Bloomberg Law
Oct. 17, 2022, 8:00 AM

Scapegoating Patents Won’t Lower Drug Prices

Andrei  Iancu
Andrei Iancu
Council for Innovation Promotion
David J. Kappos
David J. Kappos
Council for Innovation Promotion

In their quest to lower drug prices, some US leaders have identified a convenient scapegoat: patents.

Over the past few months, the Commissioner of the Food and Drug Administration has sent letters to the Director of the Patent and Trademark Office, asking about “abuses” in the intellectual property system to “protect against” the issuance of patents for “incremental” changes to existing drugs.

And this past summer, 100 lawmakers sent a letter urging the Secretary of Health and Human Services to “utilize administrative authorities” to nullify patents on certain brand-name medicines to speed up the introduction of generics and biosimilars.

Robust IP System Improves Access

All these efforts rest on the faulty premise that patents are hindering access to medicines and thus hurting patients. But the reverse is true: innovation cannot happen without a strong and reliable intellectual property system.

Robust intellectual property protections have made the US the global leader in biopharmaceutical innovation, and ensured unparalleled access to new medicines. Far from dismantling drug patents, we should work to bring more of their benefits to other parts of the economy.

Patents, like other types of intellectual property, grant creators a limited period of time during which to exclusively sell their inventions, after which copycat products can enter the market. This arrangement, enshrined in the Constitution and honed over time, balances two competing interests—it incentivizes inventors with the possibility of a reward, and protects consumers by ensuring that the exclusivity period is limited.

Over the years, our system has spurred notable growth in biopharmaceuticals, where the investment and risk required to create a new product are enormous. US drug companies currently spend around $100 billion annually on research and development, about 10 times what the sector spent in the 1980s. Over the same period, FDA approvals of new drugs have increased five-fold, from around 10 per year to 50 in 2021.

Strong Protections Spur Innovation

But the industry could not have increased its output of new treatments and vaccines so dramatically without strong patent protections. It costs, on average, more than $2 billion to bring a new drug to market, and can take decades.

Fewer than 12% of drug candidates that enter clinical trials ultimately earn FDA approval. Companies will only take that risk if they know they can profit from the intellectual property rights to successful discoveries.

Thanks to the historically strong US patent system, two-thirds of all new drugs approved over the past decade originated in US labs, among them numerous life-changing medical breakthroughs. Today, people living with HIV can manage their condition with just one pill per day. Doctors can cure hepatitis C, the leading cause of liver cancer. And we have Covid-19 vaccines based on breakthrough mRNA technology.

The US led in development of all these treatments, among many others. And while only about half of newly introduced medicines are available in countries such as Canada, France, and Japan, the figure is nearly 90% in the US.

Perhaps the most disingenuous claim by the anti-patent brigade is that intellectual property protections hinder access to affordable medicines. In the US today, about nine in 10 prescriptions are filled with generic drugs. There isn’t much room left in the drug marketplace—if generic penetration approached 100%, there would be essentially no new drugs.

Notably, the US has the highest generics penetration of all OECD countries in the Organisation for Economic Co-operation and Development. On average, generics only fill about half of all prescriptions written in OECD countries.

Put simply, our system has served Americans well. It encourages the development of new medicines and ensures that patients can access them.

IP Protections Help US Lead Globally

Instead of lamenting this success, policymakers should be looking for ways to replicate it in sectors where American companies have fallen behind foreign competitors.

The US is ceding global leadership to China for technologies ranging from 5G and quantum computing to artificial intelligence and clean energy. Yet we can’t expect to grow these industries domestically without strong IP protections to encourage investment in research and development.

The US leads the world in drug discovery thanks to—not despite—our intellectual property laws. It may be politically expedient to blame patents for high drug prices, but it’s also dangerously dishonest.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Author Information

Andrei Iancu served as the Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office from 2018 to 2021, under President Trump.

David Kappos served as the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office from 2009 to 2013, under President Obama. Both serve as board co-chairs of the newly formed Council for Innovation Promotion.

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