Why Americans pay more for prescription drugs than anywhere else globally

Illustration: Yogendra Anand / CSE

One’s heart bleeds for American patients. They pay the most for prescription drugs compared to all other jurisdictions despite many ironies: that a very large number of life-saving drugs are discovered by public-funded research in US universities and institutions; that these pharmaceuticals are made in the US and by leading US-based manufacturers.

Why is this so? It is because of a clutch of related reasons starting with the fact that there is no regulation of drug prices by the government but most of all from exploiting a patent system that allows pharma companies to keep out competition and keep prices sky high. That’s the root of the problem.

A case study of how drug companies manipulate the patent regime is AbbVie with its blockbuster anti-inflammation and arthritis drug Humira. The pharma giant has created a patent thicket around this top-selling biological medicine by applying for an incredible 312 patents on this single drug and obtaining 166! And most of these patents (94 per cent) were sought after the drug was approved by the authorities.

This has allowed AbbVie to garner revenues of $208 billion since the patent was first granted in 2002. But here’s the most disturbing aspect of Humira: two-thirds of this revenue was earned after its primary patents expired in 2016.

That was when patients and health insurance companies that pick up the tab for the drug were hoping to benefit from the less expensive biosimilar versions of the drug that were all set to launch in the US. But it did not happen.

By shrewdly exploiting the US patent system, AbbVie, blocked competitors from entering the market by using lawsuits against potential competitors and forcing them to accept settlements to delay their entry till 2023. The first of the biosimilar versions of Humira has only now been launched in in the US in February 2023 — almost seven years after patent expiry. AbbVie is not the only company to do so.

In its 2022 report, Overpatented, Overpriced, I-MAK, a non-profit that keeps tabs on drug patents, provides a chilling expose of how America’s top 10 drugs use various stratagems to extend the patent life. One such is the accumulation by innovator companies of  a vast number patents on a single drug through dense patent thickets or a set of overlapping set of patent rights which are difficult for follow-on companies to cut through.

Excessive patenting to protect their monopolies and excessive profits. Because the patent thickets pose a significant legal and financial risk to generic and biosimilar companies wanting to enter the market for high-cost drugs, these “are more likely to enter into settlements with the branded company rather than wait for a final ruling, regardless of the strength of their case,” says the report.

Most of these later patents relate to the medication’s formulation or manufacturing process, a type of patent evergreening that India’s law specifically excludes. Only a handful of countries have followed India’s example in specifically listing those claims that are not patentable since Washington employs relentless pressure to export its patent system at the global, regional and individual level.

Ironically, as the I-MAK report points out, it is an unsustainable system in which the public is paying the price. “Astronomical prescription drug costs are straining the healthcare system and the budgets of American families and employers. Prescription drug spending has tripled in the last two decades to over $500 billion today, and is poised to reach nearly a trillion dollars in the next ten years.”

I-MAK co-founder Tahir Amin says “abuse of the patent system is at the heart of America's drug pricing crisis”. Since the law permits drug makers build anti-competitive patent thickets and deploy other abusive methods to milk the system, recourse to the courts does not help.

In August last year, a US Court of Appeals ruled that there cannot be a cap long as the owner do not use the patent estate in a way that violates the antitrust law. That is a debatable point since monopolies of this nature do not allow fair and free competition. The point is that health insurers who challenged the Humira patent thicket lose the case.

Their argument was that 312 patents (claims filed) are so daunting that no generic manufacturer has dared enter the market. Even if some of patents could be declared invalid, no pharma company had the financial resources to hack through the thicket.

But the court was clear. As long as the patents are valid, asserting them in litigation can’t be a violation of antitrust laws. If AbbVie has 312 inventions (on a single drug?) why can’t it hold that many patents?”

I-MAK, however, contends that granted patents allow drug makers to block competition. “The 744 granted patents on America’s ten top selling drugs give pharma companies substantial power in litigation and negotiations to keep lower cost generic and biosimilar alternatives off the market for longer, and out of the hands of the American public.”

Some lawmakers subscribe to this view. A bipartisan group senators wrote to the US Patent Office director that “the patent act envisions a single patent per invention, not a large portfolio based on one creation.”

As countless patients even on healthcare are forced to go without critical medicines because of the high costs, many senators from both parties have moved five bills to boost competition in the industry and improve access to more affordable prescription drugs. In early February, all five bills were passed by Senate Judiciary Committee. 

Among these is the Preserving Access to Affordable Generics and Biosimilars Act to limit anticompetitive “pay-for-delay deals” that prevent or delay the introduction of affordable follow-on or generic versions of branded drugs. Biosimilar and interchangeable biologics are also covered.

Another is the Stop STALLING Act, as amended, to enable the Federal Trade Commission to deter filing of sham citizen petitions that interfere with approval of a competing generic drug or biosimilar.

But the most significant is the Interagency Patent Coordination and Improvement Act would establish a task force between the US Patent Office and the Federal Drug Administration for better communication and coordination.

Currently there is limited collaboration between these agencies although both play a critical role in matters related to patents and competition. Perhaps we are seeing the beginning of a change that will impact lives everywhere.

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