Patent Evergreening and the Response by the USPTO and FDA

by Emmaline Fisher, Associate Member, University of Cincinnati Law Review Vol. 91

I. Introduction

High prescription drug prices are a major problem within the United States healthcare system.¹ Recent data shows the rapid increase; in January 2022, the average list price was approximately $150 per drug.² In July 2022, the average list price was $250 per drug.³ During the twelve-month time period from July 2021 to July 2022, a recent report done by the U.S. Department of Health and Human Services shows that there were 1,216 products that had an average price increase of 31.6%, which far exceeds that time range’s 8.5% inflation rate.⁴ In theory, competition from generics should lead to a reduction in prices once the patent on a brand-name drug expires. Unfortunately, the patent system has been misused to extend the monopolistic protections that a patent provides. The most notable technique that many pharmaceutical companies use is called patent evergreening, where a company obtains a secondary patent on trivial changes in the drug. This article discusses the effects of patent evergreening and the potential solution proposed by the United States Patent and Trademark Office (“USPTO”) and the Food and Drug Administration (“FDA”) in response to President Biden’s Executive Order on “Promoting Competition in the American Economy.”⁵ Section II provides background on the patent system, current laws in place regarding incentives for generics and brand-name drugs, the concept of patent evergreening, and the USPTO’s and the FDA’s response to President Biden’s Executive Order. Section III discusses whether or not these efforts by the USPTO and the FDA are likely to be successful. Finally, Section IV concludes by describing the best possible solution.

II. Background

A. Short Introduction to Patents and the Policy Behind Them

Patents are a form of intellectual property that are meant to encourage innovation by providing a monopoly over an invention for a limited period of time, in exchange for an enabling disclosure.⁶ Because knowledge is intangible, it is difficult to prevent the use of an idea by another once it has been disclosed.⁷ The Patent Act provides the following requirements for patentability of an invention: it must be subject matter eligible, novel, useful, and non-obvious.⁸ According to Section 101 of the Patent Act, processes, machines, articles of manufacture, and compositions of matter are considered to be patentable.⁹ However, case law has long held that laws of nature, physical phenomena, and abstract ideas are not patentable.¹⁰ Novelty, which can be found in 35 U.S.C. § 102, essentially means that the invention must be new, and that there is nothing exactly like it in the prior art.¹¹ The utility requirement means that the application must specify a use for the invention.¹² According 35 U.S.C. § 103, inventions that are obvious, that is a person having ordinary skill in the art would think it obvious to combine the prior art to create the invention described in the application, cannot be patented.¹³ Case law attempts to clarify this standard.¹⁴ Essentially there must not be any teaching, suggestion, or motivation to combine prior art to create the invention, and the result of the combination of the prior art could not be considered predictable.¹⁵

Patents are meant to ensure that inventors are able to benefit from their inventive efforts.¹⁶ Researching and developing a pharmaceutical is incredibly expensive, uncertain, and time-consuming.¹⁷ Recent studies estimate that the average cost of researching and developing a new drug typically can range from less than $1 billion to more than $2 billion per drug, and the entire process generally takes more than a decade.¹⁸

Patents are meant to provide the inventor or assignee, in this case, the pharmaceutical company, with a monopoly over their invention for a limited time.¹⁹ This way, they are incentivized to disclose everything about the drug to the public in a manner that enables a person of ordinary skill in the art to replicate the invention.²⁰ Once the time period of essentially monopoly rights over the drug expires, generic manufacturers then are supposed to be able to enter the market with lower prices, and drive down the costs for consumers.²¹ However, companies within the pharmaceutical industry have found ways to manipulate the patent system to ensure a monopolistic exclusivity beyond the twenty year term that extends from the effective filing date of the original application.²² And, unfortunately, the USPTO does sometimes grant patents for things that should not receive a patent.²³ And, in granting these dubious patents, the USPTO gives those pharmaceutical companies an effective tool to block generic drug companies from effectively competing with them.²⁴ As a result, brand-name drug prices continue to stay high and even rise. Some of these tactics include patent evergreening, product hopping, and the creation of patent thickets.²⁵ Patent evergreening is the focus of this article.

B. The Hatch-Waxman Act

The Hatch-Waxman Act was passed in 1984 to establish the modern approval pathway for generic drugs. Before it was passed, the Federal Food, Drug, and Cosmetic Act had a regulatory approval route that could be completed by filing an Abbreviated New Drug Application (“ANDA”). However, since generic drugs had to receive independent proof that it was safe and effective, few generic drugs were approved, due to the high cost of trials.²⁶ The Hatch-Waxman Act provides incentives for generic companies to file ANDAs, while providing protections to brand-name pharmaceutical companies.²⁷ One of these benefits to brand-name pharmaceuticals consists of patent extensions of up to five years from the date of FDA approval, but the total protected time is capped at fourteen years.²⁸ However, this is not the only way pharmaceutical companies obtain extensions.²⁹

C. A Description of Patent Evergreening and its Implications

Patent evergreening is when companies take out new patents by simply changing a relatively trivial aspect of the original invention; here, pharmaceutical companies just slightly modify old drugs, and then obtain a patent on it to extend their protections.³⁰ While the companies producing generic drugs are still able to produce the older version of the drug with the expired patent, brand-name prescription drugs are heavily marketed, which influences doctors’ decisions when prescribing drugs to their patients.³¹ In theory, a pharmaceutical company could continuously extend the life of their brand-name drug by making insignificant changes.³² Examples of these insubstantial changes are: changing the drug to be taken once a day, instead of twice, slightly altering the formula, and changing the dosage amount of the drug.³³

