Yes, Of Course Drug Patents Drive Up Drug Prices; Why Is This Even Up For Debate?

from the as-obvious-as-obvious-can-be dept

The idea that there is a link between the exclusivity period on patents and higher drug prices is about as noncontroversial as a view can be. It is the easy question on an ECON 101 exam on monopolies, supply and demand. Yet, somehow, this has come under attack thanks to big PhRMA and their minions. Unfortunately they have found a sympathetic advocate in the Senate who believes the unbelievable.

Sen. Thom Tillis has taken a host of actions trying to unlink the obvious connection between patents and high drug prices, and he is trying to force both the FDA and the USPTO to agree with him that the link is a “false narrative.” This assertion, of course, is ludicrous. Patents are the backbone of the pharmaceutical industry, and the reason why drug companies make significantly more than other large public companies. Patents give these companies a guaranteed monopoly period, in which monopoly profits are intended to reward them for the risk and investment spent in bringing new drugs to market. These monopoly periods eventually expire, as required by the constitution, and the resulting influx of competition lowers drug prices by about 80% on average.

This social contract is well understood, and almost everyone thinks this is good for society. So I will give Sen. Tillis the benefit of the doubt and interpret his statement as suggesting that there is no link between gaining an extra, and unintended, monopoly period and high drug prices. But even here the body of evidence to the contrary is extensive. I collected a lot of this evidence in a recent tweet thread. However, it is important to understand a little more about the background of what has quickly become an industry practice.

The story of patent thicketing starts with AbbVie. AbbVie created the patent thicket in much the same way Apple created the smartphone – there may have been others before, but none were as successful or as emulated since. AbbVie’s drug Humira was the best selling drug for almost 10 years, but they faced a problem. Internal estimates showed they would lose their exclusivity as early as 2017. They needed a strategy to stall generic entry for as long as possible, and they hired the extremely controversial consulting company McKinsey to help come up with a plan. While several strategies were presented, the patent strategy quickly became the most successful. As one biotech patent attorney put it: if you have a $16 billion-a-year drug, “every month is a good month that you’re on market alone. So you’re going to spend whatever it takes to be as aggressive as possible and get as many patents as possible.”

The strategy is simple even if it sounds like it should be impossible: find as many ways to patent an existing product as possible. This can include creating a staggered rollout of patent applications around formulations, dosing regimen, route of administration (for example, using the drug in an injector pen), dosing regimen for new indications (i.e. new diseases the drug can treat), and manufacturing processes. As one AbbVie internal document put it: “in the eye of biosimilar makers, how would they manufacture Humira?” AbbVie just needs to patent those manufacturing processes, even if they aren’t using them, and biosimilars won’t be able to make the drug.

All of these documents show that drug companies are trying to get new patents, with later expiration dates, on existing drugs for purely financial reasons. This alone proves Sen. Tillis wrong. But is there widespread failure of the patent system that demands a response? Again there is ample evidence that there is.

One study showed that 78% of new patents were associated with existing drugs, not new ones. The same study found that most of the companies who were successful doing this once would try again, with 50% becoming serial offenders. Another study found that most of the patents used to block generic and biosimilar entry represented minimal-to-no additional benefits to patients using the drug. 

These delays have costs. One study found that Medicare spent an average of $109 million a year extra due to delayed generic entry. The main cause of delayed competition? Patent litigation. Another study found that one year of improved patent examinations on secondary and tertiary drug patents, to catch bad patents before they issue, saves $8.7 billion in the future. And when Humira went generic in Denmark in 2018, residents saw their prices drop by 82.8%. In the US we’ve faced regular price increases on Humira because it remains patent protected.

These abuses of the patent system may carry additional costs to innovation and safety. A recent study of R&D competition around Covid drugs found that whenever a firm finds it profitable to invest in developing a minor modification, R&D for radical follow-on innovation goes down. This could mean that the incentives created by the availability of patents for existing drugs may actually lower R&D investment in new drugs, as resources chase lower risk and more immediate profits. Some researchers have even found startling signs of negative innovation, or innovation that promotes riskier and less beneficial treatments. This happens when the better treatments are unpatentable. The study shows a company pursuing a treatment that overdoses patients because more appropriate doses were considered obvious under prior art. Overdosing, however, was patent eligible because it was considered non-obvious.

