selling and marketing expenses than they did on research and development. For this group of 10 companies alone, selling and marketing expenses exceeded R&D spending by $36 billion, or 37%.”

Big Pharma also used a windfall from the Tax Cuts and Jobs Act of 2017 to line shareholders’ pockets, rather than invest in innovation and R&D.

112 Percent: From 2017 to 2018 dividends and share repurchases increased by 112 percent, more than double the previous year.

17 Times: The single-year increase in payouts to Wall Street and shareholding Big Pharma board members and executives was 17 times larger than the increase in R&D spending.

Furthermore, U.S. taxpayers play a substantial role in the drug development process in this country.

The U.S. taxpayer has funded research for every single one of the 210 new drugs that the FDA approved between 2010-16. Yet the companies that have access to this research are increasingly viewing pharmaceuticals in the same way that banks view their financial product — opportunities for short-term returns.” (Mariana Mazzucato, “Big Pharma Is Hurting Drug Innovation,” The Washington Post, 10/17/18)

“More than $100 billion in NIH funding went toward research that contributed, either directly or indirectly, to the 210 drugs approved between 2010 and 2016. That’s roughly 20 percent of NIH spending since 2000.” (Megan Thielking, “NIH funding contributed to 210 approved drugs in recent years, study says,” STAT News, 2/12/18)

Claim: “When patent protections expire, we welcome generic manufacturers to develop lower-cost alternatives…Generic competition is the most effective tool we have to drive patient affordability.”

Rebuttal: Big Pharma has a decades-long track record of fighting generic competition to extend monopolies and boost profits on blockbuster brand name drugs. Below, we highlight just a few of the most egregious examples of the pharmaceutical industry’s patent abuse – and the cost to patients and the U.S. health care system.

Humira

AbbVie’s blockbuster autoimmune drug Humira finally faced competition for the first time in the U.S. in 2023. Over the course of its more than 20 years on the market – without competition – AbbVie applied for more than 300 patents on the brand name medication, securing more than half of them. 94 percent of the patents filed on Humira came after the drug was initially approved by the U.S. Food and Drug Administration (FDA). The strategy helped block competition for years and generate almost $200 billion for AbbVie.

In fact, in 2022, the drug brought in more money for the company, $21 billion, than all 32 teams in the NFL combined, $19 billion.

Keytruda

According to research from the Initiative for Medicines, Access and Knowledge (I-MAK), Merck has filed for 129 patent applications on its blockbuster cancer drug Keytruda – more than half of which were filed after the drug’s initial approval by the FDA. The Big Pharma company has been granted 53 patents on this one drug alone, and I-MAK estimates that Americans will spend at least $137 billion on Keytruda while the drug faces no competition due to its extended exclusivity that already totals more than eight years.

In December 2022, Merck announced that it would seek additional patents on Keytruda, which last year brought in over $17 billion for the company. According to reporting from Reuters, Merck is seeking “to patent a new formulation of its $20 billion cancer immunotherapy Keytruda that can be injected under the skin, allowing it to protect its best-selling drug from competition expected as soon as 2028.”

Big Pharma’s Patent Abuse Increased Costs By More Than $40 Billion in Just One Year

A 2023 analysis from The American Economic Liberties Project and the Initiative for Medicines, Access & Knowledge (I-MAK) examined the staggering cost of Big Pharma’s anti-competitive practices on the U.S. health care system and American patients. The analysis found that Big Pharma’s anti-competitive tactics, including patent abuse, cost U.S. consumers “an additional $40.07 billion on pharmaceuticals,” in just one year, 2019.

Big Pharma’s Patent Thickets On Just Five Drugs Cost Over $16 Billion In a Single Year

A January 2023 report from Matrix Global Advisors, “Patent Thickets and Lost Drug Savings,” quantified the one-year cost of lost savings on five brand name drugs around which Big Pharma has built especially egregious patent thickets. The five drugs were AbbVie’s autoimmune drug Humira and oncology drug Imbruvica, Regeneron’s ophthalmology drug Eylea, Amgen’s autoimmune drug Enbrel, and Bristol Myers Squibb’s oncology drug Opdivo.

