Don’t enact a law that diminishes the incentive for generic companies to challenge patents

Prescription drugs in the United States cost more than anywhere else in the world, and patients feel the pain of high prices every day. The cost is largely driven by the price of brand-name drugs, which account for only 10 percent of drugs sold, but 77 percent of the costs. Brand companies are able to charge $10,000, $100,000 or even more per year for their drugs because they hold patents which protect the drug from competition, typically for 12 to 14 years.  

Generic drugs on the other hand account for 90 percent of drugs sold but only 23 percent of the cost. The difference is due to competition. Once patents on brand drugs expire, multiple manufacturers can enter the market which drives prices down. As a result, generic drugs have delivered nearly $1.8 trillion in savings to patients and the health care system over the last decade.

{mosads}In recent years, it has taken longer for generics to reach the market. The major reason is that the number of patents being filed by brand name drug companies is skyrocketing. Many of these patents are filed after the drug has reached the market, with the purpose of blocking competition from generic versions of extremely profitable drugs. The 12 top-grossing brand-name drugs of 2017 were granted, on average, 71 patents for each drug. These patents, if valid, would delay competition for an average 38 years.

The only way to get generic drugs on the market more quickly is to challenge the brand patents in court and that is costly. To encourage generic companies to undertake such challenges, Congress passed a law in 1984 that created a simplified pathway for generic drugs to gain approval. The “Hatch-Waxman Act” included a financial incentive for generic companies willing to bear the expense of challenging weak patents: the first generic drug sponsor to challenge the patent(s) of a brand-name drug is protected from competition by other generics for the first 180 days on the market. 

That 180 day exclusivity is crucial to a generic drug manufacturer’s decision to undertake a risky and expensive legal challenge to a brand drug’s patents. Because that incentive generates competition from low-cost generics, we were disappointed to learn that a bill that would destroy this incentive has been designed by the administration, included in the administration’s most recent budget, and introduced in Congress. 

If enacted, the Bringing Low-cost Options and Competition while Keeping Incentives for New Generics (BLOCKING) Act (H.R. 938), co-sponsored by Reps. Kurt Schrader (D-Ore.) and Buddy Carter (R-Ga.), would severely diminish the value of the 180-day exclusivity and thereby reduce the incentive of a generic manufacturer to be the first to challenge a brand patent. Specifically, if the FDA does not approve the first-to-file drug within 30 months and there is a second generic waiting in the wings that is eligible for approval, the first drug’s 180 days of exclusivity would start counting down. If, for whatever reason, the first-to-file product is not approved by the FDA within the 180-day period, then it will totally lose the exclusivity.

The flaw in this approach is that generic manufacturers often have no control over how long FDA takes to process and approve their applications. In fact, FDA’s average approval time for generic drugs is 37 months. Thus, if there is another generic in the pipeline (and there usually is), by the time the first-to-file typically gets approved, the 180-days period will have passed. Once the 180-day period has expired, an unlimited number of competitors will qualify to enter the market, which drives down prices to the point of non-profitability for the manufacturer who incurred the expense to challenge the brand’s patent. If the bill is enacted, generic companies will have little incentive to challenge patents, even if they know the patents on the drug are invalid and that they are likely to prevail.

{mossecondads}The sponsors of this bill claim it is needed because first-to-file generics are blocking the entry of subsequent generics by sitting on the 180-day exclusivity. In 2003, however, Congress passed a law to ensure that a generic company cannot block subsequent generics by sitting on this exclusivity – if they do, they forfeit the 180 days. Thus, FDA already has the tools it needs to ensure that additional generics are not blocked from coming on the market. The BLOCKING Act is unnecessary and will undercut generic drug competition.

At a time when brand name prescription drug prices are rising, and this Administration and Congress claim to be seeking ways to enhance patient access to lower-cost drugs, devaluing the one incentive generic manufactures have to successfully challenge invalid brand patents and get generics onto the market is illogical. The BLOCKING Act will result in a further delay of competition in the market. Without competition from more affordable FDA-approved generics, patients will be forced to forego much-needed medication because of high prices charged for drugs protected by invalid but unchallenged patents.

William B. Schultz was Deputy Commissioner of the Food and Drug Administration and General Counsel of the Department of Health and Human Services. Margaret M. Dotzel was Associate Commissioner of the Food and Drug Administration and Acting General Counsel of the Department of Health and Human Services. Both represent the Association for Accessible Medicines.