The New York Times Is at It Again Regarding Patents

By Kevin E. Noonan --

It's always good to have a villain, a "Snidely Whiplash" or other cartoon caricature to support an argument, especially if the issue is complex and fails the cocktail party test.*  The New York Times is (in)famous for these types of intellectually lazy arguments when it comes to patents (see "Top Stories of 2022: #8 to #10"; #9. New York Times Reopens Attack on U.S. Patent System), and they were at it again on Sunday in a front page piece on Humira, a drug used for a variety of ailments that has brought relief to millions of patients who otherwise suffered with earlier, less effective drugs.  (At least in the past the Times has had the good sense to relegate such articles to the Op-Ed pages.)

The problem seems to be that Humira has made a pharma company a lot of money (purportedly $116 billion), that the drug is expensive (said to cost upwards of $50,000/year) and that the drug company has amassed a large number of patents to protect its intellectual property.  The bigger problem is that the article fails to recognize several important facts relating to the circumstances under which Humira's makers made this money and amassed its patent estate (or "thicket" as the anti-patent crowd likes to call it).

The first of these is that until 2010 there was no pathway for "generic" (accurately, "biosimilar") competition for innovator biologic drugs (the class of drugs including Humira).  This has nothing to do with patents; the FDA could not approve a biosimilar competitor by law until the Biologic Price Competition and Innovation Act (BPCIA) was passed as part of Obamacare (see "Follow-on Biologics News Briefs - No. 11"; "House Passes Health Care Reform Bill -- Biosimilar Regulatory Pathway Makes Cut, Pay-for-Delay Ban Does Not").  Thereafter, the FDA needed to develop guidelines (see "FDA Looks to Multiple Sources, Including EMA Guidelines, in Developing Biosimilar Approval Standards") and Guidances (see "FDA Publishes Draft Guidelines for Biosimilar Product Development"; "FDA Releases "Final" Guidances for Industry regarding the Biosimilar Approval Pathway") establishing the standards under which biosimilar drugs could be approved; while still on-going for certain types of biosimilars these efforts took about 5 years to be promulgated (the FDA engaging with stakeholders to ensure the efforts were fair and robust enough to minimize the possibility of approving drugs that were not "similar enough" to avoid safety, potency, or efficacy issues).

The first approved biosimilar was Zarxio from Sandoz, which competes with Amgen's Neupogen, an adjuvant for cancer patients for treating side effects of chemotherapy (see "FDA Approves Sandoz Filgrastim Biosimilar").  Humira biosimilars have been pursued by several companies and FDA has approved seven (see, e.g., "FDA Approves Amjevita -- Amgen's HUMIRA® Biosimilar") and this table:

(With one of them, Cyltezo, being designated as an interchangeable biosimilar, see "FDA Approves Another Interchangeable Biosimilar Drug", which is highly sought after because it has advantages, see "FDA Issues Final Guidance Regarding Biosimilar Interchangeability", similar to what can be achieved for a small molecule drug.)

Immediately it will be clear that a great deal of the $116 billion cited to raise the temperature of the debate (and the purported perfidy of Humira's producer) was made during the time that it was impossible to compete, and that once a pathway had been opened several companies took the steps to do so.  But although there was this large patent estate accumulated when litigation ensued, the number of patents asserted and claimed was but a minuscule portion of the estate.  As for types of patents accumulated, much is made in the article about the patent on the active pharmaceutical product (the drug) expired in 2016, as if that was the only patent upon which Humira was entitled to rely.  The first source of error in this assertion is that most of the current biologic drugs were approved so long ago that they similarly no longer have patent protection on the drug molecule itself.  But due to the complexity of producing these drugs commercially, they all have protection on those methods (without which the drugs could not be produced and regarding which each sponsor company invested money, time, and effort to develop).  Humira is not alone nor an outlier on such protection and these patents protecting how the drugs are made are no less worthy than the drug patent itself.

