In a 2019 hearing, CEOs of major pharmaceutical companies, including AbbVie, AstraZeneca, Johnson & Johnson, and Pfizer, testify before the Senate Finance Committee.

How Patent Extensions Keep Some Drug Costs High

Priti Krishtel’s first case as a legal aid lawyer in India was as tragic as they come. One day in 2004, she recalls a couple walking into her office in Bengaluru with their three children. Unable to afford life-saving medicine to keep their HIV infections in check, the parents were dying of AIDS. With no other options, they wanted Krishtel to draw up guardianship transfer papers: The rambunctious siblings were to be sent to an orphanage before their parents died.

Even though drugs that could save the parents’ lives were available, the cost at the time was out of reach for the couple, who were living in poverty. Krishtel and the collective of lawyers she was working with at the time went on to handle many similar cases. By 2007, she came up with a strategy to slash the cost of HIV drugs in India: On behalf of patients’ rights groups, lawyers with the nonprofit Initiative for Medicines, Access, and Knowledge (I-MAK) she had cofounded would challenge specific patent applications on brand-name drugs, opening opportunities for generic manufacturers. Through a combination of patent expirations and legal challenges, price competition in India drove down the cost of the most common HIV therapy by more than 80 percent between 2003 and 2008.

Hoping for a repeat, in 2015 Krishtel turned the organization’s focus to the United States, where skyrocketing drug prices increasingly threaten to drag families into financial ruin. A 2019 Kaiser Family Foundation survey of more than a thousand Americans found that 29 percent did not take their medicines as prescribed at some point during the previous year because of cost; 8 percent reported that the lapse made their illness worse. The reasons for high prescription drug prices in America are complex and varied. But the patent system, Krishtel says, is one culprit.

Drug patents allow companies to recoup the costs of inventing a drug and reap rewards for innovation. For an entirely new drug, a U.S. patent enables a company to sell it exclusively for a set period of time, typically for 20 years from the date it was filed. After the patent expires, other companies are allowed to market generic versions.

But companies have been abusing the patent system to extend their market monopolies, says Krishtel. A 2018 study from I-MAK found that companies amass patents on existing drugs, blocking competition: The top 12 grossing drugs in the U.S. had an average of 71 patents granted, which almost doubled the time these drugs are protected from generic competition. Many of the granted patents are for minor tweaks, such as combining two drugs into one or altering the dosage — changes that aren’t inventive, Krishtel argues, and thus undeserving of new patents. A 2018 study by Robin Feldman, a professor at the University of California Hastings College of the Law in San Francisco, found that 78 percent of new drug patents between 2005 and 2015 were for existing drugs.

The reasons for high prescription drug prices in America are complex and varied. But the patent system, Krishtel says, is one culprit.

“I fiercely defend the patent system,” Feldman says. “I also am appalled when it’s misused.”

An intense debate over whether patents on SARS-CoV-2 vaccines are restricting global access has also recently erupted among members of the World Trade Organization (WTO). But even if the WTO voted to temporarily waive patent protections to enable competition, European Union representatives argue that such waivers would not ramp up supply anytime soon.

Meanwhile, Americans continue to pay the highest prices in the world for brand-name drugs. There is a chance for quick reform: President Biden has yet to name a new director of the U.S. Patent and Trademark Office, who could make it tougher to extend drug patents or easier for generic companies to challenge them.

One patent application Krishtel and I-MAK challenged was held by Illinois-based Abbott Laboratories on a formulation of its HIV drug Aluvia that does not require refrigeration — crucial in hot climates like India. At the Indian patent office in Delhi, she argued that the technique used to make the drug heat stable was not new, Abbott had merely applied the technology to its own drug. Under Indian patent law, a drug cannot be re-patented unless it is also more effective than the existing patented form.

The office refused to grant a patent. Then Krishtel and her team scored two more victories. Patents on another adult HIV drug and on a liquid formulation for children were also refused, which enabled broad access to the drugs for millions of low-income Indians — and people around the world in subsequent years because they were supplied by Indian generic manufacturers at a fraction of the brand-name cost.

The U.S. patent system, however, “doesn’t ask whether something is better,” explains Feldman. “It asks whether something is different.” Under that system, an innovation is patentable if the difference between an invention and a similar patented invention is not obvious to someone skilled in the art and if the approach is new.

