“Medicines and IP: Balancing Innovation and Access”
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House Judiciary Subcommittee on Courts, Intellectual Property, Artificial Intelligence, and the Internet U.S. House of Representatives
Follow its sittingsDarrell Issa
With that, I take pleasure in introducing the ranking member of the subcommittee for his opening statement, Mr. Johnson.
Henry Johnson
Thank you, Mr. Chairman, and good morning, ladies and gentlemen. Our nation's founders understood that when inventors are rewarded for their contributions, economic growth and human progress follow. More than two centuries later, the success of that vision is self-evident. From the light bulb to the airplane to the medicines that save lives, patents have helped transform ideas into products that improve the lives of millions of Americans. Patents have been at the heart of America's greatest innovation moments.
The Industrial Revolution, the Innovation Age, the biotech and mobile telecommunications revolutions in the 21st century were all driven by transformative breakthroughs backed by patent law. By rewarding individuals' ingenuity, patents continue the innovation cycle by also encouraging investment in new ideas. A patent must be reliable enough for an inventor to be able to convince the investors to help transform a sketch on a napkin to a product that changes the world. But it is not always easy. Anyone who works with innovators and inventors can tell you that unpredictability is the hallmark of innovations.
Patents are granted to creations that are, among a few other requirements, new. To invent, one must do something that has never been done before.
Individuals need the resources, investment, and most of all, the promise that if they discover something new, they can own their idea without someone stealing it. Nowhere is this uncertainty more apparent than in the healthcare industry, where bringing a single new treatment to market can require billions of dollars in investment and more than a decade of research and development. Total R&D expenses for one single drug have been estimated to be $2.6 billion, invested over an average of 10 to 15 years of research, testing, and development. This all occurs before the company even knows whether the treatment will ultimately succeed or fail. Most drug candidates don't make it through the FDA's clinical trial process.
So why do so many companies invest money and time to undertake the high-risk, high-cost, high-cost work necessary to develop the next generation of cures for patients? Patents. When medical companies have an exclusive property right in their innovation, it can be financially worthwhile to go down the long road to approval for use. Strong patent protections are why the United States has been a global leader in the discovery and development of life-saving medications, with more than one-half of all new drugs invented in the United States. Reliable protections also encourage companies to continue to invest in improving existing treatments, because medical invention should not end when a drug reaches the market.
Whether it is developing a safer formulation, reducing side effects, improving dosing schedules, or expanding a drug's use to treat additional conditions, patents help create the incentives necessary to continue research long after the initial breakthrough. Manufacturers must be incentivized to continue investing in their product, ultimately leading to safer and more effective treatments for patients. Perhaps most importantly, this innovation paves the way for future competition, because patents were never intended to be the end of the story, but rather the beginning of a cycle of innovation, competition, and progress. Encouraging investment in new medicines while also ensuring that competitors can enter the market when the lifespan of the patent is complete is essential. Competition helps lower drug costs, expand access, and deliver enormous cost savings to patients.
But this is a symbiotic process: without strong patent protections to encourage innovation, there would be no new treatments for generic drug manufacturers to replicate and bring to market at a lower cost. Getting this balance right is extremely important because the cost of prescription drugs has soared too high for too long in this country. We spend more on prescription medications than residents of any other developed nation. The fact is that affordable healthcare is simply out of reach for many Americans. Congress has made various attempts over the years to streamline and simplify the patent process, such as allowing the government to negotiate drug prices for Medicare Part D, which went into effect earlier this year.
But rising healthcare costs from companies simply seeking to raise their bottom line are still a problem outside of the patent space. PBM middlemen raise drug prices. Insurance companies have increased discretionary denials while decreasing coverage, and mergers among healthcare providers prevent Americans from having options as to where they get their care. We should not have to accept high-priced healthcare as an inescapable American burden. I look forward to hearing from the witnesses about how to best address this delicate balance and ensuring that we have a system that continues to reward breakthrough discoveries while ensuring that these discoveries are available to those they are meant to help.
And with that, Mr. Chairman, I yield back.
Darrell Issa
Gentleman yields back. We now recognize the ranking member of the full committee for his opening statement, Mr. Raskin.
Jamie Raskin
Thank you, Chairman Issa. Thanks to all the witnesses for joining us today. Since I became the ranking member, I've met with some superb IP lawyers bringing their perspectives on a wide variety of issues to me, from suits against AI companies for training large language models from authors' works to the US Patent and Trademark Office director filing for a trademark on behalf of the Board of Peace. The various issues percolating before this excellent subcommittee are important and essential to the practice of law. But as I've told every single one of the people who's come to see me, I never took patent law in law school, much less taught it when I was there.
And so the field is new to me and my mind is open, and so I welcome very much the perspectives being advanced at this hearing. We're often called to weigh in on important issues that we need to learn about quickly, and it's easiest when we've got a personal connection to the problem. As an author myself, it's easy for me to understand why having your words stolen is unfair. As a former con law professor, I know that a member of the executive branch contorting his position to personally benefit the sitting president is a dangerous abuse of power. And while facially one might expect patents for medical innovation to be somehow an opaque or esoteric or inaccessible topic, in fact, all of us have benefited from the medical patent system.
As small children, we got a polio vaccine, a smallpox vaccine, a measles vaccine, among others. When we cut our fingers, we got a tetanus shot. When we were sick, we enjoyed access to antibiotic treatments, and when we were hit by the global COVID-19 epidemic, we all got access to the innovative mRNA vaccines. So we are fortunate and grateful to be living in a time of medical discovery where things that killed people in our grandparents' generation are now survivable to us. Before insulin was discovered in the 1920s, diabetes type 1 was devastating.
HIV AIDS was a death sentence when I was in college, but modern antiretroviral therapy now can help people who are able to get early treatment reduce the virus to almost undetectable levels. Bacterial pneumonia, lymphoma, breast cancer, cystic fibrosis, which has affected people in my family, all of these have been downgraded from certain killers to manageable diseases. But I also understand that as a person with good health insurance, I have a type of access to vaccines and medical innovations that not many people around the world and not everybody in the United States can match. Cures and treatments mean little to people who cannot access and afford them. Efforts to reform our healthcare system to cover more people have been steadily eroded since Congress passed the Affordable Care Act in 2010, and in part because of this, too many Americans are forced to forego a treatment simply because they cannot afford it.
It's imperative that we continue to innovate and produce new cures. It's also vital that we find a way to ensure people can access new medicines, therapeutics, and diagnostics. I know some people believe that the answer is to change the way drug patents work in the United States so that generic drug manufacturers can access protected inventions earlier. Others argue that if we allow generic and biosimilar drug manufacturers to more readily take advantage of others' work, we're not just taking inventors' property, but dramatically changing the incentive structure for future research and development. How to strike the right balance between promoting universal access and incentivizing new research and discovery isn't a new question.
When the framers wrote the Constitution, they were already familiar with the basic idea of promoting the public interest by protecting individual patent rights. In England, the Parliament passed the Statute of Monopolies in 1624, which allowed the monarch to issue letters of patent to single persons. In the Constitution, the framers bequeathed to Congress the power to promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. In Federalist 43, Madison wrote, "The utility of this power will scarcely be questioned; the copyright of authors has been solemnly adjudged in Great Britain to be a right of common law; the right to useful invention seems with equal reason to belong to the inventors; the public good fully coincides in both cases with the claims of individuals." This utilitarian approach is reflected in our patent system today.
Throughout our history, legislators have asked how we can ensure inventors are able to protect their creations in exchange for meaningful public access to the use of those ideas. Today, drugs remain exclusive or covered by a patent for an average of 12 years as opposed to the statutory 20. I understand that's because of the complicated nature of market entry, extensive research and development, and other relevant factors. I'm looking forward to hearing from our witnesses today how this system is working, how it's not working, and how we can ensure our system continues to promote the public good through the individual and through our laws. I close with the words of Thomas Jefferson, who in addition to being our third president, was our first patent examiner.
In 1813 he wrote, "Considering the exclusive right to invention is given not of natural right, but for the benefit of society, I know well the difficulty of drawing a line between the things which are worth to the public the embarrassment of an exclusive patent and those which are not." I thank the witnesses for helping us to draw that same line in the 21st century, and let us all hope for the wisdom and discernment of the third president of the United States, Thomas Jefferson. Thank you, Mr. Chairman, and I yield back to you.
Darrell Issa
I want to thank the professor for proving that he could have taught patent law at his time as a university professor. And with that, all other members will have the ability to put their opening statements into the record. And Mr. Jordan may come shortly, but he isn't here yet. So with that, I'd like to introduce our professors. Professor Michael Carrier.
Professor Carrier is on the Board of Governors Professor of Law at Rutgers Law School. He specializes in antitrust intellectual property law, particularly with respect to pharmaceutical and the technology industry.
