NCPA - National Center for Policy Analysis

Drug-Industry Rule Would Raise Medicare Costs

September 8, 2015

The pharmaceutical industry is seeking a law change that could cost the federal health care system approximately $1.3 billion over a decade by delaying the release of generic medications.

Under the current InterPartes Review system (IPR), which started in September 2012, judges working for the U.S. Patent and Trademark Office evaluate patent challenges more rapidly than it would take traditional court proceedings. The purpose of this measure was to combat nonoperating companies that profit by accusing companies of patent infringement, also known as patent trolls.

Pharmaceutical trade groups such as PhRMA or the Biotechnology Industry Organization, are requesting Congress to exempt drug patents from being challenged through this process because generic drug makers are taking advantage of it.

Many lawmakers as well as consumer advocates and health insurers oppose this move because it would increase spending in drugs and would delay the launch of certain generic products.

On the other hand, drug developers claim:

  • The IPR is being used to circumvent an established system for settling patent disputes between generic and brand-name drug companies.
  • New drugs won't be developed if the funds required to support research are not available.
  • IPR challenges have created uncertainty as drug makers evaluate whichexperimental drugs to invest in.

IPR challenges are usually solved in 15 to 18 months versus 30 months in the conventional system. Opponents of the exemption argue that pharmaceutical companies only want to delay the availability of generics and believe the exemption would be really bad for consumers and for the health system. Yet, the impact on the industry is not clear because most drug patent cases are still very lengthy.

Source: Joseph Walker, "Drug-Industry Rule Would Raise Medicare Costs," Wall Street Journal, August 31, 2015.

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