I-MAK’s Distorted View of the U.S. Patent System

In an opinion piece published at CNBC.com, Tahir Amin — co-founder of I-MAK — blames the U.S. patent system for our country’s “high drug prices.” The author commits many of the same errors we see regularly from critics of the biotech industry.

For example, he ignores the fact that the trend on prescription drug costs is actually heading in the right direction. Not surprisingly, he also neglects to mention that insurance companies have continued to shift more prescription drug costs onto patients through higher deductibles and co-insurance requirements.

Setting aside Amin’s flawed approach to prescription drug pricing, his views on the patent system and the prescription drug ecosystem are severely skewed and perhaps more dangerous to the future of biomedical innovation.

Patent “evergreening” is a red herring. Amin and others claim that brand name drugmakers are gaming the system by receiving additional patent protection for frivolous add-on inventions. But the facts tell a different story. According to academic studies, there are on average only 2.5 “secondary” patents per drug, and more than 75% of these secondary patents were filed before the drug received FDA approval. These are not “new patents on old drugs” as critics want us to believe. What’s more, these patents usually relate to valuable clinical improvements, such as supplying a drug in a special dosage form to patients with special needs.

Generic medicines are coming to market at a record rate. If there is some coordinated effort by the biotech industry to block generic competition, it isn’t working.

According to representatives of the generic drug industry, 89% of all drugs dispensed in the United States are generics. As OECD health statistics show, this far exceeds the share of generics sold in other countries, such as the United Kingdom (83%), Germany (81%), Canada (73%) and France (30%).

Meanwhile, FDA Commissioner Scott Gottlieb recently praised his agency for approving the “highest ever number of generic drugs” last year (more than 1,000 generic approvals). Once generic medicines are approved, they are gaining greater market share more quickly than ever before. And according to a report in the Journal of Medical Economics, the time it takes for a generic medicine to reach the market has remained steady for the last two decades.

I-MAK wants innovation, but wants to punish innovators. How else to explain I-MAK’s attempts at filing patent challenges against the company that recently discovered the first cure for hepatitis C? Amin balks at the cost of the cure, but omits several important facts.

  • He cites the list price of the cure, but any honest review of the facts will show that this is almost never what the drugmaker makes or what patients pay. That’s because every day drugmakers provide significant rebates off the list price of the drug to help promote broader patient access. These savings reached an estimated $154 billion in 2017, and the question is whether insurance companies and middlemen are passing the savings along to patients.
  • Competition from other innovators is driving down prices, and the cure for hepatitis C is a great example. Less than two years after the first hepatitis C cure hit the market, the average discount to payers was roughly 50% due to intense market competition from other drugmakers who soon released their own innovative cures. Today, Hepatitis C patients have multiple medicines to choose from at a fraction of the cost of the first treatment and a more than 90% chance of beating the disease.
  • Third, and perhaps more important, the costs associated with not curing hepatitis is far greater and more devastating. Before a cure for hepatitis C hit the market, the cost of treating the disease ranged roughly between $155,000 and up to $489,000. Today, the cost of care for a patient with the disease is approximately $60,000. Thanks to biomedical innovation, a cure for a deadly disease is saving lives and saving money throughout the health care system. Yet insurers still discriminate against those who need treatment, despite the benefit it provides patients and our health care system more broadly.

Our nation develops more new medicines than the rest of the world combined (57% of all new medicines to be exact), thanks in no small part to a patent system that rewards and protects innovation. These are facts Amin appears willing to ignore, because it fits well with his organization’s mission of paying lip service to biomedical innovation while pursuing an agenda that threatens the discovery of new cures and treatments. Patients and policymakers: Beware.

AHIP Cherry Picks Data on Prescription Spending

“If you torture the data long enough, it will confess.” That famous line from economist Ronald H. Coase is perhaps the most apt summation of the recently released report by the insurance industry’s lobbyists at America’s Health Insurance Plans (AHIP), which claims to find that prescription drugs accounted for 22.1% of each premium dollar in 2014.

In examining the AHIP numbers, several facts omitted in the report must be highlighted.  First, 2014 was an outlier year in terms of prescription drug spending, due to the introduction of transformative new Hepatitis C cures, which temporarily drove prescription spending growth noticeably higher as many patients with this debilitating, difficult to treat, and costly disease sought to take advantage of these breakthrough cures. What’s more, the more recent market entry of competing next-generation Hepatitis C therapies have driven the net prices for such drugs  down by roughly half compared to their original list prices.

In addition, payors are increasingly making use of aggressive utilization management techniques to further drive spending down – including for these Hepatitis C cures. A recent Trio Health analysis showed that denials of coverage are rising despite the fact that these Hep C drugs have become less expensive. Treatment “non-starts” for prescribed Hep C drugs for patients with commercial coverage have grown exponentially, from 6% in 2014 to 39% in 2016, with 80% attributed to denials of coverage – more evidence of insurer discrimination.

Other reports cast doubt on AHIP’s 22% figure. An Avalere analysis of 2014 allowed claims in the individual and small group markets found that prescriptions accounted for only 17% of claims. And because health insurance premiums cover additional costs not described in the Avalere analysis – such as administrative costs and health insurer profits – the  proportion of prescription drugs relative to all components of premium for this population is likely much lower than 17%.

Recently released data from the Centers for Medicare & Medicaid Services’ (CMS) National Health Expenditure Projections also throws cold water on the notion that prescription drug spending is growing unsustainably. CMS revised its 10-year projection of prescription drug spending downward by $18 billion, and projects that it will grow roughly at the same rate as total U.S. health care spending over the next decade. Highlighted separately from the health expenditures data, CMS  also has projected that drug pricing growth in 2017 will be a mere 1.6 percent, the lowest inflation rate for drugs in a decade.

Recent reports from two major pharmacy benefit managers – comprising a majority of the employer market for prescription drugs – are consistent with the CMS findings. Express Scripps and Prime Therapeutics reported prescription spending increased last year by just 3.8 and 2.5 percent, respectively. Meanwhile, overall national healthcare spending rose 4.8 percent, according to CMS.

While net price and overall spending growth for drugs continue to moderate, insurers are under increasing scrutiny for the role they play in driving up patient out-of-pocket costs for medicines. Lawsuits against UnitedHealth and Cigna allege that their prescription benefit design can require that patients pay co-pays far in excess of the actual cost of the drug – with the insurer pocketing the difference. Insurers also have faced criticism for discriminatory formulary design, particularly against patients with high-cost health conditions such as HIV and Hepatitis C.

To learn more about the costs and value of innovative medicines – including how patient out-of-pocket costs are really determined – visit BIO’s new website, http://www.drugcostfacts.org.