Integra v. Merk: Effects on the Cost and Innovation of New Drug Products

Journal of Law and Policy Volume 13 Issue 1 SCIENCE FOR JUDGES III: Maintaining the Integrity of Scientific Research and Forensic Evidence in Criminal Proceedings Article 14 2005 Integra v. Merk: Effects on the Cost and Innovation of New Drug Products Alison Ladd Follow this and additional works at: https://brooklynworks.brooklaw.edu/jlp Recommended Citation Alison Ladd, Integra v. Merk: Effects on the Cost and Innovation of New Drug Products, 13 J. L. & Pol'y (2005). Available at: https://brooklynworks.brooklaw.edu/jlp/vol13/iss1/14 This Note is brought to you for free and open access by the Law Journals at BrooklynWorks. It has been accepted for inclusion in Journal of Law and Policy by an authorized editor of BrooklynWorks. LADD MACROED FINAL 2-16-05.DOC 3/8/2005 12:56 PM INTEGRA v. MERCK: EFFECTS ON THE COST AND INNOVATION OF NEW DRUG PRODUCTS Alison Ladd* INTRODUCTION The rising cost of pharmaceutical drugs is a concern of most consumers.1 Americans reportedly spent $125 billion on drugs in 1999.2 The cost to discover and develop a new drug is similarly significant and is estimated at nearly $1.7 billion.3 Drugs are distinct from most other products entering the marketplace in that they must undergo extensive premarket approval by the Food and Drug Administration (FDA) pursuant to the Federal Food, Drug, and Cosmetics Act (FDCA) before reaching consumers.4 FDA approval is a lengthy process and takes, on average, 8.2 years.5 Given that the cost of research and development cannot be * Brooklyn Law School Class of 2006; B.S., Cell & Structural Biology, University of Illinois–Urbana, 1996. The author would like to thank Eric Kirsch as well as the staff of the Journal of Law & Policy for their guidance and encouragement. Special thanks to Eric Parucki for his continued support, encouragement, and, most importantly, for his patience. 1 David Noonan, Why Drugs Cost So Much, NEWSWEEK, Sept. 25, 2000, at 22. 2 Id. 3 Ann M. Thayer, Blockbuster Model Breaking Down: Pharma Industry Reaches New Sales Peak, Despite Rising Costs and Bigger Challenges for Drug R&D, MODERN DRUG DISCOVERY, June 2004, at 23. 4 21 U.S.C. §§ 301-395 (2004). 5 CONGRESSIONAL BUDGET OFFICE STUDY, HOW INCREASED COMPETITION FROM GENERIC DRUGS HAS AFFECTED PRICES AND RETURNS IN THE PHARMACEUTICAL INDUSTRY 33 (July 1998) [hereinafter CBO STUDY]. 311 LADD MACROED FINAL 2-16-05.DOC 312 3/8/2005 12:56 PM JOURNAL OF LAW AND POLICY recovered unless and until FDA approval is obtained, the research and development costs for a new drug result in a negative cash flow for pioneer drug companies.6 Consequently, only one out of 5,000 possible new drugs is approved for sale and use.7 The Patent Act provides pioneer, or innovative, drug companies with the right to patent new drugs.8 Patents enable pioneer drug companies to preclude others from making, using, importing, offering for sale, or selling their drugs in the United States.9 Further, patents provide pioneer drug companies with exclusive access to the marketplace, allowing the recovery of drug development costs.10 Problematically, however, the FDA approval process overlaps with the patent terms of new drugs and effectively shortens the period of market exclusivity enjoyed by these products. Pioneer drug companies thus face a reduced period in which to turn profits and recover research and development costs.11 As a result, drug companies seek to recover these costs from consumers through higher product prices.12 When the patent rights related to a new drug expire, generic drugs are permitted to enter and compete in the marketplace.13 Generic drugs can be sold at much cheaper prices than their brand name counterparts, in part because their manufacturers can make use of existing research in developing drug formulas rather than originating this knowledge base. Through patent laws requiring 6 Id. at 14-15. PHARMACEUTICAL AND RESEARCH MANUFACTURERS OF AMERICA (PHRMA), PHARMACEUTICAL INDUSTRY PROFILE 3 (2003), available at http://www.phrma.org/publications/publications/2004-03-31.937.pdf [hereinafter PHRMA PROFILE 2003]. 8 35 U.S.C. § 101 (2004). 9 35 U.S.C. § 154(a)(1) (2002) (“Every patent shall . . . grant to the patentee . . . the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States . . . .”). 10 CBO STUDY, supra note 5, at 3. 11 Id. at 3-4 12 Sarah E. Eurek, Hatch-Waxman Reform and Accelerated Market Entry of Generic Drugs: Is Faster Necessarily Better?, 2003 DUKE L. & TECH. REV. 18, 18 (2003). 13 See CBO STUDY, supra note 5, at 2. 7 LADD MACROED FINAL 2-16-05.DOC 3/8/2005 12:56 PM PATENT LAW AND NEW DRUG DISCOVERY 313 full disclosure of patented inventions, generic drug manufacturers can obtain the patent submissions of brand name drugs and acquire the information necessary to develop and manufacture generic versions.14 Having benefited from lower development costs, generic drugs may enter the market with lower prices than their brand name rivals.15 Prior to 1984, however, generic drugs were prevented from entering the marketplace immediately upon the expiration of brand name drug patents and were required to undergo premarket approval by the FDA prior to sale.16 Patent law prohibited generic drug companies from engaging in premarket approval activities, including the manufacture or use of brand name drugs during their patent terms.17 Thus, premarket testing by generic drug manufacturers was delayed until the brand name patent had expired.18 In 1984, in recognition of the need to control drug prices, Congress passed the Drug Price Competition and Patent Term Restoration Act.19 Commonly referred to as the “Hatch-Waxman Act,” after its two congressional sponsors, the legislation was intended to address the issue of rising drug prices by controlling the practices of brand name manufacturers and enabling generic 14 35 U.S.C. § 112 (1975) states: The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention. Id. 15 Dan L. Burk & Mark A. Lemley, Policy Levers in Patent Law, 89 VA. L. REV. 1575, 1677 (2003). 16 See Roche Products, Inc. v. Bolar Pharm. Co., 733 F.2d 858 (Fed. Cir. 1984) (holding that performance of experiments to derive FDA required test data, conducted with a view to the adaptation of the patented invention to the experimenter’s business is a violation of the rights of the patentee to exclude others from using his patented invention). 17 Id. 18 Id. 19 The Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (1984). LADD MACROED FINAL 2-16-05 (...truncated)