Professor Carrier is the co-author of a leading IP antitrust treatise and the author of more than 160 book chapters. Ms. Krista Carver, Ms. Carver is a partner at Covington and Burling, where she co-chairs the firm's food and drug and device practice group and is the firm's pharmaceutical and biotechnology industry group leader. She has represented biopharmaceutical clients for nearly two decades. Ms. Carver also teaches courses on FDA law at the College of William and Mary. Dr. Rachel Good, Dr. Good is the senior vice president and head of legal and intellectual property at, and I'm going to butcher this, Fresenius Kabi.
Fresenius Kabi. Anyhow, biopharmaceuticals, where she leads work on company's patent and legal strategies for its biosimilar business. She is a licensed attorney here in Washington, D.C. as well as the United Kingdom and the European Union. She holds a PhD in molecular biology, very qualified to talk about areas outside in addition to areas inside our jurisdiction. Ms. Jamie Simpson, Ms. Simpson is the chief policy officer and counsel for the Council for Innovative Promotions, a nonprofit organization that advocates on intellectual property matters.
She previously served as a staffer here for Chairman Nadler and Mr. Johnson and on the Senate Judiciary Committee and the U.S. Patent and Trademark Office. Basically, she's been around and we all know her well. We will begin pursuant to the committee's hearing, and Ms. Simpson, you know this very well, by rising to take the oath. Please raise your right hands. Do you solemnly swear or affirm under penalty of perjury that the testimony you are about to give will be true and correct to the best of your knowledge, information and belief, so help you God?
Thank you, please let the record recognize that all answered in the affirmative, and now I'm supposed to say please be seated, but you are. As many of you know, we have a five-minute limit. I do not interrupt people if they're finishing a sentence, but would ask you to not finish more than one sentence at the end of your five minutes. The same would be true in the case of your opening statement. I'm not going to gavel if you run slightly over, but try to stay as close as you can to the five minutes.
Your entire opening statements will be placed in the record in addition to additional supplemental material you may choose to add later and answers to questions which at the end of this we will ask you if you will answer questions of members who either aren't here or who have follow-up questions without enough time.
Mr. Chairman?
Yes.
Point of order.
Yes.
Does a sentence include a semicolon?
Darrell Issa
Any comma will exceed your time if that's your question. No, please, we try, this is a very friendly, very nonpartisan committee, even though we have strong views on both sides. And so the idea is to get your full statement out and we'll endeavor to do so to the greatest extent possible without running over the time that would allow for everyone to ask their questions. With that, start over here with Professor Carver may go first.
Karin Carver
Chairman Issa, Ranking Member Johnson, and members of the subcommittee. Thank you for inviting me to participate in today's hearing. My name is Krista Carver. I am a partner at the law firm of Covington & Burling, where I have worked for nearly two decades on regulatory issues affecting innovative biopharmaceutical companies. Let me begin with a simple point.
As the subcommittee recognized in the title of today's hearing, the question is not whether we should have innovation or access. We must have both. The challenge is ensuring that US policies continue to support innovation for the medical breakthroughs of tomorrow while also ensuring that patients have access to the medicines they need today. The United States has made extraordinary progress on both fronts. Biopharmaceutical companies have brought more than 900 new medicines to American patients since 2000.
Patients are living longer, healthier, and more productive lives because of these advances. At the same time, 90% of all drugs dispensed to Americans today are generic. That number is particularly impressive when viewed against a level of 41% in comparable OECD countries. Biosimilars also are generating significant and growing savings for the healthcare system. These outcomes benefit patients and are the result of Congress's carefully crafted policy choices, as reflected in the Hatch-Waxman Amendments, the Biologics Price Competition and Innovation Act, and the US patent laws.
We should focus on ensuring the system works well for patients, and we should be thoughtful about proposals that seek to change this careful balance of promoting competition while preserving incentives for medical innovation. To this end, let me make three points. First, medical innovation is inherently risky and resource-intensive. Developing a drug takes more than a decade and requires substantial investment, with a high likelihood of failure along the way. Intellectual property protections are essential to making this investment possible.
They allow companies to take risks, recover costs, and reinvest in the next generation of treatments. Second, innovation does not stop at the initial approval of a drug. After a medicine reaches the market, companies continue to invest in improving it, developing new formulations, new delivery methods, and new uses. These advances can improve safety, enhance effectiveness, and expand treatment options for patients, including those with unmet medical needs. So it is not unusual, and it is certainly not problematic, for a single medicine to be associated with multiple patents.
Those patents reflect real innovations that benefit patients. As a prime example, as many as 60 to 75% of oncology drugs are later approved to treat additional types of cancer. That's precisely the kind of innovation we should want to see continue. Third, proposals based on the concept of so-called patent thickets are based on flawed premises. As the US Patent and Trademark Office has concluded, the number of patents does not, by itself, determine when generic or biosimilar competition will occur.
Nor does that number establish a causal link to the prices that patients pay. Major legislative changes grounded in these incorrect premises would discourage investments in pharmaceutical innovation to the detriment of patients. Some of these proposals would force innovators to relinquish valid patent rights or limit their ability to enforce valid patent rights. These proposals represent a significant departure from long-standing principles of American patent law and encourage new kinds of gamesmanship. In closing, I would emphasize this.
The United States leads the world in biopharmaceutical innovation because our country has maintained frameworks that encourage both innovation and competition. Our continued leadership is not guaranteed.
Addressing access and affordability in an evidence-based manner that benefits patients and preserves incentives for continued medical progress. Thank you again for the opportunity to testify. I look forward to your questions.
Darrell Issa
Thank you. Before I go on to the next witness, I'd ask unanimous consent that today's Supreme Court opinion on skinny labels be placed in the record and distributed to all the members of the committee since it's timely and we have the right panel. Without objection, so ordered. Ms. Simpson, you're here at a moment in time. Please begin.
Jamie Simpson
Thank you. Chairman Issa, Ranking Member Johnson, and members of the subcommittee, thank you for the opportunity to testify today on biopharmaceutical patents and American medical innovation. Drug affordability is a real and serious concern for American families. But as Congress considers proposals to weaken pharmaceutical patents like the ETHIC Act, it should also recognize this: the United States leads the world in developing new medicines, and that leadership is not accidental. The result is meaningful increases in treatments and cures for patients.
Within living memory, as Chair Raskin noted, HIV was a death sentence. Hepatitis C was often incurable. Patients with cystic fibrosis, multiple sclerosis, and diabetes are living longer, better lives because of sustained biopharmaceutical innovation. Each of these breakthroughs took substantial time to develop and cost billions of dollars. The patent system is what made the investment possible.
At the same time, the United States has the most robust generic drug market in the developed world. That's actually a congressional success story, the result of landmark laws like the Hatch-Waxman Act and BPCIA, which created pathways for generic and biosimilar competition while preserving incentives for innovation. Hatch-Waxman took generics from roughly 13% of the market in 1983 to about 90% today. Under these dispute resolution procedures, the average drug faces roughly 12 to 14 years of effective market exclusivity before generic entry, well short of a 20-year patent term. By contrast, many current legislative proposals rely more on catchphrases like patent thickets and evergreening than on evidence.
Congressional Budget Office analysis from 2024 suggests patent-focused proposals like these would do very little to lower drug prices, in many cases less than 1%. But they could meaningfully reduce investment in the next generation of treatments. Consider the debate over patent thickets, the concern that the sheer number of patents covering a product prevents generic competition. But a 2024 USPTO-FDA study found no clear relationship between the number of patents on a drug and when generic competition begins. The argument that terminal disclaimer-linked patents are a separate kind of thicket problem overlooks that patentees agree to limits for these patents, specifically they agree to give up patent term.
And multiple patents on a complex product is normal across industries, not just in biopharmaceuticals. Similar concerns apply to the evergreening narrative. Improvements to medicine are often portrayed as suspect simply because they come after the original product. But in every other industry, we call that product improvement. New formulations and better delivery devices that allow patients to take a drug at home instead of a hospital, as well as treatments that reduce side effects, all required additional research.
They have genuinely improved patient care. And importantly, patents on improved versions do not prevent generics from competing on the original product once exclusivity expires.
Congress should also approach the skinny label legislation with caution. This is the subject of the Hikma decision that was apparently just issued and which we will all be studying soon. And I think that will probably greatly influence whether legislation is needed. We have concerns with the bill that may be worth discussing, happy to do so in the questions. Finally, I urge the committee to keep the global competitive landscape in mind.
Forty years ago, the United States was not the world leader in biopharmaceutical innovation. We became the leader because Congress made deliberate policy choices through laws like the Bayh-Dole Act and Hatch-Waxman that strengthened innovation incentives and commercialization pathways. Today, countries like China are investing aggressively to overtake the United States in biotechnology. At a moment when global competitors are racing to surpass us in medical innovation, Congress should be especially cautious in weakening the framework that made America the leader in the first place. Drug affordability matters, but weakening the patent system based on claims the evidence does not support is unlikely to fix it, and it risks undermining the innovation ecosystem that has delivered extraordinary advances for American patients.
