Patent Thickets, Product Hops, and Skinny Labels: Congress Takes on Patent Reform

With the midterm elections looming, affordability has become a prominent issue. Voters are uneasy about increasing gas prices, housing, and the high cost of healthcare. Expensive prescription drugs impact not just pocketbooks, but also health outcomes and quality of life for many Americans. Patents play a considerable role in determining the prices Americans pay for prescription drugs. While patents are designed to reward the risky investments required to discover innovative life-saving treatments, they can also be wielded as weapons to extend monopoly power and deter market entry by lower-cost generic drugs. Patent thickets, product hopping, and serial litigation can delay generic and biosimilar entry for years, keeping name-brand prices high. What can Congress do about this? 

Polling shows that six in ten Americans are concerned about prescription drug prices, with four in ten saying they have had to take cost-saving measures such as skipping doses, splitting pills, or not filling prescriptions. One RAND study found prescription drug prices in the United States to be 278 percent of prices in 33 other high-income nations. This stark difference is driven primarily by brand-name drug pricing, where U.S. prices were found to be 422 percent of prices in the other countries. At the same time, generics—which fill 90 percent of all U.S. prescriptions—were found to be cheaper in the United States, at only 67 percent of prices paid in comparison countries. This means policies that promote generic competition are critical for drug pricing.

Unfortunately, patent gamesmanship keeps prices up. In one study of just five brand-name drugs, the yearly costs of the patent thickets surrounding them ranged from $1.8 billion to $7.6 billion—a burden borne by the healthcare system, patients, and taxpayers. This series has examined patent gamesmanship and its impact on drug prices, as well as the impact of Hatch-Waxman lawsuits that delay generic entry. This installment catalogs and highlights legislation pending in the 119th Congress to address shortcomings in current patent policy and promote generic and biosimilar competition amid ongoing concerns about the high cost of prescription drugs. 

The legislation spans four categories: 

• Bills targeting patent thickets
• Bills designed to improve the information that determines drug patents and Food and Drug Administration (FDA) listings
• Bills targeting anticompetitive practices
• Bills protecting the pathway for generic entry

Six Bipartisan Bills Pending in Congress

• Eliminating Thickets to Increase Competition (ETHIC) Act: H.R.3269; S.2276
  The ETHIC Act limits the number of patents a brand-name drug manufacturer can assert against a competitor in infringement litigation. It does this by stipulating that only one patent from a patent group linked by terminal disclaimers can be asserted against a generic or biosimilar manufacturer seeking to enter the market. Terminal disclaimers are filed to overcome rejections for obviousness-type double patenting, and while courts generally do not view terminal disclaimers as an admission of obviousness, the Federal Circuit’s 2018 decision in SimpleAir v. Google suggested they provide a “strong clue” that the patent examiner and applicant viewed the patent’s claims as lacking a patentable distinction. 
  
  The purpose of the ETHIC Act is to limit strategic litigation deployed by brand-name drug manufacturers to keep lower-cost prescription drugs off the market. Narrowly tailored to reduce the expensive legal battles that keep drug prices high, the bill focuses on terminally disclaimed patents asserted in litigation against generics and biosimilars under the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act. The ETHIC Act’s limited scope means it would not affect patents claiming distinct inventions. This helps protect drug companies’ ability to invent new cures, while promoting competition by lower-cost drugs.
  
• Affordable Prescriptions for Patients Act: S.1041
  The Affordable Prescriptions for Patients Act also takes aim at patent thickets by limiting the number of patents a brand-name biologic manufacturer can assert against a biosimilar producer seeking to enter the market. Under current law, a biosimilar seeking to enter the market shares its application with the brand manufacturer. The two then engage in a “patent dance” to determine which patents to address in ensuing litigation. 
  
  The problem is that the patent dance does not prevent the brand-name company from asserting additional patents in later lawsuits. The Affordable Prescriptions for Patients Act targets patents filed more than four years after a biologic’s approval as well as those covering processes the brand manufacturer does not use. A brand may assert no more than 20 of these patents, no more than 10 of which may be issued late in the pre-litigation exchange with the biosimilar. Patents claiming methods of treatment are exempt, and a court may raise the cap for good cause.
  
  This bill intends to limit the size and scope of patent thickets in order to reduce reliance on follow-on patents filed years later to fuel additional litigation. But because the U.S. Supreme Court held in Sandoz v. Amgen (2017) that the patent dance is not mandatory, this legislation applies only if the biosimilar agrees to participate. The bill, which passed the Senate by unanimous consent on July 21, is currently being “held at the desk” in the House, meaning the House can take it up without sending it to committee.
  
  Resolving the impediments created by patent thickets significantly affects the cost of prescription drugs. AbbVie’s Humira portfolio of more than 100 patents (connected by 436 terminal disclaimers) delayed market entry of a rival biosimilar drug in the United States until 2023—more than four years after biosimilars became available to European patients. Both the ETHIC Act and the Affordable Prescriptions for Patients Act would help resolve such delays. 
  
• Medication Affordability and Patent Integrity Act: S.2658 
  The Medication Affordability and Patent Integrity Act would require drug manufacturers to provide consistent disclosures to the U.S. Patent and Trademark Office (USPTO) and the FDA in order to limit potential gamesmanship, which can extend exclusivity and delay the entry of lower-cost generic and biosimilar drugs. The legislation would address situations in which drug manufacturers tell the FDA one thing to gain regulatory approval and the USPTO another to acquire secondary patents that create patent thickets. 
  
