How Big Pharma Rigged the Patent System

By Ryan Cooper

Back in March, the Patent Office of India denied an application from Janssen Pharmaceuticals (a subsidiary of Johnson & Johnson) to extend to 2027 its patent on its drug bedaquiline, which is the best lastditch treatment for drug-resistant tuberculosis. The decision came thanks to the work of two activists, Nandita Venkatesan from India and Phumeza Tisle from South Africa, who filed a petition with the office with the backing of Médecins Sans Frontières and other nonprofits.

From the perspective of the Indian government, this decision was a no-brainer. Not only was the patent extension an obvious attempt by J&J to secure a few more years of monopoly profits due to tiny, inconsequential changes they’d made to the drug, but India has the worst tuberculosis burden in the world. Some 40 percent of its population is TB-positive, and it has the largest population of drug-resistant TB cases of any country—a problem that got much worse during the COVID -19 pandemic, which badly disrupted efforts to test and treat new infections. Refusing the patent extension is estimated to cut the cost of bedaquiline treatment in India from $46 per month to $8—a huge benefit for a country that is still quite poor.

The United States doesn’t have anything like such a problem with tuberculosis. But we have a much worse infestation of patent abuse from pharmaceutical companies. Instead of swatting down companies like Johnson & Johnson, the U.S. Patent and Trademark Office (USPTO) has more often than not bent over backwards to enable maximum corporate profit extraction.

One legal strategy Big Pharma uses is filing dozens or even hundreds of patents on the same drug. An Initiative for Medicines, Access, and Knowledge (I-MAK) report from September last year investigated these “patent thickets” on America’s ten best-selling drugs, and the revelations were staggering. The companies have obtained an average of 74 patents apiece on each of those drugs. More tellingly still, of the 140 patent applications on these drugs (on average), twothirds of them happened after the drug was approved by the FDA

The point is to create a huge legal deterrent to any generic or biosimilar competitors who might attempt to enter the market when the original patent expires. Even when a competitor might have a legal right to produce the original formulation of a drug, cutting through the patent thicket would require millions of dollars in litigation and take years.

For example, AbbVie managed to extend patent protection on its arthritis drug Humira for an additional seven years. It filed 312 patents on the drug, 94 percent of which after it had already received FDA approval, and secured 166 of those patents. Its original patent expired in 2016, but the rest of the patents extended its complete control of the medication through the first quarter of 2023. As a result, Humira was the top-selling drug in the U.S. market in 2021, with $17.3 billion in sales—almost twice as much as secondplace Revlimid (a cancer drug). Of all the money AbbVie has made on Humira, about two-thirds (or nearly $100 billion) came after its primary patent expired.

For some, that counts as a smashing success. President Trump’s choice to head the USPTO, Andrei Iancu, was a partner at IP law firm Irell & Manella both before and after running the agency. In a recent op-ed for Bloomberg Law, he argued that AbbVie’s use of patents “should be celebrated.”

Another strategy is to “make slight modifications to the drug,” Robin Feldman, a professor at UC College of the Law, San Francisco, who studies patent abuses, told the Prospect in an interview. By making small changes to dosages, formulation, method of administration, and so forth, drug companies can then apply for a new patent or a patent extension and extend their monopoly. According to her research, “more than 78 percent of new patents are not new drugs,” she said. One common tactic is to strategically produce an extendedrelease form of the drug right before the original patent is about to expire, because the companies can then receive an additional three-year exclusivity right under “new clinical investigation” rules.

A lot of these patents are probably bunk even by the lax standards of U.S. law. On the rare occasion when generics manufacturers have taken Big Pharma to court to contest patent validity, they have won about three-quarters of the time, Feldman said. But again, that costs time and money—something the major drug companies are counting on.

