On May 10, 2024, the United States Patent and Trademark Office (PTO) proposed changes to the way drug companies patent their products. The proposed rule would make it easier for companies making generic or biosimilar drugs to challenge the patents of brand-name drugs, reducing a key barrier to entry for lower-cost medicines. In the following comment, Niskanen’s Health Policy Analyst Lawson Mansell and Senior Attorney Zachary Norris explain how the proposed rule would benefit patients and improve the administration of drug patents.

The Honorable Katherine K. Vidal
Under Secretary of Commerce for Intellectual Property
Director of the United States Patent and Trademark Office

United States Patent and Trademark Office
600 Dulany Street
Alexandria, VA 22314

RE: Terminal Disclaimer Practice To Obviate Nonstatutory Double Patenting (89 FR 40439)

Dear Director Vidal,

The Niskanen Center is grateful to provide feedback on the proposed rule to add a new requirement to the enforcement provisions in 37 CFR 1.321(c) and (d). This amendment to current guidelines will help level the playing field for makers of generic and biosimilar drugs, lowering their barriers to entry and saving them time and money during the patent process. These changes will also improve the functioning of the patent system by encouraging a more efficient use of the examination and grant process. As a result, we commend the agency’s proposed rule.

The Niskanen Center is a nonprofit organization that advocates for public policies that foster innovation, competition, and effective governance. In accordance with that mission, we support regulatory efforts to expand access to lower-cost products. Across the healthcare industry, restrictions on the availability of lower cost care increase costs for patients and taxpayers without providing benefits by way of added quality. 

In this case, the current rules surrounding terminal disclaimer practices force competitors to undergo onerous legal battles when bringing generic products to market, delaying their arrival and adding unnecessary administrative costs. It is ultimately patients that bear the burden of higher costs for needed medicine as a result.

Pharmaceutical companies are among the most sophisticated users of the patent process. Under current law, manufacturers of brand-name drugs take advantage of the patent process to delay market entry of generic, lower-cost medicines and thereby stifle competition. They do this by filing multiple continuation patents to cover minor changes to their drug, creating a “patent thicket” tied together by a terminal disclaimer that helps extend the lifetime of their monopoly.1 As a result, competitors seeking to produce drugs already on the market must prevail in arduous legal battles. This delays the drugs’ arrival on the market and adds unnecessary litigation costs—even if the enforced patent claims are ultimately found to be invalid. These costs are directly paid by competitor drugmakers but are ultimately passed on to patients and taxpayers through higher prices and delayed access to life-saving medical treatments. Action by the PTO to address this practice is critical, because while it is viewed by many to be anticompetitive, the Seventh Circuit has concluded that patent thickets do not violate antitrust laws.2 


The existing terminal disclaimer rules have enabled a substantial increase in continuation patents over the last 20 years. Between 2000 and 2015, the ratio of continuation patents per approval increased 200 percent while the ratio of the number of original patents increased by only 15 percent.3 This increase in continuation patents further burdens generic competitors with litigation, as seen by the ratio of litigated continuation patents increasing 213 percent during that same time period.4 

Reducing the legal burden on generic companies will not only lower unnecessary administrative expenses, it could also speed up the market entry of lower-cost generic drugs. Over 30 percent of Americans report that they underdosed or did not purchase prescribed medication due to the cost.5 These high costs can be lowered by generic and biosimilar competition. In 2021, the FDA reported that generic drug approvals led to $16.6 billion in total savings.6 Strategies like patent thickets that delay the entry of lower cost drugs stand in the way of future savings.  

Requiring drug makers to include language in their terminal disclaimer that ensures primary patents are no longer enforceable if a linked secondary patent is successfully challenged will reduce the financial and legal barriers to market entry. Drug makers are relying on the quantity, rather than the quality of their patents under the current system. The USPTO’s proposal will incentivize drug makers to instead direct their resources to developing more novel drugs not subject to obviousness-type double patenting, knowing the increased effect that a successful challenge to a reference patent or patent claim will have on subject patents. Improving the competitive environment for drug patents will help lower drug costs for patients and reduce the administrative burden from extensive legal battles. 

These proposed changes are consistent with congressional intent to facilitate the market entry of generic drugs as expressed in the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act. That enactment explicitly addressed concerns about the difficulty generic companies experienced in getting approval for their drugs. It is now 40 years since that law was enacted, but generic companies still experience needless roadblocks to entry. By increasing the efficiency with which invalid patent claims may be challenged and removed from the universe of inventions covered by patent owners’ exclusive rights, the proposal is also consistent with the 2011 Leahy-Smith America Invents Act.

Thank you for your time and consideration of these comments. We look forward to seeing action in support of a more competitive drug market and more effective regulatory design. 

Respectfully submitted,

Lawson Mansell
Health Policy Analyst
Niskanen Center
lmansell@niskanencenter.org

Zachary Norris
Senior Attorney
Niskanen Center
znorris@niskanencenter.org

Footnotes

  1. Tu SS, Goode R, & Feldman WB. Biologic Patent Thickets and Terminal Disclaimers. JAMA. 2024;331(4):355–357. doi:10.1001/jama.2023.25389. ↩︎
  2. See Mayor & City Council of Balt. v. AbbVie Inc., No. 20-2402 (7th Cir. Aug. 1, 2022) ( “What’s wrong with having lots of patents?”). ↩︎
  3. Tu SS, Kesselheim AS, Wetherbee K, & Feldman WB. Changes in the Number of Continuation Patents on Drugs Approved by the FDA. JAMA. 2023;330(5):469–470. doi:10.1001/jama.2023.11525. ↩︎
  4. Ibid. ↩︎
  5. Kirzinger A, Montero A, Sparks G, Valdes I, & Hamel L. Public Opinion on Prescription Drugs and Their Prices. KFF. Aug 21, 2023. https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/. ↩︎
  6. Conrad R & Davis K. Estimating Cost Savings from New Generic Drug Approvals in 2021. U.S. Food and Drug Administration. September 2023. https://www.fda.gov/media/172608/download?attachment. ↩︎