The report assesses what the savings would be for these five drugs if “a steady state of competition [existed] where generics and biosimilars have achieved price discounts and uptake currently observed in the market.” Based on these calculations, the estimated one-year cost of patent thickets on each of these brand name drugs was:

$7.6 billion for Humira
$3.1 billion for Imbruvica
$2.5 billion for Eylea
$1.9 billion for Enbrel
$1.8 billion for Opdivo

This amounts to a total of more than $16 billion.

The report calls for “tangible legislative reforms… to stop this long-standing anticompetitive practice.” In particular, the report points to “the Affordable Prescriptions for Patients Act,” which would “limit the number of patents a brand drug manufacturer can contest,” as one important solution for lawmakers to consider.

Claim: “The current policy environment is increasingly hostile to inventors of new medicines.”

Rebuttal: Contrary to the above argument, brand name drug makers continue to bring new drugs to market – at increasingly high launch prices – and tout their development pipelines to investors on earnings calls.

Increasingly High Launch Prices on New Drugs

Big Pharma set a record for out-of-control launch prices last year. According to a recent Reuters analysis, the median annual price among new drugs approved by the FDA in 2023 reached $300,000. This number was 35 percent higher than the previous year.

Several of the newly approved drugs in 2023 were priced in the millions or hundreds of thousands of dollars. In fact, of the 47 drugs Reuters analyzed, at least 20 were priced above $350,000. Some of the costliest drugs launched last year include:

Sarepta’s muscular dystrophy drug Elevidys, with an annual price tag of $3.2 million.
Bluebird Bio’s sickle cell disease drug Lygenia, priced at $3.1 million per year.
BioMarin’s treatment for Hemophilia A, Roctavian, priced at $2.9 million per year.
Vertex and CRISPR’s sickle cell disease drug Casgevy, with an annual price tag of $2.2 million.
Regeneron’s CHAPLE disease drug Veopoz, priced at almost $1.8 million per year.
Sanofi’s treatment for Hemophilia A, Altuviiio, priced at $970,000 per year.
And Novo Nordisk’s rare kidney disease drug Rivfloza, priced at over $600,000 per year.

Pharma Touts Pipelines to Investors

During a December panel discussion hosted by The Hill, PhRMA President Stephen J. Ubl reiterated Big Pharma’s oft-repeated hyperbolic rhetoric about threats to innovation, saying, “We’re already seeing a flight of those research projects being cancelled within our R&D pipeline. So, this is a really acute problem that’s going to really impact the fabric of incremental innovation.”

However, just the same week, two Big Pharma companies eager to generate buzz with investors and stakeholders, were touting their innovation pipelines.

In an exclusive interview with STAT News, Sanofi CEO Paul Hudson and the company’s head of research and development (R&D) Houman Ashrafian highlighted 12 new drugs the company is developing that they believe, “could generate annual sales of $2 billion or more.” Both executives also emphasized that three of those new medicines, “could eventually generate more than $5 billion in annual sales.” While the drugs Hudson and Ashrafian highlighted were for a range of conditions, Hudson hinted that Sanofi has even more drugs coming down the pipeline.

And while Sanofi was boasting about having 12 new potential blockbusters, Johnson and Johnson’s Executive Vice President of Innovative Medicine John Reed, in an exclusive interview with Endpoints News, also highlighted how that Big Pharma giant is, “promising investors 20 new drugs and 50 expanded products, including 10 with peak sales of $5 billion or more.”

Once again, Big Pharma is using smoke-and-mirrors rhetoric to try to obfuscate the pharmaceutical industry’s role in setting the price of prescription drugs, price hikes and increasingly high launch prices on new products, and patent abuse designed to block competition from generic and biosimilar drugs to extend monopoly pricing on their best-selling products.

Thankfully, lawmakers on both sides of the aisle are seeing through Big Pharma’s false rhetoric and agree brand name manufacturers must be held accountable for gaming the patent system. Earlier this year, lawmakers in the U.S. Senate unanimously advanced legislation, The Affordable Prescriptions for Patients Act, also known as Cornyn-Blumenthal, which would crack down on one of Big Pharma’s preferred techniques to game the system, patent thicketing.

As lawmakers return to Washington, D.C. next month, they should act swiftly to pass this bipartisan, market-based solution into law.

Learn more about The Affordable Prescriptions for Patients Act HERE.

Read more on how Big Pharma’s patent abuse is the root cause of high prescription drug prices HERE.

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