Drug companies play games. One of them involves product hopping — switching from one version of a drug to a trivially different version just to keep generic rivals off the market.
Congress is actively considering legislation targeting this conduct. In June, the Senate Judiciary Committee passed by a 22-0 vote the Affordable Prescriptions for Patients Act of 2019. Rep. David Cicilline (D-R.I.) recently introduced companion legislation, the Affordable Prescriptions for Patients Through Promoting Competition Act of 2019. Both aim to quash anticompetitive behaviors by drug companies, and take specific aim at product hopping.
The momentum continued as the Subcommittee on Consumer Protection and Commerce of the House Energy and Commerce Committee just held a hearing in which members on both sides of the aisle expressed significant concern with this tactic.
Pro-pharma critics say that product-hopping legislation could harm innovation. They fear that antitrust liability for reformulating drugs could punish legitimate advances. One of us (M.A.C.) has addressed that argument in great detail elsewhere. And we believe that carefully crafted legislation, like the two proposed bills, would not threaten innovation.
But we write to raise a different point: Claims by big pharmaceutical companies (and the organizations they fund) that legislation addressing product hopping (or pay-for-delay settlements or sample denials) would harm innovation should be taken with a grain of salt. As HHS Secretary Alex Azar lamented, the industry incessantly claims that “if one penny disappears” from its profit margins, “American innovation will grind to a halt.” These “tired talking points,” he said, emerge each time Congress considers legislation affecting the industry.
The outcries trace back at least to 1961, when Eugene N. Beesley, the president of Eli Lilly, responded to the Drug Industry Antitrust Act (which sought to rein in high prices and impose licensing on drug manufacturers) before a subcommittee of the U.S. Senate. Speaking on behalf of the Pharmaceutical Manufacturers Association, Beesley warned that deletion of patent protection would “increasingly dilute the intense competition for superiority in discovery and manufacturing,” which would be “a tragic result in an area so vital to the public health.”
Even the landmark legislation that became the Hatch-Waxman Act was subject to industry threats that “you get what you pay for” and that if “Congress and the American public are unwilling to make a substantial investment in new drugs, they will get very little in return [and] innovation will dry up.”
The ominous warnings have continued ever since. Of the countless examples that could be offered, here are eight from the past 15 years.
In 2004, PhRMA claimed that modifications to the Hatch-Waxman Act “would undermine the act’s few critical protections for innovator [IP] rights,” leading to “less innovation [and] fewer new drugs to enhance treatment.”
In 2013, PhRMA criticized the House’s passage of the Innovation Act, which sought to curb the misuse of patent enforcement, voicing “concerns that it would undermine the ability of patent holders to enforce their rights, … potentially decreasing the value of patents and weakening incentives for innovation.”
Also in 2013, the president and CEO of PhRMA testified that European cost-containment measures “raise serious concerns” about EU member states’ “commitment to adequately reward innovation.”
Yet again in 2013, a PhRMA representative criticized legislation targeting pay-for-delay settlements since a presumption of illegality “would significantly undermine the value of patents that are the cornerstone of pharmaceutical innovation.”
In 2015, PhRMA worried that state legislation capping drug prices would “have a devastating impact on medical innovation.”
The same year, the organization referred to post-grant proceedings that allow patents to be reviewed as a “death squad” that “would impact our ability to develop new medicines that treat some of the most devastating diseases.”
In 2016, PhRMA lamented that the president’s FY17 budget mandating information disclosure would “undermine our competitive … incentives for innovation.”
And in 2019, PhRMA warned that “march-in rights” allowing the government to compel the granting of patent licenses if it funded some of the research would “jeopardize U.S. innovation.”
In the classic Aesop fable, the first two times the young shepherd cried wolf, the villagers came to help him. But after that, they stopped coming.
Big Pharma has cried Innovation Wolf every time Congress seeks to address its shenanigans. And the legislators keep coming to defend it. That has to stop. It is past time for the industry to be called to account on using its get-out-of-jail-free innovation card to avoid reasonable legislation.
As we get closer to the finish line of passing legislation addressing product hopping and other games, the cries about threats to innovation will grow louder and more urgent. But the industry’s history needs to be remembered. Consumers’ lives depend on it.
Michael A. Carrier is a professor of law at Rutgers Law School. Genevieve Tung is an associate director of the Rutgers Law Library.
