FDA-USPTO Collaboration and Bipartisan Efforts to Lower Drug Prices

FDA-USPTO Collaboration and Bipartisan Efforts to Lower Drug Prices

Andrew Thompson

Associate Editor

Loyola University Chicago School of Law, JD 2023

The Food and Drug Administration (FDA) has partnered with the Patent and Trademark Office (USPTO) to address the high cost of prescription drugs. While the FDA possesses the authority to approve generic, lower cost drugs, the USPTO has an important and symbiotic role in bringing affordable drugs to market by blocking anti-competitive patent extensions. FDA-USPTO collaboration has gained congressional support and is the subject of key pieces of new legislation.

Exorbitant prescription drug prices present an opportunity for regulators to improve healthcare access by reducing cost-related barriers for patient-stakeholders while also offering a target for reducing strain on Medicare and Medicaid funding. The US Department of Health and Human Services (DHHS) provided funding to the RAND Corporation to generate a report which confirmed that the US overspends on drugs. The report concludes that as of 2018, drug prices in the US were 256 percent greater than the combined prices of thirty-two OCED member-countries, and 344 percent greater for brand-name drugs. As such, the US “spends more on prescription drugs on a per capita basis than other countries in the Organization for Economic Co-operation and Development (OCED).”

Executive action spurs FDA and USPTO collaboration

Consider a prescription billed at ten dollars — in the US that same prescription would cost $25.60. The report similarly finds that US drug prices were 344 percent greater for brand-name drugs, with the ten dollar prescription now costing the American consumer $34.40. In response to the minimal controls on drug pricing in United States, President Joe Biden signed an executive order to bring about collaboration between the FDA and USTPO. A collaborative effort between the FDA and PTO is necessary because the FDA is granted authority to regulate the introduction of drugs with regard to their safety and efficacy, while the USPTO is empowered to “grant patents for the protection of inventions.” A company must obtain FDA approval for use of a drug, a process rarely subject to abuse. However, many companies engage in “pay-for-delay” agreements wherein a drugmaker compensates a payee-competitor to refrain from introducing a generic version of the drug on which the payor-company holds a patent. While some argue this behavior should constitute a prima facie showing of anti-competitive behavior in violation of US antitrust law, industry lobbying has succeeded in preventing liability from attaching to pay-for-delay agreements. Robin Feldman of UC Hastings presents his research on pay-for-delay agreements which finds the FTC’s estimation that pay-for-delay deals cost consumers 3.5 billion dollars per year to be inaccurate. Feldman concludes that pay-for-delay agreements cost the American consumer at least 6.4 billion annually, with the amount reaching 36 billion depending on methodology and which drugs are selected for inclusion in calculating excessive costs.

Legislation to protect the American consumer gains bipartisan support

Senator Klobuchar (D-MN) sponsored a bill, S.1428, which amends the Federal Trade Commission Act (15 U.S.C. 44) by inserting new language in Section 27 under which pay-for-delay agreements “shall be presumed to have anti-competitive effects and shall be a violation” of the Act. As S.1428 introduces new regulations, the text of bill justifies expanding agency authority by reference to Congressional intent in passing the now outdated Drug Price Competition and Patent Term Restoration Act. Important to this bill is the drafter’s choice of “shall” rather than “may,” as “shall” requires a finding which attaches liability to the payor-company and does not allow for lobbyist abuse of the judicial discretion enabled by the use “may.” Additionally, Senator John Cornyn (R-TX) has introduced a bill, S.1435, which prohibits companies from modifying drug formularies or delivery in order to transfer a patent. Reading S.1428 and S.1435 together provides a framework for the USPTO to intervene in the generic drug market if they are signed into law.

FDA approval of generics increases to 102 drugs

In 2017, the FDA launched the Competitive Generic Therapy (CGT) program to “encourage the development and marketing” of generic drugs where little to no competition currently exists in the market. As of September 17, 2021, the FDA reports it has given approval for 102 generics under Section 506H of the Food, Drug and Cosmetic Act (FD&C Act), delivering on the FDA Drug Competition Action Plan’s (DCAP) intention to facilitate providing consumers with safe, effective, and affordable drugs. The DCAP aims to “encourage robust and timely market competition for generic drugs” and driving “greater efficiency and transparency . . . without sacrificing safety.” Here the FDA is addressing all three elements of the Efficiency-Quality Triangle: (1) speed, (2) quality, and (3) cost. Legislation which strengthens the USPTO and thereby increases the USPTO’s role in antitrust regulation of pharmaceuticals allows the FDA to make efficient use of its limited funding to better focus on drug review and partner with the USPTO to ensure approved drugs are not priced exorbitantly due to patent abuse. As the final measure of success is not merely entry into a regulatory pathway but rather availability to the consumer, the FDA reports eighty percent of applicants under the CGT program began marketing the generic within seventy-five days of FDA approval. This illustrates that clear agency guidelines can lead to increased competition in the market with corresponding reductions in price and increase in consumer access.

New guidance on bringing generics to market under current FD&C Act regulations

In an effort to deploy scarce resources effectively and increase the number of safe and effective drugs on the market, the FDA accepts Abbreviated New Drug Applications (ANDAs). Pharmaceutical companies may use an ANDA to seek approval of a generic drug on an accelerated timeline, as the preclinical and clinical data necessary for approval are available from the innovator drug, which is the already-approved brand name version of the generic. The ANDA pathway for generic approval relies on a company demonstrating bioequivalence between the generic and innovator. Bioequivalence is “the absence of a significant difference in the rate and extent to which the active ingredient or active moiety” of the generic is bioavailable “at the site of drug action” under the same molar dose and similar conditions. To further support the introduction of generics, the FDA introduced the draft guidance “Bioequivalence Studies With Pharmacokinetic Endpoints for Drugs Submitted Under an Abbreviated New Drug Application” in August 2018. The guidance, available in the Federal Register at 86 FR 47117, will remain open for comment until October 22, 2021. After the guidance is formally adopted, it will provide companies with detailed information on how to meet bioequivalence requirements set forth in the FD&C Act to proceed under the ANDA pathway. The actions of the FDA and USPTO as described above advance consumer interests and modernize the 1984 Drug Price Competition and Patent Term Restoration Act.