With patent reform about to return to the legislative docket, lobbyists and advocacy groups are scrambling either to try to cram in their various pet ideas, or to kill the project altogether.
I hate to say it, but the reform-killers are almost preferable, since their strategy doesn’t usually require messing with the content of the bills. Those trying to alter what is being debated, on the other hand, are almost never doing so with anything but naked crony capitalism in mind. And they have hired the best crony capitalists around, including even one of the architects of Obamacare.
Case in point: The provisions in the Senate’s PATENT Act currently being lobbied for by Big Pharma. Like most lobbyist-supported gimmicks, these particular giveaways to a corrupt, government-dependent industry are masked behind inaccessible legalese and technical minutiae, but what they amount to is essentially a blank check to Pharma to jack up the cost of healthcare through patent-supported monopolies. To give some idea of the cost to taxpayers, the Congressional Budget Office (CBO) has already estimated that these changes will cost taxpayers $1.3 billion in increased Medicare costs.
So what is it that these companies want? I’ll explain. What pharmaceutical companies are seeking to do is exempt their own patents, particularly on drugs, from a process known as an Inter Partes Review (IPR). For those of you who don’t speak Latin or lawyer, an IPR is a process that allows someone to challenge a patent by appealing directly to the U.S. Patent and Trademark Office (USPTO), rather than spending a lot of time and money going through the court system. Furthermore, it is only allowed in cases where it looks like an earlier printed publication or existing patent already came up with whatever idea is being patented. In essence, it’s a way for people to tell the USPTO, “Hey, we think the patent owner stole someone else’s idea. Please take a second look, to make sure this patent should really be theirs.”
This is generally valuable because the IPR process is far faster than court proceedings, and because the Patent Trial and Appeals Board (PTAB), which oversees them, is made up of judges who specialize in the subject. And since so many patent applications are granted without proper review, this is an especially vital tool for those seeking to push back on fraudulent or meritless patents.
Now, to be fair to the pharmaceutical industry, it is true that their business model imposes some unique risks on the patenting process. For instance, it generally takes seven to ten years between when a new drug compound is patented, and when the FDA actually approves it for mass-market consumption. Since patents only last 20 years, this means that the time in which a company can claim the exclusive right to sell a drug (and to be able to maximize its profits by charging high prices) is, at best, 13 years. What’s more, pharmaceutical companies have to list the patents they’ve already come up with in a publication called the “Orange Book,” along with their expiration dates, so that generic drug manufacturers know when they can start producing the same compounds.
IPRs obviously introduce more risk into this equation. After all, in theory, drug companies could invest in researching a new drug, only for their patent on that drug to be declared invalid if a generic manufacturer with a sufficiently clever legal time and a sufficiently encyclopedic knowledge of the Orange Book challenged it. To an outside observer, this doesn’t seem fair.
And it wouldn’t be fair, if it ever actually happened. Indeed, according to Patent Progress, patents listed in the Orange Book are rarely challenged to begin with under the IPR process, and those that are tend to survive. Only about 4 percent of IPRs are filed against Orange Book patents, which means only about 123 challenges have been filed in years. Furthermore, only 3 percent of the patents listed in the Orange Book have been challenged at all, and of those, only seven patents (out of thousands in the Orange Book) are being challenged using only the IPR process. This hardly seems like a gigantic risk to an industry that is among the most profitable in the world.
But wait, it gets better. You see, not all patents that the pharmaceutical industry applies for are patents on new drugs. Many are actually just patents on new uses for drugs they’ve already developed, which are called “secondary patents.” This process of trying to keep drugs patented (i.e. monopolized) using secondary patents is understandably very popular with Big Pharma companies. And those seven patents that are being challenged through IPRs alone? They are all secondary patents. In other words, they’re for drugs where the hard process of FDA approval has already happened, and Big Pharma has been able to charge sky high prices for 13 years.
So even if those seven patents were invalidated immediately after 20 years, pharmaceutical companies would still make a pretty penny on them. But the odds of them being invalidated through the Inter Parties Review process are slimmer still. In fact, they’re nonexistent, because so far, zero Orange Book patents have ever been invalidated by the Inter Partes Review process.
So your question at this point might be: If this never happens, why are pharmaceutical companies so afraid of seeing their patents die?
Answer: They’re not. They’re pretending to be scared because they want to get rid of a process that keeps them honest, and prevents them from doing things like filing junk secondary patents in order to maintain their profitable monopolies on drugs in perpetuity. If you think the cost of health care is sky high now, you should see what it would become if this happened.
This kind of anti-consumer predation shouldn’t surprise anyone, but it should surprise conservatives least of all. Pharmaceutical companies are famously allergic to competition. We see that in their dogged attempts to protect against people being allowed to purchase health care across state lines. We see it in their willingness to cut deals to support Obamacare. And we see it here. How long will it be before this liberal attack on the free market leads to unsustainable medical costs, which will in turn lead Pharma’s pets to call for yet more socialized medicine under the guise of compassion?
Patent reform is a conservative idea. It comes with the imprimatur of the likes of Mike Lee and Bob Goodlatte, and its main opponents are the trial bar. But even the most conservative ideas can be twisted by bad liberal ideas. For the sake of sanity in the patent system, and to avoid yet more disasters in our rapidly socializing health care system, we should tell the pill-hawkers to stop trying to shove this poison pill down our throats.
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