Drug Costs

Incremental Or Secondary – It’s Incredibly Valuable

May 8, 2019 11:57 am

The Senate Judiciary Committee met yesterday to discuss the U.S. patent system and its impact on drug pricing. Listeners again heard several buzzwords – like “secondary innovation” and “evergreening” – as a handful of panelists and lawmakers outlined far-reaching suggestions for legislative changes.


However, committee members from both sides of the aisle, including Sen. Thom Tillis (R-N.C.) and Sen. Chris Coons (D-Del.), cautioned against legislative overreach.


They were right to do so. The United States’ strong patent system is why this country is the world’s innovator. And not just when it comes to pharmaceuticals. It’s important to remember radical changes to the patent system would have implications for the tech companies, the automobile industry, apparel manufacturers and other sectors, in addition to drug companies.


Before explaining measures policymakers have taken to strengthen the patent system that would not harm innovation, let’s get back to those buzzwords.


As other Arnold-funded advocates have done before, Patients for Affordable Drugs President David Mitchell, a witness at yesterday’s hearing, spent a lot of time alleging that drug companies game the system by prolonging the lives of some patents.


But other witnesses pushed back. Boston College Law Professor David Olson testified that new patents can only be issued for a new drug or a new use of a drug, otherwise the patent can be denied. “When we see ‘evergreening,’ what we see is a patent system that encourages finding new innovation,” Olson testified.


PhRMA’s General Counsel James Stansel clarified that when a new patent is awarded to an existing drug, the patent only applies to that specific improvement, not the original product. In other words, the new patents do NOT extend the original patent, which allows generics drug companies to sell the original version of the drug.


The patents that Mitchell tries to portray as worthless actually improve drugs currently on the market, either by making them more effective or safer to use. A paper written by two Temple University researchers in 2005, and posted on the World Health Organization website, describes many of the benefits of so-called “secondary innovation.” The emphasis below is ours:


“The advantages of incremental improvements on already existing drugs are paramount to overall increases in the quality of health care. As the pharmaceutical industry has developed, classes of drugs have expanded to provide physicians with the tools they need to treat diverse patient groups. While critics claim that there are too many similar drugs, drugs based on incremental improvements often represent advances in safety and efficacy, along with providing new formulations and dosing options that significantly increase patient compliance. From an economic standpoint, expanding drug classes represent the possibility of lower drug prices as competition between manufacturers is increased. Additionally, pharmaceutical companies depend on incremental innovations to provide the revenue that will support the development of more risky ‘block-buster’ drugs.” 


The International Federation of Pharmaceutical Manufacturers and Associations also has explained the benefits to individual patients: “Incremental innovation can include reformulating a medicine to encourage children’s compliance with treatment regimens or increasing a medicine’s shelf-life and heat-stability to ensure that the medicine is effective in diverse environments.”


Canada’s Fraser Institute has argued incremental innovation brings down drug costs. A report from that organization said, “Incremental innovation also promotes increased price competition among drug manufacturers, thereby generating cost savings in the health-care sector.”


As Sens. Coons and Tillis did, the Temple University scholars warned policies that go too far in changing the patent system “will ultimately lead to a reduction in the overall quality of existing drug classes and may ultimately curb the creation of novel drugs.”


The senators also acknowledged that there is no doubt that – across industries – individual actors try to game the patent system. The biopharmaceutical industry supports efforts to prevent this manipulation and reiterated in the hearing its support of efforts to crack down on bad actors. In 2018, for example, the Food and Drug Administration provided improved guidance to address egregious business activities designed to prevent or delay generics from entering the market. Organizations like the Biotechnology Innovation Organization supported this effort.


True abuse should be addressed, but the types of radical reforms lawmakers and Mitchell mentioned yesterday are not necessary. As this article explains, representatives of the generic drug industry have noted themselves that 89 percent of all drugs dispensed in the United States are generics. That figure is higher than the share of generics sold in United Kingdom (83 percent), Germany (81 percent), Canada (73 percent) and France (30 percent).


The American system of innovation and competition is working.