By simply changing the formulation or mode of delivery — a capsule versus a tablet for example — a drug company can gain a new U.S. patent. In some cases, a mere tweak in dosage can win the drug a new patent. Many patent attorneys including Feldman argue that most such patents aren’t innovative, and that the strategy is just an effort to hold on to profits.

Steven Hadfield of Charlotte, North Carolina is both a beneficiary and a victim of such tactics. The 68-year-old was diagnosed with a rare blood cell cancer called Waldenström’s macroglobulinemia in 2014. The following year, he started taking ibrutinib, a drug manufactured and marketed as Imbruvica by Illinois-based AbbVie, after the Food and Drug Administration approved it for his particular cancer — a more effective treatment than his previous option and likely the reason he is still alive today. But the drug is not a cure; he will have to take it for the rest of his life. The cost to his insurance company: $15,000 per month.

The primary compound in ibrutinib was first patented in 2006. The company has since gained additional patents, some of which are for mere changes in dosage to treat subtypes of lymphoma. It’s a common tactic that companies use to extend patent life and protect profits, says Krishtel. Some experts say it’s debatable whether the additional patents are merited under the current patent requirements. Even with a different dosage, it would be obvious to an expert that ibrutinib would be able to treat Hadfield’s type of cancer, says Mark Ratain, an oncologist and pharmacologist at the University of Chicago, and the approach is “not novel.” To date, brand name ibrutinib is protected by 88 patents that add an additional 5 to 9 years to the manufacturers’ market monopoly.

“I fiercely defend the patent system,” Feldman says. “I also am appalled when it’s misused.”

By 2018 — five years after ibrutinib received its first approval from the FDA — its price had increased over 57 percent. In January 2020 alone, its price went up by more than 7 percent over the previous month, according to Patients for Affordable Drugs, a nonprofit advocacy organization. The extended years of monopoly will cost the health care system up to an additional $41 billion in costs, according to I-MAK.

For Hadfield and patients like him, price hikes are financially devastating. He has a $6,850 annual medical deductible and a 25 percent copay after that. His deductible is for all medical services, not just drugs, so his out-of-pocket costs have varied over the years. But assuming he applied his deductible to ibrutinib alone this year and paid 25 percent each month, Hadfield would be responsible for $38,150 of the drug’s cost. Luckily, he qualifies for an AbbVie sponsored copayment program and pays $10 at the pharmacy. But the program only subsidizes his copay at a maximum of $24,600 per year. Hadfield will still be responsible for the roughly $13,000 in remaining drug costs — almost $20,000 in out of pocket costs this year to treat his cancer alone. He suffers from diabetes and kidney disease too. (In response to a request for comment, AbbVie directed Undark to a website regarding their copayment program.)

To make ends meet, he works three jobs. His primary job is at Walmart, which provides his health insurance, and he juggles his schedule so he can work two additional jobs in the hospitality industry on weekends and during his off hours. His monthly social security check of $1,200 barely covers his rent, he says, so he must continue to work; and because he works, he doesn’t qualify for Medicare’s prescription drug coverage program. He says he lives “week to week or month to month.”

Competition could bring down prices for patients like Hadfield, but drug companies have come up with tactics to avoid it. Existing patent law allows companies to recoup research dollars and reap rewards for their innovations. Bringing a drug to market is expensive: Analysts estimate an average of about $1 billion per drug, which includes the cost of failures. Consequently, patents on new drugs award owners a period of 20 years free from market competition.

Under U.S. law, the first company to market a generic version of a brand-name drug enjoys six months of exclusive sales before another generic maker can sell their product, so the first generic may only be marginally cheaper than the brand-name version. After more generics hit the market, prices can drop up to 95 percent.

In addition to extending patents, Feldman says, the pharmaceutical industry has engaged in other anticompetitive behavior over the past decades that keep generics off the market for even longer. In her book, “Drug Wars,” Feldman documents backroom deals where brand-name companies pay generic manufacturers to delay selling their drugs in a tactic called “pay for delay.” Even a six-month delay in a generic hitting the market can mean billions of dollars in profits for the brand-name company, she explains. Companies then work out ways to share their profits in a tit-for-tat type of deal that isn’t always transparent. Such deals have drawn scrutiny from federal antitrust regulators. But the attention has only forced companies into making more complex deals that fall under the radar, says Feldman, such as a brand-name company agreeing to license, market, and sell generic company drugs in lieu of taking a cash payout — which makes anti-trust allegations difficult to prove.

