Healthcare Policy February 22, 2023

Look to the EU for Generic Versions of Expensive Brand Name Drugs

by Barry P Chaiken, MD

U.S. Patent protection for drugs lasts 20 years, although most pharmaceutical companies only get the medication to market after as much as half of that time has already elapsed. This exclusive period to sell the patented drug allows companies to recoup their research and clinical trial investments. It also covers the development costs of drugs that never get to market. At the end of the patent period, generic formulations enter the market, causing a decrease in the price of the drug by up to 90%. Therefore, these conditions incentivize pharma companies to take all legal means to extend the length of their patents.

Due to loopholes in the patent law, companies use these minor changes in formulation or intended use to extend patent protection. For example, suppose a drug’s initial patented intended use is for hypertension. In that case, a pharma company can submit a subsequent patent for the drug where the indication may extend to congestive heart failure. Suppose a drug manufacturer releases a generic at the end of the initial patent protection. In that case, the indicated use can only be for hypertension, not for congestive heart failure, as that patent protection may still be in place. Although companies use “skinny labeling” approaches so that only hypertension is an indicated use on medication packaging, even this approach is under review by the courts and may be outlawed.

And this does not describe the legal thicket created by additional patents submitted claiming protection for minor formulations and drug purity changes. For example, AbbVie protected its blockbuster immunosuppressant Humira, which generated more than $17.3 billion in U.S. sales, with more than 70 patents. The generic version of Humira will be available later this year, five years later than in the European Union, and the EU does not permit this type of patent manipulation.

Pharma companies are entitled to the profits generated due to the financial risk they take developing these lifesaving drugs. Yet, there needs to be a balance. Excessive profits hurt consumers and misappropriate taxpayer dollars that fund Medicare and Medicaid, especially when not plowed back into drug development. Currently, Congress is considering revising patent law to address this problem. Let us hope they choose a solution that encourages continued drug development while lowering the cost of these much-needed drugs. Thanks for your time today.

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