Skyrocketing drug prices are forcing states to take unprecedented measures to rein in health care spending. Vermont just became the nation’s first state to require prescription drug pricing transparency. The New York and Massachusetts attorneys general have launched investigations into major pharmaceutical companies’ and insurers’ drug pricing policies and strategies.
These are important steps. But they ignore a key driver of the problem: secondary patents. Familiar to only a few people inside the insular world of intellectual property law, secondary patents work like this: Companies file for additional, defensive patents to thicken the protection around their original base patents. These additional patents rarely represent anything new in terms of science. Instead, their purpose is to prolong a company’s monopoly and, along with that, its ability to charge high prices for its drugs. Some drugs have dozens of secondary patents. Abbott Labs, for example, has over 108 patents on its HIV drug Kaletra.
Take the case of Sovaldi, a treatment for hepatitis C developed by Gilead Sciences. In the United States, Gilead prices Sovaldi at up to $1,000 a pill, or about $84,000 for a complete course of treatment. This pricing strategy helped Gilead clear $18 billion in profits last year, while taxpayer-funded Medicaid programs, state health programs, and patients have trouble affording this astronomically priced drug.
Sovaldi is comprised of a base compound — sofosbuvir — for which the pharma giant has filed three patents. On top of that, Gilead has pursued an additional 24 patents, with more likely to come.
My organization, the Initiative for Medicines, Access & Knowledge (I-MAK), aims to ensure that people with hepatitis C and HIV around the world get the medicines they need to survive and lead healthy lives. We have evaluated Gilead’s patent portfolio and found that, based on US and international patent law, Gilead does not deserve any of its 27 patents for Sovaldi. Both the base and secondary patents for the drug are based on old science and commonly known techniques. Yet because of its defensive patenting strategy, Gilead will maintain an iron lock on its market share and charge exorbitantly high prices to Americans with hepatitis C until well into the 2030s.
Harvoni, another medication that treats hepatitis C, combines sofosbuvir and a drug called ledipasvir. Currently, Harvoni has 27 secondary patents. If these were removed, people in the US could access far cheaper versions of the same drug as soon as 10 years earlier. Based on I-MAK’s conservative estimates, this could open access to treatment for millions of people in the US, saving patients and payers like Medicare and Medicaid $5 billion over an eight-year period. In the US, Harvoni is priced at $94,000 for a course of treatment. In middle-income, high-population countries like Argentina, Brazil, and China, people are forced to pay thousands of dollars for sofosbuvir. Stripping away unmerited patents would reduce drug costs and increase access for millions of people in the US and around the world.
Pharmaceutical companies love to claim that winnowing their armada of patents would be a disincentive to innovation and would limit research into new drugs. Don’t believe it. The industry devotes shockingly little funding to research and development. Companies spend roughly one-third of their revenues on marketing and only half as much on research and development, while spending big on armies of lawyers to devise and defend secondary patents and other so-called “life cycle management” strategies. Drug research funding has been declining for more than a decade, while strategies of secondary patenting have steadily increased.
We support patents — just not those that are unmerited and that unjustly prolong companies’ market power and prevent legitimate competition.
It’s time to reevaluate and modernize the current standards for awarding all patents, but especially secondary patents. In the 10 years since we founded I-MAK, we have won multiple cases challenging secondary and other unmerited patents. This has helped government health programs and patients around the world access cheaper medicines and live better. As a result of public-interest intervention, China, Ukraine, and Egypt have already knocked down secondary patents for Sovaldi.
By ensuring that patents are fairly awarded, governments can ensure that medicines are affordable and available to those who need them. This is especially important in the US, which is the only OECD nation with no government regulations on drug pricing.
Our patent system should reward only true inventions in science and medicine. In the face of public health epidemics and out-of-control drug pricing, we need a patent system that achieves a better balance between the interests of corporations and the public.
Priti Radhakrishnan is cofounder and director of the Initiative for Medicines, Access & Knowledge (I-MAK), a US-based nonprofit group of scientists and lawyers working globally to get people lifesaving medicines. Before founding I-MAK, she worked as a health attorney in the US, Switzerland, and India.
Interesting thread. So, I may be wrong here as I am not a PhD holder, but if my math is correct I could (hypothetically) fly to India, enjoy a rather nice vacation and visit some temples, grab an 8 week regimen of this drug, take in India and still come out about $80k ahead of the $95,500 price tag.
Hypothetically of course.
There are several elements in this article with which I take issue on both a factual and rhetorical basis. But in the interest of brevity I will keep my comments succinct.
