The Inter Partes Review Process is Working, Even For Pharmaceuticals

Sen. Thom Tillis, R-N.C., says the patent review process created during the last round of patent legislation works well for the most part. But he has proposed an exception for pharmaceuticals.

Tillis said pharmaceutical firms, many located in the Research Triangle in his home state, need the certainty that comes with knowing their patents can???t be challenged without tremendous expense for the challenger.

But here???s another certainty ??? the new system does not appear to have been abused, and it is saving taxpayers money.

For instance, last week, Novartis, a pharmaceutical giant, went through the Inter Partes Review process created in the America Invents Act of 2012 and lost. The firm was attempting to ???evergreen??? a patent on Gilenya, a drug that treats multiple sclerosis.

That is, by making small alterations that didn???t meaningfully improve effectiveness, the firm had attempted to extend patent protection over the drug until 2026. Generic drug manufacturers prevailed in the process, and now the patent protection for Gilenya, which generates $1.53 million in U.S. sales per year, will end in 2019.

Why should you care? Because the victory for the generic manufacturers also was a victory for American taxpayers. Generic drugs typically sell for 20 percent or less of the cost of drugs still under patent. The extra seven years in which Gilenya will be available generically will result in up to $13 billion in savings.

For one drug.

And who reaps those savings? Consumers of the drug, obviously, but also the government, since taxpayers pay for about 40 percent of the prescription drugs sold in the country. So conservatively, this one decision will save public health programs $5.1 billion over seven years.

A report from the Center for Economic and Policy Research illustrates just how much Americans can save if Congress will leave the Inter Partes Review process in place.

Improperly granted patents could cost from $73 billion to $220 billion over the 20 years ending in 2037, according to the group. Savings for Medicare and Medicaid could reach $93 billion during that time, according to the report.

The U.S. Patent and Trade Office is significantly understaffed. In 2014, its 9,300 examiners considered 618,000 patent applications. That???s 70 per examiner per year, and most of the submissions amount to hundreds or even thousands of pages of highly technical data. This is how, in 1997, two inventers managed to patent a peanut butter and jelly sandwich.

The Inter Partes Review process serves as a backstop for the examiners, allowing manufacturers to challenge improperly granted patents quickly, which maximizes taxpayer and consumer savings and provides clear rules of the road for all involved. It also creates incentives for drug companies to spend their profits on developing truly new drugs rather than making slight improvements to current drugs to game the system.

It???s not clear why pharmaceuticals should receive an exception. In the two years since the process was established, about 16,000 patents have been issued for pharmaceuticals, and 114 ??? about 0.8 percent ??? have been challenged. A little less than a third of these challenges, across all patents, have been successful. Absent a finding that drug patents are on some other level from the rest, the process appears to be working.

Sen. Tillis is right that certainty is important for pharmaceutical firms. It reportedly takes $802 million to bring a new drug to market, and most fail in the first few years. Patent protection enables pharmaceutical firms to recoup their significant investments and earn profits that can be used to develop other drugs.

Moreover, many of the new drugs are customized to patient needs to a degree that they deliver cures never before imaginable but only to a small group of patients. Recovering those investments requires not only extensive patent protection but headline-grabbing prices ??? see Evoldi.

But there is another group of people for whom fair treatment in patent law is important ??? the taxpayers. They???re not going to dig deep into the findings of patent examiners. And they???re not going to pony up to increase staffing levels. But billions of their dollars hang in the balance, and before anyone considers taking up Tillis??? legislation, their interests need to be considered.