Thank you and I look forward to your questions.
Thank you, Dr. Good.
Rachel Good
Chairman, Ranking Member, and distinguished members of the subcommittee, thank you for the opportunity to appear before you today. My name is Rachel Good and I work for the biopharmaceuticals business of Fresenius Kabi, which is a global healthcare company dedicated to bringing high-quality and affordable generic drugs and biosimilars, so the off-patent medicines, to patients with chronic and critical conditions. Fresenius Kabi employs over 4,000 people in the United States and has invested over $1 billion in US-based manufacturing. And today I'm grateful for the chance to talk about how abuse of the patent system contributes to high drug prices and how the ETHIC Act and the skinny label bill offer balanced and pro-innovation solutions. So it's well known that not all patents are valid.
Patent examiners only have a limited amount of time to review each patent application, and peer-reviewed data shows that about a quarter of pharmaceutical patents are later invalidated and canceled after being challenged and litigated to a final court decision. Generic and biosimilar companies challenge low-quality patents to help bring affordable drugs to market sooner. The problem is that the branded drug companies, the ones that own the patents, can litigate duplicative and repetitive patents on the same feature of the drug. This is driving up litigation costs, it's increasing business uncertainty, and it seemingly traps generics and biosimilars into an endless trap of litigation. This bureaucracy is slowing down getting affordable drugs to patients.
So when I say duplicate patent, I'm referring to something called obviousness-type double patenting, which is exactly what it sounds like. This type of double patenting is when a company has two or more patents on the same invention, and so that's actually called non-patentably distinct invention. And so this is not allowed in other countries, but in the United States, a company can overcome a rejection from the patent office against this type of double patenting by filing routine paperwork called a terminal disclaimer, which is a formal statement that the duplicate patents will expire on the same day. The problem is if one of those duplicates is defeated and canceled in litigation, the other duplicate sister patents stay in force and can be litigated again. Now the correct name for these types of patents is terminally disclaimed continuation patent.
That's quite technical, so that's why I'm calling them duplicate patents, but that's a fair name to call them because continuation patents have a copy-paste description, specification, and drawings of the invention.
They only differ from each other on the last page where they use different descriptive terms or obvious variations to claim essentially the same invention. There are real examples of duplicate patents where one claims treating a human and the other claims treating a patient, and one claims treating the named disease and the other claims reducing symptoms of the same disease. This is not even incremental innovation. Continuation patents provide no new information to the public. We colloquially call this strategy patent thickets.
Patent thickets are not a myth. They have been proven to exist by numerous pieces of empirical research that have been rigorously peer-reviewed and published in highly reputable journals. Peer-reviewed data shows that the ratio of these duplicate patents being litigated against by the pharmaceutical industry is increasing over time compared to the ratio of unique patents litigated on drugs which is decreasing over time. This is also a problem for innovation. The solution is the ETHIC Act, which is also a pro-innovation solution.
Under the ETHIC Act, pharmaceutical companies can litigate one patent per cluster, so it eliminates the duplicate litigations. At the same time, this incentivizes innovation because the more unique patents that a company gets on the same drug, the more patents they can litigate against competition. The ETHIC Act maintains full flexibility for patent owners. If a company believes that its inventions are different from its earlier patents, it can explain that to the patent examiner and avoid grouping them together with terminal disclaimers. And if that's not possible, it can put its all of its duplicative claims into a single patent.
This reform will bring billions of dollars in healthcare savings, which most importantly will help patients to afford their drugs. Separately and just briefly, I want to address skinny labeling. Congress created this pathway as a way to expedite generics and biosimilars into the hands of patients as soon as the branded drug had some uses that were no longer on patent while some uses were still on patent, carefully balancing the interests of the branded drug companies with the generic drug entrant. Today this balance is starting to break down with seemingly simple conduct such as calling a drug a generic drug or talking about the sales of the branded drug company amounting to patent infringement. So we need Congress to step in and clarify the skinny label pathway.
So on behalf of Fresenius Kabi, our employees, and the millions of patients who depend on access to affordable medicines, thank you for your attention to these important matters.
Thank you, Professor Carrier.
Michael Carrier
Well, thank you for holding this hearing. For the past 26 years, I've been a professor at Rutgers Law School. Thank you for giving a short version of my bio, saved 12 seconds from my opening statement. But one thing I will mention is that I have co-authored amicus friend of the court briefs on behalf of dozens, usually 50 to 80 professors, including in Amarin v. Hikma. So less than an hour ago, the Supreme Court nine-nothing decided the case based on what I and my co-authors said in our amicus brief.
And so generally when we think about generic competition, we think about affordable drugs. We all are on prescription drugs or know someone who is.
If we were to sum up the Hatch-Waxman Act in one word it is balance. The problem now is that there isn't balance because the stuff that was in there for generics is no longer there. The skinny label pathway is drying up. Patent thickets are arising in ways that they were not at the time of the Hatch-Waxman Act. And so let me briefly talk about skinny labels, patent thickets, and the Patent Office.
First in terms of skinny labels there are a couple ways that generics can enter the market while a patent is in force. The first is through litigation. This is difficult. The brand firm gets to file lawsuit, gets an automatic 30-month stay, two and a half years in which there's no generic on the market at all. The litigation path is difficult.
That's why the skinny label path is so important because it allows generics to enter the market without the hassle of litigation, without that two and a half year delay. Skinny labels are absolutely crucial to lowering prices for US patients. The problem is that the Federal Circuit has said that this commonplace activity of a label, of calling the product a generic equivalent, of sales figures, that this can induce patent infringement. The Supreme Court less than an hour ago said no, that's not right. But the court decided this based on the pleading standards in court, which is different than what you as a Congress can do.
What you can do gives more certainty than what the Supreme Court did about 50 minutes ago. The second thing to consider is patent thickets. Patent thickets are most concerning in the pharmaceutical industry. There's no other industry in which the company can collect as many patents as it wants just to keep competitors off the market. Compare pharma to high tech.
Compare pharma to electronics, semiconductors, computers. In those industries companies collect patents. Why? Because they cross-license. They all come to the table and they say I have a patent, you have a patent, let's trade.
That's different in pharma. In pharma the brand firm doesn't need to collect patents to negotiate with the generic. It's not like the generic has patents that the brand firm needs. So there's something unique about thickets in the pharmaceutical industry. I've done empirical research with Shawn Tu where we found that continuations, which are based on the earlier patent, there's less innovation going on here, are a lot more frequent in the pharma industry than other settings.
The ETHIC Act would be a very effective way of dealing with anti-competitive thickets. Finally with the Patent Office there are many patents that are issued that are not valid. Inter partes review was essential to the America Invents Act, which said that the patent system needed to reflect the constitutional imperative of patents that of a system that will improve patent quality. So the America Invents Act was designed to do that. Inter partes review has fallen dramatically in the past year or so.
We see these new doctrines, settled expectations, that basically make it impossible to challenge these patents in the pharma setting. And this is really a concern. It's also a concern given that the industry itself knows that patents play a crucial effect on pricing. So you look at the recent statement from the Pfizer CEO. We have a loss of exclusivity wave coming, 17 to 18 billion dollars in annual revenues.
Patents have a crucial effect on price. Or how about the thicket? You look at the comment from the Merck CEO recently. You're losing the patent on the active ingredient. No worries.
We have the estate. The estate is something that we are going to firmly promote. They know what's up. We know what's up. At the end of the day generic competition is crucial to the Hatch-Waxman Act.
We're not getting it like we used to before and the legislation before us today could make a significant difference. Thank you for your attention.
Speaker 9
Thank you. We now go to the gentleman from Wisconsin for his round of questioning.
Speaker 10
Thank you, Chairman. Recent reports have found that nearly 100 million prescriptions are abandoned by patients each year due to surprise costs. For example, the Journal of Managed Care and Specialty Pharmacy found that increased cost sharing above $100 was associated with up to 75% abandonment rate for certain specialty drugs. This suggests that cost is a prevailing consideration for patients' medication purchasing. I think it's fair to say that none of us want to see patients abandoning necessary prescriptions due to high costs.
Similarly, we do not want to block the pipeline of Americans' long-standing history of creating innovative, life-saving drugs and therapies that benefit millions of patients. I'm grateful to Chairman Issa for calling today's hearing so we can take a look and kind of scrutinize policy ideas that vow to lower drug prices and ensure America continues leading in pharmaceutical innovation. Dr. Good, do you believe reforming patent law rather than looking towards market-based solutions could present a more effective way to lower drug prices for all Americans?
