Bills
| 3.23.22

Should the FTC be able to Challenge Anti-Competitive ‘Product Hopping’ by Pharmaceutical Companies? (S. 1416)

Do you support or oppose this bill?

What is S. 1416?

(Updated December 17, 2019)

This bill — the Affordable Prescriptions for Patients Act of 2019 — would codify definitions of “product hopping” and “patent thicketing” within the Federal Trade Commission Act. This would empower the FTC to challenge such practices as anticompetitive and enable the FTC to use its equitable remedy authority to keep companies from capitalizing on their abuse of the system. 

Argument in favor

Patent system abuse by pharmaceutical companies is one of the industry’s key tools for suppressing generic competition. Defining patent thicketing and product hopping will empower the Federal Trade Commission (FTC) to challenge these practices as anticompetitive and prevent companies’ abuse of the patent system.

Argument opposed

Patenting products is a common practice across all industries. Specifically targeting the pharmaceutical industry for patenting its products discriminates against the industry and could have a chilling effect on innovation and new product development by both branded and generic pharmaceutical companies.

Impact

Pharmaceutical companies; generic pharmaceutical products; branded pharmaceutical products; patents; FTC; patent thickets; and product hopping.

Cost of S. 1416

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. John Cornyn (R-TX) introduced this bill to curb major drug companies’ anti-competitive use of patents to protect their prescription drugs and prevent generic and biosimilar competition from coming to market: 

“Drug companies have taken advantage of the patent system to maintain their monopoly on certain drugs and prevent generics from coming to market. These tactics mean Americans are forced to pay more for the life-saving medications they need. This bill puts patients first and reforms the system to encourage the availability of cheaper generics.”

Original cosponsor Sen. Richard Blumenthal (D-CT) added that pharmaceutical companies have crushed competition and squeezed billions out of consumers and the government: 

“Using practices that would make the robber barons of the gilded age blush, Big Pharma has crushed competition and stifled access to cheaper generic drugs to squeeze billions out of families, businesses, and the government. Through common sense reforms, this bipartisan bill will empower the FTC to fight back against drug companies’ most egregious and monopolistic practices. It represents an important step in reining in Big Pharma’s greed and puts the industry on notice—enough is enough.”

The Association for Accessible Medicines (AAM) supports this bill. In a statement, it wrote: 

“AAM commends Senators John Cornyn (R-TX) and Richard Blumenthal (D-CT) for seeking to address two significant obstacles to generic drug and biosimilar competition: product-hopping and the creation of patent thickets. Brand-name drug companies are able to employ these strategies to prevent automatic substitution of generics and extend brand-name drug monopolies – and high prices – for decades. AAM appreciates Senators Cornyn and Blumenthal for investigating and seeking to address abuses of the patent system by some brand-name drug companies, and we look forward to working with them to ensure that the patent system is balanced and works in the best interest of patients who seek more affordable prescription medicines.”

In testimony to the Senate Judiciary Committee in May 2019, Rutgers Law professor Michael Carrier expressed support for giving the FTC increased authority to cut through patent thickets. In response to a question on the topic from Sen. Cornyn, he said, “I think that would make perfect sense. This is an abuse of the system and giving the FTC the power to deal with it would be a great development.” However, David Olson, a Boston College Law School professor, counter Carrier’s assertion and argued that patent evergreening, not patent thicketing, is the real problem facing pharmaceuticals.

The Pharmaceutical Research and Manufacturers of America (PhRMA) opposes this bill. Its spokesman, Tom Wilbur, says: 

“We are committed to working with Senators Cornyn and Blumenthal to address potential outlier behavior. As drafted, however, this legislation fails to appreciate the role and importance of medical advances post-FDA approval to patients, competition and the health care system. Virtually any innovation made after filing of an original new drug application or biologics license application would be presumed to be anti-competitive and could be subject to significant new and existing penalties under the FTC Act. It would exponentially increase uncertainties for innovative biopharmaceutical companies, which could lead to the net result being less innovation and less competition. PhRMA strongly supports policies that foster a robust, competitive market for generic and biosimilar medicines while providing needed incentives for continued biopharmaceutical innovation. Unfortunately, this legislation as drafted would fundamentally upend the biopharmaceutical innovation ecosystem, creating a presumption of violation for almost any post-approval innovation.”

