America’s extraordinary economic machine would simply not be possible without some of the strongest intellectual property (IP) protections in the world. Many of the healthcare breakthroughs to prevent and treat COVID-19 would never have happened without robust IP protections. Quite frankly, inventors of all sizes simply wouldn’t have the incentive to invest countless amounts of time and money into products that could easily be ripped off by copycats if the U.S. didn’t protect IP. Despite the success and necessity of robust IP rights, it is all-too tempting for policymakers and pundits to turn patent protection into a boogeyman for any trend they don’t like.
The New York Times’ recent piece bemoaning the rise of pharmaceutical “patent thickets” is just the latest case study in spurious correlation. Despite the Editorial Board’s assertions, there’s little evidence linking the heavy patenting of products with price increases and anti-competitive practices. America’s healthcare system direly needs reform, but short-circuiting IP protections will make things worse.
According to the Editorial Board, drug companies are adding old and inconsequential technologies (e.g., injector pens) to medications in order to keep medications under patents for longer and preserve their monopolies. This is supposedly a large cost driver, given that, “[t]welve of the drugs that Medicare spends the most on are protected by more than 600 patents in total...” This may indeed be alarming, if drug companies were in fact using these thickets to exploit patients who had no other treatment options.
The reality is far more complicated.
One oft-cited “thicketed” drug is Eylea, which treats macular degeneration for diabetics at risk of vision loss. The medication has more than fifty patents associated with it, and also happens to be quite expensive at nearly $2,000 per dose. But, Eylea is hardly the only game in town for patients desperately trying to avoid blindness. One competitor drug called Avastin (with more than 80 associated patents) is 96 percent cheaper than Eylea and similarly effective in treating macular degeneration. Lucentis is another effective competitor, though more similarly priced to Eylea than Avastin. If patent thickets are supposed to deter competing drugs from entering the marketplace, they don’t seem to be doing a very good job. As retinal surgeon and Tufts University School of Medicine scholar Andrew Lam explains, “Medicare covers them all...[and]... about 35 percent of retina specialists continue to use the expensive medicines as their first treatment of choice.”
Doctors have little incentive to be cost conscious on behalf of their patients and would rather prescribe what they perceive as the very best drug (despite studies showing little difference). Medicare and private insurance in turn shield patients from doctors’ costly choices. It’s little wonder that costs to taxpayers have skyrocketed in recent years and private insurers face constant pressure to raise their premiums. That’s not to say, of course, that patients can or should shoulder their own prescription costs. Sticker shock across the healthcare system is all too real and telling consumers they are on their own would only succeed in causing a cascade in bankruptcies. A more sober, middle of the road approach would be to shift government policies toward giving patients more flexibility in how they spend their healthcare dollars. Instead of Medicare covering drug costs (under Part D) past a $400 deductible, policymakers could raise the allowed deductible while depositing funds in tax-free accounts for enrollees to spend on their medications. That would make patients behave more like consumers and ask doctors whether paying twenty times more for a similarly effective drug is worth it.
Until the third-party payer system sees reform, taxpayers and consumers will continue to see outrageously-priced medications and healthcare services. Making patents easier to invalidate would make the pricing crisis worse by deterring new competition in the marketplace.
America’s healthcare system direly needs reform, but eroding IP protections will only make things worse.