Rachel Good
So I think there are two issues going on. I think you're talking about also the market access issue. Once complex generics and biosimilars get on the market, they also have to get market share. And there is an issue at that stage as well. But first they need to get on the market in the first place.
And so that's what this patent system reform is about. So with respect to the issue of getting market share, the free market is starting to evolve around that now. But the market cannot evolve around patent system abuse. You've got to get the generics onto the market in the first place. So even though 90% of prescriptions today are filled by generics, what the ETHIC Act would do is it's about timing.
It would bring these drugs onto the market sooner. And that's important because patents don't last forever. This is about getting the timing right and making sure that there are no inappropriate delays or extra monopolies being eked out. And so the reason we need patent system reform is because we've got a lot of peer-reviewed data that links patent thickets to delayed access to generics, especially in this country. So I co-authored a paper with Professor Chao, and it was peer-reviewed, so it was rigorously studied.
We counted patents and we compared how many patents were litigated in Canada, the UK, and the US on the same set of drugs, and it was all of the regulatory-approved biosimilars at that time. In Canada and the UK, it was 46 and 24 patents. In the US on the same drugs, it was 344 patents, head and shoulders above the other countries. But most of these were the duplicate patents. We then counted how many months delayed were those same biosimilars in getting access to market.
And we found in the UK and Canada, it was five months and seven months, and that's beyond expiry of the basic patents on the drug, so they have some patents there as well. But in the US, it was two years and 10 months.
Speaker 10
So let me interrupt you there. So is the expectation that expediency and getting those pharmaceuticals to the patients is the most important thing? Are there other benefits that the ETHIC Act could result in?
Rachel Good
Yes, so the ETHIC Act is pro-innovation because right now we see pharmaceutical companies stacking duplicate patents on their old cash cows, when what they should be doing is innovating more unique patents, looking for new uses of these drugs. So this would incentivize them more because under the ETHIC Act, if a drug had 50 patents on it and 20 of them were duplicates and 30 were unique, under the ETHIC Act, they could litigate those 30 unique patents and they could still litigate one duplicate from each cluster.
So the more patents that they innovate, the more unique inventions, then the more patents they can litigate against competition. So the ETHIC Act is discouraging this behavior of spreading out duplicate patents and encouraging them to invent more and more unique patents on the same drug. So it does, it works both sides. They don't lose anything.
Speaker 10
Thank you. Ms. Carver, trials for a new drug treatments typically take years, as was just stated, and cost hundreds of millions of dollars. If legislation like ETHIC Act was signed into law, what behavioral changes would you expect pharmaceutical companies, if they have, I'm not sure how this would work, but what type of changes would they have to make, the way they function or operate, I guess is the best way to put it.
Karin Carver
So, the ETHIC Act would harm innovation. It would allow generics and biosimilars to infringe valid patents with no recourse for the innovator to enforce those valid patents, and it would be a substantial shift, a seismic shift in the balance of Hatch-Waxman. It would also invite gamesmanship. We see that the way the bill is structured, an innovator would need to pick a patent to enforce from a patent group with no information on which to do it. There would be no obligation for a generic or biosimilar to provide technical information for the innovator to make a decision about which patent to enforce, and there's also nothing preventing them from changing their product as soon as the decision is made.
So, my view of the ETHIC Act is that it would undermine innovation.
I yield back.
Speaker 11
The gentleman yields back. We now go to the gentleman from Georgia for five minutes.
Henry Johnson
Thank you, Mr. Chair. Dr. Good, in a 2024 research letter, you wrote, quote, "Although the US Patent and Trademark Office is required to reject patents that are obvious follow-ons from earlier versions, they may grant such patents when applicants file terminal disclaimers." Dr. Good, doesn't a patent applicant have to demonstrate the claimed invention is new, useful, and non-obvious over prior art?
Yes, they have to demonstrate that for the first of the duplicate patents. After that, what we see, and there's peer-reviewed data on this as well, is once the patent owners start filing and duplicating the patents, it's a given because the first patent was already examined. The issue is that these duplicates add nothing more to the first patent.
Henry Johnson
Well, now, patents with a terminal disclaimer do demonstrate some new or useful or non-obvious use over prior right, isn't that correct, prior art?
Henry Johnson
Well, let me ask you, Ms. Simpson, in some situations, a patent applicant can receive a patent that is an obvious variant when compared to a portion of its own work that isn't in the prior art, so long as a terminal disclaimer is filed. How is this different from what Ms. Good, Dr. Good has said?
Jamie Simpson
Well, I think the first thing to understand here is I think the version of what is going on with terminal disclaimers that Dr. Good has described is an oversimplification of what is happening. And I think a really important clarification is that, first of all, terminal disclaimers are an agreement by a patent owner to give up patent term if a second patent they're claiming has an overlap with another patent they have. And this means you can have two patents that are actually fairly different, if they have a small overlap that the patent applicant doesn't think is worth fighting over, they'll agree to this.
The second thing to bear in mind is that terminal disclaimers, they're a valuable tool for the patent office to help manage the process of patent prosecution. It helps them, helps the office and the applicants kind of break it down into bite-sized pieces. So you have a big patent application, you'll examine part of it, get that patent issued, you'll continue to examine maybe different parts of it in a second patent, and maybe again some of that will overlap so there's a terminal disclaimer, but not all of it. So these patents are not duplicates of each other. And that's why the ETHIC Act goes a lot further than I think is being suggested.
And it would really take away innovators' rights to get the benefit of what they're disclosing to the public and actually have protection over everything they've invented.
Henry Johnson
Thank you, Ms. Simpson. Total R&D expenditures for each new drug are estimated to be $2.6 billion invested over an average of 10 to 15 years of research, testing, and development before the first patient is prescribed the drug by a doctor. How do revenues from successful drugs help offset the cost of the many research programs that fail? And isn't it correct that most drug candidates never become approved drugs after the $2.6 billion average expenditure?
Jamie Simpson
That's exactly right, and it's an interesting feature of this market, which is that so many drug candidates fail. So I think when you're looking at this, the only way that drug companies can afford to take all of the bets they take is to be able to rely on strong patents to recover investment for the drugs that do succeed.
Speaker 12
Thank you, Ms. Carver. What role do patents play in giving companies the stability to make substantial investments in research and development?
Karin Carver
Patents are crucial to the substantial research effort. Your mic. Sorry. Patents are crucial to enabling companies to make those substantial investments in research and development. As you pointed out, the failure rate is extremely high for medicines in clinical trials going all the way back to the beginning of development.
Patents help provide an opportunity for companies to recoup those R&D costs and bring new therapies to patients. Pharma companies have invested more than $850 billion in research and development in the last decade, and that's led to many important innovations for patients, including drugs that cure hepatitis C, drugs that have improved cancer outcomes greatly in the past few years, and major improvements in cardiovascular health. We have a very strong drug industry here.
Speaker 14
Thank you. I now recognize myself for five minutes. Americans want two things that should not be mutually exclusive. They want access to life-saving medications and they want continued medical innovation. Our challenge is not choosing one over the other, it is making sure the legal framework that Congress enacts continues to deliver on both.
I know our witnesses today have some areas of disagreement on important issues, but I also think there is a shared recognition that patients benefit when new treatments are developed and when those treatments in the long term become accessible and affordable.
So I appreciate all of you for being here today and for sharing your substantial insight on our pathway forward. Ms. Simpson, I'd like to start with you. In more than 40 years since Congress enacted Hatch-Waxman, what aspects of that framework have been most successful in promoting both pharmaceutical innovation and patient access to lower-cost medicines?
Jamie Simpson
Thank you for the question, Congresswoman. I think what that law did, as many have mentioned, is that it created a balance between respecting the patent rights of the innovators and providing a pathway to resolve disputes over the patents that still cover drugs once the regulatory exclusivity expires. And I think it's been particularly effective because it encourages all the disputes to be litigated together in one forum.
Speaker 14
Ms. Good, I'd like to present the same question to you from the perspective of a biosimilar generic manufacturer. What aspects of the Hatch-Waxman framework do you believe have been the most successful in protecting innovation and achieving patient access to lower-cost medications, and what lessons should Congress keep in mind?
Rachel Good
So the Hatch-Waxman Act was established in 1984, and it worked really well to begin with for the first few decades. We've seen in the last 10 years that patent thickets has become an entrenched strategy. So if you look at data going back to 1984, generics are getting on the market quite soon after basic product patent expiry. But if you look at the last 10 years, it's a very different picture now that we see these continuation patents and terminal disclaimers increasing. So right now, the litigation framework is not cut out to handle patent thickets, and that's why we're now seeing delays compared to other countries in the world.
Speaker 14
And Ms. Good, how important is regulatory and legal certainty when companies are making decisions that may take years or even decades to come to fruition?