Hadfield will still be responsible for the roughly $13,000 in remaining drug costs — almost $20,000 in out of pocket costs this year to treat his cancer alone.

In September 2020, the House Oversight Committee invited several drug company CEOs to answer questions about prices. The exchange was tense, but the CEOs did not budge from their mantra that high prices were necessary to fund innovation. At the hearing, Kåre Schultz, CEO of Teva Pharmaceutical Industries in Israel, testified that prices “must reflect the significant cost of ongoing research and development projects.” The committee also subpoenaed Richard Gonzalez, AbbVie’s CEO, for documents concerning the pricing strategy behind ibrutinib and another top selling drug, citing the company’s unwillingness to comply voluntarily with previous requests.

The idea that prices are justified by the cost of developing new drugs is not backed up with data, according to experts. In a recent opinion piece published at STAT, retired intellectual property attorney Alfred Engelberg and colleagues argued that large pharmaceutical companies did not invent most of the drugs they sell, instead acquiring many through mergers with smaller companies, or further developing drugs invented at public research institutions and funded by taxpayer dollars.

Still, the pharmaceutical industry continues to defend the existing patent system. “Our companies continuously find new diseases for which a medicine may be effective, new populations who can benefit from a medicine’s use, better ways to get a medicine to and into patients, and new ways to make a medicine,” wrote Nicole Longo, senior director of public affairs at the industry group the Pharmaceutical Research and Manufacturers of America, in an email to Undark. “As long as these new medical advances meet the statutory requirements for patentability, they rightfully deserve patent protections.”

Drug patents, however, are often revoked. Companies can challenge patents through the Patent Trial and Appeal Board (PTAB), a division of the USPTO. A 2019 study found that the PTAB narrowed or overturned patents in 51 percent of cases brought by generic drug makers since 2011.

The high number of successful challenges merely reflects how weak many patents are, says Feldman. The true number of trivial patents is much higher, she adds, and these remain unchallenged because of the high legal costs involved. Companies should pick one set of patents, she says, and “once that’s over it’s done.” No one is arguing that the pharmaceutical industry should not be rewarded for innovative drugs, she adds. But a 20-year monopoly ought to be enough for a company to recoup its costs and earn a profit on top.

In Dec. 2004, protestors in Bengaluru rally against the passage of a new patent law in India. Between 2003 and 2007, patent expirations and legal challenges drove down the cost of the most common HIV therapy by more than 80 percent. Visual: Tahir Amin

In March, a group of senators led by Republican Thom Tillis of North Carolina and Democrat Chris Coons of Delaware wrote a letter to USPTO interim director Drew Hirshfeld asking him to commission a study on the “current state of patent eligibility jurisprudence in the United States.” The senators were particularly interested in “how the current jurisprudence has adversely impacted investment and innovation in critical technologies.” They asked for their findings to be submitted no later than March of next year.

No specific bills have been made public yet and some critics worry that reforms won’t necessarily curb abuse, considering the $233 million the pharmaceutical industry spends on lobbying in an average year.

In 2017, I-MAK tried to knock down 10 patents on a hepatitis C drug, but the cases never made it to a U.S. court. “The culture was stacked against us,” Krishtel says. In the U.S., only organizations with a commercial interest are allowed to challenge a patent in court, she explains. She hopes that the new USPTO director will be open to change. “We need to educate the public and to try to get policy reform,” she says. Her experience in India and in other countries has shown how challenging weak drug patents can have an outsized effect.

The couple that came into her office in Bengaluru so many years ago almost certainly died. Krishtel does not know what happened to the children. But by helping to bring down the cost of HIV drugs in India, she knows countless other people were able to continue living. U.S. patent law reform would not only help rein in prices and widen access in America but would also have “a ripple effect” in other countries, she says.

UPDATE: An earlier version of this piece incorrectly described Chris Coons as a senator from Connecticut. While he was born in Connecticut, he is a senator for the state of Delaware.

Gunjan Sinha is a freelance science writer living in Berlin, Germany.