How many patents on a single drug is too many? Scholars, activists, and politicians have debated the question for decades. This week, a panel of the US Court of Appeals for the 7th Circuit gave a firm answer. As long as the owner doesn’t use what’s known as the patent estate in a way that violates the antitrust law, wrote Judge Frank Easterbrook, “the patent laws do not set a cap.”
He’s right.
The litigation involved AbbVie Inc. and its wildly successful arthritis drug adalimumab, marketed in the US as Humira. The principal patent on Humira expired in 2016, but AbbVie has obtained some 132 more, of which the great majority were granted in 2014 or later. Most of these newer patents relate to the medication’s formulation or manufacturing process. The last of them expires in 2034.
The practice of adding new patents to an old drug, though common in the pharmaceutical industry, is often derided for creating what critics call a “patent thicket” — which in turn is claimed to have anticompetitive effects. And Humira, with annual sales in excess of $20 billion, has been labeled “the poster child” for patent thicketing. Even the then-acting commissioner of the Food and Drug Administration was moved to complain last year about Humira’s “vast patent estate.”
The case decided by the 7th Circuit was filed by a group of health plans who argued that by obtaining so many patents, and asserting them in litigation against would-be market entrants, AbbVie violated the Sherman Act. The trial court dismissed the suit and, this week, the 7th Circuit agreed that the dismissal was proper.
The simplest way to understand the plaintiffs’ contention is this: The 132 patents are so daunting that no generic manufacturer has dared enter the market. Even if some of patents might turn out to be declared invalid, no pharmaceutical company wants to spend resources hacking through the thicket they create. (See how the metaphor works?) As a result, even though Humira’s original patent has expired, the drug has no competitors.
Sounds impressive. But Judge Easterbrook, who has long been one of the nation’s most renowned antitrust scholars, makes short work of the plaintiffs’ claims.
In the first place, the thicket might be less daunting than plaintiffs seem to think. Most drugs are what are known as synthetics, and the Food and Drug Administration is required to suspend the approval process if a patent infringement suit is filed against the applicant. But Humira is a biologic, isolated from natural sources. Since 2007, federal law has allowed the FDA to approve biologic applications even if an infringement suit has been filed. Moreover, once the agency gives its blessing to the “biosimilar” drug, the maker has the right to launch “at risk” — that is, to market the biosimilar even as the suit moves forward.
So why haven’t any competitors launched? The plaintiffs assert that other companies have been frightened off by the thicket created by all those patents.
Judge Easterbrook is unpersuaded: “But what’s wrong with having lots of patents? If AbbVie made 132 inventions, why can’t it hold 132 patents?” As long as your patents are valid, he reasons, asserting them in litigation can’t be a violation of antitrust law. Are they valid here? All 132 were approved by the Patent Office, and, as the court reminds us, “every patent comes with a presumption of validity.”
True, a defendant in an infringement suit can challenge the validity of the underlying patents. Why hasn’t that happened here? After all, when each potential competitor approached federal regulators, AbbVie sued immediately. Shouldn’t the defendants have responded by trying to invalidate some or all of those 132 patents?
Maybe. But the lawsuits never reached that point. Instead, AbbVie agreed to settle each of its lawsuits under terms that allow the biosimilars into the market in 2023 — well ahead of the expiration of the last of the patents on Humira.
Such “acceleration clauses” have long been common in settlements of pharmaceutical infringement cases. Often the patent owner will allow entry before the patent expires but pay the generic maker to delay entry for a few more years. Critics contend that such agreements are illegal under the antitrust law, a question the US Supreme Court has left open. Here, however, no money has changed hands. As Easterbrook puts the point, “0 + 0 = 0.”
The 7th Circuit’s reasoning is sufficiently crisp and clear that one is moved to wonder why the lawsuit was filed at all. True, the litigation began before the pandemic, meaning that Big Pharma hadn’t yet developed the Covid vaccines and become a hero.
Or maybe the suit was an effort to lower drug prices by proxy. That would be easy to understand. The prices are often high. But one study after another has found that the social benefits of a successful new drug, even a relatively expensive one, almost always far outweigh the costs.
Even if one is unpersuaded, let’s not forget that Humira’s biosimilar substitutes will be available next year. The short of it is that the federal scheme works. The law promotes competition among drug companies, and there’s no more efficient tool for moderating price.
Bloomberg