Rachel Good
So it takes eight years to develop a biosimilar. Even though we're only copying, it still costs around 100 million. And so when we start our development program, there are usually just a handful of unique patents that we're looking at. By the time we get to the end, we're faced with huge numbers of these duplicate patents. And I wrote a paper that showed that there's this really interesting strategy, a huge spike in these duplicate patents issuing out of the patent office at year 12.
The scale and the timing of this spike shows it must be a strategy to put patents in place at year 12, which is when FDA exclusivity expires on biologics. That's the time when the biosimilars are trying to get to the market. So this is clearly a strategy. And so it makes it very difficult for companies who need that business certainty because if you are going to face litigation multiple times, you need to get onto the market, but the risk that you pay the branded drug company's lost profits could be more money than you would ever make. So if you have a volatile patent system, it makes launching more difficult.
It also makes manufacturing in the United States more difficult because patents also block manufacturing.
Speaker 14
Yes, Ms. Simpson, you read my mind. I was just about to come back to you to ask specifically on the question of certainty and the importance of having a regulatory framework that you can anticipate with clarity.
Jamie Simpson
Thank you. Well, one thing I'd like to highlight about the Hatch-Waxman Act and the structure it provides is that it doesn't matter how many patents you have, they can all be in that suit. And what typically happens in a case like this is as the case develops, the scope of the dispute will narrow. Often a judge will require a couple of claims to be litigated before a jury. So that's how all of these cases normally progress.
And at least what the data shows is that it's been steady over the past three decades that that period of exclusivity that drugs have enjoyed has been between 12 and 14 years. And numerous studies have shown this. And so if there is an increase in patent thickets, which I'm not sure that the data, well, regardless of that, it hasn't changed when generics get on the market. So I think, like I said in my opening, I think this is a real success story for Congress and I don't think the evidence shows that Hatch-Waxman has somehow stopped working.
Speaker 14
Thank you. We are now out of time. I now recognize the ranking member, the gentleman from Maryland, Mr. Raskin.
Jamie Raskin
Thank you very much, Madam Chair. Dr. Gupta, I wanted to start with you because as I'm understanding your point, you think that there should be one patent per cluster because the more patents you get, even if they're all cut off at the same time, the more you can litigate and it's the litigation that's time-consuming. So in theory, if all the litigation could be done in one day, then you would have no objection to the proliferation of new patents under the thicket, is that right?
Rachel Good
Not exactly, because patents can continue, these duplicates can issue during litigation, after litigation. There's been an example of a drug, Myrbetriq, where the first litigation was in 2016, there were subsequent litigations starting with duplicate patents in 2020, and in the end, a three-year litigation took nine years because patents can keep issuing even during and after litigation.
Jamie Raskin
I got you. But I'm just trying to isolate what your issue is. You don't have a problem in theory with the idea that there are good faith new patentable discoveries taking place as they do more and more research on a particular drug. Your problem is that you don't want that, you don't want it to be used as an excuse to continue monopoly control over the original patent and profiting from it, and you're saying that's possible because of the length of litigation. But if somehow there were a litigation or administrative process that could reduce that time, just hypothetically to a day, then you would have no problem with doing that, right, other than whatever the cost of going to court that day would be?
Rachel Good
Not exactly, because we like the unique patents, the innovative different ones. Innovation is good for us as well. The branded drugs' innovation builds our pipeline.
Jamie Raskin
So what should they do when they make what they view as a substantial new discovery within the process? You said file a unique new patent?
Rachel Good
Yes, that's what they should, and they do, and that's fine. Under the ETHIC Act, that would continue and it would even be encouraged. The ETHIC Act is not...
Jamie Raskin
Right, well, Ms. Simpson, does that work for you? They're just saying file a unique new patent and then the process starts over, is that right?
Jamie Simpson
Well, I think, I think again that's oversimplifying what's going with terminally disclaimed patents. And I think there are a number of issues here in terms of are you litigating them all at once or is there serial litigation? And importantly too, I don't think all the time we're talking about generics not being on the market. Sometimes we're talking about generics being on the market and then it's just two companies litigating. But I think the main point I think I'd like to make with the terminally disclaimed patents is that it's, it really is a procedure that benefits the office in making it easier to go through a big patent application in smaller pieces.
And that's a separate thing than having a different patent that's on just a different invention.
Both of those things are happening. You know, these are very complex inventions. But I think, given that there's no real data showing that the number of patents relates to how long it takes a generic to get on the market, I don't think there's a real problem to solve here. And that's the main problem I have with these bills.
Jamie Raskin
I got you. Okay, Ms. Carver, let me come to you. Will you tell us how the so-called patent dance works and what that is?
Karin Carver
Sure. So, the patent dance is a phrase that's used to refer to the patent provisions of the Biologics Price Competition and Innovation Act that were enacted by Congress in 2010. As described in the statute, the first step of the patent dance is for the biosimilar applicant to provide access to the reference product sponsor to their application and manufacturing process information about the product. Then the reference product sponsor needs to provide a list of all the patents they believe could reasonably be infringed by the biosimilar manufacturer's product. In practice, we have seen though that, first of all, the Supreme Court interpreted this provision to be voluntary.
So applicants need not use it. And as a result, we are seeing that that happens where some companies opt out entirely and others only participate in the patent dance to some extent. This undermines the purpose of the original BPCIA patent dance that Congress enacted.
Karin Carver
Well, what happens is if the company doesn't have enough information to know which patents might be infringed, the only option they have is to bring suit on the ones that they believe may be infringed based on no information. So it misses an opportunity to narrow the scope of patents that could be at issue.
Speaker 18
So do you think that the dance should be a mandatory dance? Forgive me.
Okay. I yield back.
Russell Fry
Thank you, Madam Chair. I don't think I've ever had a hearing before where a Supreme Court decision drops at the same time. So we're like real-time trying to figure this out. And I know that you're sitting here and you haven't read the opinion, but Professor Carrier, what do you make of at least the top line of the Supreme Court's decision that just came out five minutes ago?
Michael Carrier
Well, actually, I did read it, thanks to phones. And I think it is a very positive decision. It was unanimous. It made clear that certain types of conduct, at least in this case, did not lead to a finding of induced infringement. But there still is a different role for Congress to play.
If I were the brand firm, I would go back to the wayback machine and find one tiny piece of evidence that the Supreme Court didn't talk about, file another lawsuit, and we're off to the races. The Supreme Court, even though it was unanimous, cannot act with the certainty that Congress can. Supreme Court also only applied to one context, not the biosimilar context. So I still think even today's decision does not displace the role for Congress.
Speaker 19
So maybe a step, at least according to your opinion, maybe a step in the right direction, but Congress, we can't punt and say the Supreme Court has already addressed this.
Speaker 21
What, Ms. Simpson, you discussed major changes to patent laws related to generic competition in the 80s and the 2010s. You also discussed how investment in R&D has shifted from Europe to the United States in the last 50 years. How was, how has balancing patent rights for inventors and generic competition affected US investment trends in the, in the biopharma sector?
Jamie Simpson
Well, as I mentioned, I think these laws really transformed the United States into a place that attracted investment and brought the biopharmaceutical industry here.
And those were laws that were largely passed in the 1980s. And since that time, and most recently, I'd say over the last 10 to 15 years, through things that Congress has done and especially the courts have done, have in a number of ways dramatically weakened patent law. And I think we might not be seeing the effects yet, and this is not specific to the biopharmaceutical industry, this is across all industries. But it's providing a real opportunity for other countries to take the lead, and China most notably has been filling in the void. Not only have they strengthened their domestic patent system, but as an economy that's largely state-driven, they've just been investing money.
And as I laid out in my testimony, they're making real moves to try and take the biopharmaceutical industry from us using both state money and their patent system. And our country relies on the patent system to fuel investment. And that's why I think taking any measures to further weaken the patent system on top of what's already happened in the absence of strong evidence would be a mistake.
Speaker 21
Thank you for that, Ms. Good. Do you think, just broadly, do you think our patent system is too restrictive? I think Ms. Simpson obviously has a different view of that, but do you think it's too restrictive for generics and biosimilars?
Rachel Good
So, with the ETHIC Act being pro-innovation, these patents that are duplicative, they would not issue without terminal disclaimers, they would be rejected. But terminal disclaimers make it easy to flood the markets, flood the system with these duplicate patents. When we talk about China, we should think not about the quantity of American patents, but we should measure American innovations by the quality of its patents. And this is what the ETHIC Act goes to. So, yeah.
Speaker 21
Do you, Professor Carrier, what role do you think that intellectual property policy plays in promoting that competition? Obviously, we've got these three bills that we've talked about a little bit today, but what role do we have in promoting that competition and lowering prices relative to other factors like PBMs or insurers, regulatory barriers?
