Affordable Prescriptions for Patients Act of 2023: Congress’s Effort to Reduce the Impact of Patent Evergreening on Drug Prices
Americans spend more on prescription drugs (averaging about $1300 per person per year) than any other country.[1] In 2021, the median launch price for a new drug for a one-year supply was $180,000.[2] While the government and insurance pay a large part of the bill, patients still bear the brunt of these high drug prices by paying an exceedingly higher insurance premium.[3]
Unlike other nations, in the U.S., brand-name drug manufacturers can set drug prices without any governmental control.[4] Once set, the drug prices don’t stagnate or decrease. [5] Brand-name drug manufacturers can hike drug prices since they have an exclusivity in supplying the drug to the market. This exclusivity is provided by patents covering their pharmaceutical product. Ideally, the brand-name drug manufacturer has patent exclusivity for 20 years from filing the patent application.[6] After the expiration of this term, a generic or biosimilar should be able to enter the market, raising competition and lowering drug prices.[7] But brand-name drug manufacturers often extend their patent exclusivity by making small tweaks to their drug, sustaining a monopoly for several years. While this type of gaming of the system is known to all, the patent system designed to incentivize innovation for new medicines cannot completely shut down granting patents on improvements of a drug if they fall within the requirements set by the legislation of the U.S. Patent Law.[8] Given the impact patenting pharmaceutical products has on drug pricing and patients, legislators have all been actively petitioning for a change in the Patent Law to aid competition. On June 8, a letter signed by a bipartisan group of U.S. senators was sent to U.S. Patent and Trademark Office (“USPTO”) Director Kathi Vidal voicing concerns over the anti-competitive impacts of so-called “patent thickets,” especially in the drug industry.[9]
On January 30, 2023, Senator Mr. Cornyn (with Mr. Blumenthal, Mr. Grassley, Mr. Durbin, Mr. Cruz, and Ms. Klobuchar) introduced the Affordable Prescriptions for Patients Act of 2023 (“S. 150”).[10] S.150 seeks two distinct amendments that will have a significant effect on patent litigation efforts in pharmaceutical industry – amendments to the Antitrust Act and the Patent Act.[11]
S.150 seeks to amend Section 5(a) of the FTC Act to make product hopping an antitrust violation.[12] A product hop occurs when an innovator drug company makes a change to an existing patented drug, such as a new form, formulation, administration method, or dosage of the drug and then patents that change right before the patent on the original drug is set to expire.[13] Thus, the brand hops from one product to another for the same indication. There is no existing statute prohibiting product hopping.
There are two types of product hopping: a hard switch, where a new brand drug is introduced and the old brand drug is taken off the market and a soft switch, where the older product is left on the market and the new brand drug is introduced. [14] If S.150 is approved as it drafted, it would be a prima facie violation when a brand-name drug manufacturer sells or markets a product made by a hard switch or a soft switch of their drug product-if the action unfairly disadvantages the generic or biosimilar manufacturers.[15] Under S.150, both a hard or soft switch would be unlawful if it takes place within 180 days after a new generic or biosimilar is first marketed.[16] The brand-name drug manufacturer can then rebut the prima facie case for a hard switch by showing that the actions it took were related to patient safety or financial reasons unrelated to obtaining anti-competitive advantage, such as, a supply disruption.[17] For a soft switch rebuttal, the manufacturer must establish that it had legitimate pro-competitive reasons.[18]
Once the brand-name drug manufacturer makes the switch to the new drug that has no generic or biosimilar, cheaper alternative, patients get stuck paying higher prices—often for many years at a time. In the current climate where no law protects against product hopping, the FTC faces significant obstacles to combating all forms of this harmful practice under existing law. Even when successful to assert a case, antitrust litigation addressing anti-competitive behavior against brand-name manufacturers has been costly and slow and often taking years—if not decades—to stop the abusive behavior. The Affordable Prescriptions for Patients Through Promoting Competition Act of 2023 might make prescription drugs more affordable for patients by strengthening the FTC’s ability to bring and win cases against drug companies that engage in all forms of product hopping.
