Richard Lloyd

If patent reform legislation is going to pass in this Congress, consensus will be needed over any reform of the inter partes review process. Since Kyle Bass and Erich Spangenberg started challenging the validity of a series of life sciences patents earlier this year, IPR reform has become the big reform issue for the pharma and biotech communities.

As this blog’s interview with Kyle Bass last Friday underlined, he is clearly committed to a long game. For an industry that derives so much value from its IP, like pharma, the challenges from Bass are a significant threat, even if the patents under review represent a very small chunk of the industry’s patent universe.

With the tech sector, which has become the most frequent user of IPRs, opposed to any measures that would weaken its ability to bring reviews, we have a very clear divide on a key reform issue which doesn’t leave legislators much wiggle room. One option that has been proposed by the sponsors of the PATENT Act, which includes the leadership of the Senate Judiciary Committee, is to give brand name pharmaceutical companies an effective exemption from the IPR process.

At the end of last week, however, a powerful group of organisaitons "representing consumers, health insurance plans, and pharmacy benefits managers" - including AARP and the health insurance body BlueCross BlueShield Association - spelled out their opposition to that kind of carve-out in a letter to the leaders of the House and Senate Judiciary Committees. The group insisted that while they supported the PATENT Act, they had serious concerns over attempts to modify the proposed legislation which would give Big Pharma its IPR exemption.

“We strongly oppose any exemption from the IPR process for drug and biologic patents,” the letter stated. “We are particularly concerned that such as exemption would provide little protection against a widely-used practice known as “evergreening” where manufacturers make minor modifications to existing products in order to extend patent protection for years.”  

During mark-up of the PATENT Act last month, Senator Schumer admitted that work still needed to be done on the legislation to win the support of the life sciences community, as he insisted that “the IPR package will get further refinement”. But the AARP letter demonstrates the complex web of competing interests that has been woven around the subject. In its concluding remarks against the exemption the letter added: “We ask the Committee to fully consider the implications of any such exemption in terms of increased spending for payers, including Medicare and Medicaid, and higher prices for consumers. It would be unfortunate if this issue was to impede progress of the larger patent reform effort.”

As if to underline the point being made, earlier this month the Center for Economic and Policy Research produced a paper entitled The Impact of Exempting the Pharmaceutical Industry from Patent Reviews. It concluded:

… the failure to remove improperly awarded patents at an early date could lead to substantially higher drug costs. These costs will translate into higher payments from government run health insurance programs like Medicare and Medicaid.

The improper award of patents is also likely to lead to misdirected research, potentially wasting billions of dollars in spending in pursuit of patent rents based on the improperly awarded patents. In addition, these patents will provide incentives to mismarket drugs, a process that has led to substantial costs in the form of increased morbidity and increased mortality in the past. This analysis suggests that there could be substantial costs associated with exempting the pharmaceutical industry from the IPR process.

Undermining pharma’s ability to raise drug prices and bringing down the cost of medications overall is one of the motivations that Bass has claimed is behind his IPR strategy. Those arguments carry a lot more weight when they come from an organisation like AARP and take on tangible form for legislators when converted into dollar estimates of how much more consumers and government agencies might have to pay should a pharma IPR exemption be created. A vote on the Innovation Act in the House of Representatives might happen as early as this week. But it still looks like we’re some way from a reform package reaching the President’s desk.