Michael Carrier
The pharmaceutical system is incredibly complex, and there's more than enough blame to go around. There's blame to be placed at the feet of the PBMs, there is blame to be placed at the feet of drug companies. The legislation here would be really helpful because the Hatch-Waxman Act was designed to be a compromise between promoting generic competition and fostering brand-firm innovation. There was a lot in Hatch-Waxman for brand-firm innovation: patent term extension, 30-month stays, and all that. It's just this stuff on the generic side now, the ladder's pulled up behind them when, for example, they try to get rid of skinny labels.
So we're trying to restore that balance.
Speaker 21
I'm trying to, last question, just want to make sure I get it and just to boil this down. You know, the compromise act that was created that we're operating under, is it your belief that pharmaceutical companies have used that and then maybe structurally or procedurally used it to game the system to get a monopoly by another way? Is that kind of what you're articulating at times?
Gentleman's time has expired, but you may answer.
Michael Carrier
Yes to all of the above. Hatch-Waxman has been incredibly successful in certain ways. Look at the percentage of generics on the market. Hatch-Waxman also has been gamed. And it's not just me that says it, Hatch and Waxman themselves have said that the system has been gamed.
Thank you for that, Mr. Chairman, I yield back.
Speaker 22
I thank the gentleman for yielding back. We now go to the gentlelady from California, Ms. Lofgren.
Thank you, Mr. Chairman. Americans are facing a drug prescription drug affordability crisis, really. Americans are paying more for prescription drugs than almost anyone else in the world. US drug prices are nearly three times higher than prices in peer countries, and nearly one in three Americans report not taking their medication as prescribed because of cost. So these issues are very important to the American people, and it's one of the reasons why I was glad to join Congressman Cline in introducing the Skinny Labels Big Savings Act.
This is a bipartisan bill, and I believe it would get lower-cost generics to patients sooner while preserving valid patents and real innovation, which is important to me and every member of this panel. For people who are watching online, I guess I feel sorry for those who are watching online, but I think it's important to describe what is a skinny label. It allows a generic company to compete for uses of a drug that are no longer under patent while leaving the patented uses protected. It's interesting that the court decided this morning, it was good to see it. So Professor Carrier, do you think, I you addressed this a little bit, but the bill that we've introduced is partly solved by what the court did this morning, but would it add certainty to make this bill law because as you pointed out, you could litigate further and further.
Part of this is the expectation game, are you going to put a lot of time and effort into developing a generic if the risk of litigation continues? What's your thought on that?
Michael Carrier
Absolutely, certainty is needed. And so even though the Supreme Court issued what I would call a favorable decision, what did Amarin say in oral argument? We're just going to re-plead our complaint. They're going to go back to the drawing board, they're going to find another piece of evidence, and they're going to do it all over again. And so they can't give the certainty that Congress can give.
And just to be clear, even the earlier decision, GSK v. Teva a few years ago, has already led to a reduction in skinny labeling according to one peer-reviewed survey from 56% down to 20% over a couple of years. Why? Because the generic is on the hook for not just its revenues, but the brand firm's profits as well, triple the case in the case of GSK.
Dr. Good, would the Skinny Labels bill restore certainty to the pathway in your judgment to help get lawful generics to patients sooner?
Rachel Good
Yes, it would, because what it does is it puts a safe harbor around the label itself. So as long as it's also incentivizing good behavior. So as long as you do the label carve-out and you don't mention the patented disease in any promotional material, then you're safe. So that incentivizes biosimilars and generic drugs to stay in their lane and stay away from the patented material, which is the exact same compromise that was made in 1984 that worked so well for four decades until the recent case law started to erode this balance. So we want to move it back to how it was working before.
Speaker 22
So just to be clear, the bill that we've sponsored does not allow a generic to market a patented use, correct?
Exactly.
Correct.
Speaker 22
So I think the practical effect is straightforward. It follows the FDA-approved label, leaves the patented use out, doesn't promote the patented use, and it can reach patients sooner that are for uses that are no longer under patent.
It seems to me that reducing the cost of pharmaceuticals for Americans is a really important goal. And I have not sponsored the other bill. I think that's a more complicated measure and I think this hearing's been very helpful in outlining the issues to help us sort through that. But to me, I think reinforcing what the court did this morning would add certainty to a decision that was unanimous on the part of the court, but also keep the solid reasoning that they had in place as part of the law and would be very helpful. So with that, Mr. Chairman, I yield back and thanks for this hearing.
Speaker 23
I thank the gentlelady. We now go to the gentleman from Virginia, Mr. Cline, for five minutes.
Ben Cline
Thank you, Mr. Chairman. I'm going to tag team with my colleague from California and celebrate this ruling but recognize that it is a step and not a finish line. And you know, this is a pleading stage ruling, not a safe harbor. By holding that Amarin failed to state a claim on facts and said inducement can be implicit, the next brand can still sue on different marketing. The generic still spends years and money proving its carve-out was lawful.
Codifying a clear rule stops those suits at the front end. And that's what we want is certainty. We want to make sure that generics continue to drive down costs as was argued in the case. Generics have saved patients and insurance payers an estimated 2.9 trillion dollars over the past decade. This is something that has benefited my constituents, constituents of every member up here, all Americans, and we should enact laws that continue to encourage their use.
But the decision today does not reach biosimilars, but our bill does, the Skinny Labels bill does. The decision today is a small molecule Hatch-Waxman case, says nothing about biosimilar carve-outs. Our bill amends section 271 to extend the same safe harbor to biologics approved under section 351(k), closing a gap that the ruling leaves wide open. The statute that we need would provide something that is absent from the court decision: durability. And because even a unanimous ruling leaves the line to be drawn fact by fact in the lower courts.
And that drift is how the Federal Circuit got crosswise here in the first place, arguably. So, Ms. Carver, in practice, to sell a generic, a company has to communicate that its product is a generic of or therapeutically equivalent to the brand. It's a routine, necessary part of marketing any generic, correct?
Karin Carver
The therapeutic equivalence of the generic would be listed in FDA's Orange Book for everyone to see. I think from the, on the Skinny Labels Act, one thing that was brought up previously is the question of whether the label does or does not mention the patented use. And to me, that's a really critical part of this question. It's FDA that's reviewing the labeling of a generic and they are not equipped, both from an authority perspective as well as an expertise perspective, in determining whether labeling infringes or induces infringement of a patent. And so that's a concern I have with the bill.
It's also very important that we continue to incentivize new uses of existing drugs. And that's what we're talking about here. In oncology in particular, we see that 60 to 70 percent of drugs are later approved to treat additional types of cancer and it's important that we maintain those incentives.
Speaker 26
Right, but the FDA itself does not review a generic's carve-out for patent inducement adequacy. In fact, hasn't the FDA said it lacks the authority and expertise and the courts are the appropriate forum?
Ben Cline
Okay. Ms. Simpson, as we have been talking about with the decision, doesn't an after-the-fact court victory give generics the upfront certainty that a statutory safe harbor would?
Jamie Simpson
Well, I think the issue here is, and I have not read the ruling, but...
Speaker 24
Well, it's, I mean, you can say yes or no. Does a court decision give the certainty that a statute would?
Speaker 27
Well, answer my question, then you can tell me what you think the issue is.
Jamie Simpson
Um, well, I think it doesn't necessarily give you the certainty, but I think the bill would do more harm than good.
Ben Cline
Okay. Professor Carrier, the skinny label carve-out has worked alongside method-of-use patents for 40 years, and by one estimate, 15 carve-outs saved Medicare roughly 15 billion in five years. The Supreme Court just reversed the Federal Circuit and protected Hikma's carve-out this morning. Some will say that ends the matter. So you can tell the committee plainly, why doesn't a single favorable pleading-stage decision give generics the certainty they need to keep that savings pipeline going, and what would codifying the carve-out add that the ruling does not?
Michael Carrier
Amarin said in oral argument that they're just going to go back to the drawing board and file another complaint. The Federal Circuit can do what it does and not follow the Supreme Court's decision. Congress can act and give certainty in a way that the court cannot, because there's always another tweak to the system. We hear a lot about innovation, but this piece was not about innovation in the Hatch-Waxman Act. You look at what the Solicitor General said in the Amarin case, Congress was willing to accept the risk of reduced innovation incentives rather than delaying generic entry until all method-of-use patents have expired.
In other words, there's a ton in Hatch-Waxman about upfront innovation. Skinny label is not that, and that's the tradeoff that Congress specifically made.
Thank you. I yield back.
Speaker 28
I thank the gentleman. We now go to the gentlelady from North Carolina, Ms. Ross.
Speaker 29
Thank you, Mr. Chairman. And I'm really glad that our committee is discussing this topic today, and clearly it is very timely with the Supreme Court's decision. It also concerns one of the main economic engines in my district in the Research Triangle of North Carolina. The Research Triangle is home to one of the most vibrant life sciences and biotechnology sectors anywhere in the world. My constituents are clinicians, researchers, entrepreneurs, students, and drug trial candidates, each playing a vital role in the discovery and development of the next generation of medicines.
