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How Drug Manufacturers Keep Hold of Market Exclusivity

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There is a fine balance between incentivizing medical innovation and managing associated health care costs, two forces that often are in opposition with one another. Drug patents are a perfect example of this. A brand name drug manufacturer retains patent exclusivity for a set duration of time before cheaper generic substitutes enter the market. Usually brand manufacturer’s drug patents last 20 years from the date of filing; however, since the FDA drug approval is a long process, the actual exclusivity of brand drugs on the market could end up being much shorter than 20 years. Brand name manufacturers utilize a handful of strategies for extending the patent life of their brand drug(s) to delay or prevent the entry of generic competition, and legislation is often one step behind. Let’s further explore this complicated relationship between profitability and health care access, and unravel how patients are the ones most impacted by this relationship.

A specific example of legislation passed by Congress aimed at fostering this intricate relationship between innovation and drug access is known as the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act.

For brand manufacturers, this Act provided a five year period of market exclusivity for new drug molecules never previously approved by the FDA, and incentivized research and innovation. For generic drug manufacturers, this Act provided a pathway for FDA approval without fear of patent-infringement from brand name drug manufacturers. Generic drug manufacturers could demonstrate bioequivalence between their generic drug with that of the brand name drug by filing an Abbreviated New Drug Application instead of the standard New Drug Application. The goal of this was to speed the entry of low-cost generic drugs into the market, and it worked. Between 2006 and 2015, it is estimated that the introduction of cheaper generic drugs as alternatives to costly brand name products resulted in about $1.5 trillion in cost savings to the U.S. health care system.

However, brand manufacturers continue to have an arsenal of strategies to delay, prevent, and suppress the entry and access of generic drugs to the health care system, effectively monopolizing market exclusivity. Some of these strategies include:

  • paying potential generic manufacturers who challenge their patents to delay their entry into the market (“pay-for-delay”)
  • developing their own generic drug (“authorized generics”)
  • developing a new formulation of their product (product hopping) to extend their patent
  • lobbying against cross-border drug importation where the same drugs could be significantly cheaper (e.g., in Canada)
  • patenting of the FDA’s Risk Evaluation and Mitigation Strategy (REMS) program

The last bullet regarding patenting a REMS program is of particular interest as I believe it is the most unique strategy of delaying or preventing competition. A REMS is a drug safety program that Congress passed as a part of its FDA Amendments Act of 2007. This gave the FDA authorization to require drug manufacturers to submit a proposed REMS to ensure a drug's benefits outweighed its risks. REMS programs are designed to minimize the risks associated with a medication while still making the drug available to patients who need it. REMS programs can include various elements to mitigate risk, such as creating patient registries, providing educational programs for clinicians, and placing restrictions on who can prescribe (specific clinicians), how a drug is dispensed (specific labs must be completed by the patient prior to receiving the drug) and where the drug is dispensed (specialty or specific pharmacies). These programs are established to monitor the risks and benefits of these products, and do not indicate that a medication is unsafe; rather, it means that there are measures in place to help ensure that the risks associated with the use of the medication are minimized. Also, REMS programs can be removed after a drug has shown its safety overtime. As of August 19, 2022, there have been 299 REMS programs approved, with 60 currently active.

Of particular interest is that the FDA also requires a REMS program for a generic version of a brand name drug if the brand name drug has an existing REMS program in place. The generic manufacturer must work with the brand manufacturer to create a Single Shared REMS system (SSRS). This has created a conundrum for generic drug manufacturers looking to enter the generic drug market as many of these REMS programs contain intellectual property. Brand manufacturers often delay generic competitors' entrance to the market by extending negotiations around access to intellectual property resulting from their REMS program.

For example, in order for a generic drug company to establish bioequivalence, the brand manufacturer must send them samples of the brand drug for testing to establish bioequivalence. The brand manufacturer can limit samples of their drug to the generic manufacturer by citing certain components of their REMS program which could, for example, limit distribution only to select facilities or health care settings. Although this is not illegal and brand manufacturers have the right to protect their intellectual property, I feel like patenting a REMS program is pushing the limits of the original intention of the Hatch-Waxman Act. Additionally, brand manufacturers can further prolong the discussions and negotiations by complicating the creation of a joint SSRS, as this system is complex and requires agreement from both the brand and generic manufacturers.

The FDA has an option to grant waivers to the SSRS, allowing generic manufacturers to create their own REMS programs; however, this too has resulted in many legal challenges and complications. Brand manufacturers argue that the FDA waiver does not determine the claim scope of a REMS patent and the FDA cannot play a role in determining the extent of REMS patent infringement liability. As a result, generic manufacturers who establish a REMS program based on a FDA waiver are likely to still face infringement if the brand manufacturer has a patented REMS program in place. As this example demonstrates, the negotiating power is in the hands of the brand manufacturer and continued legislation needs to be passed to prevent the excessive monopolization of market exclusivity.

In 2019, Congress passed the Creating and Restoring Equal Access to Equivalent Samples Act (CREATES Act), which allows a generic manufacturer to sue for injunctive relief if the brand either fails to deliver the requested drug for bioequivalence testing within 31 days or if the two parties are unable to agree on a SSRS. This is an example of a win for generic manufacturers; however, the challenges persist as there seem to always be legal loopholes to prolonging patent exclusivity. There are several other pending bills introduced in Congress to further improve generic drug access.

The fine balance of catalyzing the continuation of medical innovation while keeping down the cost of health care and medications is a challenging task, albeit a very important one. I believe brand manufacturers can and should have a degree of patent protection as legally allowed; however, Congress should continue to push legislation that would prevent brand manufacturer utilization of loopholes in the legislation to prevent generic drug entrance into the market. Reducing brand manufacturers’ strategies at extending market exclusivity will not only benefit the health care system but also provide patients cheaper access to needed medications. Although health care is a business, we must not forget that health care must be a basic human right and should not be sacrificed for extra profitability.

Dalga Surofchy, PharmD, APh, is an Advanced Practicing Pharmacist currently working as a Clinical Manager of Medical Affairs at a boutique pharmaceutical consulting group. He also teaches as an adjunct faculty at UC San Diego. He holds a Bachelor’s degree in Biology from UC Berkeley and a Doctor of Pharmacy degree from UC San Francisco. His interests are in precision/personalized medicine, preventative medicine, health equity, education, and market/patient access. His previous roles include a mix of outpatient and clinical pharmacy. Outside of work, he enjoys playing basketball, surfing, rock-climbing, skiing, and spending outdoor time with his family. Dalga is a 2021–2022 Doximity Op-Med Fellow.

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