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ICYMI: Patent Abuse Is Undermining American Health Care

September 22, 2017
The pharmaceutical company Allergan recently announced a decision to transfer the intellectual property rights of its eye treatment, Restasis, to the Saint Regis Mohawk Indian Tribe. While this novel decision has garnered a lot of attention, what has received far less attention is a flawed patent review process underlying the decision. Fortunately, Phil Goldberg, director of the Center for Civil Justice at the Progressive Policy Institute, is helping to explain how a well-intended law has led to some harmful consequences. In an op-ed published at The Hill, Goldberg writes:

“This cautionary tale is all about unintended consequences from the 2011 enactment of the American Invents Act (AIA). At that time, ‘patent trolls’ were using old, questionable patents to extort money from high-tech companies that independently developed innovative products. Because patent litigation can be expensive, the trolls were able to generate settlements for less than the cost of defending their often specious claims.

“To take away the troll’s leverage, Congress gave the Patent Trial and Appeal Board the authority to invalidate old, poorly constructed patents. This post-patent review process is called inter partes review (IPR). It could be used instead of, or in addition to litigation, and could be filed by anyone and at any time after the Patent & Trademark Office issues a patent. Congress was hoping that, by removing these obstacles, it could achieve the social and economic benefit of facilitating the next generation of technology.”

While the goal behind the law was certainly laudable, it has had a harmful impact on the pursuit of biomedical innovation. As Goldberg points out:

“When announcing the deal, Allergan’s CEO underscored what he believed to be the unfairness of having two, separate forums and rules for invalidating patents, especially where IPR can effectively overturn the patent decisions made in the federal courts…

“This issue of double jeopardy is common to all patents, but is particularly controversial for prescription drugs because IPR could undermine the Hatch-Waxman Act. This act, passed in 1984, was a major compromise between branded and generic drug companies that has opened the door to the wide availability of generic drugs. …

“In 1984, less than 20 percent of the post-patent market was captured by generic drugs. Today, that number is nearly 90 percent. Also, patent litigation and enforcement has become fairly predictable. Courts, unlike IPR panels, are bound by previous rulings and use well-defined legal theories to determine whether a patent is valid. If Hatch-Waxman has shortcomings, which it no doubt does, these issues can be addressed. IPR, though, threatens the entire framework.

“The problem is that, rather than facilitate technology developments, IPR can chill advancements in prescription drugs. … These manufacturers have explained that patent predictability is essential for generating investments in new medicines and engaging in beneficial joint endeavors with competitors.”

So where does the country go from here? Goldberg concludes:

“What should the role of IPR be? Is IPR subject to too much abuse? How can we balance the needs of both the hi-tech and pharmaceutical industries? Congress, the PTO and the courts should heed Allergan’s clarion call and try to answer these questions. The American health care system depends on it.”

Read the full op-ed by Goldberg here.

Learn more about drug costs and biomedical innovation here.