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Biden Drug Price Pressure on Patent Office Draws Skeptics

Sept. 21, 2021, 9:30 AM

The Biden administration’s approach to bring down drug costs by challenging aspects of the U.S. patent system lines up with a push from Democrats and Republicans in Congress, but skeptics say it’s looking in the wrong direction.

President Joe Biden, working through the Food and Drug Administration, has asked the Patent and Trademark Office to reconsider practices often criticized as vehicles for pharmaceutical companies to block generic competition, effectively extending their drug monopolies.

Among the targets: giving drug companies new protections for changes to old inventions.

Critics such as Andrei Iancu, the Trump administration PTO director who backed strong patent rights, said disparaging terms such as “patent thickets” are being thrown around without evidence that the intellectual property protections are causing high drug costs.

“If you want a lot of innovation surrounding any product or technology, then a lot of patents go hand and hand with that,” Iancu said.

Some policy watchers say that congressional lawmaking, Federal Trade Commission actions and other levers may be better suited for getting a grip on rising drug prices.

Administration Push

Patents—viewed by some as an obstacle to greater competition in pharmaceuticals—have seized the spotlight in a wide-ranging government effort to get at high drug costs. A 2021 RAND Corporation report, funded by the Department of Health and Human Services, found that prescription drug prices were, on average, two and a half times as high in the U.S. as in 32 other nations, and that brand-name drugs were the primary driver of those costs.

In July, Biden, by way of executive order, told the FDA to reach out to the PTO “to help ensure that the patent system, while incentivizing innovation, does not also unjustifiably delay generic drug and biosimilar competition.”

That same month, the Senate Judiciary Committee advanced, with bipartisan support, legislation to curb practices deemed anticompetitive such as pay-for-delay patent settlements, where name-brand drugmakers pay generics to refrain from entering the market, and “product hopping,” where a company changes a drug formulation or delivery as an older drug patent is expiring.

In September, HHS Secretary Xavier Becerra followed suit, noting in a recommendation that actions across departments and agencies like the PTO “can lower prices and promote competition.” Days later, FDA Acting Commissioner Janet Woodcock wrote to the PTO, requesting information and a dialogue to promote pharmaceutical competition.

The Pharmaceutical Research and Manufacturers of America, in a statement, said that American patients already benefit from “the world’s most competitive market for prescription medicines.” Net prices for brand-name drugs dropped by almost 3% last year, and cheaper generics are available for more than 90% of all prescription medicines, it said.

Quality Questions

The FDA’s letter to the PTO largely focuses on its review of patent applications, urging the agency to give examiners more time and resources to ensure a thorough, high-quality process before granting intellectual property rights.

Companies may use the system to “obtain follow-on patents directed to inventions disclosed in earlier patents,” creating a so-called “patent thicket” that blocks competition to a product and its uses, the FDA warned. That process “increases litigation burdens and potentially delays the approval of generics,” it said.

Another FDA concern is the process of “evergreening,” or the patenting of new delivery systems or other secondary changes to an initial invention that serves to block market entry of generics.

“A lot of these patents are filed for monopoly purposes,” said Matthew Lane, executive director at the Coalition Against Patent Abuse, an industry group comprised of patient advocacy organizations, health-care providers, and others.

The later a patent is filed in the life of a drug, the more likely it is to be of low quality, he said.

“It would be easier to get generics to market if you’re canceling the patents that are issued later in the drug’s life,” Lane said.

Joseph Matal, who led the temporarily led the PTO under Trump, said the administration’s proposed changes to patent policy, such as allotting more time to examiners, amount to " major undertakings and that would only indirectly affect drug prices, if at all.”

But Andrew Hirshfeld, who is temporarily performing PTO director duties, has said that the agency looks forward to bolstering its work with the FDA to help drug competition and is weighing options to help lower costs.

Hill View

Both Democratic and Republican senators are also nudging the patent office to tighten up its examination process.

Senate Judiciary Intellectual Property Subcommittee Chair Patrick Leahy (D-Vt.) and ranking member Thom Tillis (R-NC), in a letter, asked the PTO to “take steps” to prevent patent applicants from providing the office with statements that are “inconsistent” with those submitted to the FDA to secure product approval.

Giving examiners more time is also a pretty easy, politically feasible way forward that could block out more secondary patents” like those on drug-delivery methods, said Melissa Wasserman, a University of Texas law professor who researches the institutional design of innovation policy with an emphasis on patent and administrative law.

Wasserman’s research found that more examination time could decrease secondary patents issued a year by 10%.

PTO examiners have a harder time determining whether applications for secondary drug patents are inventive enough to secure intellectual property protections, Wasserman said, given difficulties determining whether things like controlled release formulations on a compound are an advancement in understanding or trivial.

What’s more, pharmaceutical companies, if an application is rejected, may “throw so much money” fighting that decision that it can overwhelm an examiner, who may lack the tools to push back against submitted scientific evidence, she said. The FDA, as part of its proposal, offered to help the PTO scour FDA data during patentability determinations.

Cost Fight Collaboration

Meanwhile, some say other issues—not directly in the PTO’s purview—are propping up drug prices.

The HHS, in a September report, recommended that Congress prohibit pay-for-delay agreements and voiced support for the Federal Trade Commission, which has sued to stop such deals and estimates that they mean $3.5 billion in higher drug costs every year for taxpayers and consumers.

“Cross-agency collaboration is going to be a huge part of lowering drug prices,” Lane said.

Others say the administration, if it’s going to go after the PTO, should look to the to agency’s Patent Trial and Appeal Board, the administrative tribunal that oversees companies’ challenges to rivals’ patents or examiner results.

In Congress, senators and House members from both parties urged the agency to reconsider Apple Inc. v. Fintiv Inc., a precedential PTAB decision that critics say has made it more difficult for generics to offer lower-cost versions of patented drugs.

“There have been actual cases of generic companies trying to challenge a drug patent as obvious at that PTO, and the PTO refusing to consider the challenge on its merits because of the recent Fintiv policy,” Matal said.

Iancu says the administration may be asking the PTO to step beyond its normal role.

“There are a set of statutory requirements for obtaining a patent, and they apply across all technology,” Iancu said. “Examiners need to just follow the law and not be distracted by some of these other considerations.”

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editor responsible for this story: Alexis Kramer at akramer@bloomberglaw.com, Melissa B. Robinson at mrobinson@bloomberglaw.com

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