We have small, scrappy startups putting it all on the line for the potential to find transformative cures, as well as large companies that leverage their resources to invest in creating the next blockbuster medicine. We also have a strong base of generic drug manufacturers who play an important role in supplying affordable medicines for all Americans. But we have to be clear. Underlying all of this innovation and the hundreds of billions of dollars in economic activity it generates is our nation's robust patent system. Strong intellectual property protections are the foundation that that success is built on.
Congress worked thoughtfully and cautiously on a bipartisan basis to create the current framework governing intellectual property rights. This framework recognizes that ownership of these groundbreaking ideas is crucial to ensuring that they're pursued here in the United States, that the jobs, economic value, and life-saving discoveries they generate ultimately reward American citizens and taxpayers like my constituents for doing the hard work that allowed these innovations to exist in the first place.
This leads me to the consequence of weakening patent protections for our national and economic security. Over the last year and a half, we have experienced a loss of talent due to misguided immigration and trade policy combined with funding cuts to academic research. Now we're beginning to see the flight of investment and capital from the United States. Alarmingly, it is moving to our adversaries, like China. I cannot stress enough that ensuring that these advancements exist in the American domain is paramount.
Losing IP to China and other countries would be a critical strategic failure. Ms. Simpson, could you please expand on the consequences of American innovation moving overseas and keeping strong patent protection for innovation that occurred here?
Jamie Simpson
Well, thank you for the question, and I, I think that's exactly right. It is a huge concern if the biopharmaceutical industry were to move overseas. Strategically, it would mean that the difficult face, choices we face now would be compounded if someone like our adversary like China were controlling all of the drugs. It would make decisions we have within our own borders today decisions that they would have over us. Economically, this is a hugely important industry to our country.
It supports over a million job, jobs directly and many more others by association. And, and I think related to what you said too, a lot of what we are talking about is kind of death by a thousand cuts to this industry. The skinny label bill, for example, it might seem like a relatively small thing, but there was a big research study that came out last year that found out that additional uses of drugs are what they called a missing market, that we're losing 100, 100 to 400 billion dollars a year in lost value for drugs that already exist that we just don't know what all they can be used for. And, and this bill would undermine one of the last incentives we have to keep companies trying to do that research. And I have not read the Supreme Court case yet today, but I think what they're doing is preserving the balance by letting companies pursue the highly fact-intensive question of intent, which the skinny label bill that we've been talking about, I think unfortunately, because of its categorical exemptions, would not allow.
So I think this is yet again another step that we should not take because it is slowly eroding our lead.
My time has expired and I yield back.
Jamie Simpson
The gentlelady yields back. We now go to the gentleman from Texas for five minutes.
Speaker 30
Thank you, Professor Carrier. Some argue that the issues of evergreening and patent thickets are largely non-existent myths. Is that an accurate characterization?
No, it is not.
Michael Carrier
Could you explain that further to me so normal people could understand what that means?
Sure. So, the patent system is designed to promote innovation, and we should be grateful for all that the pharmaceutical industry has done to promote innovation. But when you collect a whole bunch of patents and then use it in an abusive way, I think that is a problem. If I can take just a second, we've heard a lot about terminal disclaimers. It's a bit wonky, tough to understand what that is.
Let me give you one concrete example. So, Eylea is a drug that treats an eye disease.
And Regeneron here sued Amgen in a patent over Eylea. The patent had a buffer that controlled the acid and ensured safety. The biosimilar Amgen did not have the buffer. In other words, it did not infringe. Courts said, you're fine, no injunction, keep doing what you're doing.
The very next day, Regeneron went back to the drawing board, got a new patent, new terminal disclaimer, and sued them again. They didn't have it in the first place, they got the idea from their competitor, and they filed another lawsuit. This is not about innovation. This is about playing games with these terminal disclaimers. Ms. Simpson, do you, do you have a thought on that?
Jamie Simpson
I do. I think one, one of the things that's important to bear in mind with this idea of repetitive lawsuits that Professor Carrier just mentioned is that courts have a lot of doctrines specifically to deal with repetitive lawsuits. Issue preclusion, claim preclusion, and if they're not dismissing these, those cases on these grounds, it means these cases aren't truly duplicative. It means someone is going to court with a different enough property right that it's worth pursuing. And I think this goes back to an even more fundamental point that civil litigation is, especially in this space, it's complicated.
It's due to choices that both sides make. And, and I think having, and to that end, I don't think there's actually, again, I don't think there's a real problem here to be solved that the courts themselves don't already have tools to deal with.
Speaker 30
Some of these, some argue that the US patent law makes it too easy for brand manufacturers to prevent generic and biosimilar competitors from entering the market. Would you agree with that thought?
Jamie Simpson
I would not. And for this I go back to the data that shows that generics enter the market on average between 12 to 14 years, which is less than the length of a term of a patent. And that number's held steady for about 30 years. So, I think if there were evidence that it were harder for them to get on markets, we would see it. 90% of prescriptions are filled by generics.
We have an extremely robust generic industry in this country, which we should be proud of, but that's because the system we have is working.
Rachel Good
Yeah, I just want to give an example. So, there was a patent which was a method of purifying a drug. And the method was you put it through column A, then column B, then column C. That was showed to not be new, the patent was canceled. Then the duplicate came along.
The duplicate patent said you put it through column A, then directly through column B, then directly through column C. This one word difference, the word directly, then needs to be litigated again. And when it comes to judges narrowing down claims, that takes years. So, that's time when patients abroad are getting the drugs and patients in America are waiting for the patent litigations to be resolved. We're talking about a difference between a human and a patient in two different patents.
Patents that would be rejected by the patent office if they weren't filing terminal disclaimers. The ETHIC Act does not weaken patents, it encourages unique patents. It stops clogging up the system with, you know, repetitive patents. The branded drugs would not lose anything other than the ability to game the system.
Thank you. I yield back.
Would the gentleman yield?
Yes. You can have it all.
Darrell Issa
Ms. Simpson, you, you said 14 years had been staying. Isn't it true that it's 21, 22 years for biosimilars? It's much longer if you look specifically at the largest new growing area.
Jamie Simpson
At least the data I've seen suggests that it's also more like 14 years, so slightly longer.
Speaker 32
Dr. Gurg, had you any information on that because our information shows it's more like 20?
Rachel Good
Are you talking about the exclusivity of the branded drug, how long they're exclusive for?
Darrell Issa
Yeah. How long it takes to get to market, which is what Ms. Simpson opined that it was 14 years.
Rachel Good
Our information on biosimilars is much more like 20, 21.
Old data shows 14 years or less because that's going back to 1984 when there were less entrenched patent thickets. The latest data dated 2026 showing the last 10 years of how long it took biosimilars to get on the market was 18 years of exclusivity for the brand. But Congress thought 12 years was appropriate with FDA exclusivity and Congress allowed patent term extension up to 14 years. So 18 years is four years longer than Congress ever contemplated.
Speaker 33
Thank you, Mr. Chair. I think we can all agree here and we all share the goal of getting as many people as possible access to the most efficacious drugs possible at the lowest cost. And you know, we're actually living at a time that's incredibly exciting for drug discovery with timelines for discovery and testing rapidly accelerating and with a lot of new potential discoveries and applications happening all the time and maybe even more exciting ones ahead of us. So I think there's a lot to actually be optimistic about despite the frustration that so many people with, you know, the price of prescription drugs. But Ms. Simpson, kind of continuing on the last set of questions.
So, you know, whatever the number is, it seems 11 years or so, maybe a little more is the time it takes for the generic competition to begin. But I mean, you know, if there was no original innovator who created the underlying drug, what would be the opportunity for the generic to come along?
Speaker 34
Right, exactly. And that's why the, why balance is so important here because we can't have a generic industry if there's not a branded industry to begin with.
Speaker 33
And if we didn't have, you know, patent protection or if those protections were viewed as as inadequate, I suppose you could try to protect your IP through trade secret law, right? But what would that do for the ability to develop generics? Because, you know, one of the sort of virtues of the patent system or or the tradeoff inherent in it is the requirement of disclosure. That's how these generics make their drugs, right, is that the the patent holder has to actually tell you how to do it, whereas with trade secret law you don't necessarily have that access, do you?
Speaker 34
That's right. I think that's an easy to forget part of the patent system is that it promotes disclosure as opposed to incentivizing people to keep things as trade secrets, allows other people to directly copy. That's part of why generics can get on the market so quickly, they see exactly how to do it in patents.
Speaker 33
So assuring that innovators have the incentive to utilize the patent system to protect their IP actually enables the creation of a generics much more readily than trying to protect those secrets through trade secrets laws. Is that, is that right?
Jamie Simpson
That's right. And I mean there is no time limit on trade secrets either as opposed to patents. So I mean if you were able to successfully keep your drug or treatment secret, you could have it, you know, theoretically forever.
