Patents over Patients: How Pharmaceutical Companies use the Patent System to Keep Drug Costs High
By Kaitlin Carroll
The United States is in a drug-pricing crisis.[1] One in four Americans report that they simply cannot afford to take their medication as prescribed.[2] Part of what has led to this crisis is the pharmaceutical industry’s manipulation of the patent system to keep generic alternatives from entering the market.[3] Once generic brands enter the market, drug prices can drop by up to 90%.[4] However, drug manufacturers have been manipulating the patent system to extend their monopolies for years, namely through the use of patent thickets and pay-for-delay agreements.[5]
One way that pharmaceutical companies extend their monopolies is by building up “patent thickets” by stacking multiple patents covering the same product.[6] Strategically overlapping slightly differing patents’ protection periods can ensure a drug’s monopoly for decades past the original patent’s expiration.[7] More than half of the top 12 selling drugs in the U.S. have over 100 attempted patents per drug.[8] For each of these top 12 drugs, there are at least 38 years of attempted patent protection sought by drugmakers, almost double the intended 20 year period.[9]
Of these top selling drugs, the number one spot goes to Humira: a rheumatoid arthritis medication sold by AbbVie.[10] Although the initial patent on Humira expired in 2016, thanks to the over 75 patents filed three years before its expiration, AbbVie is set to hold the monopoly until 2034.[11] With this monopoly, AbbVie is able to hold prices high enough to keep this medication out of reach for many Americans.[12] A coalition of ethical investors is now questioning several pharmaceutical companies’ tactics, including AbbVie, Johnson & Johnson, and Pfizer.[13] The coalition is demanding accountability from these corporations, and answers about how these strategies are impacting patient access to medications.[14]
Another tactic employed by pharmaceutical companies, often in conjunction with patent thickets, are pay-for-delay agreements made with generic manufacturers.[15] Pay-for-delay agreements are created when companies who hold “blockbuster” drug patents (drugs with profits in the billions) pay other companies to stop them from creating cheaper generic alternatives for a certain amount of time.[16] Companies accomplish this by first suing generic-manufacturing companies for patent infringement, and then settling the lawsuit by paying them to stay out of the market in what is known as a reverse-payment settlement.[17]
An example of this is seen in a 2014 deal struck by Gilead Sciences, the leading marketer of antiretrovirals used to treat HIV/AIDS.[18] Gilead began by suing Teva Pharmaceuticals, an Israeli drug company, after Teva indicated that they would be entering the market of one of Gilead’s top antiretrovirals, Truvada.[19] The lawsuit ended in a settlement with Gilead agreeing to pay Teva, the supposed infringer, $1.5 billion in exchange for Teva delaying its entry into the Truvada market for five years.[20] Normally when a company is sued for infringement, they are the ones that end up paying.[21] However for drug companies like Gilead, it can often be cheaper to threaten rivals with a lawsuit and then pay them to back off instead of actually competing with their price in the market; brand-name HIV treatments like Gilead’s can start at $30,000 a year per patient.[22] To both companies engaged in a pay-for-delay agreement, it can seem like a win-win, but the ones really paying the price are the patients struggling to afford the medications they need.
In 2019, a group of HIV/AIDS advocates filed a lawsuit against Gilead, arguing that this deal was a clear violation of antitrust law and an illegal effort to extend the life of their patent, which has led to a public health crisis.[23] “This gross profiteering explains why less than half of people living with HIV in the U.S. are virally suppressed, one of the lowest rates among the world’s high-income countries,” said activist Brenda Goodrow, one of the plaintiffs in the lawsuit who was born with HIV.[24]
At first glance, one would think this would be an open-shut case of collusion since the Sherman Act, the federal antitrust law statute, clearly outlaws agreements between rivals not to compete.[25] However, due to a 2013 Supreme Court decision in Federal Trade Commission v. Activis, pay-for-delay agreements are no longer per se illegal, but subject to the “rule of reason” standard which considers whether the collusion actually even harms consumers, and if it does, whether the business had a good reason for it.[26] The Activis decision provides plenty of wiggle room for defendants to argue their way out of collusion charges using speculative business theories.[27] Under this reasoning, the court found that Gilead’s 2014 patent deal with Teva did not violate antitrust laws.[28] This decision lets corporations know that these types of collusive agreements will be held up in court, as long as they can argue around it, thereby assuring the continuance of these patent deals delaying generic alternatives for years to come.[29]
Americans should not have to risk going into extreme debt in order to give themselves or their family members the life-saving medications they require. What we need from Congress is patent system reform to close the gaps that drug manufacturers continue to use to their advantage in creating patent thickets.[30] The question is where exactly to draw the line when balancing patent holders’ intellectual property rights with patients’ rights to affordable medications.[31] As for pay-for-delay agreements, the Gilead ruling seems to legitimize this tactic, but there is still hope— the Federal Trade Commission has the power to make rules specifically outlawing unfair competitive practices under the FTC Act.[32] However, the clock is ticking—the longer that drug-patent holders are allowed to continue building up patent thickets and engaging in pay-for-delay treatments, the more harm the drug pricing crisis will cause patients.
[1] Ashley Kirzinger, 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/.
[2] Id.
[3] Tahir Amin & David Mitchell, Big Pharma’s Patent Abuses Are Fueling the Drug Pricing Crisis, TIME (Feb. 24, 2023, 7:00 AM), https://time.com/6257866/big-pharma-patent-abuse-drug-pricing-crisis/.
[4] S. Sean Tu, Pharmaceutical Patent Two-Step: The Adverse Advent of Amarin v. Hikma Type Litigation, SSRN (Jan. 24, 2023), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4210624.
[5] Id.
[6] Abuse of the Patent System is Keeping Drug Prices High for Patients, Association for Accessible Medicines, ttps://accessiblemeds.org/campaign/abuse-patent-system-keeping-drug-prices-high-patients (last visited Nov. 24, 2023).
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Abuse of the Patent System is Keeping Drug Prices High for Patients, supra note 6.
[12] Id.
[13] Brian Buntz, Big Pharma, it’s time to talk: Investors demand transparency on patent thickets, Drug Discovery & Development (March 29, 2023), https://www.drugdiscoverytrends.com/big-pharma-its-time-to-talk-investors-demand-transparency-on-patent-thickets/.
[14] Id.
[15] Sandeep Vaheesan, Antitrust Has a Generic-Drug Problem, The Atlantic (June 15, 2023), https://www.theatlantic.com/ideas/archive/2023/06/pharmaceutical-generic-drugs-pay-for-delay/674410/.
[16] Id.
[17] Id.
[18] Id.
[19] Id.
[20] Vaheesan, supra note 15.
[21] Id.
[22] Christopher Rowland, Gilead is accused of cutting anti-competitive deals to extend profit on HIV drug combinations, The Washington Post, https://www.washingtonpost.com/business/economy/gilead-is-accused-of-cutting-anti-competitive-deals-to-extend-profit-on-hiv-drug-cocktails/2019/05/14/94e79c56-75ad-11e9-bd25-c989555e7766_story.html
[23] Id.
[24] Id.
[25] Vaheesan, supra note 15.
[26] Id.
[27] Id.
[28] Eric Sagonowsky, Gilead Sciences, after trial win, moves ahead with $247M settlement in HIV antitrust case, Fierce Pharma (Sep. 26, 2023, 10:39 AM), https://www.fiercepharma.com/pharma/gilead-after-trial-win-moves-ahead-247m-settlement-hiv-antitrust-case.
[29] Vaheesan, supra note 15.
[30] See Buntz, supra note 13.
[31] Id.
[32] Vaheesan, supra note 15.
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