217 years ago, on April 10th, 1710, the Statute of Anne came into effect — creating a 14-year period of exclusive protection for the works of authors. The Statute of Anne is considered the first copyright act in the world. The law itself was repealed 132 years later, but by that time its ideas had found their way into the U.S. Constitution’s Intellectual Property Clause. However, a combination of overzealous protections and weak regulations have been detrimental to the American consumer.
The pharmaceutical industry sits at the heart of most debates surrounding patent reform. Companies spend an estimated $1.2 billion to 1.8 billion to develop, test and market a single new drug. These are risky gambles. Bristol-Myers Squibb’s failed trial of a novel immunotherapy drug wiped out $20 billion worth of value from the company overnight.
To shelter companies from the risk of failure, Congress has provided strong intellectual property protections that severely limit competition. The Hatch-Waxman Act of 1984 gives a five-year window of exclusive sales for brand name drugs. During this time the Food and Drug Administration is forbidden from approving any generic drugs which function similar to the brand name drug. On occasion, large pharmaceutical firms file lawsuits against companies in the process of developing cheaper generic drugs. Under the provisions of the act a lawsuit keeps the exclusivity window open for another 30 months.
In a last ditch effort to lock out competition brand name drug manufacturers are blatantly refusing to cooperate with generics. Under a 2009 law, any generic or biosimilar drug seeking approval after the exclusivity period lapsed could do so by simply proving chemical similarity to the preexisting brand name drug. This allowed new drugs to rely upon a proven body of evidence for approval and makes new drugs safer. However, to prove this similarity the FDA must have samples of the original and new drug for comparison. In this brand name firms have proven to be difficult to work with, refusing to provide samples or develop risk mitigation strategies required by law.
Drug monopolies are formed by these policies, and consumers bear the brunt of unreasonably high prices. The tactics used by medical companies to shut out generics competition are estimated to cost consumers $3.5 billion a year.
Moreover, ill-thought-out regulation has created trouble after generic drugs are approved by creating exclusive 180-day marketing windows for the first generic drug approved. Moreover, the original manufacturer of the brand name drug has a special “fast-track” to the generic drug approval. The impact is nearly identical to the brand name drug monopolies. Markets become winner-take-all and gray-market monopolies develop around older drugs — most notable in the 500 percent increase in the price of EpiPens over seven years. The drugs people desperately need are costing them more than they should.
The current legislation regulating big pharma was born of compromise and lobbyists and is woefully inadequate in addressing the fundamental issues plaguing the industry. The courts have taken positive steps toward deeming pay-for-delay tactics as deserving antitrust scrutiny. However, the legal loopholes of the Hatch-Waxman Act must be closed.
Exclusivity windows should be extended on a case-by-case basis in the instance of lawsuits and the fast-track original manufacturers hold for generics approval needs to be revoked. Fairer pricing is more likely to occur when competitors stand on a level playing field. Finally, the cooperation between generics and brand name drugs to prove similarity was addressed by the CREATES Act of 2016 before it died in committee. Congress must take up similar legislation again this session and pass it. These steps will provide proper protections to the American people while balancing the protection of intellectual property.
Patent protections are critical to respect innovators, but the inadequacy of current regulation is poised to stifle innovation. The concept of intellectual property must be updated from its 1710 origin.
Hasan is a business freshman from Plano. Follow him on Twitter @UzzieHasan.