Tillis Tells Judiciary Committee That Hyper-Focus on Patents Has Led to Lack of Progress on Drug Pricing

“I’ve been here for 10 years and the substance of this hearing is not materially different than the substance of hearings that I had in my first Congress here.” – Senator Thom Tillis (R-NC)

Judiciary committeeThe full Senate Judiciary Committee met today to discuss ways to make U.S. prescription drugs more affordable, with a focus on the role patents play in high drug prices. Three of the five witnesses who testified pushed for various legislative and agency actions they claimed would help, while two of the witnesses said the patent system is working and that major changes like the ones proposed would gravely hinder incentives for innovation.

Professor Adam Mossoff of the Antonin Scalia Law School, George Mason University and Jocelyn Ulrich, Vice President, Policy & Research for PhRMA, were the two pro-patent witnesses on the panel. William Feldman, Associate Physician, Division of Pulmonary and Critical Care Medicine at Brigham and Women’s Hospital; Professor Arti Rai, Elvin R. Latty Distinguished Professor of Law at Duke Law; and David Mitchell, President and Founder of Patients for Affordable Drugs, all argued from different perspectives that patent abuses are the key reason Americans pay more than four times those in other economically comparable countries for the same drugs.

drug pricesMitchell represented a patient perspective and explained in his written testimony—which relied heavily on data provided by the Initiative for Medicines, Access & Knowledge (I-MAK)—that his incurable blood cancer requires a four-drug combination treatment that he spent more than $16,500 out of pocket on just one of those drugs last year. But following passage of the Inflation Reduction Act (IRA), that cost was cut to $3,326 this year and going forward costs will be capped at $2,000. While he lauded the patent system for its role in incentivizing innovation, Mitchell said patent abuses like thickets actually inhibit innovation by extending existing drugs via minor improvements, which means companies don’t need to take the risk on making new ones.

drug pricesCommittee Chair Dick Durbin (D-IL) cited statistics that he said show the prices of more than 1,200 medicines were raised by an average of 32% in 2022 and said that the National Institutes of Health (NIH) contributed to 99% of all new drugs approved by the Food and Drug Administration (FDA) between 2010 and 2019. Durbin said that “too often, the prices charged by big pharma do not reflect the scientific advancement” and noted that the Federal Trade Commission (FTC) has recently challenged more than 400 patents it said were improperly listed in the Orange Book between November 2023 and May 2024.

The issue of drug pricing is a largely bipartisan one, though Republicans and Democrats often blame different factors for the problem. Committee Ranking Member Lindsey Graham (R-SC) agreed that patent “abuses” such as patenting minor improvements and delaying generic entry into the market need to be curbed, but also blamed other countries that subsidize drugs for putting the financial burden on U.S. consumers for R&D done by U.S. companies. “What I don’t want to do is kill the goose that laid the golden egg,” Graham said. “The goal is to enhance medical science and deal with sheer greed. I want you to make a profit but the idea of playing games with patents needs to stop.”

Professor Rai said the problems can be addressed surgically, most importantly via greater cooperation between the FDA and U.S. Patent and Trademark Office (USPTO). A bill titled the Interagency Patent Coordination and Improvement Act of 2023, introduced by Durbin for the last two Congressional sessions, would amend Title 35 of U.S. Code for the purposes of establishing an interagency task force between the USPTO and FDA that would share information and provide technical assistance with respect to patents. Rai said the USPTO could help the FDA to ensure that “irrelevant patents are never listed,” and called out terminal disclaimer practice as being “a big deal”, citing a statistic that claims 48% of patents asserted against biosimilar competitors contain terminal disclaimers. While Rai noted that the recent USPTO rulemaking on terminal disclaimers could help, she said “I think revision to the statute is necessary.”

Rai also proposed ensuring the “continued vitality” of the USPTO’s Patent Trial and Appeal Board (PTAB). “The PTAB is doing an excellent job,” Rai said. “Keep up the good work.”

