Drug Prices, Mike Bloomberg 2020 (last visited Feb. 10, 2020).
Drug prices continue to climb faster than any other form of healthcare spending. In the first half of 2019, the prices of 3,400 drugs rose, on average, 5 times the rate of inflation. To combat the problem, Democratic presidential candidate Michael Bloomberg has honed in on the pharmaceutical industry’s patent scheme. In an effort to limit evergreening, Bloomberg proposes to “bring generic drugs to the market faster by limiting brand-name drug makers to one patent that lasts 20 years.”
Evergreening enables companies to artificially extend the life of patents by stacking the time periods of multiple patents for different aspects of the same product. For instance, a company can patent a discovery for 20 years and then add a second patent on an improved manufacturing method for the same drug before the first patent ends, which separately has a 20 year period. When the first patent ends, competitors can begin creating generics with the active ingredient. However, competitors cannot use the improved manufacturing process in the second patent until the new time period ends.
As noted in Article I Section 8 Clause 8 of the Constitution, the fundamental goal of the patent system is to promote scientific progress by allowing inventors to obtain exclusive rights for their discoveries. Allowing patent holders to block competitors from the market ultimately spurs long term innovation by incentivizing market actors to invest in hefty research and development (“R&D”). Ideally, a company creates a new drug and receives market exclusivity. Then generic companies can enter the market to create a more competitive environment to drive down the drug price once the patent expires. However, by stacking patents, companies can extend exclusivity rights of a product beyond the typical 20 year period.
The practice of evergreening has continued to gain traction. Professor Robin Feldman found that between 2005 and 2015 “78% of the drugs associated with new patents were not new drugs, but existing ones.” This can have stifling consequences for industry innovation as companies make small modifications to current drugs rather than funding high R&D costs for new drugs. As Dr. Joel Lexchin notes, “typically, when you evergreen something, you are not looking at any significant therapeutic advantage. You are looking at a company’s economic advantage.” In turn, evergreening delays drug competitors from entering the market and keeps the prices of legacy drugs sky-high. For instance, AbbVie’s Humira, the world’s best selling drug at $21 billion in revenue, has over 100 patents since its initial approval in 2002, and these patents have shielded Humira from competitors like Amgen and Boehringer from launching their FDA-approved biosimilars to Humira.
In defense, pharma industry actors counter that evergreening actually advances drug development. As most technology improvements continue on an incremental basis, evergreening provides an incentive for companies to improve on old products. Patrick Kierans, the Global Head of Pharmaceuticals and Life sciences for Norton Rose, an international law firm with pharmaceutical IP expertise, notes that “a week doesn’t go by when you don’t open up a newspaper and see that some company’s drug got wiped in a phase-3 clinical trial, and by that time they had already sunk 800 to 900 million bucks into that drug.” Thus, he suggests that additional barriers to patent protections will further discourage innovators from investing in high risk R&D for drug development. However, critics like patent lawyer Janet Gongola point out that these improvements are mostly aesthetic and allow innovators to game the system by evergreening for improvements on “a drug’s color, label, or indication.”
While Bloomberg has proposed limiting evergreening, he has not provided specifics regarding his envisioned patent reform. For instance, it is unclear if he plans on allowing patent extensions (maximum 5 years) under the Hatch-Waxman Act. Other presidential candidates have also proposed ambitious plans to lower drug costs. Senator Elizabeth Warren has proposed that the federal government should step in and produce cheap generic drugs when no other company steps in to address drug shortages. Outside of patent reformation, Senator Amy Klobuchar has proposed allowing Medicare to directly negotiate drug prices, and President Trump has outlined opening the market to cheaper Canadian drugs. Thus, despite the apparent staying power of evergreening power, there are many alternative paths to driving down the costs of drugs.
Eddy Zheng is a JD candidate at Harvard Law School interested in biotech law.