Exploring the Cost of Big Pharma’s Egregious Abuse of the Patent System
With each new year comes a time-honored tradition for Big Pharma: Hiking prices on hundreds of brand name prescription drugs in the first two weeks of January.
As Big Pharma’s next round of January price hikes approach, we can take a look back at a year of bad behavior for the pharmaceutical industry and be reminded why policymakers must hold brand name drug companies accountable to lower drug prices.
In our first installment of our year-end series, we reviewed Big Pharma’s egregious pricing practices in 2023, including continuing to hike prices faster than the rate of inflation, bringing new drugs to market with skyrocketing launch prices and colluding with each other to raise vaccine prices.
In the second installment of our series, we looked at Big Pharma’s massive spending opposing drug pricing solutions, pushing a blame game designed to boost brand name drug companies’ bottom line and evade responsibility for high prices and staggering investments in direct-to-consumer (DTC) advertising pushing high-priced brand name products.
Today, we’ll explore new data from 2023 on the staggering cost of Big Pharma’s anti-competitive abuse of the U.S. patent system.
Get a Dose of Reality on Big Pharma’s year of extending monopolies and keeping prices high:
BIG PHARMA’S PATENT ABUSE COSTS CONSUMERS AND THE U.S. HEALTHCARE SYSTEM
Big Pharma’s Patent Abuse Increased Costs By More Than $40 Billion in Just One Year
In May, The American Economic Liberties Project and the Initiative for Medicines, Access & Knowledge (I-MAK) released an analysis examining the staggering cost of Big Pharma’s anti-competitive practices on the U.S. health care system and American patients. The analysis found that Big Pharma’s anti-competitive tactics, including patent abuse, cost U.S. consumers “an additional $40.07 billion on pharmaceuticals,” in just one year, 2019.
The American Economic Liberties Project and I-MAK conducted the analysis by examining the top 100 best-selling prescription drugs in the Medicare Part D and Medicaid programs in 2019. From this data, they found that several anti-competitive tactics commonly employed by Big Pharma “increased Part D gross spending by 14.15 percent, or $14.82 billion, and increased Medicaid gross drug spending by 9.05 percent, or $3.15 billion.” By assuming “all U.S. retail brand drug spending was similarly impacted,” the report concludes Americans paid as much as $40.07 billion extra for brand name prescription drugs in 2019 due to Big Pharma’s anti-competitive tactics.
Big Pharma’s Patent Thickets On Just Five Drugs Cost Over $16 Billion In a Single Year
In January, Matrix Global Advisors released a report titled, “Patent Thickets and Lost Drug Savings,” that quantified the one-year cost of lost savings on five brand name drugs around which Big Pharma has built especially egregious patent thickets. The five drugs were AbbVie’s autoimmune drug Humira and oncology drug Imbruvica, Regeneron’s ophthalmology drug Eylea, Amgen’s autoimmune drug Enbrel and Bristol Myers Squibb’s oncology drug Opdivo.
The report assesses what the savings would be for these five drugs if “a steady state of competition [existed] where generics and biosimilars have achieved price discounts and uptake currently observed in the market.” Based on these calculations, the estimated one-year cost of patent thickets on each of these brand name drugs was:
This amounts to a total of more than $16 billion.
Big Pharma’s Patents Invalidated More Than Any Other Industry – Increasing Costs for Consumers
According to November coverage in STAT News, a recent analysis published in the Journal of the American Medical Association (JAMA) found U.S. Food and Drug Administration (FDA) approved patents secured by Big Pharma are more frequently invalidated than any other industry sector due to drugmakers misrepresenting or omitting information during the patent application process.
The analysis found that pharmaceutical companies failed to provide accurate information to the U.S. Patent & Trademark Office (USPTO) on 34 patents previously approved by the FDA. When unchallenged or invalidated, these faulty patents contribute to increasing prescription drug costs by extending periods of exclusivity, which enables Big Pharma to engage in anti-competitive and monopoly pricing – as these products face no competition. As outlined in the analysis, these anti-competitive practices have contributed to Big Pharma increasing the median brand name drug launch price from $2,115 in 2008 to $180,007 in 2021.
