May Your Drug Price Be Evergreen

Journal of Law and the Biosciences, 590–647 doi:10.1093/jlb/lsy022 Advance Access Publication 7 December 2018 Original Article May your drug price be evergreen ∗,1 Robin Feldman Downloaded from https://academic.oup.com/jlb/article/5/3/590/5232981 by Elsevier user on 30 October 2020 Hastings College of the Law, University of California, 200 McAllister St. San Francisco, CA 94102, USA Corresponding author. E-mail: [email protected] ABSTRACT Presenting the first comprehensive study of evergreening, this article ex- amines the extent to which evergreening behavior—which can be defined as artificially extending the protection cliff—may contribute to theprob- lem. The author analyses all drugs on the market between 2005 and 2015, combing through 60,000 data points to examine every instance in which a company added a new patent or exclusivity. The results show a startling departure from the classic conceptualization of intellectual property protection for pharmaceuticals. Rather than creating new medicines, pharmaceutical companies are largely recycling and repurposing old ones. Specifi- cally, 78% of the drugs associated with new patents were not new drugs, but ∗ Robin Feldman is the Arthur J. Goldberg Distinguished Professor of Law and Director of the Institute for Innovation Law at the University of California Hastings. Her most recent books in the life sciences are Drug Wars (Cambridge) and Rethinking Patent Law (Harvard). Professor Feldman also has published more than 50 articles in law journals including at Harvard, Yale, and Stanford, as well as in the American Economic Review and the New England Journal of Medicine. Professor Feldman’s empirical work has been cited by the White House and numerous federal agencies. She has appeared frequently before committees of the US House and Senate, the Federal Trade Commission, the Department of Justice, the Patent & Trademark Office, and various committees of the California legislature. Professor Feldman recently participated inthe GAO’s preparation of a report to Congress on the future of Artificial Intelligence and in the Army Cyber In- stitute’s threat casting exercise on weaponization of data. 1 In accordance with the protocols outlined in the Harvard Journal of Law & Technology Open Letter on Ethical Norms, upon final publication, all of the data will be publicly available for future use byother academics on the Inter-University Consortium for Political and Social Research (ICPSR), https://www. icpsr.umich.edu/icpsrweb/ (accessed Nov. 1, 2018); see also Robin Feldman et al., Open Letter on Ethical Norms in Intellectual Property Scholarship, 29 HARVARD J.L.&TECH. 339, 350–52 (2016) (signed by dozens of professors). In further accord with the Open Letter, donation information for the University of California Hastings Institute for Innovation Law, which Robin Feld- man directs, is available at Donors,INST. FOR INNOVATION L.: UC HASTINGS COLLEGE OF L. (May 3, 2017), http://innovation.uchastings.edu/about/funding/funding-for-academic-year-2015-2016 [https://perma.cc/EK2K-XB72]. C The Author(s) 2018. Published by Oxford University Press on behalf of Duke University Schoolof Law, Harvard Law School, Oxford University Press, and Stanford Law School. This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs licence (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial reproduction and distri- bution of the work, in any medium, provided the original work is not altered or transformed in any way, and that the work is properly cited. For commercial re-use, please contact [email protected] May your drug price be evergreen r 591 existing ones, and extending protection is particularly pronounced among blockbuster drugs. Once companies start down the road of extending protection, they show a tendency to return to the well, with the majority adding more than one extension and 50% becoming serial offenders. The problem is growing across time. KEYWORDS: Drugs, Pricing, Patents, Evergreening, Pharmaceuticals Downloaded from https://academic.oup.com/jlb/article/5/3/590/5232981 by Elsevier user on 30 October 2020 I. INTRODUCTION The intellectual property system has a simple and intuitive design at its core. Fromthe store of activities that should be free to all people, we remove some, for a limited time and a limited purpose, in the hopes that the pause will rebound to the benefit of all of society.2 This conceptualization echoes basic Lockean theories on the formation of government, in which individuals emerge from perfect freedom in the state of nature, choosing to relinquish certain liberties (and only certain ones) for these individuals’ mutual benefit.3 One can wax poetic about the complicated pathways of the intellectual property system—the intricacies of state and federal powers,4 thedelicatedance 2 ROBIN FELDMAN &EVAN FRONDORF,DRUG WARS:HOW BIG PHARMA RAISES PRICES AND KEEPS GENERICS OFF THE MARKET 8 (2017); see also U.S. CONST.art.I,§ 8, cl. 8 (the Intellectual Property Clause of the Constitution states that, ‘The Congress shall have Power . To promote the Progress of Science anduseful Arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective Wrings andDiscovers...’