Lower drug prices depend upon the timely entry of generic competitors at the conclusion of a drug’s patent life. Current legislation, moving through Congress, would limit the ability for generic manufacturers to compete with patent-protected pharmaceutical companies.
Sen. Orrin Hatch, R-Utah, has introduced an amendment, the Hatch-Waxman Integrity Act of 2018, that would limit the ability of new generics from challenging invalid pharmaceutical patents. This amendment would enhance protection for branded pharmaceuticals and limit generic competition, which could, in the end, result in higher drug costs to insurers and consumers.
In 1984, Hatch helped pass the Hatch-Waxman Act, which was intended to balance the need for generic competition with incentives to spur innovation in the branded drug market. The bill included an accelerated generic approval process called ANDA. This new process replaced a requirement for preclinical and clinical safety and efficacy assessment with a simple demonstration of bioequivalence to the existing patented drug; in other words, the new generic just had to prove that it had the same effect as the branded drug. This change drastically lowered the financial and temporal bar for generic manufacturers to enter the market. The Hatch-Waxman Act was incredibly successful, evidenced by the growth in generics in the market from 19 percent of prescriptions in 1984 to 86 percent in 2013.
In 2011, the America Invents Act created the inter partes review (IPR) process to enable the U.S. Patent and Trademark Office to re-evaluate the validity existing patents. The primary driver for developing this new process was to combat invalid patents, which pharmaceutical companies used to unjustly sue its competitors. The IPR proceedings are especially important in the pharmaceutical industry given the abundance of patent “evergreening” – the process by which companies gain secondary and tertiary patents on minor changes to a drug, such as a new formulation – and patent “thickets” – the process of patenting different parts of a single drug creating an overlapping web of intellectual property rights that is difficult to challenge for generic competitors. Because of these common practices by branded pharmaceutical companies, it is imperative that generic manufacturers have tools at their disposal to battle non-meritorious patents claimed by branded companies.
As Hatch completes his final months in office, he risks harming one of the most lauded accomplishments of his 42-year career. Without the ability to utilize the IPR process, generic manufacturers will have difficulty challenging their patented competitors, thus delaying their own entry into the market. Delayed entry by generics will force insurers to pay higher prices for the patented version for an extended period of time.
The initial purpose of the Hatch-Waxman Act was to promote generic competition and lower drug costs. By incorporating the new amendment, Hatch will be undermining his own legacy by enhancing protections for branded drugs at the expense of generic competition and drug prices.
Pharmaceutical companies must remember that an eventual loss of patent was part of the bargain for their initial exclusivity rights. Crafting convoluted plots to prevent generic competition beyond their patent’s life hinders competition, harming consumers and insurers in the form of higher drug prices. Given the current incentives and lenient regulations governing pharmaceutical companies, the practices of evergreening and patent thickets will continue; therefore, maintaining tools to combat them is critical.
Sen. Hatch should prioritize a healthy generic market with access to the IPR process over enhancing protections for branded drug companies. His legacy depends on it.
Alexander Urry is a Winston Health Policy Scholar and current masters student at Yale University studying health care management.
