Revelations that AbbVie, the manufacturer of Humira, made more than $100 billion in extra profits by abusing the patent system to delay generic competition has spurred efforts by the Biden administration and Congress to limit the length of patent monopolies over prescription drugs.
An executive order issued in July 2021 forced the Food and Drug Administration and the U.S. Patent and Trademark Office to join forces to finding ways to reduce the number of poor-quality patents that are granted. And the Senate’s Judiciary Committee reported out five bipartisan bills addressing competitive abuses that delay generic competition or otherwise lead to higher prescription drug prices.
While these efforts are well-intentioned, they do not go to the heart of the problem: fixing the laws that enable patent abuses.
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The widespread use of so-called patent thickets to delay generic competition results from a mistake by the FDA in interpreting a provision of the Drug Price Competition and Patent Term Restoration Act, informally known as the Hatch-Waxman Act, which was signed into law in 1984 and gave birth to the modern generic drug industry.
A patent thicket is created by making small changes to a previously patented drug that have no material effect on its safety or effectiveness and then acquiring trivial patents on those changes. Such modifications cover things like changing the drug from a tablet to a capsule or altering the form of the active drug ingredient to a more stable hydrated or salt form. The purpose of these changes is to use the trivial secondary patents to delay generic competition after the basic patent covering the new drug expires.
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Under conventional patent law, trivial secondary patents do not delay competition because a court will not grant a preliminary injunction to prevent competition while the patent is being adjudicated. Experience proves that most adjudications of these secondary patents result in a declaration that the patent should never have been granted.
The Hatch-Waxman Act, however, changed conventional patent law by granting the owner of an approved new drug an automatic 30-month injunction for merely claiming that a patent was being infringed, regardless of the merits of that assertion. That 30-month delay is a powerful incentive to acquire and enforce patents, since it automatically blocks the entry of a lower-cost generic drug and allows the brand-name manufacturer to pocket extra profits — sometimes in the billions of dollars — even if the disputed patent is of such a trivial nature that it should never have been granted.
Hatch-Waxman did not make all patents eligible for the 30-month injunction. Instead, it required an applicant filing a New Drug Application (NDA) to submit a list of patents with the initial application “for which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner of the patent engaged in the manufacture, use, or sale of the drug, and that — (I) claims the drug for which the applicant submitted the application and is a drug substance (active ingredient) patent or a drug product (formulation or composition) patent; or (II) claims a method of using such drug for which approval is sought or has been granted in the application.”
On its face, that limited eligible patents to the basic patents and patent applications that existed when the NDA was initially filed.
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The FDA regulation implementing Hatch-Waxman’s 30-month injunction wrongfully expanded the definition of eligible patents from those that claim “the drug for which the applicant submitted the application” to those that claim “the drug that is the subject of the NDA or amendment or supplement to it.” That opened the door to allowing pharmaceutical companies to list hundreds of belated patents covering trivial changes made to the drug substance or formulation made long after the NDA had been submitted or approved. It gave birth to the routine creation of patent thickets for every important new drug. One study shows that the average number of patents per drug went from 1.9 for drugs approved between 1985 and 1987 to 6.1 for drugs approved between 2012 and 2014 — an increase of 321%.
The legislative history of Hatch-Waxman makes it clear that Congress wanted generic competition to begin when the basic patent for a new drug expired, and it provided patent owners with the opportunity to extend the life of that patent for up to five years to assure that manufacturers of brand name drugs could earn a reasonable return on their investment in the discovery of new drugs. But Congress deliberately excluded secondary patents from eligibility for any patent extension. A House committee report states “that subsequent patents on approved drug products are frequently not the same magnitude of innovation as occurs with respect to the initial patent.”
