Paul deLespinasse: Pharmaceutical companies are gaming patent law, at our expense
Before the FDA was established in 1906, Americans were victimized by "patent medicines" whomped up without scientific basis and marketed with exaggerated claims by unscrupulous enterprises. Despite the terminology, many weren't actually patented.
Thanks to the FDA, today's medicines are generally safe and effective. But the FDA does not protect us from the fact that these medicines can be patented.
The Constitution grants Congress the power to create intellectual property rights like patents for "limited times" (my emphasis) in order to "promote the progress of science and useful arts." Patents give inventors a monopoly of the right to produce their inventions, protecting them from the competition that otherwise would drive down what they could charge. After drug patents expire, competitors are supposed to be able to offer generic equivalents at much lower prices.
Patents motivate people to invent new and better products. They expire after a limited time so the invention ultimately costs less, benefits more people and promotes the general welfare.
Patents are supposed to expire 20 years after they are filed with the U.S. Patent Office. After that, anybody is supposed to be free to produce the invention without paying the inventor anything.
But pharmaceutical companies have figured out how to game the patent system and postpone generic competitors for years. A recent report in the New York Times indicates that an American pharmaceutical company made $114 billion on Humira in the six years after its patent expired. It ultimately raised Humira's annual list price to more than $80,000. This is not supposed to be how it happens.
Various techniques are used to get around the time limit, including patenting small variations in the drug years after it went on sale and suing would-be competitors. Litigation costs are tiny compared with the huge additional profits gained by extending the producer's immunity from competition.
The would-be generic producers cannot afford to spend nearly as much on their defense. Once they can offer a generic version of the drug, competition will drive the price down so far that they have little left over to pay their lawyers.
Often the lawsuits end only when the would-be competitor agrees to hold off marketing its generic version of the drug for a specific number of years.
In the case of Humira the would-be competitors also had to agree to pay royalties to the company producing Humira once they began selling their generic version of it.
It appears that reforming the patent laws to prevent this kind of abuse would be a good idea. Unfortunately, Congress will probably be more sensitive to the existing monopoly producers, who can easily contribute heavily to political re-election campaigns, than to the less well-heeled companies who seek to compete with them.
If Congress does not act, litigation might challenge the constitutionality of current patent law. If the current law does not encourage "progress of science and useful arts" as required by the Constitution, the Supreme Court conceivably could strike it down. Or if the Court just found that gaming the current law violates the Constitution's "limited times" clause, it could rule out such lawsuits against generic producers after the initial patent has expired.
Anything limiting how much money a patent holder can make would upset the offending drug companies. They would argue that reducing their ability to make money would discourage them from developing new and better drugs. But why should these new and better drugs, which would benefit future patients, should be financed by sick people who are currently taking different drugs?
Research for future drugs should be financed either by venture capitalists, or by the government, which is to say by all taxpayers, not by people who currently happen to be sick.
— Paul F. deLespinasse is professor emeritus of political science and computer science at Adrian College. He can be reached at pdeles@proaxis.com.
This article originally appeared on Sturgis Journal: Paul deLespinasse: Pharmaceutical companies are gaming patent law, at our expense