Speaker 33
Right. So that would be higher costs for people if we didn't have an effective patent system, potentially.
Speaker 33
You know, another area where maybe we're, you know, seeing an unnecessary limit on innovation in a way that reduces access and raises cost is when it comes to the issue of subject matter eligibility for patents. I've sought to address this through the Patent Eligibility Restoration Act, bipartisan and bicameral legislation. Could you just give us a little insight into that that specific issue, subject matter eligibility?
Jamie Simpson
Yes, so I think that's an incredibly important issue that I think a bill like PERA is critical to address. The Supreme Court made a number of changes to patent eligible subject matter in the last decade and it's impacted several industries relevant to this hearing, medical diagnostics and other part of the parts of the life science.
It's not as clear, and for diagnostics, it's very unclear whether or not you can get adequate patent protection in the US. You can get a greater scope in Europe, in China, in Korea, in Japan. And as I mentioned earlier in discussions with Ms. Ross, there's a real risk that we are going to lose our industries to other countries that provide better protection unless something like PERA is enacted.
Speaker 33
Yeah, and I think you just mentioned a few, but the key industries, the key innovations that we could lose access to or lose at least being the home to?
Jamie Simpson
Yes, so the diagnostic industry is a very clear one where it's gotten much harder to get patent protection at all in the US. Other parts of the life sciences industry have also been affected, and various parts of computer-implemented inventions have also been affected, which is also clearly a very important area of the economy.
Speaker 33
Yeah, absolutely. I think this issue is really, really important right now from the perspective of global competitiveness when we have, you know, China and the EU and others that have much more stability, predictability, I'd argue rationality when it comes to the matter of what is and is not patentable. It really puts us at a disadvantage. So hopefully we can get this legislation through this Congress. Thank you for your testimony.
I yield back.
Chairman yields back. I recognize myself.
Speaker 33
Actually, Mr. Chair, sorry, can I seek unanimous consent to enter into the record this study, Drug Patent and Exclusivity from the USPTO?
Thanks.
Speaker 38
Well, so as not to fall victim to that ruling, Mr. Chairman is recognized for his unanimous consent.
Henry Johnson
Thank you. It's rather lengthy. A letter from the Council for Innovation Promotion, a letter from the National Association of Manufacturers, a statement from the ERISA Industry Committee, a letter from the Center for Medicine in the Public Interest, a statement from Families USA, a letter from Alliance for Aging Research, two statements from Generation Patient, a statement from the US Chamber of Commerce on the ETHIC Act and patent policy, a statement from Patients for Affordable Drugs Now, a statement from AARP, a statement from the Biotechnology Innovation Organization, a statement from the Biosimilars Forum, a statement from the Alliance of US Startups and Inventors for Jobs, a statement from the American Society of Health-System Pharmacists, a statement from the Campaign for Sustainable Rx Pricing, and last but not least, a letter and issue brief from the Center for American Principles, and these are offered for unanimous consent.
Henry Johnson
And they are as bipartisan as this hearing and this panel, Mr. Chair.
Darrell Issa
Thank you for noting that. And with that, I'll recognize myself. Dr. Good, the ETHIC Act has been alluded to not being good, being good, whatever. Let me just ask a workaround question. If we narrowed the act to requiring that all claims be brought at one time, that a pharmaceutical company couldn't sequentially sue, would that be a partial conclusion, and is there any level of unfairness considering if I charge someone with a crime, I don't have the ability to sequentially charge them with crimes, I have to bring all known crimes at the same time?
Is that one of many solutions that could be ordered by this committee?
Rachel Good
So, a couple of thoughts, that's actually bad for innovation because we want branded drug companies to continue innovating new uses of old drugs and the ETHIC Act would allow that.
Darrell Issa
No, I'm saying that all known at that time. In other words, in the case where they actually already have two patents and they're bringing one set and then when they lose bringing the similar one.
Rachel Good
So, it overcomplicates a case when you go from five patents to 75 patents like in the case of the drug Simbravo.
Or tens of thousands of claims.
Rachel Good
Yeah, so in the case of the drug Simbravo, there are five unique patents and 70 duplicate patents. Federal courts cannot handle that number of patents. So they try to narrow it down but that takes years. This is slowing down patients getting access to affordable medicines. It's just extra bureaucracy.
You can take all of those claims and put them into a single patent. You don't need to spread them out unless you're trying to game the system.
Darrell Issa
Thank you, I think you've made our case for the bill as it is. We obviously are dealing with the unanimous Supreme Court ruling just a few minutes ago. Ms. Carver doesn't like it and opined on how they're going to work around it and I'm fine with that, that's their right. But would you say in spite of all the good work that your companies do, that the history of doctors prescribing for patients, if you will, off-patent, is in fact a huge part of innovation and that so much of what pharma takes credit for, in fact, around the world are doctors making discoveries that then lead to that innovation? I'd like to hear both of your ideas on that.
Rachel Good
Yes, so the skinny label has been available for four decades and innovation continued. So despite today pharma is saying that it's a problem for innovation, for the last four decades they kept innovating and finding new uses.
Darrell Issa
Thank you. And Professor Carrier, I was deviating slightly in the question to skinny labels and physicians making decisions off-patent have been around for a long time and they're really first cousins, aren't they, when it comes to finding ways to help the patient?
Michael Carrier
Absolutely, in advance of the Hatch-Waxman Act in the early 80s, just about every state had a substitution law.
Darrell Issa
Okay, I'm going to get to my unanimous consent in a moment. There's been a lot been said about competitiveness and there's a few people up here who have a history in competitiveness, but I want to ask each of the witnesses to answer briefly in one sentence. If the United States market is the most excluded market from, if you will, generics, and as a result the original patent holder keeps their price high longer because they clearly do keep their price higher than the generic because they have the right on the day the patent expires to lower a price to exclude generics from even entering the market if they wanted to. But if the United States, call it 20% of the world's market, if we continue to have our price here and notoriously China, India, and other countries have a much higher barrier to getting a patent, a much higher barrier to enforcing, and as a result other products arrive in their market much sooner. Are we in fact doing ourselves a favor or are we effectively excluding the development of those products here in the United States while around the world the consumer is getting that less expensive product years earlier?
Start with Dr. Good.
Rachel Good
So because the US patent system is so volatile, American patients get access to cheaper drugs later and less manufacturing can happen in the US.
Professor?
Darrell Issa
So innovation is crucial, but so is generic competition, and so I would consider both of them together.
Ms. Simpson, you're a great scholar, but if you try to narrow your answer to the competitive situation in a global market in which China ignores our patents and produces their products in real time if they can figure out how to reverse engineer them.
Yes, I would say that is a very big problem to our competitiveness.
Karin Carver
I would say that America is doing a great job with balancing those two types of innovation and access compared to other countries, with American patients having access to 85% of new medicines compared to an average of 38% in patients across G20 countries.
Darrell Issa
It's a very good point that other countries simply keep the generics and lock out big pharma in order to lower costs. There's no question at all. One question that I'm going to submit for the record for all of you, if you don't mind, is under current law, universally, my old company, any company, the patent standard is make, use, or sell. Under the idea that America needs to be competitive, if a product is legal and off-patent in countries other than the United States, should this committee consider a narrow carve-out for what I would call a bonded manufacturing facility, meaning that American companies should be allowed to produce in America for sales to countries where the product is already available, could be available legally? The concept being that if you're not making in America till later, you probably won't make in America at all.
If you make in America in real time, you will hit the ground running when it becomes available in the US. I personally have observed that China has that advantage. They make the products, as does India, years ahead of being able to sell them in America. It means they're prepared on day one. So I'd ask you to, as lengthy and as scholarly as you can, please give me your answers on that because it's a serious consideration for what we would not necessarily apply to non-regulated products.
In other words, we're not going to open the floodgates for making in America and selling around the world, but this highly regulated product in which the opportunity occurs at different times, I'd want to have that considered. And since I took extra time, does the ranking member have any follow-up?
I do not. Thank you.
Darrell Issa
So with that, I'd ask unanimous consent that we place into the record Mr. Arrington of Texas's statement and a copy of the maligned HR 3269, the ETHIC Act, and the now perhaps to be modified HR 6485, the Skinny Label Act. Without objection, those are ordered to be placed in the record. And without re-reading them, we will place into the record both some of them that Mr. Johnson opined on, but there's a total of 20 record letters to be placed in the record, and they'll be made available to all of our witnesses. And now for the closing.
This concludes our hearing, and I want to thank all of our witnesses for being here before the subcommittee today. Without objection, all members will have five legislative days in which to submit additional written questions for our witnesses in addition materials for the record. And as is my tradition, do you all agree to accept those and and come back in as timely a fashion as you can? They've all answered in the affirmative. I thank their witnesses, and we stand adjourned.
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