Fresenius Says to Congress, ‘Do as I Say Not as I Do’ on Drug Patents

Congress frequently seeks advice from experts in a wide variety of industries. In theory, this expert testimony helps lawmakers craft better, more nuanced legislation.

Sometimes these “expert” witnesses aren’t especially knowledgeable. Even worse, sometimes they mislead lawmakers in the hope of advancing legislation that benefits their own companies, even if it hurts the country.

That’s precisely what happened in June, when the House Judiciary Committee held a hearing to investigate whether patenting practices in the pharmaceutical industry are driving up drug prices.

A Dangerous Depiction

One of the witnesses, Rachel Goode—a senior vice president at Fresenius Kabi, a multinational biosimilar drug manufacturer—sought to convince lawmakers that brand-name pharmaceutical companies are obtaining numerous “duplicative patents” in order to create “patent thickets” that unfairly block cheaper generics from coming to market. She urged Congress to pass the ETHIC Act, a bill that would limit the number of patents that drug innovators can assert in infringement lawsuits.

Goode is a lawyer and claims to be an intellectual property expert, but her description of “patent thickets” bears little resemblance to reality. And if lawmakers fall for her misdirection, fewer lifesaving drugs will reach American patients in the coming years.

In her fable of misdeeds, drug innovators apply for multiple, overlapping patents on the same drug over a period of years. Those applications “only differ from each other on the last page” and “claim essentially the same invention.” To obtain these “duplicative” patents, companies file “terminal disclaimers” that stipulate that all the related patents will expire at the same time.

What Goode depicts as a nefarious effort to block competition is actually a routine, common practice used by many innovators to create the modern products used by all Americans—from high-tech devices to biotech to semiconductors.

The Real Story

In all sectors of the U.S. innovation economy, the research and discovery process is precisely that: a process. When companies initially file a patent application soon after making a discovery, they don’t always foresee what aspects of the technology will be incorporated into a final commercial product or will prove most meaningful to a consumer.

As companies gain a better, more nuanced understanding of the technology during their ongoing inventive labors in development of the product, they frequently file new patent applications on different aspects of the technology first disclosed in the earlier application. The goal isn’t “abuse” — it’s simply to provide companies the ability to protect the important innovations further revealed during the development process.

To ensure that companies don’t extend their exclusivity merely by filing more related patents, the patent office requires a company to file what is known in technical patent jargon as “a terminal disclaimer.” This limits the term of the later patent to the term of the original patent. In other words, terminal disclaimers prevent abuse, rather than enable it.

Do As I Say

Goode doubled down in her written follow-up to the House, insisting that terminal disclaimers “add no value to American innovation” and asserting they turn “invalid patents into years of extra monopoly profits.”

Goode’s comments to the House exemplify the classic saying, “do as I say, not as I do.” While Fresenius Kabi is a generic drug company, it is also part of Fresenius SE & Co. KGaA, a conglomerate of affiliated companies (“Fresenius”) that files patents and terminal disclaimers—the very practice Goode told the Senate “add[s] no value to American innovation.” In fact, approximately 20% of patents owned by Fresenius contain terminal disclaimers.

Consider Velphoro^®, Fresenius Medical Care’s treatment for patients with chronic kidney disease on dialysis. The drug is protected by a total of 12 patents. Ten of these patents are linked by terminal disclaimers.

Or consider Fresenius Kabi’s three patents on Levothyroxine Sodium Solution, a drug that treats people with underactive thyroids. Aspects of this drug are covered by three patents, the two latter patents are linked by terminal disclaimers to the original patent. In fact, Fresenius Kabi has sued multiple rival companies for allegedly infringing these multiple patents linked by terminal disclaimers.

(Terminal disclaimer status is accessible via the USPTO Patent Center by reviewing the patents’ image file wrappers for recorded terminal disclaimer filings).

Distortions Ultimately Harm Patients

Goode never mentioned to lawmakers that Fresenius uses terminal disclaimers for its many patents, and that it even asserts these patents in litigation. Yet, she broadly accused brand-name innovators of doing exactly the same thing as Fresenius, but this time it’s solely for “duplicative” patents and “monopoly profits.”

The reality is that these patents represent real innovations in healthcare that benefit patients. Fresenius’ own patent practices confirm this fact, despite Goode’s statements to the Senate.

A majority of all new medicines are invented in the United States, largely thanks to our strong intellectual property protections. The U.S. patent system also ensures that cheaper generic drugs arrive quickly once patents expire. About 90% of all prescriptions dispensed in the United States are filled with generics.

Our patent system is undoubtedly complicated. But complicated doesn’t mean broken. In fact, it’s working well—which is why lawmakers ought to be wary of “experts” who distort the law to advocate for changes that would harm healthcare innovation and patients.

Image Source: Deposit Photos
Author: BlueJay18
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