_On Monday, April 25, the Supreme Court will hear oral argument on a seemingly unsexy issue of patent law in Cuozzo Speed Technologies, LLC v. Lee. But don't stop reading. Please don't let the words "patent law" be immediately sleep inducing. Darn, I used those words again. Bear with me.
What the Supreme Court is taking on specifically is a 2011 law, the Leahy–Smith America Invents Act (AIA) (PL 112-29), bipartisan legislation that governs the challenging of patents and which was the most marked development in patent law in decades. Among other things, the law provided for inter partes review, according to which patent challenges may be heard by an appeals board within the United States Patent and Trademark Office, as opposed to through costly and time-consuming litigation. The setting in which patents are challenged is important given the standard of review that is applied, with courts in litigation settings presuming patents to be valid and understood by their "plain and ordinary meaning," while appeals boards under the 2011 AIA interpret patents more broadly. The consequence is that with a specific claim by a patent holder (a condition favoring patent holders), it is more difficult for competitors to argue that the claim isn't novel or important, and there is the general complexity of different standards of review for the same claims in different legal venues, which thus creates uncertainty in the legal environment.
So what does this have to do with pharmaceutical industry?
Patent law governs much of the dynamic between the brand prescription drugs that are manufactured and the much cheaper generic versions of drugs that are comparable. It protects drug manufacturers in that they are permitted to exclusively sell their drugs at their chosen price (let's face it, the maximum price that the market will permit) to boost profits and recover research and development expenses before other companies are permitted to market generic versions (for example, marketing Klonopin (brand) vs. clonazepam (generic).
Should the Supreme Court overturn the Federal Circuit opinion, pharmaceutical companies argue that it will be more difficult for them to recoup expenses for drug manufacturing, research, and development, while health insurers and generic drug companies urge that the lower court ruling be upheld so as to facilitate the introduction of more generic drugs into the market and thus reduce consumers' cost of prescription drugs (for more, see full article at STAT News).
There is no doubt that drug manufacturing is expensive. Those in favor of patent protections held, "In the twenty-first century, it costs an average of $2.6 billion to develop a new drug... Meaningful patent protection is required to justify that investment." A question raised by insurers and those manufacturing generics, however, is whether drug manufacturers are exploiting those protections to prevent generic competitors from entering the market, given that market competition will lead consumers to opt for the inexpensive (or less expensive) versions. Not surprisingly, the implications for consumers is striking. In 2015 alone, 4,065,175,064 prescriptions were filled in the United States, with those prescriptions yielding retail sales of $286,797,651,607. In 2011 alone, 4.2 billion prescriptions were written, with 34% of American adults taking at least one prescription drug and 11.5% of American adults taking 3 or more prescription drugs. Given these numbers, it is not hard to imagine why the ability to take a generic version of one, and especially of three, prescription drugs every month would aggregate to a large financial difference when it might matter greatly. in fact, 10.5% of those earning under $25,000 annually take four or more prescriptions, compared with 20% of those making $100,000-149,000 annually taking only one prescription. And while generic drugs are required to have the same active ingredients as do brand name drugs (though are not required to have the same inactive ingredients), they are on average 80-85% less expensive than are their brand name counterparts.
Given that this case implicates not only patent law broadly but a multi-billion dollar industry affecting the majority of American consumers, the case, while at face value not the stuff of landmark holdings, could have monumental implications. And with a continued eight-member bench, should a 4-4 split arise in this instance, the Federal Circuit ruling would hold, favoring the position of insurers and generic companies.
What the Supreme Court is taking on specifically is a 2011 law, the Leahy–Smith America Invents Act (AIA) (PL 112-29), bipartisan legislation that governs the challenging of patents and which was the most marked development in patent law in decades. Among other things, the law provided for inter partes review, according to which patent challenges may be heard by an appeals board within the United States Patent and Trademark Office, as opposed to through costly and time-consuming litigation. The setting in which patents are challenged is important given the standard of review that is applied, with courts in litigation settings presuming patents to be valid and understood by their "plain and ordinary meaning," while appeals boards under the 2011 AIA interpret patents more broadly. The consequence is that with a specific claim by a patent holder (a condition favoring patent holders), it is more difficult for competitors to argue that the claim isn't novel or important, and there is the general complexity of different standards of review for the same claims in different legal venues, which thus creates uncertainty in the legal environment.
So what does this have to do with pharmaceutical industry?
Patent law governs much of the dynamic between the brand prescription drugs that are manufactured and the much cheaper generic versions of drugs that are comparable. It protects drug manufacturers in that they are permitted to exclusively sell their drugs at their chosen price (let's face it, the maximum price that the market will permit) to boost profits and recover research and development expenses before other companies are permitted to market generic versions (for example, marketing Klonopin (brand) vs. clonazepam (generic).
Should the Supreme Court overturn the Federal Circuit opinion, pharmaceutical companies argue that it will be more difficult for them to recoup expenses for drug manufacturing, research, and development, while health insurers and generic drug companies urge that the lower court ruling be upheld so as to facilitate the introduction of more generic drugs into the market and thus reduce consumers' cost of prescription drugs (for more, see full article at STAT News).
There is no doubt that drug manufacturing is expensive. Those in favor of patent protections held, "In the twenty-first century, it costs an average of $2.6 billion to develop a new drug... Meaningful patent protection is required to justify that investment." A question raised by insurers and those manufacturing generics, however, is whether drug manufacturers are exploiting those protections to prevent generic competitors from entering the market, given that market competition will lead consumers to opt for the inexpensive (or less expensive) versions. Not surprisingly, the implications for consumers is striking. In 2015 alone, 4,065,175,064 prescriptions were filled in the United States, with those prescriptions yielding retail sales of $286,797,651,607. In 2011 alone, 4.2 billion prescriptions were written, with 34% of American adults taking at least one prescription drug and 11.5% of American adults taking 3 or more prescription drugs. Given these numbers, it is not hard to imagine why the ability to take a generic version of one, and especially of three, prescription drugs every month would aggregate to a large financial difference when it might matter greatly. in fact, 10.5% of those earning under $25,000 annually take four or more prescriptions, compared with 20% of those making $100,000-149,000 annually taking only one prescription. And while generic drugs are required to have the same active ingredients as do brand name drugs (though are not required to have the same inactive ingredients), they are on average 80-85% less expensive than are their brand name counterparts.
Given that this case implicates not only patent law broadly but a multi-billion dollar industry affecting the majority of American consumers, the case, while at face value not the stuff of landmark holdings, could have monumental implications. And with a continued eight-member bench, should a 4-4 split arise in this instance, the Federal Circuit ruling would hold, favoring the position of insurers and generic companies.
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