The FDA had no reason to assume that Congress wanted secondary patents to be eligible for the 30-month injunction. By stating that eligible patents must be for the drug for which the new drug application was originally submitted, Congress deliberately limited eligibility for the 30-month injunction to the basic patents that existed when the new drug application was initially filed. If Congress had wanted to make later filed secondary patents eligible for the 30-month injunction, it could have easily allowed the listing of all patents that covered the approved new drug. Instead, it limited the patents eligible for the 30-month injunction to the ones that existed when the new drug application was initially filed, while recognizing that some of those patent applications may not yet have matured into issued patents.
It is the “claims” of a patent that define the scope of the rights conveyed by a patent. To a patent lawyer, a patent that claims “the drug for which the applicant submitted the application” is not the same thing as a patent that claims the drug which is “the subject of the NDA.” You can’t patent the same thing twice. To be valid, the claims of a later patent must be limited in scope to something that is new and different from what was already known, used, or patented. In other words, the claims of a later patent can cover only changes that were made to the original drug — not the drug itself. That is because the original drug is already known and was patented earlier. Under Hatch-Waxman, a patent is not eligible for the 30-month injunction if it does not claim the drug itself because it cannot legally prevent anyone from copying the original drug.
Congress was clear. It wanted to protect the basic patent covering a drug from commercial infringement before the courts had an opportunity to weigh in. But it did not want to afford the same benefit to patents covering trivial changes to a drug after the basic patent had expired. The FDA wasn’t capable of recognizing these nuances of patent law because it lacks any expertise in patent matters — a shortcoming it freely acknowledged in the Notice of Rulemaking that announced its misguided regulation. Given that admission, it was a clear abuse of discretion for the FDA to substitute its own interpretation for the words Congress used to describe which patents were to be eligible for the 30-month injunction.
It is legitimate to ask why this FDA regulation, which has improperly delayed generic competition, has not been challenged since its adoption in 1994. The simple answer is that generic drug manufacturers make more money by challenging trivial secondary patents than by selling generic drugs. They earn extra profits from early market entry after successfully establishing that the trivial patent is invalid or from accepting a large cash payment from the patent owner for discontinuing the patent challenge, which allows the brand-name drug maker to wrongfully prolong its monopoly.
Drug patent thickets have become a lucrative specialty law practice involving hundreds of new lawsuits annually that employ thousands of lawyers and scientists worldwide. A Hatch-Waxman ANDA Litigation Forum on LinkedIn has garnered more than 14,000 members since 2009.
Repeal of the FDA regulation would bring an end to this game. No trivial secondary patent could ever block generic competition unless it was first declared valid and infringed by a court. In the unlikely event that happened, the monetary damages for infringement would be small because they would be limited to the value of the improvement and would not include the value of the basic drug on which patent protection had already expired. Given these circumstances, procuring and enforcing trivial secondary patents would be a waste of time and money and the practice would end.
Unfortunately, repeal of the FDA regulation erroneously interpreting the Hatch-Waxman Act will have no effect on the patent thickets that are growing up around biologic drugs, since they are covered by the Biologics Price Competition and Innovation Act (BPCIA), which was enacted as part of the Affordable Care Act of 2010. But Congress should recognize that the FDA’s misinterpretation of Hatch-Waxman was influential in expanding the ability of brand-name drug manufacturers to create patent thickets for biologics. The BPCIA needs to be amended to eliminate the ability of trivial secondary patents to delay competition from biosimilar drugs.
The Hatch-Waxman Act was based on the sound principle that generic competition should begin when the basic patent claiming a new drug expires. Congress should codify that principle into a fixed time limit for drug patent monopolies rather than enacting piecemeal legislation that seeks to prevent abusive schemes from exceeding these limits. Otherwise, brand-name drug manufacturers will continue to find ways to game the system to accomplish the longest possible monopoly for any important drug.
Alfred Engelberg is a retired intellectual property lawyer and philanthropist who focuses on efforts to make health care and medicines more affordable. As counsel to the generic drug industry, he played a major role in drafting the Hatch-Waxman Act.
