They Said It! R Street Institute Expert Explains How Big Pharma Games The Patent System to Keep “Drug Prices Artificially High”

New Report Emphasizes The “Pharmaceutical Industry’s Patent Gamesmanship Serves As A Stark Reminder Of The Need For Reform”

In case you missed it, R Street Institute Senior Fellow Wayne Brough, an expert on intellectual property and patent law, is out with a new column titled, “Patents, Property Rights, and Regulation.” In the column, Brough reviews the history of the U.S. patent system, shines a spotlight on Big Pharma’s manipulation of the patent system, and offers several policy recommendations to crack down on Big Pharma’s abuse of the patent system, which Brough argues, “delay[s] generic competition and keep[s] drug prices artificially high.”

History of U.S. Patent System

Brough starts by reviewing the history of patents, and their transition from them being associated mostly with physical property to intellectual property. “Patents emerged historically as government-granted privileges…[f]or example, early patents in England were not just for inventions. They were a form of royal patronage.” However, “[c]orruption and abuse of these grants from the monarchy ultimately led to the Statute of Monopolies, passed in 1624, which curbed the ability to grant such privileges while repealing a large swath of patents. Importantly, patents for novel inventions were allowed only under the new law.”

This was the foundation of our modern patent system – a move away from royally-granted privileges and rights that lasted in perpetuity – to a system that rewards ideas that are seen as innovative and new and enables their inventors to recoup profits exclusively on those products for a certain number of years.

In the U.S., there has been a continued emphasis on patents being seen as a public good that are meant to lead to innovation and new inventions – not a government granted right to make profits on those products in perpetuity.

As Brough writes, “Justice Clarence Thomas…stated unequivocally that patents are ‘public franchises’ rather than ‘private rights.’ This characterization firmly places patents in the realm of public rights that, should they fail to achieve their goal, can be reconsidered and reformed through administrative processes and statutory law.”

“A Regulatory Framework Established by Congress”

Brough argues that patents should be “understood as a regulatory framework established by Congress and administered by the U.S. Patent and Trademark Office (USPTO).” He states that, “[u]nlike physical property, patent rights depend on the institutional structure, incentives, and decision-making processes within the USPTO.”

Brough argues the USPTO is squeezed at times and hampered by budget constraints: “the USPTO’s fee structure and funding model encourages the overgranting of patents, particularly when budgets are tight. Patent examiners also face time pressures and institutional biases that can lead to the approval of low-quality patents.”

Despite this, Brough argues, this system should still help incentivize innovation and new inventions.

A Case Study of The Problem: Big Pharma’s Patent Abuse

The problem with the system, however, is that it is, “vulnerable to rent-seeking behavior and manipulation by special interests.” Brough highlights several examples of tactics the pharmaceutical industry has utilized over the years to manipulate the patent system.

This includes, “[ev]ergreening strategies, such as filing numerous additional patents on minor modifications to existing drugs,” as well as “[pa]tent thickets—impenetrable walls of patents filed around the initial patent—[which] make it extremely difficult for generic competitors to enter the market.”

Brough outlines how Big Pharma builds these patent thickets by utilizing “so-called ‘secondary patents.’” These patents cover “such elements as dosage, manufacturing process, delivery mechanism, or formulation.” Brough writes that these patents have been criticized because “although…changes can be relatively minor and/or of little therapeutic value, they can effectively delay market entry by generic manufacturers.”

To illustrate the extent of the problem, Brough cites studies which found that on some of the best-selling drugs in the U.S., “pharmaceutical companies filed an average of 140 patent applications for each drug—66 percent of them filed after U.S. Food and Drug Administration (FDA) approval.”

Brough cites AbbVie’s blockbuster rheumatoid arthritis drug Humira as a case study of Big Pharma’s abuse of the patent system, writing, “AbbVie conducted an aggressive patenting campaign [on Humira], racking up 166 secondary patents to maintain Humira’s exclusivity in the market. In fact, generic competition for Humira did not reach the U.S. market until 2023,” even though the drug was originally approved in 2002.

The Current Situation

Brough highlights two recent bills the pharmaceutical industry is currently supporting that would expand their ability to manipulate the U.S. patent approval process. This includes, “the Patent Eligibility Restoration Act (PERA) and the Promoting and Respecting Economically Vital American Innovation Leadership Act, (PREVAIL).” These bills would “strengthen the hand of patent owners and deter innovation—PERA by expanding what can be patented and PREVAIL by making it harder to challenge weak or invalid patents.”

Brough argues that the “pharmaceutical industry’s patent gamesmanship serves as a stark reminder of the need for reform.” The industry’s patent abuse techniques, “not only burden consumers and strain health care systems, but they also stifle genuine innovation by diverting resources from research and development to legal maneuvering aimed at extending (or challenging) the monopolies of blockbuster drugs.”

Potential Solutions

Brough argues that there are several policy solutions that would crack down on this manipulation of the patent system. These include:

• “[R]aising standards for patent approval and providing more resources to improve the patent-examination process, with a more careful assessment of secondary drug patents.”

• “Restricting patents on minor modifications to existing products, such as new formulations or delivery methods that do not significantly improve therapeutic value, would help curb evergreening and patent-thicket practices that keep generic rivals out of the market.”

• And, “[s]trengthening and expanding the inter partes review process for challenging patents would help weed out invalid patents more efficiently and discourage some of the secondary patenting that delays competition.”

Brough argues that, “together, such reforms would help restore balance to the patent system, ensuring it rewards true innovation rather than unnecessarily extending monopolies that impede innovation while keeping prices artificially high for patients and consumers.”

This latest column should serve as a stark reminder that in order to truly lower prices for patients, lawmakers must work to pass solutions that hold Big Pharma accountable for its egregious abuse of the patent system.

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

Read more on bipartisan, market-based solutions to hold Big Pharma accountable HERE.