Patent thickets are pricing Americans out of medicine

The United States has a health care cost crisis. Among other things, high prices reflect the cost of innovation, including years of R&D that deliver life-saving treatments. Although evidence suggests pharmaceutical companies often set prices far beyond what’s needed to recoup innovation costs, drug companies should be allowed to recoup their investments. To do so, the law allows them a term of exclusivity to sell unique drugs before they enter the generic market. However, drug companies often fuel the cost crisis by seeking to extend their periods of exclusivity using patent thickets—webs of overlapping patents—that are often based on minor changes to the drug.

The payoff for society should be affordable generics once exclusivity ends. But patent thickets derail this implicit contract. As an example, Abbvie filed over 100 secondary patents for Humira, a popular arthritis remedy. Many of these secondary patents were for minor tweaks, and thus unnecessarily delayed U.S. biosimilars until 2023, five years after hitting the cheaper market in Europe. This delay extracted $80 billion from American consumers. This hits low-income Americans hardest, with approximately 37 percent of people earning  less than $40,000 annually skipping or substituting prescription meds due to cost. Filing dozens or even hundreds of patents to retain exclusivity price gouges patients and adds little benefit to the health care system.

The PREVAIL Act: A gift to PhARMA monopolies

The PREVAIL Act, sponsored by Sens. Chris Coons (D., Del.), Dick Durbin (D., Ill.), Mazie Hirono (D., Hawaii), and Thom Tillis (R., N. Car.), hinders patent challenges. The bill curbs the Patent Trial and Appeal Board (PTAB), a 2011 reform letting third parties challenge weak patents via inter partes review. PTAB clears thickets, paving the way for generics. PREVAIL limits challenges to those sued for infringement, shielding dubious patents. Critics point to PTAB’s 70 percent claim rejection rate, but only 30 percent of 2023 patent challenges fully failed. Many claims were settled, strongly suggesting PTAB works. This bill extends monopolies, defying its sponsors’ price-lowering claims.

Smarter challenges and real incentives

The generic payoff should be and can be reclaimed. The PTAB should be bolstered by Congress, who can write statute to reverse a Supreme Court ruling that government entities cannot challenge patents. This would allow agencies like the Federal Trade Commission and the Centers for Medicaid and Medicare Services to target thickets that block generics, thereby lowering patient and insurance costs.

Second, incentives should change. High prices are one cost of breakthrough drugs, but exclusivity periods must end on time. The pediatric drug exclusivity benefit allows pharmaceutical companies to extend their exclusivity window for six months if a drug for children is altered in a way that represents a significant innovation. This should be expanded to all drugs for genuine advances on existing medications, but the number of expansions should be capped at a few filings per drug. This will help build-out existing drugs to their full utility, such as oral and intravenous administration. Applying the pediatric drug exclusivity rules would also ensure innovation’s value is paid for, then shared as generics, and not hoarded via endless patents that shift costs to patients.

A path to affordable innovation

Patents should fuel progress, not profiteering. High drug prices are one price of innovation’s value: society pays, expecting lower-cost generics as the return. PREVAIL locks-in costs by weakening PTAB, delaying that return. Instead, robust challenges and incentives for real advances can deliver meaningful reductions in patent thickets and ensure that drugs become generic on time. By clearing thickets and tying exclusivity to true innovation, Congress can lower prices and honor the deal: costly drugs today, societal goods tomorrow. For low-income Americans, this is a meaningful step to affordable care.