Abusive secondary patenting
A new drug is not protected by a single patent, but by dozens, or sometimes even more than a hundred patents, commonly called “patent thickets”. These are also filed over a period of time, which means that the duration of a product’s monopoly often easily exceeds the theoretical 20 years foreseen by the World Trade Organization’s (WTO) Agreement on Intellectual Property (TRIPS). A strategy of endless accumulating patents described as “evergreening”.
A distinction should be made between two types of patent:
primary patents relating to the substance(s) and filed early in the development phase,
and secondary patents filed just before or during the marketing phase, which extend the period of monopoly but without any real therapeutic added value.
While any patent is an exception to the free market, secondary patents are undoubtedly the ones that have the most impact on competition and prices – especially since they have proliferated in recent years, particularly in the United States, where they are more easily granted.
Secondary patents granted en masse
Every year Switzerland boasts of being one of the “most innovative countries”, based simply on the number of patents filed. However, at least as far as drugs are concerned, the vast majority are unjustified and have little to do with real progress. The big pharmaceutical groups quickly realised the financial advantages they could gain from the abusive use of patents to block the way of their competitors. At the other end of the supply chain, patients have to pay high monopoly prices for their treatments for longer, without any valid justification.
It should be remembered that a patent is an exclusive right that allows the holder of the invention to prohibit third parties from manufacturing and marketing it. But it is a territorial right: if a pharmaceutical company wants to protect its drug in several countries, it has to apply for it in each of them – except in Europe, with the European Patent Office (EPO) bringing together 39 countries, including Switzerland, and having a centralized procedure that applies simultaneously in all these jurisdictions.
It should also be remembered that an invention must meet three general requirements to be patented: (1) be novel; (2) involve an inventive step; and (3) be capable of industrial application. A patent application for a drug is therefore not judged on the basis of the treatment’s benefit – but only on the basis that it is a “new invention” that is taken into account, even if it is only a minor modification of an already existing product.
The TRIPS Agreement leaves a great deal of leeway for WTO member states to decide which invention deserves a patent or not, as long as the three requirements are met. Therefore, depending on the legislation in force and how meticulously the applications are examined, patents are either granted en masse (as in the United States), in a slightly more restricted way because they are sometimes opposed (as in Europe), or sparingly because of more restrictive clauses aimed at avoiding rewarding pseudo-innovations that jeopardize the right to health (as in India). These approaches have very different consequences in terms of competition and access to medicines, with generics arriving on the market more or less late, depending on the country, and sold at lower prices.
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2024 Bloomberg Finance LP
United States – a real paradise for the pharma industry
As in numerous other industries, the United States sets the tone in the pharmaceutical sector. With a turnover of more than $600 billion annually, USA alone accounts for more than half of the global pharmaceutical market. This is a key theatre of operation for Roche and Novartis, which are ranked second and eighth respectively in the world in terms of sales in 2023.
The Basel-based giants are long-time members of the powerful pharmaceutical lobby in the United States (Pharmaceutical Research and Manufacturers of America or PhRMA), which is well established in Congress and the White House. The Novartis CEO is even chairing it since 2023. In the United States, pharmaceutical companies benefit from numerous incentives and major tax benefits in the field of research, as well as a very generous patent policy and a legal system conducive to initiating litigation at all costs. The marketing authorisation procedure is also closely linked to the status of patents, which is not the case in Europe. And the icing on the cake: there is currently no proper governmental price control policy.
Therefore, large corporations seek to launch their new products first in the United States in order to be able to protect their invention for as long as possible (sometimes for 40-50 years) and obtain a very high price on the United States market, which they will then use as a basis for negotiation in other countries, for example in Europe, where price controls are slightly tighter.
©Switzerland must take action against the abusive use of patents
“Evergreening” or the accumulation of abusive secondary patents on therapeutic products is a stumbling block to access to medicines, as well as a huge additional cost for patients and society. In Switzerland, medicines account for almost 1 in 4 Swiss francs of compulsory health insurance expenditure, 75% of which is attributable to patented products, according to an analysis by the Federal Council. What proportion of these are frivolous allowing a monopoly to be maintained – and the high price that goes with it – much longer than the duration provided for by WTO rules? It is impossible to quantify this, due to the lack of precise studies on the subject in Europe. However, we can bet that this is a high proportion, if we compare the limited number of new drugs launched on the market each year with all the pharmaceutical patents filed.
According to the US NGO I-MAK, patent abuse involving the 10 best-selling drugs in the United States amounts every year to dozens billions of dollars in additional costs for the healthcare system. The United States Government has finally spoken out against these patent thickets that feed Big Pharma’s greed, and is considering reforms. Is the tide finally turning on the other side of the Atlantic?
Switzerland, for its part, systematically refuses to act against intellectual property abuses concerning access to medicines in multilateral forums, as we saw during the COVID crisis (at the WTO) and currently in the context of the pandemic accord, which is being negotiated at the World Health Organization (WHO). Worse still, the Swiss authorities are seeking to strengthen intellectual property further or, if they fail, to limit the room for manoeuvre of lower-and middle-income countries in combating abuses, as we saw as part of the bilateral free trade agreement concluded in March with India.
As a member of the EPO, which grants European patents for pharmaceuticals, Switzerland could act at this level to ask for a more meticulous examination of applications. Even though Europe grants fewer than the United States, far too many undeserved patents are still granted, as illustrated by our 2019 opposition to the cancer treatment Kymriah, following which Novartis revoked the disputed patent before any adversarial debate. It is better to avoid abusive patents being granted, rather than having to contest them in long and costly litigation afterwards. To achieve this, it is essential to define and enforce stricter patentability rules.
Switzerland had long opposed patents on medicines, considering them to be an essential good unlike other items, before radically changing its stance. Without going as far as to make such a U-turn, why not start by tackling the abusive practices of its pharmaceutical companies, which have harmful consequences for health and public finances in Switzerland just like elsewhere?