DRUG MAKERS’ PATENT ABUSE TACTICS DELAY ACCESS TO SAFER AND MORE EFFECTIVE TREATMENTS
Gilead Employs “Product Hopping” Scheme to Block Access to Safer HIV Treatments
In July, The New York Times published an article exposing how brand name drug maker Gilead employed a greedy patent strategy around a pair of blockbuster HIV treatments to maximize profits while blocking access to newer versions of those treatments proven to be safer for patients.
The Gilead scheme offers a particularly egregious case study in the Big Pharma practice of “product hopping,” one of the pharmaceutical industry’s commonly employed tactics to game the patent system. Product-hopping involves a drug manufacturer making changes to an existing product — then patenting those changes before an original product expires to extend exclusively, delay competition and keep prices high.
According to coverage from The Times, internal documents from Gilead showed executives and researchers at the company were aware that a newer version of one of their HIV drugs, Truvada, “had the potential to be less toxic to patients’ kidneys and bones than the earlier iteration.” However, the company purposefully delayed the development of this “less toxic” treatment so that its eventual release would coincide with the loss of patent protection around Gilead’s existing HIV treatments that were already on the market. This meant Gilead delayed the development of a safer, less harmful treatment for HIV for over ten years.
Gilead’s use of this tactic around its HIV treatments is particularly egregious because the company chose to prevent patients from accessing a safer, less harmful treatment option to maximize profits. The article points out that fellow Big Pharma giant Merck is currently seeking to employ a similar tactic around its blockbuster cancer treatment Keytruda.
Drug Maker Exploits Patent System on Narcolepsy Drugs to Boost Profits
In February, The New York Times also reported on anti-competitive tactics used by Jazz Pharmaceuticals on their brand name narcolepsy drugs, Xyrem and Xyvaw, to block patients from accessing alternatives — including alternatives that may be more effective.
“Jazz took the unusual step of patenting that safety program and then listing those patents in a federal registry known as the Orange Book,” the piece explains. “Under an obscure federal rule, if a rival contested one of the patents in certain circumstances, federal regulators would be barred for more than two years from approving that competitor’s product.”
The treatment “is enormously lucrative, generating more than $13 billion in revenue since Jazz acquired it in 2005. Medicare now spends hundreds of millions of dollars annually for it. The drug accounted for 58 percent of Jazz’s revenue in 2021.” These profits, in large part, can be accredited to the fact that “the list price of the highest dose of each version is now more than $200,000,” and that “Xyrem is now 19 times as expensive as it was in 2007.”
The current system is “supposed to promote drug safety,” Dr. Aaron Kesselheim, a professor of medicine at Brigham and Women’s Hospital and Harvard Medical School, told The Times. “That’s not supposed to be a mechanism for extending revenue streams.”
These case studies in Big Pharma’s greed underscore the urgency for Congress to hold the pharmaceutical industry accountable and crack down on egregious anti-competitive tactics, like product-hopping and patent thicketing.
As policymakers return to Washington in 2024, they should take note of the pharmaceutical industry’s continued egregious pricing practices, reject Big Pharma’s bogus rhetoric attempting to evade responsibility and shift blame for high prices and advance bipartisan, market-based solutions to hold Big Pharma accountable.
Learn more about market-based solutions to hold Big Pharma accountable and lower prescription drug prices HERE.
Read our first blog in this series on Big Pharma’s egregious price hikes and increasing launch prices HERE.
Read our second blog in this series on Big Pharma’s massive spending on direct-to-consumer advertising and a bogus blame game in 2023 HERE.
And stay tuned as we continue to review Big Pharma’s bad behavior from this past year throughout the week.