The Institute for Policy Innovation and a coalition of other organizations, including the American Conservative Union, ALEC Action and Independent Women’s Voice, wrote a letter to Sen. Cornyn expressing concerns about this bill: 

“Under [this] bill, almost any incremental innovation made after filing of an original new drug application or biologics license application would be presumed to be anti-competitive and subject to penalties. By classifying incremental innovation as anti-competitive, [this] legislation erodes incentives and threatens innovation. These provisions should be of grave concern to proponents of limited government. But perhaps most ominous is the threat posed to continued medical innovation. Beyond discouraging incremental improvements in biopharma products, [this] legislation actually assumes incremental improvement to be suspect. The most notable losers are the patients who would have benefitted from such improvements.”

Kevin Buckley, a patent attorney and founder of Torrey Pines Law Group, calls this bill a “blunt instrument” that doesn’t approach high drug prices appropriately. He points out that that pharmaceutical and biopharmaceutical industries “spend millions and millions of dollars in finding new therapeutic uses or safer ways of administering drugs to patients.” Buckley says, “If an old compound is effective in treating a new disease, that’s huge, and if it’s novel and nonobvious it should be patented” and argues that treating such filings as anticompetitive “patent thicketing” activity could have a chilling effect on R&D at both branded and generic drug makers. Buckley adds that this bill would make pharmaceutical companies treat pharmaceutical formulations as “one-and-dones,” potentially jeopardizing future innovations. He asks, “Why would you bring that formulation back into the lab, through the FDA approval process and onto the market if it’s going to be inherently anticompetitive?”

This bill passed the Senate Judiciary Committee on a bipartisan 22-0 vote and has six bipartisan cosponsors, including four Republicans and two Democrats, in the 116th Congress. It also has the support of Patients for Affordable Drugs, Coalition for Affordable Prescription Drugs, Vizient, Prime Therapeutics, Mylan and the Association for Accessible Medicines (AAM).


Of Note: The two practices this bill would seek to codify into law are “intentional and problematic” anticompetitive practices that pharmaceutical companies use to stifle competition and keep generic drugs from coming to market. 

“Product hopping” takes advantage of the FDA approval system to get around pharmacy-level generic substitution laws. When a drugmaker makes a new version (such as a minor reformulation) of a drug, the generic version of the old drug can’t be substituted for the new drug because the generic is tied to the old version. Sometimes, according to Sen. Cornyn’s office, the manufacturer will so so far as to remove the old version from the market completely, leaving the generic with nowhere to go as patients are forcibly switched to the new branded drug. 

“Patent thicketing” is a practice in which manufacturers take advantage of the complex interplay of different kinds of patents (methods of manufacture, formulations, devices, uses, as well as the underlying composition of matter patents) that are inherent to one drug to deploy patents strategically to prevent competition. This forces would-be competitors to fight through what can sometimes be hundreds of patents before their drugs can be approved. According to Bloomberg, patent thickets are mostly confined to biologic drugs made from living organisms, as such biologics are more complex to manufacture and therefore offer drugmakers more manufacturing steps to patent.

Bloomberg notes that drugmakers “sometimes secure more than 100 patents over a product’s lifetime,” deterring generic companies due to the costly and time-consuming task of challenging those patents in court (which is necessary to bring generics to market). As an example of this phenomenon, Bloomberg cites AbbVie’s Humira, a rheumatoid arthritis drug that also treats other autoimmune conditions. The drug is shielded from competition by over 100 patents and doesn’t have any generic competition (although Johson & Johnson does have a competitive drug, Remicade) after 16 years on the market. In 2018, Humira generated $20 billion in revenue for AbbVie.

Sen. Cornyn’s office notes that major drug companies have been using these practices to abuse the patent system to impede potential competitors’ entry into the market. Further, the office notes, “While every patent is by definition anticompetitive—after all, a patent is a government-sanctioned monopoly—drug manufacturers have engaged in behaviors that are an abuse of the system for wrongful anticompetitive reasons.” To prove this point, Sen. Cornyn’s office cites the examples of: 1) drugs that first came onto the market in 1996 with over 70 patent applications; 2) drugs that first came onto the market in 2003 with over 136 patents and no biosimilar until 2023; and 3) insulin products with over 30 patents filed 15 years after their primary patents were approved, blocking generic competition.

In recent testimony before the House Judiciary Committee, USPTO Director Andrei Iancu defended his office’s practice of issuing multiple patents to the same drug. He stated that each application is evaluated for whether the claimed invention “actually presents novel and nonobvious innovation vis-à-vis what’s come beforehand.”


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / Bill Oxford)