Say you have a patent on Coca-Cola, and you’ve started selling it in 6 ½-ounce bottles. One day, you realize you can sell even more if you also use 10-ounce bottles. Do you get a new patent for the Coke you’re now putting in the bigger bottles?
Of course not.
But Congress is being asked to allow drug companies – and only drug companies– to do precisely this. And if Congress can stand up to this Goliath of the Washington influence world, it will go a long way toward erasing its image as a bought-and-paid-for arm of K Street.
Drug companies want to keep their patents enforceable for as long as possible to hike profits. So when drugs near the point at which they could be manufactured by others and sold as generic, drug companies sometimes make minor changes to the drugs – such as increasing dosage sizes – that represent little in the way of medical progress but enable the drug to continue to be sold at higher prices.
The last round of patent reform legislation attempted to address this by creating what is known as Inter Partes review. This process allows challenges to established patents when those patents clearly did little to advance the usefulness of a product.
Drug companies don’t like Inter Partes review because it’s working. According to the U.S. Patent and Trademark Office, 514 Inter Partes petitions were filed in 2013, 1,310 in 2014 and, as of the end of May, 1,119 already in 2015.
Only about 8 percent of these petitions concern biotech or pharmaceutical patents – most filed by companies facing infringement lawsuits on the patents they are challenging. About two-thirds of health care-related challenges are successful. That means the petitioners are showing appropriate restraint, and only the most illegitimate patents are being eliminated.
Still, drug companies contend the system is vulnerable to abuse. They’re making a straw man argument against Inter Partes Review out of a tiny number of filings by hedge funds to try to pressure Congress into returning to the days when they had blanket immunity from scrutiny of their bad patents
But hedge funds are not the problem here; keeping drugs out of the generic market for no good reason is the problem. And none of this constitutes cause to change the Inter Partes Review system.
And yet, some in Congress seem determined to do just that.
Relevant committees have approved language granting the drug companies’ request for a carve-out on the Innovation Act in the House and the PATENT Act in the Senate. The House’s amendment forbids Inter Partes Review for any person or firm that would gain financially from overturning the patent. The Senate’s version would come closer to gutting the entire process.
The House’s version is aimed at firms suing for profit, but its impact will be just as vast as the Senate’s amendment since nearly all such challenges are for financial gain.
But both proposals would return us to the bad old days when drug companies could make the most minor of adjustments to their most popular drugs and keep them off the generic market for decades.
Drug companies say they need the money to spur further research and create still more transformative cures. But nothing motivates companies to seek new avenues for profit like older avenues drying up. Not all the blacksmiths went broke.
And who pays this premium if drug companies succeed in beating back this effective-but-not-overwhelming system for challenges? Taxpayers.
Thanks to Obamacare, which has put 14 million people on the government health care dole, and Medicaid expansion, which has added nearly 40 million more, Washington is now the payer of first resort for the health care and drug costs of an unsustainably high portion of the population. Hundreds of billions of dollars hang in the balance.
Congress did something mostly right with Inter Partes Review. The other affected industries seem to accept it. Even within the health care sector, the health insurers association and the AARP have sent a letter in support of keeping it, as have unions and, of course, the generic drug manufacturers.
But the big drug companies are not accustomed to losing these fights, regardless of the opposition. They roll out hedge fund straw men, but, for decades, it was these big drug companies who were rigging it and profiting handsomely.
Will Congress stand with the people and against a powerful Washington lobbying force just this once? It would be nice – and fiscally prudent to boot.
McNicoll is a conservative columnist and freelance writer based in Alexandria, Va. He is a former senior writer for The Heritage Foundation and former director of communications for the House Committee on Oversight and Government Reform.