Prescription drug reform can’t succeed without fixing the patent system

Since taking office, the Trump administration has made lowering prescription drug prices a top health care priority. Americans pay nearly three times more for medications than citizens of other developed nations, a fact the White House has acknowledged. Yet despite growing public support for reform, one critical policy lever remains conspicuously absent from the conversation in Washington: patent reform.

Drug prices are too high

Public frustration with high drug costs continues to grow. A 2024 Kaiser Family Foundation survey found that 82 percent of Americans across the political spectrum believe drug prices are too high. Moreover, 72 percent think the government isn’t doing enough to bring prices down.

This frustration reflects real hardship. The same survey reports that nearly one in three adults are not taking medications as prescribed due to cost by skipping doses, cutting pills, or avoiding the pharmacy altogether. Among those who struggle to afford medications, 40 percent live in households making less than $40,000 a year. The consequences are clear: high drug prices reduce disposable income and worsen health outcomes, especially for lower-income Americans.

The Trump administration’s efforts

The administration has responded with two executive orders aimed at curbing drug costs. The first order focuses on payment reform and administrative efficiency. It proposes changes to the Inflation Reduction Act (IRA), explores new Medicare and Medicaid payment models, targets pharmacy benefit managers, and directs the Food and Drug Administration to provide recommendations to accelerate drug approvals and to reclassify some drugs as over-the-counter medications. The only policy that could resemble patent reform is a vague directive for interagency cooperation to recommend actions to reduce anti-competitive behavior by pharmaceutical firms.

The second executive order takes a more aggressive stance by proposing a “most favored nation” (MFN) pricing model. This order would link American drug prices to those in other developed countries. It also outlines a voluntary negotiation process with drugmakers; if they fail to meet price targets, the administration may attempt MFN pricing through rulemaking. Finally, the order acknowledges the MFN model must comply with existing law and available appropriations. The order suggests limited executive authority to impose MFN pricing beyond demonstration projects in public programs like Medicare and Medicaid, but it does signal administrative priorities.

MFN pricing could be quite effective at reducing prices, depending on how the model is designed. When the Trump administration promulgated an interim final rule to implement an MFN demonstration in Medicare during their first term, FREOPP proposed an alternative MFN model that would include drug prices in countries that support pharmaceutical innovation and use free-market pricing mechanisms, while also excluding countries with no private insurance and strict government price setting. Even so, past opposition to referencing foreign prices—often viewed by Republicans as a step toward government-run health care—may present political barriers. If MFN pricing does not survive legal and legislative scrutiny, a root cause of high drug prices still would remain unaddressed: abuse of the patent system.

Patent reform is essential

Patents play a vital role in spurring pharmaceutical innovation and patent regulation is one of Congress’ enumerated powers under the Constitution. But in practice, many brand-name drug manufacturers use the patent system not to reward breakthrough innovation, but to block generic competition and extend monopolies far beyond what is necessary.

Some common tactics include:

• Patent thickets: securing dozens of overlapping patents on a single drug to make it nearly impossible for generics to enter the market without risk of patent infringement
• Evergreening: making trivial modifications to extend patent life
• Product hopping: moving patients to a slightly altered version of a drug just before generic competition hits, effectively extending the patent
• Pay-for-delay: compensating generic manufacturers to postpone market entry

These strategies inflate costs of a small number of brand-name drugs that account for the vast majority of prescription drug spending. While the United States boasts the highest generic drug utilization rate in the world—over 90 percent by volume—generics represent 17.5 percent of total drug spending. The remaining 10 percent of prescriptions, often biologics or specialty drugs with heavy patent protections, account for the other 82.5 percent.

In other words, the problem is not that patients aren’t using generics or that they are not working. Rather, the branded market remains distorted by government-sanctioned monopolies that have outlived their usefulness.

A blueprint for reform

Any serious prescription drug reform must include changes to how the United States grants and protects pharmaceutical patents. Using its constitutional authority to regulate the patent system, Congress should adopt a reform agenda that includes:

1. Rewarding true innovation: The patent system should distinguish between genuine breakthroughs and obviously minor changes. 

