Drug companies re-patenting old drugs to extend price

Drug re-patenting is making waves in the pharmaceutical market. This practice allows drug manufacturers to continue enjoying a sales monopoly while dramatically reducing research and development costs. In the 1980s, the European Patent Office (EPO) passed patent laws to protect new uses of known drugs. Many other countries, including the United States, have followed suit and established similar laws. As more blockbuster drugs approach their expiration dates and fewer patentable new drugs funnel down the commercialization pipeline, pharmaceutical companies are facing critical financial challenges since losing patent protection means losing market exclusivity. Drug re-patenting, then, is an attractive alternative for extending much desired market protection and retaining exclusive shares. It is much easier and cheaper for a company to find new uses for an old drug than to develop a new drug from scratch. The cost of developing new uses for existing drugs or failed drugs is 40% cheaper than coming up with something completely novel. That is $400 million in savings considering the average $1 billion price tag for new drug development.

Re-patenting is becoming the new buzzword among pharma companies. Only one in 5,000 discoveries makes it to market, and of those, many do not recoup the cost of their research and development. A three-year patent extension for the popular allergy drug Claritin was estimated to be worth a billion dollars to its manufacturer, Schering-Plough. Under current patent laws, multiple strategies can be pursued in re-patenting old drugs. These include changes in dosage regimes, formulations, and routes of administration. Other avenues incorporate use of stereo selectivity / chiral switches (i.e. a chemical mirror image of the drug), the treatment of a new patient group by the current method of use, or utilizing a combination of two or more old drugs into one which is then marketed as a new product. The question is, however, whether the re-patent applications truly meet the goal of improved patient outcomes or are simply disguises for extending price monopolies and preventing generic competitors from entering the scene.

In practice, pharmaceutical companies are sometimes more interested in creating minor modifications to existing drugs than developing new breakthrough medications. Such modifications require significantly less investment while offering good returns. From 2000-2007, 667 new drugs were approved by the FDA and of those only 75 (11%) were novel products that offered a significant advancement. Over 80% of these were so called “me-too” drugs: ones developed based on something already known and structurally similar to the original. A 2007 ABC News analysis looked at two kidney-dialysis drugs from Abbott Labs, Calcijex and Zemplar. The former was about to lose patent protection when the much-trumpeted latter came onto the scene and received a 15-year patent even though Zemplar did not show clinical superiority to Calcijex.

Another example is the asthma treatment called Albuterol. After it was re-patented, Albuterol’s price jumped from $15 to between $50 and $100 per inhaler. Asthma is the most common chronic disease in the U.S. with 40 million people affected. Currently there are no generic asthma inhalers available in this country. Asthma care costs the U.S. healthcare system more than $56 billion each year when hospital visits are included. Similarly, re-patenting of other older drugs used for birth control, gout and insulin increased their costs dramatically.

Patents provide the necessary legal protection to encourage an innovative pharmaceutical market. The market needs these drugs to thrive. But in turn, the pharmaceutical industry must also provide affordable treatments to patients who need them to survive. A successful market has to achieve a fine balance between the two but oftentimes, that balance is missing. The challenge for regulators as more blockbuster drugs near their patent expiration dates is how to restore the desired market equilibrium so patient outcomes can continue to improve at an affordable price.

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