Professor Mossoff, on the other hand, said that “policy-driven arguments about patents have sown confusion.” The problem, Mossoff said, is that the causes of U.S. drug pricing problems “are complex and multidimensional yet we’ve reduced it to a single cause – patents.” Mossoff pointed to two federal laws that are presently being misused by those seeking to assert price controls—the Bayh-Dole Act  and Section 1498—and said that imposing march-in rights for pricing under Bayh-Dole or forcing compulsory licenses under Section 1498 would “turn the law on its head” and would also be ineffective.

Mossoff also explained that the statistics cited by Durbin on NIH’s role in the R&D process are misleading. As of 2018, Mossoff said, private companies invested $129 billion in private R&D funding, “which dwarfs the $40 billion or so by NIH.” One 2021 study showed that the 23,200 grants by NIH in the year 2000 were linked to just 18 FDA approved meds by 2020. “NIH funds very far upstream initial research and then once the university researchers figure out it’s important, they get a patent, the university licenses it to a biotech company… and that’s what accounts for the $2.6 billion on average that goes into drug development and ultimately leads to an FDA-approved drug in the marketplace,” Mossoff said.

Feldman was the only physician on the panel and echoed Rai’s proposal that the USPTO and FDA must work more closely together.  He gave the example of Ozempic, which he said has had 25 patents listed in the Orange Book over the years, 21 of which were on the delivery device/ injector pen technology, while only two were on the active ingredients and two on methods of use or formulations. “The FTC has said these patents should never have been listed in the first place,” Feldman said. “Have the FDA review every patent that gets to the Orange Book. Give them the authority and resources to review those patents and submit them for reexamination to the USPTO.”

Representing the biopharmaceutical industry was Ulrich, who called the IP system for pharmaceutical patents “a resounding success,” with over $100 billion every year spent on research, which far outpaces NIH. Fewer than 12% of the therapies researched make it to clinical trials.

Ulrich pointed to significant progress on some of the most costly and challenging diseases, such as cancer, where death rates have declined by 33%, Sickle cell anemia, Leukemia, and AIDS and HIV.

A slew of bills have been introduced on drug pricing this congress, and many were mentioned throughout the hearing. The Prescription Pricing for the People Act is nearing markup and directs the FTC to issue a report on the pharmaceutical supply chain and whether pharmacy benefit managers (PBMs)—the three biggest of which are CVS, Express Scripts, and UnitedHealth’s Optum—are engaged in anti-competitive behavior that raises consumer cost. Pharmaceutical companies have pointed to PBMs as part of the problem, as they tend to favor higher priced drugs with bigger rebates, and don’t always pass the rebates they’re given on to insurers, for example. The bill would also direct the FTC to make policy recommendations based on their findings.

Late in the hearing Senator Chris Coons (D-DE) chimed in to point out that the patent system applies to more than just pharmaceutical inventions and said he hopes the changes being considered do not harm the foundation of the patent system. “The core issue I had with NIST’s proposal is it applies to everything,” Coons said. “So every inventor is open to the federal government coming in if the price is too high.”

Senator Thom Tillis (R-NC), Ranking Member of the Judiciary Committee’s IP Subcommittee, expressed frustration about the lack of progress on drug pricing issues, which he blamed on the Committee’s narrow focus on patents. Tillis noted that some reports have found the IRA, though well-intentioned, has resulted in a double-digit reduction in small molecule research, and lamented that hearings on drug pricing haven’t been more holistic.

“I’ve been here for 10 years and the substance of this hearing is not materially different than the substance of hearings that I had in my first Congress here,” Tillis said. He alluded to his thwarted efforts to obtain information on I-MAK’s data, which Mossoff and others have called out as being flawed, and said the Committee has failed to make progress and may have even taken steps backward with “well-intentioned provisions in the [IRA]” because “we at least know we’re reducing incentives to invest and take risk.”

Tillis implored those on the Committee to acknowledge that drug pricing is a “sausage-making factory” that involves many players and said that singling out patents will not solve the problem. “We need to stop talking past each other, finding one link in the value chain that we naively think is the way you solve this problem and all agree that there are ways to increase availability and decrease the cost of prescription drugs but it’s not this simplistic approach to take it only one link in the chain at a time,” Tillis said. “Or, Mr. Chair, I’ll look forward to the next Congress having a hearing that’s substantially the same information with substantially no progress. We haven’t really made major leaps forward.”

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