This evidence shows a widespread problem in need of a policy response. Indeed, those calling for reform now include the New York Times, the Department of Health and Human Services, former Trump cabinet member Alex Azar, and many researchers and public interest advocates. Whoever is advising Sen. Tillis on this issue needs to include the full evidence on drug prices and patents. Especially since the Senator appears to be engaging in good faith around efforts to improve patent quality and stop various abuses of the patent system. But without good information, I fear bad policy may result.

Matthew Lane is a Senior Director at InSight Public Affairs where he specializes in competition and IP issues.

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Companies: abbvie

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Comments on “Yes, Of Course Drug Patents Drive Up Drug Prices; Why Is This Even Up For Debate?”

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Anonymous Coward says:

Thom Tillis- Exactly when/how/why benefit of the doubt?!?

Great post, certainly difficult to argue the obvious.

Except when exactly did Senator Thom Tillis earn the benefit of the doubt you grant him? While his name does not often come up in non-TechDirt type policy circles as much, I cannot recall seeing ANYTHING ANYWHERE that didn’t more or less show him to be a corrupt and negligent lawmaker mostly interested in lining his own pockets with corporate friendly and constitution abridging positions and proposals. One opinion piece in the Hill notwithstanding…
Prove me wrong TechDirters! or noble author…

sumgai (profile) says:

Re: Beaten to the punch

AC, of course I can’t prove you wrong, you’ve stated unassailable observations that even T.T. hisownself couldn’t disprove!!

All I can say is, you beat me to it. But any “curses” I might issue will be uttered in the direction of the Senator most closely fitting the description of corrupt, greedy, and couldn’t-give-a-fuck-less-about-the-public-at-large.

This comment has been deemed insightful by the community.
This comment has been deemed funny by the community.
Naughty Autie says:

Yes, Of Course Drug Patents Drive Up Drug Prices; Why Is This Even Up For Debate?

Because Hymen Rosan et al. ;p

That One Guy (profile) says:

Stupid or corrupt?

The idea that a monopoly doesn’t increase prices is so mindbending that the only two possible explanations that come to mind for someone to hold that position are blinding ignorance, to the point that the person has no business speaking on the subject until extensive education on the matter or corruption and dishonesty, which should be responded to by publicly calling them out on it and treating their argument with as much weight as it deserves.

sumgai (profile) says:

Re: Wherefore Art Thou, Oh Anonymous?

*….corruption and dishonesty, which should be responded to by publicly calling them out on it *

If only the Legions of Anonymous would arise from the ashes and expose the secret bank accounts of these assholes, we’d see a better country almost overnight.

Naughty Autie says:

Re: Re:

If Anonymous could rise up from the ashes and send ‘official’ warnings to Putin ‘from the UK and the US’ that if he uses nuclear weapons on Ukraine, the UK and the US will use nuclear weapons on Russia, we’d see a better world almost overnight.

Naughty Autie says:

Re: Re: Re:2

Actually, I am certain we would see a dead world overnight.

Possibly, but the last time the Second World was threatened with nuclear bombardment by the First World, we ended up with the Cold War that was so much better than what could have occurred.

Anonymous Coward says:

Consider that from the very beginning, intellectual property was claimed by rightsholders to be “necessary” for them to stake a monetary claim on the work they did. Suggestions to maybe dial back these protections are invariably met with howls of complaint. “How can we possibly be incentivized to commit resources and research if we’re not paid for it?”

Tillis might not like the political implications of higher drug prices, but if stronger IP law is supposed to bring in more money for righstholders, where did he think the money was going to come from?

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That Anonymous Coward (profile) says:

“Never argue with a man whose job depends on not being convinced. It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” – Upton Sinclair

Something something humans never learn from their history.

This comment has been deemed insightful by the community.
Pixelation says:

“Why Is This Even Up For Debate? ”

Because rich greedy fuckers convince Fox news listeners that the current system costs them less. Brilliant!