  Under the proposed law (which has been reported out of committee and placed on the Senate legislative calendar), drug makers would need to provide the USPTO with the same patentability information provided to the FDA for drug approval and certify that the information is correct and consistent. Belcher Pharmaceuticals v. Hospira (2021) illustrates the problem this legislation seeks to resolve. In order to gain regulatory approval for a drug, Belcher told the FDA it relied on an old, well-known standard; when seeking a patent, it told the USPTO it was a critical innovation. 
  
  The court found that Belcher had engaged in inequitable conduct by providing contradictory information to the FDA and USPTO. Existing inequitable conduct doctrine was applied, but only after the patent was issued and asserted in costly litigation. The disclosure requirements proposed in the Medication Affordability and Patent Integrity Act would have addressed this problem in the examination stage (before the patent was issued).
  
• Interagency Patent Coordination and Improvement Act: S.1097; H.R.4570
  The Interagency Patent Coordination and Improvement Act would create an interagency task force between the USPTO and the FDA to share information and provide technical assistance “relating to patents, and decisions or actions involving patents, for human drugs and biological products.” 
  
  This legislation aims to improve patent quality and address concerns over patent gamesmanship by mandating that the USPTO director prepare a report to Congress regarding opportunities to improve interagency coordination. It also requires both agencies to share information and establish procedures that allow patent examiners to request assistance from the FDA when examining drug patents. The USPTO would assist the FDA with its Orange Book patent listings.
  
  A 2023 case involving Jazz Pharmaceuticals and its narcolepsy drug, Xyrem, illustrates the issue of gamesmanship. Given the FDA’s concerns over the known potential for abuse of the drug, Jazz patented a system of protocols to follow when prescribing and distributing the drug. The company then listed it in the FDA’s Orange Book as a method of use—even though it was not. When Avadel CNS Pharmaceuticals sought approval of a rival product, the FDA required Avadel to file a certification challenging the listed patent. Jazz then sued for infringement, triggering a 30-month stay on the approval of Avadel’s product. Avadel counterclaimed, asking the court to delist the patent from the Orange Book. Both the district court and the Court of Appeals for the Federal Circuit found that Jazz’s patent was a system patent rather than a method-of-use patent, rendering it ineligible for listing in the Orange Book. The coordination required under this legislation could have identified this improper listing before it delayed competitor entry.
  
• Drug Competition Enhancement Act: S.1040 
  The Drug Competition Enhancement Act addresses product hopping, which is when a drug manufacturer threatened by generic competition attempts to shift doctors and patients to a follow-on version of the drug that retains its exclusivity. This is done either by taking the original off the market (a hard switch) or by providing strong incentives to prescribe the new version while the older version remains in production (a soft switch). Oftentimes, the newer version offers little therapeutic improvement over the previously marketed drug. 
  
  The product hop from the popular acid reflux drug Prilosec to Nexium demonstrates this point. In a classic soft switch, AstraZeneca launched Nexium with a $500 million ad campaign as its patent exclusivity on Prilosec was ending. Yet Nexium is simply one of the two mirror-image enantiomers of the original Prilosec molecule. Researchers found at most a marginal advantage for Nexium, concluding that the therapeutic benefit of the switch was “questionable considering the substantially greater economic burden involved.”
  
  If a drug manufacturer were to engage in a hard or soft switch after receiving notice of a potential generic entrant, the conduct would be presumed to be product hopping, and the Federal Trade Commission could challenge it as unfair competition. The Drug Competition Enhancement Act also allows drug companies to rebut this presumption by demonstrating that the change had a legitimate purpose.
  
• Skinny Labels, Big Savings Act: S.43; H.R.6485 
  The Skinny Labels, Big Savings Act amends the Patent Act by creating a statutory safe harbor to protect against induced-infringement liability (when a person is liable for encouraging others to infringe a patent). This is important for generics entering a market in which some uses of a brand-name drug remain patented while others have expired. 
  
  In such cases, the generic carves out the patented methods of use and seeks approval only for expired uses. This is known as skinny labeling. The legislation seeks to defend this practice to encourage quicker entry of lower-cost drugs—a goal reinforced by a recent Supreme Court decision issued while a congressional hearing on skinny labeling was underway. 
  
  In Hikma Pharmaceuticals v. Amarin Pharma (2026), the Court unanimously held that Amarin failed to plausibly allege that Hikma’s skinny-label generic and its concurrent marketing induced infringement. The Court clarified that the brand manufacturer must allege that the generic actively encouraged infringement rather than simply asserting that physicians could interpret the generic’s statements as encouragement to infringe. While the Court’s ruling raised the bar for attempting to allege inducement through skinny labels, the Skinny Labels, Big Savings Act can still play an important role in codifying protections for skinny labeling.

Conclusion

Both chambers of Congress and both parties have worked to address shortcomings in the current patent process, which can unnecessarily delay entry by lower-cost generic and biosimilar drugs. Patent thickets, product hopping, litigation risks, and the lack of institutional coordination all contribute toward the high prices of prescription drugs in America. Bills introduced this Congress tackle these challenges with varying mechanisms, but the ultimate goal is the same: a robust market for lower-cost generics and biosimilars driven by competition rather than litigation and gamesmanship. With the legislative calendar in the 119th Congress winding down, the Affordable Prescriptions for Patients Act has advanced the furthest, passing the Senate by unanimous consent. The ETHIC Act has also gained momentum, particularly after the House Judiciary subcommittee hearing in June. Both may come into play in the upcoming lame-duck session, but if none of these bills move forward this Congress, then prescription drug affordability will surely gain attention in the next Congress.