On July 10, the Affordable Prescriptions for Patients Act of 2023 (S.150), sponsored by Senators John Cornyn (R-TX) and Richard Blumenthal (D-CT), was fast-tracked and passed the Senate by unanimous consent. The bill seeks to lower drug costs by cutting down “patent thickets” (an anticompetitive practice that brand name drug makers use to delay the arrival of lower-cost products).
This summer the U.S. Patent and Trademark Office (USPTO) also took action to combat patent thickets with a proposed rule to remove entry barriers for generic competitors. The Niskanen Center provided public comment in support of the rule last week.
The Senate’s and USPTO’s efforts would both increase public access to lower-cost medicine by easing the path to market for generic and biosimilar drugs.
What is a patent thicket, and why do they matter?
A patent thicket occurs when brand-name drug makers create a portfolio of sometimes-overlapping patents and patent claims designed to block as many avenues for competitors’ entry as possible. Would-be generic and biosimilar competitors, who manufacture lower-cost versions of those drugs, are forced into arduous litigation battles to challenge the validity and scope of the claims in a patent portfolio covering an existing drug. This process ultimately delays lower-cost biosimilar and generic drugs’ arrival on the market. For example, continuation patent applications, which expand the scope of a patent portfolio of a prior submission to block prospective competitors, increased by 200 percent between 2000 and 2015. This led to a corresponding increase in litigation to combat those bolstered patent portfolios.
Strategies like patent thickets prevent potential government savings and widespread access to needed affordable medication. Polling from 2023 revealed that over 30 percent of Americans underdosed or did not purchase prescribed medication due to the cost. Some of the delayed medication is life-saving. Revlimid, an oral medication that treats blood cancers, was the subject of litigation in 2018 due to the manufacturer’s use of patent thickets to ward off competition from generic rivals. Because makers of generic drugs price their products at an 80-85 percent discount compared to their brand name counterparts, Revlimid’s manufacturer’s success at warding off competition allowed it to raise prices by 300 percent over 20 years (from $6,000/month in 2002 to $24,000/month in 2022). The manufacturer’s FDA-enforced period of protection from generic competition expired in 2019, but Revlimid is unlikely to encounter competition until 2026.
However, high drug costs can be lowered with competition from generic manufacturers. An FDA study found that approvals of generic and biosimilar drugs led to $16.6 billion in total savings in 2021 alone. To reduce delays for life-saving medicines like those experienced with Revlimid and ensure future savings, patent reform is essential.
What is the newly-passed S.150?
The bipartisan Affordable Prescriptions for Patients Act would limit the number of patents a biologic drug maker can claim were violated by a competing biosimilar manufacturer during litigation. Biologic drug makers can assert a competitor violated up to 20 patents of a particular type (the court, however, can raise that cap by request if the “interest of justice” requires it or for other reasons of “good cause”).
For context, the 10 best-selling drugs in America average 74 patents per drug, per a 2021 analysis. The patents subject to the cap must meet three criteria: they must be 1) the subject of a biosimilar application from a competitor, 2) a biological product, and 3) either four years older than the original patent or include a claim to a method in the manufacturing process that the patent owner does not use. These criteria target the types of patents that are most commonly used to deter competition while maintaining existing incentives for innovation in manufacturing needed drugs.
Placing a reasonable cap on the number of patents biologic drug makers can assert during litigation will incentivize them to bring their best patents forward and better resolve disputes over patent infringement. Last month, the Congressional Budget Office (CBO) estimated that this approach would reduce litigation costs due to fewer patents being litigated. In total, the CBO predicts the patent thicket reforms in S.150 would reduce spending by $1.5 billion over 10 years and lower the price of affected products by 20 percent on average. By reducing this key barrier to entry, the public will have access to potentially life-saving medication at faster rates and at a lower cost.
A previous version of the bill relied upon the Federal Trade Commission (FTC) to enforce the provisions in S.150 and specifically identified patent thicketing as an anticompetitive activity. The newer version passed in July removed mentions of the FTC. Because not all additional patents on biologic or branded drugs constitute anticompetitive behavior, discretion is required to determine whether new patents or applications offer a necessary or meaningful improvement on the original drug. While the current version of S.150 targets the specific types of patent activity that contribute to thicketing, FTC discretion would be helpful in ensuring that provisions are enforced fairly.
U.S. Patent and Trademark Office proposes new rule
Earlier this year, the USPTO proposed a new rule that would change the enforcement process for assembling patent portfolios. Under current law, patent owners use a “terminal disclaimer” to comply with prohibitions on receiving a different patent for a variation on a previous invention, known as obviousness-type double patenting. A terminal disclaimer ties the earlier and later patents together, allowing owners to file patent applications that will last as long as their original reference patent. Even though these patents expire together, generic competitors have to challenge the validity of each patent separately during litigation.
Under the USPTO’s proposal, drug makers will have to include language in their terminal disclaimer that ensures later patents are no longer enforceable if a linked claim in the reference patent is successfully challenged. As a result, generic drug makers will only need to successfully challenge a smaller number of claims in a thicket to invalidate the other patents. This could significantly reduce the barriers to market entry for those companies and would incentivize drug makers to focus on quality and novelty in their patenting decisions.
Looking ahead
Momentum is growing to reform the patent system in a way that enables more competition and less gaming by reducing the amount of time drug manufacturers spend on litigation and incentivizing work on more novel innovations. Both the Senate and USPTO offer critical reforms to cut down patent thicketing tactics and speed up the arrival of generic and biosimilar drugs. Congress should continue to prioritize action on drug costs and competition by passing the same reforms in the House.