The irony of ironies in this story printed this Sunday is that this Tuesday, January 31st, those seven Humira biosimilar-approved companies will be able to sell their biosimilar Humira free of all the patents in the patent estate, pursuant to a settlement agreement (see, e.g., "HUMIRA® Biosimilar Update -- Settlement in AbbVie v. Amgen Case Announced and AbbVie v. Boehringer Ingelheim Litigation Begins"; "AbbVie Announces Global Resolution of HUMIRA® (adalimumab) Patent Disputes with Sandoz"), with others as yet not approved being licensed to go on the market on July 1st and September 30th of this year.  As mentioned above, the overwhelming number of the Humira patents were not asserted but could have been asserted to prevent these Humira biosimilars from being marketed for many more years.  Inconsistent with the bad guy caricature promulgated by the Times, the cases were settled, benefiting the public at the real-world expense of Humira's drug maker.

Two other points bear mentioning.  First, the 7th Circuit Court of Appeals decided last year that the Humira patent estate was not an antitrust violation and thus fear of antitrust liability is not a factor in these settlements (see "Mayor and City Council of Baltimore v. AbbVie Inc. (7th Cir. 2022)").  The second point is that the FTC in a 2009 white paper (see "No One Seems Happy with Follow-on Biologics According to the FTC") predicted that the price reduction benefit of biosimilars would be about 30%, that is that the cost of a biosimilar equivalent to a patented biologic drug would be about 70% of the reference biologic drug price.  With admittedly few data points, that prediction has been borne out so far, meaning that instead of $116 billion the cost for an equivalent period of time an amount of Humira biosimilar sales can be expected to be $82 billion.  As Sen. Dirksen would say that is real money but hardly the type of windfall public benefit that small molecule drug generics represent (which sell for about 10% of the innovator price).

The real issue is that the development cost of biologic drugs is much higher than traditional small molecule drugs as is the cost of producing them.  Everyone thinks "drugs cost too much" and want them to be cheaper but the reality (in a capitalist society) is that there needs to be sufficient prospect of return on investment to justify development.  The entire economic argument is TLDR (which is why articles like the one in Sunday's Times is both easy and incomplete); for a good and accurate explication of the patent side of this issue, Professor Adam Mossoff at George Mason University has published a report for the Hudson Institute (see "Unreliable Data Have Infected the Policy Debates Over Drug Patents"), which, while generating less heat than the Times article, does shed enormously more light (see "Faux-Populist Patent Fantasies from The New York Times").  Suffice it to say that while it may make the medically self-righteous feel better, it does little to advance the real debate about how to ensure that people who need drugs (and medical care generally) can get them.  That's too complicated for a lazy winter Sunday afternoon reading the Times, but the issue deserves more than this shallow level of analysis and rhetoric.

* Where you are likely to be talking to yourself in under five minutes if you bring up the subject.

Comments

[Dan Feigelson]

People still read NYT?

Kevin, I've said it before, and you guys have refused to print my conclusion because I don't phrase it nicely, but I'll try again: take away protection on people's investments, and there won't be new drugs, not small molecules and certainly not biologics. But we're not going to see change until the loved ones of people on SCOTUS or in Congress die from lack of treatment for something that might have had a treatment (or something that could have been detected earlier) had IP protections not been eviscerated by SCOTUS decisions and Congressional inaction.

[Kevin E Noonan]

The other possibility/ likelihood is that the Court will change its mind only when the WSJ has a headline "Supreme Court Guts US Industry"

Thanks for the comment

[Girish Malhotra]

Kevin: There are two separate issues. Brand and Generics. Brand drugs will be sold at the highest price a customer who is part of our mutually subsidized healthcare system. No one can control that. Inefficiencies of the development and manufacturing are passed on. PBMs also capitalize on that pathway.