Anonymous Coward says:

I think that RyunosukeKusanagi is making a reference to the ongoing opioid crisis which Big Pharma is responsible for causing.

sumgai (profile) says:

Re: Hooked

It’s not even opioids, it’s almost any life-saving drug as well. Trust me, if you skip such a drug for a few days, and you start feeling like you’re gonna die, you WILL get back on that drug, post-haste. That’s the very definition of “hooked”.

After all, if you aren’t living, you can’t get high…. or so I’ve been told. 😉

Naughty Autie says:

Re: Re:

Really? I thought the definition of ‘hooked’ included a mental dependence as well as a physical one.
TC;DR? Just because you’re paranoid, doesn’t mean nobody’s out to get you. Just because you feel like you’re dying from lack of insulin, doesn’t mean you’re not.

sumgai (profile) says:

Re: Re: Re: Thanks...

… for making my point for me.

Unless you are 100% sure you want to commit suicide, then you are indeed mentally dependent on getting the life-saving drug, as well as physically dependent. You could be said to be “hooked on life” so much that you aren’t willing to give it up until it really is your time to go.

But in point of fact, there are beaucoup people out there who wish to Gawd that they could kick the ‘habit’. Their mental dependence is subject for many a fine debate amongst the cognoscenti.

This comment has been deemed insightful by the community.
PaulT (profile) says:

“Why Is This Even Up For Debate?”

The same reason why there’s constant opposition to the idea of a universal public healthcare system in the US, even though the current system already costs way more per capita that other western democracies (and many countries who aren’t) and is extremely inefficient with many duplicated functions, while covering a far lower proportion of the population – there’s a lot of money to be made.

Once you’ve decided that profits outweigh the health and public benefits that easier access to drugs or healthcare provide, you can then come up with all sorts of reasons why overpriced monopolies are great.

Samuel Abram (profile) says:


The same reason why there’s constant opposition to the idea of a universal public healthcare system in the US, even though the current system already costs way more per capita that other western democracies

Here’s the thing, though: The American people want something like Universal Healthcare. But the power of the established Health insurance industry has over lawmakers of both parties in both Washington DC and in every single state means that it won’t ever happen.

PaulT (profile) says:

Re: Re:

Well, that is of course another issue. I think everyone would have been better off if the government had been more representative so that an actual long-term solution was implemented rather than the band-aid compromise of the PPACA (which backfired as soon as the resulting plan was attacked by the party whose policies it was based on).

But, I think from my outside viewpoint there’s 2 problems. One is the hold that lobbyists, etc. have on the process, but the other is the partisanship and party line nature of the current thinking. When Mitch McConnell announced that he intended to do everything he could to make Obama a one-term president regardless of the policies actually being discussed, that’s not healthcare lobbyists, it’s just that the PPACA was the most visible and obvious of the attempts to put party over country.

particleman (profile) says:


One reason Americans may sensibly oppose government healthcare is that it would be run by the US government. If instead we could hire the geniuses who run the system in (insert favorite country) to manage ours, I might be on board.

Anonymous Coward says:

The funny (in a sad way) about this situation...

The drug companies are themselves suffering from higher prices caused by patent monopolies. Modern drug development relies on new technologies coming out of modern molecular biology research that have been patented by others and are costing them a bundle – just not quite enough to make them more expensive than other approaches.

The patent system may have worked when scientific and technological know how were a somewhat scarce commodity and the patent examiner’s job was to prevent the issuance of bad patents. In Today’s world of readily, widely and cheaply available knowledge and training, where the patent examiner’s job is to facilitate the granting of as many applications as possible, regardless of the quality, this system no longer increases the general welfare and would be struck down if challenged by an honest and competent supreme court. No honest and unprejudiced reading of the US constitution could possibly support the current system.

Anonymous Coward says:

Plenty of people think patents are bad.

“This social contract is well understood, and almost everyone thinks this is good for society”

I’m sorry but I have to call bullshit on that. Is this even backed by polls?
And Americans are not everyone. Many people worldwide have been calling to kill patents in the area of essential medicine. Just look at how many organizations and individuals have signed this online petition at

Surely it’s a known fact by now that patents kill. How can “almost everyone” think patents in the area of medicine is good for society? They just take it as truth on faith or ideology and never mind empiricism? I guess it depends on what ideal society they aim for. Obviously not a just society or a society for everyone but a society for those have as opposed to those have-nots.

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