Prescription drug prices are far too high, and many Americans are being forced to choose between paying for their medicines and other basic necessities such as rent and housing. One of the main causes of high prices are the anticompetitive actions taken by drug companies to stifle other drugs. Two of these practices are product hopping, when drug companies make small changes to new versions of a drug so cheaper generic drugs can’t be substituted for it, and patent thicketing, where drug companies deploy lots of patents strategically to prevent competition from other drugs that would lower prices. A bill introduced by Senators John Cornyn (R-TX) and Richard Blumenthal (D-CT) is a good first step toward addressing these problems. Congress should swiftly pass this bill and follow it up with stronger measures.
The Cornyn-Blumenthal bill, titled the Affordable Prescriptions for Patients Act, was recently unanimously passed out of the Senate Judiciary Committee. It is designed to encourage competition and ensure consumers have greater access to prescription drugs, and stop abuses and manipulation of the system. Drug companies have been abusing the patent system to extend their monopolies and increase prices.
Product hopping is a tactic used to get around laws requiring generic substitution and to extend their monopolies. Drug companies make slightly different versions of their drugs (such as changing a pill into a tablet or making small changes to dosage). When patients are switched to these new versions, generic drugs can’t be substituted for them at the pharmacy and patients are left paying higher prices even when therapeutically equivalent generics drugs become available. This bill codifies definitions of product hopping within the Federal Trade Commission (FTC) Act, empowering the FTC to challenge this behavior as anti-competitive. It also empowers the FTC to use its equitable remedy authority to force companies to disgorge the profits they have gained from their abuse. This makes product hopping, if caught, unprofitable and drug companies will be less likely to engage in this behavior.
Patent thicketing occurs when drug companies file lots of patents on a single drug over time to prevent generic competition. Normally generics can enter when the patent on a drug expires. This is part of the system Congress explicitly designed through legislation like the Hatch-Waxman Act. However, drug companies can avoid this by always having a new patent on an old drug whose term has yet to run out. Even if these patents are bad, it eventually becomes too expensive to challenge all of them when there are so many patents that it becomes a thicket.
The Affordable Prescriptions for Patients Act is a first step towards stopping these thickets. It puts a cap on the maximum number of patents a drug company can assert against a generic challenger. It basically says “bring your best patents” to the patent dance. This is a fair way to tackle the patent thicketing problem. It only takes one valid and infringed patent to block generic entry, but a manageable amount of patents makes it more likely that a generic company can cut through a thicket of invalid or not-infringed patents. Real patent worthy innovations are still rewarded and there is less incentive to build thickets of bad patents to protect a monopoly.
However, as written the cap is too permissive to solve patent thicketing. The cap only applies to patents filed four years after FDA approval and it’s set at 20 – still quite a few patents. The bill also allows a judge to increase the cap “if the interest of justice so requires.” This could mean that many thickets are still too big to cut through. Still, the bill is an important step toward tackling the anticompetitive practices of product hopping and patent thicketing, and Congress should pass it at the first opportunity. But it is just a beginning, not a complete solution. Alone, the Affordable Prescriptions for Patients Act will not solve the problem.
After enacting this bill, Congress should pursue other reforms to stop anticompetitive patent thicketing. This is a complicated problem that will likely need more than one solution. It requires being able to sort good patents from bad patents in a less expensive process. One promising possibility is inter partes review (IPR), a procedure created in 2011 through bipartisan legislation to allow the U.S. Patent and Trademark Office to take a second look at patents it has issued. Strengthening this procedure would greatly help cut down patent thickets, curb patent abuse on a broader scale, and make sure that patents on prescription drugs are for genuine innovation and not for exploiting loopholes.