In his State of the Union address, President Biden focused part of his comments on the skyrocketing costs of prescription drugs. In his remarks he noted that the drug companies are “unfairly charging people hundreds of dollars.” The President was drawing a line in the sand that he would veto any measure that weakened the ability of the federal government to negotiate drug prices for Medicare recipients.
American drug prices are the result of myriad factors, one of which is the nation’s system for allowing patents for medicines. Granting a “patent” bestows an exclusive right “for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem.” In the area of drugs, it allows a company the exclusive right to sell a medicine approved by the Food and Drug Administration (FDA) for 20 years from the date on which the application for the patent was filed in the United States.
During this patent-protected period, drugs are exempt from normal price competition – usually from “generic” drug companies. Thus, the manufacturers can charge whatever prices they want in order to maximize profits and reap the rewards of their investment.
The rationale for the patent system was to encourage and incentivize innovation. Companies that successfully bring new therapies to the market can be rewarded handsomely.
Yet, nowadays most companies are no longer innovating new medications. Instead, they’re monopolizing existing ones. For example, it is estimated that as much as 80% of new patent applications are not for new medicines but are for minor changes that allow companies to argue that the drugs are “new.”
Allowing new patents for essentially old drugs extends the period in which price competition is prohibited, resulting in higher costs for patients.
These increased costs impact many Americans. Two-thirds of U.S. adults rely on prescription drugs. And one in four people struggle to pay for them.
When people can’t afford their medicines, they often have to decide whether to skip doses or not fill their prescriptions. High prices impact all insured people, not just those taking medications. Because drug expenses make up 20 percent of health insurance costs, when drug prices go up, so do premiums.
But policymakers can change that by doing more to allow generic competitors to come to market. Savings from new generic drug approvals are dramatic - $10-20 billion annually. That’s the power of a competitive marketplace. Unfortunately, abuse of the patent laws by pharmaceutical companies undermines price competition.
Patents are meant to spur innovation. But the monopoly-pricing granted by a patent isn’t meant to last forever. Too often drug makers spend significant time and money obtaining new patents to gain protections for medications already available – thus blocking access to generics and biosimilars. And while a wrongly-granted patent can be challenged in federal courts, these challenges take years and come with a median cost of $3.5 million per case.
So, what should be done? Clearly, the Congress must push both the U.S. Patent and Trademark Office (USPTO) and the FDA to more closely examine what gets patented and eliminate incentives for drugmakers to game the system by obtaining frivolous patents. More vigorous regulatory oversight – and whatever needed additional resources – is a critical step that must be taken.
Also, there needs to be a public database combining both agencies' information on new and pending patents and their related drugs. Regulators and academics need a one-stop shop for reliable information on FDA and USPTO applications and decisions. A more robust database could inform solutions to barriers that keep drug competitors off the market.
There is growing bipartisan support for tackling this problem. Republican and Democratic Senators have called on the patent office to crack down on the practice of granting multiple patents for minor variations on a single invention, which they said drug companies have sometimes used to stave off generic competition for decades. According to the Senators, "The Patent Act envisions a single patent per invention, not a large portfolio based on one creation."
Regulators must heed their call. Unless action is taken, too many Americans will be stuck with making the cruel choice between paying for needed medicine or food. No one should have to be forced to make that choice.
Blair Horner is executive director of the New York Public Interest Research Group.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.