A study conducted with data from 2005 through 2015 found that 78% of drugs with new patents were not new drugs, but rather drugs that were already in existence.³⁴ It is dramatically less expensive to obtain a patent on a minute change in comparison to developing a new drug.³⁵ Unsurprisingly, widely prescribed medications, such as pain medications, drugs to treat opioid addiction, insulin, and HIV medications are the most common medicines to undergo patent evergreening.³⁶

D. President Biden’s Executive Order and the USPTO’s and FDA’s Response

President Biden’s issued an Executive Order on “Promoting Competition in the American Economy” on July 9, 2021.³⁷ In this order, he states the following: “[T]oo often, patent and other laws have been misused to inhibit or delay — for years and even decades — competition from generic drugs and biosimilars, denying Americans access to lower-cost drugs.”³⁸ He then orders the FDA communicate with the USPTO on any relevant concerns relating to the patent system and how it may be used to delay generic drug competition.³⁹ The Acting Commissioner of Food and Drugs did this, and the USPTO responded with a list of initiatives that they plan on pursuing in collaboration with the FDA.⁴⁰

One of the first initiatives that the Under Secretary of the USPTO describes is that the USPTO will create formal mechanisms to work with other agencies, like the FDA.⁴¹ Specifically, there will be more discussions between the FDA and the USPTO on this topic, possible joint USPTO-FDA public engagement to collect stakeholder input, and ensure that the disclosures made to the FDA and the USPTO are complete.⁴² There will be more collaboration with the FDA on certain proceedings, and another look at current patent term extension practice.⁴³ This is currently required under 35 U.S.C. § 156.⁴⁴ Most importantly, the USPTO states that they will discuss with the FDA, other agencies, and stakeholders, pharmaceutical companies’ manipulation of the patent system through evergreening, patent thickets, and product hopping.⁴⁵

The USPTO also states that they will work to improve patent issuance procedures, to ensure that patents are more reliable.⁴⁶ This will be done by increasing the patent application examining time, providing patent examiners with more training and resources, improving communication between the Patent Trial and Appeal Board (“PTAB”) and the examiners, making information disclosure statements procedures more efficient, and applying increased scrutiny to continuation applications in large families.⁴⁷ The USPTO will also take another look at the use of terminal disclaimers to overcome double patenting rejections, and apply greater scrutiny in regards to whether the modifications fall under an obviousness rejection (essentially the variation on the original invention is deemed obvious, and unworthy of patent protection).⁴⁸ The USPTO also will compare the patenting process of drugs in the United States to that of other countries.⁴⁹ They will also work to make the process for third party submission of prior art more user-friendly and therefore likely to be utilized.⁵⁰ The USPTO will also improve the overall process for challenging patents, seek out more diverse viewpoints and increase public participation, and look into ways to create incentives for pharmaceutical companies while not unduly inhibiting generics from reaching the market.⁵¹

III. Discussion

Some argue that it’s the way Congress writes patent law that hampers the USPTO’s practices. Basically, that the patent examiners are only looking to see if the application complies with the law.⁵² However, improving the quality of patents that are issued by the USPTO is a critical step in preventing the practice of patent evergreening.⁵³ This can be achieved by increasing the amount of time that patent examiners spend on a patent, as well as improving their resources and access to information.⁵⁴ The proposals made by the Under Secretary of the USPTO in response to the Executive Order by President Biden and the letter from the FDA states that these changes will be considered.⁵⁵ Specifically, that they plan to increase patent application examination time, ensure that examiners are aware of prior art and PTAB proceedings that are related to the application, and improve examiners access to resources mentioned in information disclosure statements, and they will work to find ways to increase third party submissions.⁵⁶ By increasing the amount of information patent examiners have access to, theoretically, they should be able to recognize situations where a brand-name pharmaceutical company is attempting to implement a patent evergreening strategy by patenting trivial changes to a drug that would be obvious to a person of ordinary skill in the art.⁵⁷ The USPTO also states that they will increase the involvement of Quality Assurance specialists with continuation applications.⁵⁸ They will also look into the use of terminal disclaimers for overcoming double patenting rejections.⁵⁹ If these steps are taken, then potentially the prevalence of patent evergreening may be curbed.

The letter’s proposed changes, which included the allowance of third parties’ input into proceedings, may lead to low quality patents being found invalid.⁶⁰ Theoretically, PTAB could thwart the pharmaceutical companies’ evergreening strategy by finding their secondary patents to be invalid due to increased access to information and prior art.⁶¹

Ultimately, consistency in the obviousness inquiry will be critical in reducing patent evergreening. This is difficult when the obviousness standard is so subjective. A bright-line test on obviousness would greatly benefit examiners in determining whether an invention is nonobvious. However, the current standard should be sufficient in thwarting patent evergreening, now that patent examiners should have more time and increased access to prior art, considering many of these secondary patents are simply just trivial changes to an already patented drug.

IV. Conclusion

The proposed efforts by the USPTO in response to the FDA’s letter and President Biden’s Executive Order will lead to a decrease in the prevalence of patent evergreening strategies.⁶² Patent examiners will have more time to determine whether inventions are obvious, as well as increased access to prior art, which will help them make that decision.⁶³ A bright-line rule on obviousness would be practical and helpful.⁶⁴ However, these secondary patents are generally so trivial that with sufficient access to prior art and time, a patent examiner should be able to determine obviousness.⁶⁵

Cover Photo by Nick Youngson on Pix4free licensed under CC BY-SA 3.0

Emmaline Fisher

Emmaline Fisher graduated from Georgia Tech with a degree in Chemical Engineering, and after working for a bit, she decided to go to law school to pursue a career in intellectual property law. When she has free time, she enjoys spending it outdoors with her dog, Penny.

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