While the intent of S.150 is to prevent a brand-name drug manufacturer from using the patent system to stop generics by making an “insignificant change” to their drug, the language in S.150 could be far-reaching. It has the potential to stifle legitimate pharmaceutical innovation, such as discouraging research that can lead to a related but new indication for the same drug for another disease. The presumption that any follow-on product often viewed as product hopping is a prima facie antitrust violation undervalues the enormous benefits that several of follow-on products have bestowed on patients over years. A World Health Organization (“WHO”) reports about 63% of the drugs on the WHO’s Essential Drug List were follow-on products.[19] If S.150, as proposed, were to pass as is, pharmaceutical companies would treat a known approved drug as “one-and-done.” Eventually, patients will be left disadvantaged as they will not be able to benefit from the follow-on invention which could be more beneficial to them than the initially approved drug product. Additionally, the current language of S.150 targets both hard and soft switches. If adopted, no follow-on product or innovation could pass S.150’s three-part test, which puts the onus on companies to rebut presumptions of anti-competitive activity. It is therefore likely that S.150’s prohibition on soft switches could cause brand-name drug manufacturers to think twice before introducing improved versions of existing drugs, thus arguably reducing the incentive for innovation and therefore reducing the potential for patient benefit.
S.150 also seeks to amend Section 271(e) of the Patent Act to limit the number of certain patents that brand-name drug manufacturer may assert in a lawsuit, such as patents that were filed more than four years after the reference product received market approval.[20] The patents covered by S.150 include patents which claim the biologic products, its use, or its method of manufacture with either (a) an effective filing date of more than 4 years after the approval of the biologic drug or (b) not being used by the brand-name drug manufacturer in their processes for making the biologic drug.[21] S.150 seeks amend the BPCIA legislation to only allow 20 such patents to be asserted during litigation.[22] Additionally, it further limits that maximum 10 out of 20 such patents can be issued after the brand-name drug manufacturer has provided the initial list of patents to be asserted to the biosimilar.[23] S.150 would not affect the brand-name drug manufacturer’s ability to assert other patents with claims to the biologic drug, method of use of the biologic drug or manufacturing process of the biologic drug that it ends up using itself.
Since biosimilar companies start developing a biosimilar product several years before the actually plan to launch, they have to make several decisions based on the patent landscape. If new patents are issued to the brand name drug manufacturer at the time closer to the plan of launch for the biosimilar, it might be too late start for the biosimilar company to change the development decisions that they have already made and spent money on. This can cause a delay in the launch date of the biosimilar drug. The proposed legislation would provide a relief to the biosimilar companies who would have had no advance notice on the patents from the brand-name drug manufacturers that they would have to deal with 5 years from when they have started making developmental decisions. S.150 can be considered a reasonable piece of legislation since it does not stack up against the brand name manufacturers by setting a high bar for the patents comprised within the 20-patent limit. However, setting a cap of 20 patents with specificity on the claimed invention and recency artificially limits a brand-name drug manufacturer’s ability to enjoin infringement prior to the launch of the biosimilar.[24] Such a limit can also strip the ability of the brand name drug manufacturer to make a strategic and informed decision on which patents they perceive to be the strongest before getting ample opportunity to conduct full discovery on the biosimilar product during a BPCIA patent dance.[25] Considering AbbVie’s Humira, which has arguably a patent thicket with 166 granted patents granted patents, only 18 of the granted patents have ever been asserted and litigated (from over 60 that were identified initially as potentially infringed).[26] On an average, in BPCIA Litigation, 12 patents on average are litigated. Therefore, the limit of 20 patents (of a specific type) set by S.150 is not a real limitation for patent litigation under BPCIA. A report by AJMC found that all the litigations conducted under BPCIA so far have had less than 20 such patents listed. [27] Therefore, while considered a reasonable legislation, S.150 might have no impact on brand-name drug manufacturer’s ability to sue a biosimilar company which means that S.150 will have no impact on a biosimilar’s willingness to enter the commercial market. [28]
Footnotes
