Like food, gas, and other essential products, the public is now paying more for prescription drugs than ever before. In January alone, drug manufacturers raised the price of more than 910 major brand-name drugs by 5% on average, according to the drug price nonprofit 46Brooklyn Research. Between 2011 and 2021, America’s annual spending on prescription drugs increased 64%, from $366 billion to $603 billion.
A major driver of the rising cost of prescription drugs is patent abuse.
America’s patent system is essential to promote new innovations that benefit everyone. In the case of drugs, patents are essential for developing lifesaving and life-improving medications. However, drug manufacturers are increasingly obtaining patents that do not advance new drugs or new innovations for existing drugs. Instead, they are obtaining patents to stymie generic competition so they can raise prices.
Patent abuses force patients to wait years and sometimes decades before they can purchase a cheaper generic version of an expensive brand-name drug. A 2021 analysis of the 12 bestselling drugs in the United States found that these drugs have an average of 74 patents. These patents force patients to wait 40 years before they can access a cheaper generic version of these drugs.
Without generic competitors, drug manufacturers are free to raise prices. Between 2016 and 2021, the makers of these top-selling drugs raised their prices by 44%. In 2021, these drugs, on average, cost $57,000 for every Medicare beneficiary who used these drugs.
Expanding access to generic drugs would dramatically improve the affordability of prescription drugs. Introducing two generic competitors, on average, reduces drug prices by 54%. Four competitors lower prices by 79%, and six competitors lower prices by 95%
Five major changes would expand generic competition and lower drug prices. First, policymakers should abolish the abuse of a patent practice known as ancillary patenting. Ancillary patenting occurs when a drug manufacturer adds new patents to an existing drug by claiming they have added a new feature. In reality, the so-called new feature was a feature of the drug from the beginning. In September, Sen. Mike Braun (R-IN) and several bipartisan co-sponsors introduced a proposal to end this practice.
Second, lawmakers should eliminate another patent abuse called building a patent thicket. A patent thicket is a large group of duplicative patents that drug manufacturers file on their drugs to block generics from entering the market. Most patents inside a patent thicket do not promote an innovation. Unfortunately, it is virtually impossible for competing generic companies to fight these junk patents in court. It takes four to five years for a court to decide a single drug patent dispute, and it costs, on average, $747,000 to litigate a single drug patent. In January, Rep. Jodie Arrington (R-TX) and a bipartisan group of lawmakers introduced legislation to clear away patent thickets.
Third, lawmakers should combat the abuse of a practice called “evergreening.” When a drug’s patents are about to expire, its manufacturer will often exploit federal regulations that allow it to block generic competition for an additional three years. This practice increased spending on prescription drugs by $62 billion between 2008 and 2016.
Fourth, lawmakers should eliminate pay-for-delay agreements. Under these agreements, brand-name manufacturers compensate generic drug developers to launch the generic drug at a later date. This allows brand-name companies to charge patients higher prices. One analysis by the University of California estimates that pay for delay raises the cost of prescription drugs by $37 billion.
Fifth, policymakers should allow drug manufacturers to sell low-cost generic drugs if a brand-name company sues them for patent infringement. Under current law, drug developers cannot sell generic drugs for 2 1/2 years once another drug company sues them. This grants brand-name drug manufacturers enormous veto power over their competitors. No other business has the power to prevent another company legally from selling its product simply by accusing it of infringing its patent. In every other industry, the burden of proof is on the accuser to convince a court its patents have been infringed.
America’s patent system has promoted enormous pharmaceutical breakthroughs that have improved the lives of millions suffering from debilitating illnesses. Unfortunately, far too many drug manufacturers are filing patents so they can raise prices on patients, instead of improving their health. Thankfully, commonsense reforms will ensure drug manufacturers use our patent system for the good of patients and not to exploit them.
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Bobby Jindal served as governor of Louisiana from 2008-16 and as a U.S. assistant secretary of health and human services from 2001-03. Charlie Katebi is deputy director for the Center for a Healthy America at the America First Policy Institute.
