Patent schemes, hostage government payers driving U.S. drug spending, report says

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Time and time again, as reports of drug price hikes went viral, pharma and biotech representatives hit back with statements that drug development is expensive and their prices are justified. But a new study in the Journal of the American Medical Association says that’s not true.

In reviewing the causes for sky-high drug spending in the U.S., researchers found that there is “no evidence of an association” between R&D costs and drug prices. Rather, “prescription drugs are priced in the United States primarily on the basis of what the market will bear.” The investigators said a combination of patent-enabled monopolies and required coverage by government plans are what's driving U.S. drug spending.

Plus, the key force working against drug spending--the introduction of generics--is hamstrung by the “life-cycle management” efforts of pharma, the authors found. Drugmakers use lawsuits, add-on patents, patient switching and “pay-for-delay” schemes, all moves industry-watchers will recognize, in their efforts extend branded sales, the authors wrote.

The result? Per capita drug spending in the U.S. was $858 in 2013, compared with an average of $400 for 19 other industrialized nations. Brand name drugs make up just 10% of prescriptions, but represent 72% of drug spending. Between 2008 and 2015, prices for common brand-name meds grew 164%, far and away above the consumer price index of 12%.

In a recent example of patent maneuvers, Biogen ($BIIB) and Samsung accused AbbVie ($ABBV) of evergreening its Humira patents to block biosims. The partners filed a suit in the U.K., with a spokesperson claiming AbbVie was working to “obstruct” competition with “overlapping patents.” AbbVie, for its part, said it “intend(s) to defend our intellectual property.”

In one older, notorious case, Abbott was able to achieve more than 33 years of patent protection for its cholesterol med Tricor through re-formulation and other tweaks.

Pushing back against that strategy, hedge funder Kyle Bass has asked the Patent & Trademark Office to review numerous “questionable” pharma patents that he says are costing the healthcare system. His targets include Biogen’s Tecfidera, Celgene’s ($CELG) Revlimid, Shire’s ($SHPG) Gattex, Acorda’s ($ACOR) Ampyra and Johnson & Johnson ($JNJ) and AbbVie’s Imbruvica. But he's not without critics, as Celgene said last July his real motive is to short pharma shares and make money when stocks fall.

The JAMA study authors’ proposed solutions for runaway costs? They provided no shortage: enforcing existing laws more thoroughly, adding stringent requirements for extending exclusivity, allowing more governmental price negotiations, generating more evidence about cost-effectiveness and educating stakeholders. All those moves could help address the issue, according to the study.

- here’s the JAMA study

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