The United States Patent and Trademark Office (USPTO) must be better equipped to review complex drug patents and apply objective standards to deny low-quality applications. On average, patent examiners spend about 18 hours per patent application, and recent studies show that more time spent on applications would be a cost-effective way to reduce the issuance of weak patents. Congress should evaluate whether USPTO has the resources it needs from current user fees and whether additional funding may be necessary to increase USPTO’s ability to scrutinize patents. 

2. Strengthening patent challenges: Generic and biosimilar manufacturers need a fair, predictable path to challenge weak patents and develop alternatives. 

The American Invents Act, enacted in 2011, established the Patent Trial and Review Board (PTAB) to quickly handle patent validity challenges. But proposed legislation like the PREVAIL Act would weaken the patent challenge process by requiring putative challengers to be sued for patent infringement prior to the challenge. A recent Supreme Court ruling also barred government agencies from challenging patents through PTAB. Instead, Congress should strengthen PTAB, allowing government entities like the Centers for Medicare and Medicaid Services and the Federal Trade Commission (FTC) to challenge weak patents. 

3. Prohibiting anticompetitive behavior: As mentioned above, branded drug makers attempt to switch patients to a newer drug that is similar to an existing product that will soon have generic competition, known as product hopping.

In 2023, a bipartisan group of senators reintroduced the Affordable Prescriptions for Patients Act, which defines product hopping as an anticompetitive practice and would empower the FTC to enforce its prohibition through litigation. The bill would also address patent thickets by limiting the number of patents a branded biologic manufacturer could assert in a patent infringement lawsuit against a biosimilar drug maker to 20 patents.

The version of the bill that passed the Senate removed the sections on product hopping entirely, leaving only the limitation on asserted patents on biologic products. Congress should revisit the issue and ensure that product hopping is no longer used as a weapon to stifle competition.

Other legislative efforts target patent thickets more expansively. In 2024, a  bipartisan group of senators, including Sen. Peter Welch (D., Vt.), former Sen. Mike Braun (R., Ind.), and Amy Klobuchar (D., Minn.) introduced a bill that limited asserted patents by branded manufacturers of either small molecule or biologic products to one patent.

4. Promoting transparency: Every patent linked to a drug should be publicly disclosed and trackable across FDA, USPTO, and other federal agencies. Transparency empowers payers, regulators, and consumers to challenge unjustified monopoly extensions. 

Congress should build upon an executive order issued by the Biden administration that called for greater coordination between the USPTO and the FDA to reduce delays in generic and biosimilar competition. This is vital because the prescription drug market is unique, in that intellectual property for prescription drugs is protected by the FDA’s drug approval process that grants marketing exclusivity concurrently with patents issued by USPTO.

In addition, the Fair Care Act of 2024 would require manufacturers to list all applicable patents in the FDA’s Purple Book, the database that contains information on FDA-licensed biological products. This policy would mirror requirements for drug manufacturers to list all applicable patents for small molecule drugs—those typically in pill or capsule form—in the FDA’s Orange Book. Reforming patent disclosure in the Purple Book gives biosimilar drugmakers the information they need to develop their products and anticipate when litigation is most likely to occur.

The path forward

The Trump administration has rightly elevated drug pricing as a national issue and taken steps to address it through administrative tools and international pricing models. But as the administration continues pursuing MFN policies and IRA-related changes, it should work with Congress to push for patent reform as the centerpiece of any durable solution.

High drug prices are not merely a result of free-market dynamics, they are in large part the product of government-created monopolies that are susceptible to regulatory capture. Any attempt to lower prices without addressing the patent loopholes that sustain them are insufficient.

If policymakers want a pharmaceutical system that rewards innovation, serves patients, and spends taxpayer dollars wisely, they must start by fixing the broken patent system that too often prioritizes profits over progress.