The reference to which the author sends the reader reveals that biopharmaceutical companies have increased R&D funding at a compound annual growth rate of around 4%. Admittedly for analytical rigor these figures should be in constant dollars (and audited) but it doesn’t look like a decline. I won’t speculate on the appropriate amount of funding for R&D or on what the ratio of this number should be to marketing spend as these are philosophical questions. But let’s get our facts straight.
I would also like to point out, with all due respect to the nations that have “knocked down” the secondary patents for Solvadi, that few if any innovative therapies have come from these countries. The real engine that will lower prices of Solvadi is competition from innovative therapies from Merck and other companies – and indeed this is what we are already seeing in the marketplace. I doubt that weakening patent protection would increase the competition that’s necessary to increase the supply of complementary goods so that prices go down.
Last, has anyone compared the price of the grim standard of care for Hepatitis C prior to Solvadi? This burdensome multi-pill cocktail was profoundly less effective and much more toxic — and it was taken for a much longer period. What was the cost of this therapy over the life of the patient? I’m betting it was not much less than a full course of Solvadi (and if anyone wants to do this calculation please do so in constant dollars).
If only Gilead had matched the scientific innovation with innovation in pricing (to be clear the actual drug was discovered by a small biotech that Gilead purchased for $11B — but Gilead is an expert in development and they wrote the big check). Solvadi is an unusual drug as it actually has the potential to cure an awful disease – shouldn’t the pricing model for a therapy that offers a categorically different benefit (aka a “cure”) be different?
I suggest that we spend a little less time demonizing industry and a little more time considering how we should continue to incent firms to do this difficult work. Thanks for listening.
Sam you are right and no one is demonizing the industry. I know the value of the drug as it came four years late for my next of kin. I was sharing by example. One can do the type of analysis across the board. You can see the price of orphan drugs.
By the way Gilead took lower price in India and another 111 countries being supplied by Indian companies as they were afraid of “compulsory license”. That is what happened when Gilead did not lower the price of HIV drugs and Indian companies saved the African continent by selling at $300 per year vs. five figures per year in the developed countries.
Yes there are many variables and there are not enough equations to solve the pricing problem. One can only conjecture.
The role of the monopsony purchasing power of the rest of the developed world is a significant part of the reason drug prices are so high in the
US. Those National Health Systems do not pay enough to allow adequate profit so the US consumer ends up subsidizing those countries’ health systems.
All of what you are saying is not true. If you reverse calculate the prices, one can see the costs are. In the case of Sovaldi, the active can be produced at about $150 per kilo. Kilo will produce about 5000 tablets of 200 mg. This translates to $.03 per tablet for the active. When each tablet sells in US for $1000.00 and has $0.03 worth active, one can figure out what all is happening in the supply chain. Gilead is selling Sovaldi in India for about $4.00 per tablet, not at a loss. Yes there are acquisition and bonuses costs. We have to accept that the drugs are sold at the highest price any system can afford as we all want to live and/or extend life.
It is interesting that there is lot of hoopla about drug prices. It should be as brand pharma companies have limited number of drugs that are under patent. They are their lifeline and idea is to extend the patent life as much as they can. Gilead is milking the IP system.
There is another opportunity that is totally missed and that is in generics. Before I get there, we have to recognize that most of the new drugs that have been commercialized in the last five years are for limited population and high priced. Companies are gauged by revenue they generate rather than how many benefit. Thus I call our gauge is upside down. Shouldn’t we be looking at size of the patient base for their drugs? Patient base translates to affordability.
In pharma landscape affordability can be tremendously improved if companies used economies of scale to have the best manufacturing technologies and practices. We don’t want to accept but pharma manufacturing technologies live with quality through repeated analysis rather than having the best process to produce quality product at the lowest cost. When a product is produced by e.g. five companies no one has the best technology and lowest cost.
In pharma lowest cost and best technology are not necessary as patients will pay the highest price to live. In mutually subsidized system, drug prices do not matter much compared to where patient pays from their pocket. There they have to make a choice between food and life.
HCV drugs make a case but there are many similar cases where patient affordability and profits could be improved if economies of scale and technology became the consideration. Technology is one consideration that is not part of the pharma equation and it should be.
Perhaps you meant Organisation for Economic Co-operation and Development instead of OPEC? OECD?
Thank you for pointing that out — OECD it is. I’ve corrected the post.
Obtaining a patent is one thing, but it is a totally different thing to defend it. Probably worth looking into these dynamics further as I suspect many folks will challenge those patents.