Patents are necessary to spur innovation. Otherwise, rival companies could sell iPhones at a huge discount due to not having the expense of their development. The result would be less innovation as no company would have an incentive to create new products since they could never recoup their investments. Even with patents, competition still exists. If you do not want to buy the newest Apple iPhone 17 you can choose a Galaxy S25 that was designed to provide similar functionality. Every year a new model smartphone comes out. My old iPhone 8 is still protected by patents but has been superseded by nine newer, more advanced models. Elon Musk reportedly said, “patents are for the weak.” Although his companies hold numerous patents his point was that new, improved technology is the best defense against copycats.
While patents are designed to reward innovation, patents can also stifle innovation. Take drugmakers for example. It is expensive for drugmakers to innovate. Each new product as to go through Phase 0, 1, 2 and 3 testing. With each new product, drug companies must apply for a new drug application, called an NDA. If Apple develops a new and improved functionality, it can be incorporated changes into next year’s model. Not so with drugmakers. If a drugmaker discovers a new tweak to an existing drug, the improvement is probably shelved for later use in the next version of the drug years in the future. Drugs facing generic competition spurs innovation. That is the purpose of patent expiration; make enough money to repay the risky investment but later compete on price or develop a newer drug.
Drugmakers have long used the U.S. Patent Office offensively. A patent lasts 20 years in most cases. Drug companies often complain that once they get a drug approved, there is only about seven to 12 years left on the patent. Nowadays drug makers generally file multiple patents on each new drug, many after the drug is already on the market.
Forty years ago, new drugs had an average of just under two patents (i.e., 1.8) to protect them from generic competition. Less than 30 years later that had tripled to 6.1 patents per drug. It has gotten much worse since then. As of 2021 blockbuster drugs had an average of 71 patents. This represents a patent proliferation strategy, sometimes referred to as a patent thicket. Additional patents that come later extend the patent clock. The more patents, the more avenues to fight patent expiry. Patent proliferation should not be allowed by the U.S. Patent Office.
Just over 90% of the drugs Americans take are generic drugs that have lost patent protection. Yet, generic drugs represent less than 20% of drug spending. Generic drugs are a bargain. By contrast, about 5% of drugs – mostly biological specialty drugs – consume more than half of the nation’s drug budget. The FDA recently announced plans to speed up the approval of biosimilars, copies of biologic drugs to create savings like how generic drugs create savings for consumers. The following is from Kaiser Family Foundation:
Under the guidance the FDA proposed, the agency would begin overseeing biosimilars similarly to the way it regulates generics, which are copies of simpler molecules, usually pills. This change in approach could allow companies to save up to $100 million for each drug they develop, enabling them to make more products for underserved patients, said Stefan Glombitza, CEO of Formycon AG, a maker of biosimilars based in Germany.
But President Donald Trump’s patent office is working at cross-purposes with the FDA, biosimilar makers charge, by narrowing the opportunities for companies that try to challenge the throngs of patents that brand-name drugmakers file to protect their products from competition.
In the past, biosimilar makers have been able to invalidate some of those patents through a sped-up process called “inter partes review,” or IPR. But the new administration has denied most IPR requests and issued a proposed rule in October that makes IPRs harder to get.
Without patents innovation would stall since no firm could enjoy exclusive benefits from their innovation. Less understood is that too much patent protection also stalls innovation, as firms can hold off generic competition and have less reason to discover new products to keep income streams flowing. Congress, the U.S. Patent and Trademark Office, and the FDA should work together to close the loopholes and reduce patent abuse that slows generic competition, even when the initial patient on a drug has expired.
Read more at Kaiser Family Foundation Health News: FDA’s Plan To Boost Biosimilar Drugs Could Stall at the Patent Office