Yet another strategy is to obtain nonpatent exclusivities. The government grants companies that do certain kinds of research, like treatments for pediatric or tropical diseases, or develop “orphan” drugs to treat rare conditions, additional time-limited rights, like keeping their data private or a monopoly on marketing. (Congress wanted more attention paid to these particular disease areas, but it may have succeeded too well, as companies have piled on resources to develop treatments for relatively uncommon conditions that are often not very effective.)

Finally, there is the “pay for delay” tactic. When patents or other legal protections are about to expire, drug companies commonly take their enormous profits and offer generics manufacturers hefty bribes to stay out of the market, thus preventing competition. The Federal Trade Commission, which has filed some lawsuits against this practice, estimates that this tactic alone costs the country $3.5 billion in higher drug costs every year.

As usual in health care matters, the U.S. is a huge outlier on drug patents compared to peer nations. Returning to Humira, AbbVie obtained 6.4 times more Ameri - can patents than it did in the European Union, and its patents ran out in October 2018 on the continent. Another more than four years of patent protection in the U.S. market secured an additional $68 billion in monopoly profits.

All this outrageous price-gouging is a major reason why American health care is so expensive. A 2018 study found that drug spending makes up about 15 percent of U.S. health care spending—the highest fraction of any rich country and much higher in absolute terms because our health care is so expensive. In dollar terms, we spend about half again as much as Switzerland per person, more than twice as much as France, and more than three times as much as the Netherlands. That is largely due to hyper-expensive patented drugs. Just 8 percent of American prescriptions are for brand-name drugs, but thanks to extreme prices—Gilead originally priced its hepatitis C cure at $84,000, though it was later reduced somewhat—they make up 84 percent of total drug spending.

Finally, the broken patent system also provides a toxic incentive for pharmaceutical companies. The ability to extract year after year of hyper-profits from a handful of blockbuster drugs pushes companies to spend heavily on drug modification and lawyers who’ll protect their patent monopoly instead of investing in genuinely new drug research. In 2021, Keytruda alone made up 48 percent of Merck’s profits; Eylea 48 percent of Regeneron/Bayer’s; and Humira 40 percent of AbbVie’s. Feldman’s research found that once a drug company starts down the patent abuse road, it tends to rely on it more and more as time passes.

In the longer term, however, going down this road might prove to be a risky strategy. Even in the U.S., patents run out eventually, and drug development is expensive, slow, and prone to failure. Relying on one drug for such a huge share of revenue could easily leave such companies twisting in the wind—particularly if Congress were to pass intellectual-property reform.

What should be done about this? Feldman suggests that one simple step would be to clarify the meaning of “non-obviousness” in U.S. patent law. To obtain a patent, one must demonstrate that the invention is something that required skill and effort to produce. There is a lot of legislation in this area, as well as a large body of case law, the details of which are beyond the scope of this article. But clearly it is far too easy to get a drug patent in this country, as shown by how many fewer patents are awarded in the European Union. In the U.S., companies can get patents on stone obvious ideas like “an extended-release formula” that have been well known for decades. The USPTO could also be better funded; its small staff is frequently overwhelmed by drug companies’ blizzard of highly technical filings. The FDA , which has many more medical specialists, might also be assigned to help in this area.

Another more radical idea is a “one and done” patent system. This would outright forbid companies from obtaining more than one patent on the same drug. They would be able to choose between a normal patent, or one of the other exclusivities mentioned above, but not more than one. That would solve the problem at a stroke.

There are at least moderately encouraging signs on the horizon. Both the American Rescue Plan passed back in March 2021 and the Inflation Reduction Act passed last year contain a number of drug price reforms. The former allowed Medicaid to penalize companies that raise their prices above the rate of inflation, prompting Eli Lilly to lower its list price of insulin; the latter allows Medicare to negotiate the price of a limited number of prescription drugs, with new prices starting to take effect in 2026.

Now, these are pretty small-bore and slow reforms. But they are still the biggest defeats Big Pharma has suffered in decades. Drug prices (like the rest of the health care system) are simply so outrageous that even the rickety American government is starting to do something about them. Patent reform is the obvious next step. n