An Obscure Supreme Court Case Is a Big Deal for Prescription Drugs
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WASHINGTON — America’s drug price debate is coming to the Supreme Court.
How the nation’s highest court rules in a case that, on its face, has nothing to do with prescription drugs could, nonetheless, leave a big mark on medicine. Oral arguments in the case, to be heard Monday, come as a huge majority of Americans say medicines are not affordable and drug costs have become a major issue in the 2016 presidential race.
Brand-name pharmaceutical manufacturers are warning that the wrong ruling could limit their ability to recoup their investment in research and development, putting their drug pipelines at risk.
The case being heard by the court has nothing directly to do with medicine. Far from it: The foundation of the case is a patent for a speedometer that tells drivers when they’re speeding by displaying their speed and the speed limit.
So what does that have to do with drugs? It’s all about patents.
“In patent law, much turns on the nitty-gritty details. There’s nothing grittier than the issue” raised in the Supreme Court case, Robin Feldman, a law professor at the University of California, Hastings, told STAT. “It matters a lot. It matters a lot for pharma.”
The consequences, for pharmaceuticals and any other industry that relies heavily on patents, could be huge.
Ronald Mann, a Columbia law professor writing for SCOTUSblog, said “the case has the potential to be a landmark, setting the practical boundaries of patent validity for decades to come.”
Patents are extremely important to brand-name drug companies because they allow those companies to exclusively sell the medicines they develop for a set period of time, before generics can enter the market offering a similar drug at a much lower price.
During that period, the companies can charge whatever price they want (or at least whatever the market will pay) and, therefore, they say, earn back the millions and millions of dollars they spent developing the drug. Then, the companies say, they reinvest that money into more research to find the next breakthrough treatment.
At stake in the Supreme Court case is a new process for challenging patents. In 2011, Congress passed a law that created a new procedure — called inter partes review — for patent challenges to be heard by an appeals board inside the US Patent and Trademark Office. Previously, patent challenges were typically addressed in costly and time-consuming litigation.
In court litigation, patents are presumed to be valid and understood by their “plain and ordinary meaning.” But in these inter partes reviews, as established by the administration, patents are interpreted more broadly.
For drug makers, that’s a problem. Patent holders want the standard for review to be narrow. The more specific their claim is considered to be, the harder it will be for competitors to argue that the claim is not novel and important. They also want the same standard to apply in both the courts and the appeals board.
It’s a subtle difference, but an important one.
The current system threatens “the predictability and strength of the protection that the patent system provides to innovators and the public alike,” the drug industry trade group PhRMA — short for Pharmaceutical Researchers and Manufacturers of America — wrote in a brief supporting the plaintiffs. (The group declined to comment beyond its briefs.)
“In the twenty-first century, it costs an average of $2.6 billion to develop a new drug,” the group’s lawyers said. “Meaningful patent protection is required to justify that investment.”
On the other side, insurers and generic drug manufacturers argue that brand-name drug companies exploit the patent system to prevent generics from coming on the market and, therefore, they insist, keep prices high. They allege that drug companies will, for example, make an ultimately insignificant change to their products to extend the patent’s life — the kind of practice that the new inter partes reviews are supposed to prevent.
The trade groups, America’s Health Insurance Plans and the Generic Pharmaceutical Association, said in their brief that the reviews as currently constructed are “a critical consumer protection against abusive patent extensions that limit patient access to more affordable treatment options, delay market entry of less expensive generic therapies, and drive up drug costs.”
PhRMA, supporting the plaintiffs, argues that the administration got it wrong for a few reasons.
First, Congress intended for these reviews to be a substitute for court litigation, so the standards should be the same. Second, by creating two different standards for patent reviews, patent challengers are being encouraged to shop their challenges to the most hospitable forum. One PhRMA brief cites an incident in which Allergan’s patent was contested in court, and the court rejected the case. Soon after, the same challenge was brought to the patent office for inter partes review.
The generic drug association and the health insurance industry are arguing the other side and supporting the administration. They say that broad interpretations are used in other patent reviews and that the administration was well within its legal authority when it crafted the rules for inter partes review. Congress wanted to make it easier to challenge weak patents, they say, so the administration’s rules help fulfill the lawmakers’ goals.
The parties are also arguing whether the patent board’s decision to review a patent in the first place should be subject to an appeal in district court. The plaintiffs and PhRMA say it should be. The administration, supported by the generics and health plans, says it shouldn’t.
It might sound arcane and even a little boring. But these major industry groups care a lot about patents. Whenever Congress starts working on patent reform, as it has over the last few years, both sides lobby heavily — and that’s why they’re weighing in at the Supreme Court.
The situation created by the Obama administration and the lower court ruling “breeds uncertainty and stifles innovation,” PhRMA wrote in one of its briefs.
Health insurers see the stakes as equally dire.
“Consumers and the health system as a whole benefit from a more competitive prescription drug market,” Marilyn Tavenner, president and CEO of America’s Health Insurance Plans, said in a statement. “Protecting monopoly-like pricing schemes threaten[s] consumers’ access to more affordable prescription medications.”
The case being heard on Monday is Cuozzo Speed Technologies, LLC v. Lee.