(emphasisadded));Pennockv.Dialogue,27U.S.1,16–17(1829) (‘[The Constitution] contemplates ... that this exclusive right shall exist but for a limited period...’);BonitoBoatsv.ThunderCraft Boats, 489 U.S. 141, 146 (1989) (‘Congress may not create patent monopolies of unlimited duration . .’); LetterfromThomas JeffersontoOliverVans (May2, 1807),HE inT WRITINGSOFTHOMASJEFFERSON200–202 (Andrew A. Lipscomb ed., 1903) (Jefferson writing, ‘Certainly an inventor ought to be allowed a right tothe benefit of his invention for some certain time. It is equally certain it ought not be perpetual; for toembarrass society with monopolies for every utensil existing, & in all the details of life, would be more injurious to them than had the supposed inventors never existed’); WILLIAM C. ROBINSON,THE LAW OF PATENTS FOR USEFUL INVENTIONS 42–43 (1890) (arguing that ‘[t]he duty which the state owes to the people to obtain for them, at the earliest moment, the practical use of every valuable invention in the industrial arts is ... a higher and more imperative duty than which it owes to the inventor’; see generally Edward C. Walterscheid, Defining the Patent and Copyright Term: Term Limits and the Intellectual Property Clause,7J.INTELL.PROP. L. 315 (1999–2000) (exploring term limits on rights granted in the Intellectual Property Clause). 3 See PETER LASLETT &JOHN LOCKE:TWO TREATISES OF GOVERNMENT:ACRITICAL EDITION 336–37, 341, 343, 351 (1967) (including a reprinting of the 1698 version of Locke’s Two Treatises); see also Paul Brest, State Action and Liberal Theory: A Casenote on Flagg Brothers v. Brooks, 130 U. PA.L.REV. 1296, 1300 (1982) (noting that in the Lockean modality, courts embrace the natural rights view of a sphere of autonomous pri- vate conduct immune from state regulation); Robin Feldman, Coming to the Community in IMAGINING NEW LEGALITIES:PRIVACY AND ITS POSSIBILITIES IN THE 21st CENTURY 88 (Austin Sarat ed., 2012). 4 See Robin Feldman, Federalism, First Amendment & Patents: The Fraud Fallacy,17COLUM.SCI.&TECH.L. REV. 30, 32 (2015) (Discussing the overlap between federal and state laws with regard to intellectual property, and patent regulation in particular); see also Hoke v. United States, 227 U.S. 308, 322 (1913) (Noting that while ‘state and Nation [have] different spheres of jurisdiction . it must be kept in mind that we areone people; and the powers reserved to the states and those conferred on the nations are adapted to be exercised, whether independently or concurrently, to promote the general welfare . .’). For a general discussion of federal preemption, see Jeanne C. Fromer, The Intellectual Property Clause’s Preemptive Effect,inINTELLECTUAL PROPERTY AND THE COMMON LAW 265, 279 (Shayamkrishna Balganesh ed., 2014); Mark A. Lemley, Beyond Preemption: The Law and Policy of Intellectual Property Licensing,87CAL.L.REV. 111 (1999). 592 r May your drug price be evergreen of biosimilars,5 the vastness of open source and open science,6 and the strange overlap of different protection regimes.7 Nevertheless, the basic concept of the US intellectual property system is quite simple: give inventors the possibility of garnering a return from their innovations, and they will invest in creating those innovations and in sharing the fruits of their labors with society.8 At first glance, one might think the intellectual property system eschews competition. After all, the system is designed to grant benefits that block competitors, giving Downloaded from https://academic.oup.com/jlb/article/5/3/590/5232981 by Elsevier user on 30 October 2020 the rights holder free reign in the market, a result that is decidedly non-competitive.9 That perspective, however, only skims the surface of the theoretical bases of intellectual property. The reality is far more nuanced and layered when one plunges the depthsof the system’s design. At a fundamental level, the intellectual property system exudes a deep faith in the power of competition. Competition may be held in abeyance, but those who receive the benefit of a patent or exclusivity must pay for that privilege by disclosing sufficient information such that competitors will be able to step into the market. And as the protection clock winds down, other inventors can use that disclosure, making preparations to enter the competitive field or jump ahead to the next generation.10 Nowhere does this concept apply more fully than with pharmaceutical develop- ment. The processes of developing new drugs, conducting the clinical trials, obtain- ing FDA approval, and bringing the drugs to market are extraordinarily expensive. 5 See FELDMAN &FRONDORF, supra note 2 at 142; see generally Jason Kanter & Robin Feldman, Understanding andIncentivizingBiosimilars,64HASTINGSL.J.57(2012)(analysingandidentifyingissueswiththeBiosimilars Act).

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