Introduction

According to poll data, eight in ten Americans have characterized the cost of prescription drugs as “unreasonable.” As a result, millions of citizens are becoming sicker or even dying because they cannot afford necessary medications. The issue is so pervasive that voters for both parties report that the “rising price of prescription drugs was an important factor,” in their voting decisions. Lawmakers on both sides of the aisle have committed to tackling the problem, but finding the right solution has proven to be difficult.

In the 116th Congress, legislators introduced over a hundred bills to address prescription drug prices. Recently, Sen. John Cornyn (R-Texas) introduced one such bill to tackle the drug pricing problem: the Affordable Prescriptions for Patients Act of 2019 (APPA). The bill received a fair amount of attention and was quickly reported favorably out of the Senate Judiciary Committee, but stalled due to unrelated external events. The APPA takes a unique approach to addressing high drug prices: It targets costly patent litigation practices that raise entry barriers for competitor generic manufacturers, thereby preserving patent-holding pharmaceutical firms’ monopoly power to raise prices. In particular, the APPA— as amended in committee—places limits on litigation over biologics, a particular class of medical treatments that have become especially costly and hotly litigated in recent years.

Yet despite the potential for legislation like the APPA to advance, there has been little scholarly attention to the bill’s approach of using litigation limits to increase competition and lower drug prices. Some commentary has focused on earlier versions of the bill, which employed a substantially different legislative approach involving the Federal Trade Commission, and some industry members have commented on the bill as amended in committee. The Congressional Budget Office estimated that the bill in total would save the government over $500 million over ten years, but there appear to be no analyses of what impact the bill would have in view of present litigation patterns.

This paper aims to assess what impact the APPA would have on patent litigation over biologics, as a first step to assessing the bill’s impact on drug prices. It does so by looking at data on past patent litigation to estimate what effect the APPA’s changes would have on the biologics litigation landscape.

Briefly, the analysis reveals that, as a general matter, the approach of imposing limits on biologics patent litigation would likely be beneficial in terms of increasing competition and lowering drug prices. Industry members and experts widely believe that patent litigation has stymied the development of competition in the U.S. biologics market.12 Similarly, manufacturers of Food and Drug Administration (FDA)-approved biosimilars “have already delayed market entry to avoid patent litigation.”13 This study confirms that biologics patent litigation is becoming increasingly complex and voluminous, so imposing limits could cut down on the most cost-prohibitive litigation.

At the same time, nearly all biologics litigation would be unaffected by the particular numerical limitations that the APPA provides, which is both a positive and a negative. On the one hand, it suggests that the bill would not affect the vast majority of biologics patent litigation, thereby lessening concerns that the bill would be disruptive to innovation in the biologics industry. On the other hand, the effect of the bill as written is likely to be so minimal that it will probably have almost no effect on competition or drug prices. More stringent litigation limits may increase the effectiveness of the legislation while still avoiding widescale industry disruption.

This paper begins by reviewing the nature of biologics, the rules of biologics patent litigation and the governing regulatory framework. It then reviews the APPA and its litigation-limiting provisions in detail, and briefly discusses the history and progress of that legislation. It discusses the methodology used for collecting information on litigated cases and patents of relevance, and then presents findings based on that population of cases and simulations of the APPA’s litigation limits on that population. Based on those findings, the paper identifies improvements and areas of further reform that could strengthen the bill.

Press release: How Patent Litigation Can Help Lower Drug Prices

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