How Do We Afford New Blockbuster Drugs? Let Old Drugs Go Generic

This month, the U.S. Food and Drug Administration approved the first new Alzheimer’s drug in 20 years, and while its effectiveness is still being explored, its reported $56,000 annual price tag reinforces the massive prescription drug cost problem facing U.S. taxpayers.

Even before this new drug entered the market, Medicare Part B spending by the federal government cost taxpayers $37 billion in 2019 alone. If even half of the Americans newly diagnosed with Alzheimer’s this year began treatment with this new drug, Aduhelm, the cost to taxpayers would be an additional $14 billion per year for that single drug. Most of those suffering from Alzheimer’s receive prescription drug coverage from Medicare, meaning this one drug could easily push Medicare Part B spending to more than $50 billion per year. This new approval comes as the federal government has necessarily added trillions to the government debt to combat and recover from the COVID-19 pandemic.

It’s also an especially big problem for our state governments. As The Atlantic pointed out recently, “states could face hundreds of millions of dollars in unanticipated Medicaid spending. That’s an especially big problem because, unlike the federal government, states aren’t allowed to run a budget deficit. To pay for Aduhelm, they’ll have to either raise taxes or (more likely, given today’s political environment) cut spending on education, infrastructure, and health care.”

Our drug system is based on a simple deal: New drugs are granted temporary monopolies to reward companies for undertaking the risk and expense of discovering them. The knowledge of how to make those drugs then becomes available to the public, so that competition will enter. This competition leads to an 80 percent price reduction, on average, for American patients through the availability of more affordable generic and biosimilar medicines.

Anti-competitive games played by some brand-name drug companies can prolong monopoly prices on older brand-name drugs even as newer drugs enter the market. While there may be good reason to reward new drugs with high profits, the health care system is running out of money to pay for new innovations due to these anticompetitive games.

Tactics such as patent thicketing are used to exploit legal loopholes within the patent system to extend a drug’s monopoly far beyond what Congress intended. These types of practices subsequently block generic competition and are one of the key factors today in high drug prices. In fact, brand-name drugs represent only 10 percent of prescriptions but 77 percent of drug spending. Without enough generic entry, our total drug spending will only continue to increase at an unsustainable rate.

AbbVie recently faced tough questions before the House Oversight Committee. AbbVie’s strategies are well-known within the industry due to the sheer volume of patent applications they file to protect their drugs. For example, AbbVie has filed an estimated 165 patent applications on its cancer drug Imbruvica to extend its monopoly for at least 29 years. Another one of AbbVie’s drugs, Humira, has seen over 240 patent applications filed to prevent competition for up to 39 years. Over time, this practice has allowed AbbVie to keep competition out of the U.S. marketplace while other countries have enjoyed price cuts of up to 80 percent due to access to more affordable biosimilars.

All the while, American tax dollars and federal funds contribute to research and development of new drugs – including around COVID-19 treatments – yet patient access and savings generated through competition from generics has so far been of little priority in the marketplace.

Thankfully, however, there are solutions to balance competition with innovation. Proceedings conducted by the U.S. Patent and Trade Office’s Patent Trial and Appeal Board known as the inter partes review process are instrumental in cancelling erroneously issued patent claims that are used to block generic competition, making them unaffordable or inaccessible to many patients. This process has unfortunately been weakened due to misinterpretations of the law that created it — the America Invents Act. However, new legislation could restore and strengthen this process as a tool to lower drug prices.

Congress has long struggled with how best to reduce drug prices, and those debates will undoubtedly continue. However, it should be a no-brainer to unlock the ability to use market-based, pro-competitive tools to lower drug prices. This can be done through a simple legislative fix that clarifies and strengthens the already existing provisions in the America Invents Act. Addressing patent abuse means prices on older drugs will go down so that our government and patients can afford new ones.

Matthew Lane is the executive director of the Coalition Against Patent Abuse

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