The U.S. is often revered for being at the forefront of medical innovation, but whether these remarkable advancements are actually accessible to its people remains a separate question. The price of patented drugs with a trademarked name is 422% as high in the U.S. as the average price in the 33 Organization for Economic Cooperation and Development member countries; indeed, Novo Nordisk, producing Ozempic at $5 per dose, sets its price at $969 in the U.S., while the same medication is sold at one-sixth of that price in Canada, and for a mere $59 in Germany. These stark price differences exclude many households in the U.S. from critical treatments, necessitating that government agencies take concrete action to promote healthcare access. Yet even with the federal government’s recent patent challenges and changes to march-in rights, these adjustments do not suffice for making accessible medical treatments a universal reality.
Currently, big pharmaceutical firms earn median yearly profit margins of 76.5%, 39.1% higher than the median of Standard and Poor’s 500 largest companies overall. To maintain high profit margins, many companies attempt to extend patents past the 20-year mark through life-cycle management strategies such as patent thickets and evergreening, as in the case of insulin patenting. Since insulin often requires a complex delivery mechanism, it lends itself to the formation of thickets, where small changes to the drug itself and each component of the injector pen, even when not specific to insulin delivery, can be subject to a new patent; these thickets prolonged insulin patents by over five years, amounting to thousands of dollars for individual users or forcing a switch to lower quality yet cheaper alternatives.
Similarly, companies may attempt to file patents at a later stage on components of a drug beyond the active ingredient or on a slightly altered composition of the drug to prolong their market exclusivity, a technique known as “evergreening.” While these patents can be challenged more easily, they can be effective at postponing generic competition. The antidepressant Paxil, for instance, was protected by 10 patents not involving its active ingredient, paroxetine; if not for a case in 2003 rendering its additional patents obsolete, these patents would not have expired until 16 years later while Paxil’s price would have remained artificially elevated.
Fortunately, in September 2023, the Federal Trade Commission published a warning statement to mitigate and reduce pharmaceutical patent abuses, contesting that only patents involving an active ingredient, including in the case of drug-device patents, should be granted market exclusivity as part of the FDA’s “Approved Drug Products with Therapeutic Equivalence Evaluations,” often referred to as the Orange Book. The Commission threatened that improper patent listings, which attempt to thwart cheaper generic competition to sustain elevated prices, could also be legally challenged for infringing upon Section 5 of the FTC Act for attempting to secure an unfair advantage among competitors.
Then, on Nov. 7, 2023, the FTC, disputed 110 patents from 10 major pharmaceutical companies recorded in the Orange Book. Following the challenge, the FDA notified companies they had 30 days to retract or remedy the patent listings in question; otherwise, companies could be accused of perjury should they choose to sustain their current patents, claiming that they are in accordance with statutory guidelines. Removing these patents could give consumers the choice of a generic alternative and put downward pressure on prices, opening essential treatments to a wider group of people.
According to the FTC’s reports, these patent challenges led to the withdrawal of 14 patents spanning six products. Most companies, however, asserted that their current listings were compliant with regulations, writing to members of Congress that they had not hindered competition. Hence, the overall efficacy of these disputes may heavily depend on whether the FTC chooses to initiate antitrust investigations for improper patent listings. Nevertheless, on April 30, 2024, the FTC filed challenges of over 300 more patent listings on 20 drugs.
In another attempt to oppose unreasonable patent filings, in December 2023, the Biden Administration enacted a new march-in policy affirming the government’s right to retract patents that are exploited to set excessive prices if they are backed by federal grants and permitting the Administration to offer licenses to other entities to manufacture those drugs. Although the march-in principle was established by the Bayh-Dole Act 43 years ago and could have been relevant in several past cases, the White House had never applied these capabilities or named exorbitant prices as a valid basis for implementing march-in rights.
Nonetheless, the reach of march-in rights may still be limited; they can only be used for federally-funded inventions or advancements supported by taxpayer dollars, which represented fewer than one in 72 medications entering the market from 2011 to 2020, and the disclosure of government funding and patent rights is relatively weakly enforced. Thus, many patents could be missing this component of information crucial to the application of march-in rights.
Others are also hesitant about the potential of the new policy, citing the relatively ambiguous provisions specifying that, for march-in rights to be executed, the costs of the medication must be “unjustified.” Putting a number on this term could be challenging, especially as the Biden administration has not based its interpretation of “extreme” prices on comparisons with other nations. Thus, the overall impact of the new march-in rights framework may come down to the reading of these few critical words.
Yet the government has other alternatives to march-in rights for reducing excessive prices on patented products. For instance, they may request royalty-free licenses for government-funded products, opening the doors to the production of generic versions, and are guaranteed the usage of any given patent after paying an amount determined in court. For medications developed with taxpayer funding, the threat of a royalty-free license may be sufficient to initiate negotiations with a pharmaceutical company, which, risking zero returns, may choose to submit to a significant reduction in the pricing of a drug. Indeed, even when these government powers, including march-in rights, are not directly applied, scholars envision that governments could instead leverage them to push for lower prices in discussions with pharmaceutical companies.
However, some legislators have raised concerns around the impact of Biden’s move on stalling innovation. Given the high costs of drug development, estimated to average around $1.38 billion per drug, many argue that patents, which allow company ownership of new healthcare discoveries so that they can set prices that ensure revenue for their efforts, increase the incentive for continued investment and innovation.
Therefore, within weeks of the updated framework’s release, 28 Senators and Representatives implored Biden in a letter to reevaluate the new policy. Primarily, they expressed apprehension about the policy’s potential to dissuade private investors, to whom the possibility of march-in rights reflects a company’s inadequate control over their patents, a weakness they would rather avoid. Others speculate that pharmaceutical companies would be deterred from accepting federal grants, hindering U.S. competitiveness internationally, especially as other national governments have grown their R&D investment. On the other hand, some believe that certain patents currently held by pharmaceutical companies are already limiting innovation by excessively curbing competition. Thus, the overall role of patents and march-in rights in driving innovation may remain unclear.
Although the two-pronged approach from both the FTC’s patent challenges and the government’s march-in rights tentatively signify the beginnings of a shifting mindset around patent powers in the U.S., its efficacy will rely heavily on how these regulations are interpreted and enforced: will the FTC continue its myriad of patent challenges or follow through on antitrust litigations? and, what qualifies as an unreasonable price for the implementation of march-in rights? Ultimately, the road toward truly affordable healthcare without sacrificing technological development still appears nebulous, posing the question: in life-threatening scenarios, is it possible to set a price on medication at all?