Generics is a totally different animal. They constitute the most medication used in USA. PBMs have and will prevent direct marketing of the FDA approved drugs as their profits will gravely suffer. FDA is part to blame as it has no play book to prevent less than quality drugs except for issuing 483s that have no TEETH to prevent poor quality drugs. System has to change from the current to the method outlined (http://bit.ly/34RYypH). Yes there will be some initial hiccups but everyone will shape up once strict controls are placed. FDA does not want to do anything as its ex folks become high priced consultants, a life long benefit.

Game rules have to change and till that happens the discussion will continue.

[skeptical]

I'm with Mr. Feigelson, and indeed would go further that most ALL of what the Times attempts to pass off as news is nothing more than propaganda according to a desired narrative.

Not just patents -- pretty much ANY topic.

If 'journalism' were the 'there,' there would be NO there, there.

[Kyle]

No one seems to have noticed a key event in the Humira patent litigations: the PTO refusing institution of IPR on several of Humira's super-broad formulation patents. One may criticize that decision, but I would bet that drove the settlements. The formulation patents could not be designed around (unusual for biosimilars) and only expired last summer.

ANDA conventions have carried over to some extent to BPCIA, and it seems like follow-ons have usually not launched at risk against formulation/MOT patents (vs. process).

[Bob Billings]

Above comment about NYT and propaganda is spot on. And Kevin makes noteworthy points about Humira patents and actual dollars. But that said, there was some patent gamesmanship at Abbott/AbbVie in the early days. I have a McKinsey presentation that Abbott commissioned in 2010 laying out the planned Humira patent thicket strategy, namely a staggered rollout of patents claiming anything and everything that a "biosimilar company might possibly need" to develop and manufacture a biosimilar for Humira, even if "there is no intention of ever using the patent." The presentation includes slides from an Oct. 2010 company brainstorming session that resulted in the “Humira Idea Submission Program” kicked off in Dec. 2010...it was designed to incentivize the company’s scientists to increase the patent coverage for Humira. One of the slides list the incentive prizes – free I-pad for a patent submission, free Apple computer for patent award. Might fall under Gottleib's list of shenanigans.

[Kevin E Noonan]

Bob: I think your comments illustrate something pharma companies need to consider - you don't want to become another Myriad that acts within the law but run afoul of contemporary mores. Acting aggressively against competitors is fine, but when it can be made out that the public suffers the strategy becomes fraught with causing more trouble than it's worth.

Ironically, the complexity of biologic drugs and the "similarity" aspect has chilled acceptance by the front-line doctors who often have sick patients for whom the biologic drug has alleviated the worst symptoms of their illnesses and for whom doctors are understandably leery of changing their medication for fear that it won't work as well. And while biosimilars provide a cost reduction there are no $4/prescription sources of any biologic drug or biosimilar. Ultimately patents aren't significant enough to cause the price inequities unless they can be seen to be so by thicket behavior or other practices.

Going forward, the 12 year market exclusivity on the drug itself will likely be the way "profitability" will be measured. But in the face of a biosimilar pathway being enacted at the end of the drug patent life and 12+ years after approval, building a wall, or a thicket, or the metaphor du jour makes economic even if not societal sense.

Thanks for the comment.

[skeptical]

Outside of "Pharma," the so-called gamesmanship is known by a different phrase:

Strategic competition.

It is ONLY when there is a nanny-like, "but this is about human health" that the notion of competition is made to suffer.

Like MOST ALL OTHER competition, if one does not like what one's competitor's have done, there are several options:

1) pay the innovator their asking price.
2) use what was there before the innovator provided the advance.
3) INNOVATE ANOTHER WAY.

Something that the nanny-folk forget is that the blocking aspect of the negative right of patents is EXPLICITLY there for the very reason that option 3) provides the quantum benefit beyond the mere Quid Pro Quo.

So while I 'get' the tendency to have a (somewhat myopic) Pharma view, it is critical to keep in mind that patents serve a purpose well beyond Pharma, and indeed - talk to the very essence of human nature.