Attack Mounts on Extended Drug Exclusivity

November 2, 2015

November 02, 2015.

Public outrage over more high-priced drugs is undermining support for provisions in the House-passed 21st Century Cures legislation that provide additional exclusivities for developing certain new therapies. Even though there is general enthusiasm for R&D on new antibiotics and pediatric therapies, proposals to fuel such R&D with extended patent protections has generated concerns that extending monopolies in the pharmaceutical market will merely keep prices high and profits rolling in.

The critics include long-time patent attorney Alfred Engelberg, who argues that the current system of drug exclusivities should be repealed and replaced by a system that rewards research for drugs of “high therapeutic value,” in a recent article posted by Health Affairs [http://healthaffairs.org/blog/2015/10/29/how-government-policy-promotes-high-drug-prices]. Engelberg played a central role in crafting the the Hatch-Waxman Act of 1984, which provided an additional five-year’s exclusivity for innovator products as a trade-off for provisions facilitating the development and marketing of generics, which now account for some 85% of prescription drug utilization in the U.S.

But 7-to-12 year exclusivity periods, and additional protections for studying drug use in children, merely limit competition and keep prices high, says Engelberg. These extended exclusivity provisions “clearly went too far in compensating the pharmaceutical industry at the public’s expense,” he asserts, noting that the U.S. pays the world’s highest prices for drugs even though it is the largest purchaser. The advent of personalized medicine, he adds, will aggravate the pricing situation, as more therapies are developed for smaller patient bases, as opposed to blockbuster drugs for large populations.

One solution, says Engelberg, is to permit Medicare, Medicaid and other public health programs to evaluate the value of each new drug and to obtain fairer prices through a range of tools, including direct negotiation of drug prices, restricted formularies, reference pricing, and rebates based on the lowest price charged for a drug in other industrial countries.

Because biopharma companies benefit from government policies that grant monopolies and subsidize R&D, Engelberg also believes that the pharma industry should be regulated like utilities, with rules setting appropriate returns on investment, say around 6-8%. And he’d like to change the government’s practice of basically “giving away” its patents from basic research; drugs developed with public support should produce public economic benefit – and not just private profits – in the form of reasonable prices and shorter monopoly periods, he concludes.