Big Pharma is all about lining their pockets with money and no conscience for the little people of this world. I know two elderly people that eat catfood in order to pay for their medications.
Living on a fixed income, Social Security, is like not having a choice on drugs you can afford. Most I can get generically, but when I have to give up my insulin for one that is less effective/inferior due to the cost it really pisses me off. No one on a fixed income can afford to pay Big Pharma’s high priced pharma- verticals! When people have to play Russian Roulette with their medications it becomes a serious matter. In many situations one has to decide between medications and food for the month, it becomes a SERIOUS MATTER! When people are having to juggle Bill’s to try and come up with money for their medications, IT BECOMES A SERIOUS MATTER!! Something has to be done, OR IT BECOMES A VERY SERIOUS MATTER!!!
Do to physical problems I was forced to retire early, which messed up what should have been a decent retirement, I now live on a fixed amount. There are others that worked hard for years but trying to support a house hold with $2000.00 or less a month, nearly impossible this day & time. We bairely make it for about 7 months, then when we’re in the so called donut holes, we can’t afford even the copayments, and are told can’t get extra help because we make to much money. I paid into Ins.& Pharm. For 35 Years. Americans shouldn’t have to do without meds that helps sustain life.
I’m in the exact same position. Like you, I was forced into early retirement by a catastrophic medical diagnosis. By the time I was finally approved for Social Security disability (2+ years), I’d used up what little was left in my 401(k) after the Great Recession of 2007-8 and early withdrawal penalties/taxes decimated it just to keep a roof over my head and the utilities on. Alas, once the retirement fund was gone, I lost my house and car, ending up in an apartment that, a decade later, devours over 3/4 of my Social Security income thanks to the obscene inflation in rental prices all over the country. I have a phone and internet; utilities and Medicare Part B premiums take up the rest. Yet like you, my SSDI is too high at $1789 for any assistance with medical costs. I can’t afford groceries; haven’t entered a grocery store in several years, depending instead of whatever the local food bank might have available; coffee, orange juice, dairy and produce are only memories. During the 2-year wait period for Medicare I went without any treatment at all; even after I became eligible I rarely seek medical attention because I simply cannot afford the copays. A Part D prescription plan is simply out of the question. Over a decade later, the rare and miniscule “COLA” increases haven’t brought me any closer to being able to afford a prescription plan, much less the outrageous prices of the medication that would slow down the progression of the damage the disease is doing to my ravaged brain and central nervous system. I hope people like the despicable little weasel Martin Shkreli rot away in Hell, though unfortunately, it won’t do anyone any good. Recently I read that he’s still operating his businesses from prison, raking in his obscene profits and laughing all the way to the bank. Nice.
Sounds like anti trust laws only letting themselves but not letting everyone compete. Selfish, only thinking of themselves and not others. They do not serve others.
I’m 72 years old and import Rx’s (generics) for my personal use at a fraction of the cost of domestic generics. Offshore importation for personal use has to be maintained as a viable and effective form of competition to control drug pricing. For those of us requiring health maintenance medications, this is a valued resource. Protect it!
Would appreciate knowing how one would go about doing this!
A key point is what percentage of the great innovations of the last 5 years as well as the next 10 years are coming from big pharma? Zolgensma, Avexis; Solvaldi, Pharmasset. Pharma is using the money to BUY innovation, not create it. Cutting out legal manipulations that create longer protections of blockbusters may lead to lower big pharma profits, and lower over the top biotech buyout premiums, but it will not stop innovation. The legal departments are the most innovative part of big pharma these days!
Even if the biotechs are doing all the innovation, the effect is the same. No one will start biotechs and put up venture capital if acquisition prospects are poor.
However, I don’t think these policy changes will make prospects that poor…
Am I missing something here?
1. Drug goes generic, gets cheap – GOOD!
2. Govt grants patent for incremental drug improvement – GOOD!
3. Patients can pay more for better drug – GOOD!
4. Govt compels patients to buy expensive version, not generic one – BAD!
5. Everyone slaps pharma – BAD!
The simpler talking point is the percentage of revenue spent in actual innovative R&D, excluding clinical trials costs. Pretty sure it doesn’t reach 10%.
Why would you exclude trial costs? That’s where most of the cost is. “This Picasso is pretty cheap if you only count the frame.”
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