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Senate Judiciary Committee Examines Patent Abuse, Anticompetitive Behavior That Contributes to Risin

This morning the Senate Judiciary Committee held a hearing on intellectual property and rising prescription drug costs. During a two hour session, the Senators heard from several witnesses how drug companies abuse the patent system and manipulate regulations in order to prolong their monopolies and increase profits, and what can be done to solve the problem.

The witnesses for this hearing were:

Mr. Joshua Barker, Director of the South Carolina Department of Health and Human Services,

David Mitchell, President and Founder of Patients for Affordable Drugs NOW,

Mr. James Stansel, Executive VP and General Counsel of PhRMA

Professor Michael Carrier of Rutgers Law School, an expert on the patent system,

And Professor David Olson of Boston College Law School.

Senator Lindsey Graham (R-SC) chaired the hearing, and opened by saying that "we don't want to kill the goose that lays the golden eggs, but we don't want to have a system where patents drive up costs for the average consumer...I expect us to do something on patents this year."

The witnesses delivered powerful testimony on the need for substantial reforms. Joshua Barker spoke about how the rising costs of prescription drugs are marking his job difficult and increasing government costs, putting strain on their budget. "The current trend of rapidly increasing drug prices is unsustainable and incompatible with entitlement problems," he told the Committee. On average, South Carolina's Department of Health and Human Services has to spend $50 million more each year because of price increases. And without generic competition, prices will continue to skyrocket. There must be protections to ensure that patents aren't abused and to promote competition.

David Mitchell testified next. "I have an incurable blood cancer," he said. "Prescription drugs are keeping me alive, so the importance of innovation is not theoretical for me, but literally a matter of life and death. But drugs don't work if people can't afford them." Mitchell explained how the drug he used to be on, Revlamid, costs up to $15,000 per year, and this is because Celgene, the company that makes the drug, refuses to sell samples to generic competitors. He urged Congress to pass the CREATES Act to promote access to samples so generic drugs can be developed as well as legislation to combat product hopping, pay-for-delay settlements, and fraudulent citizen petitions.

James Stansel of PhRMA spoke next, and attempted (unconvincingly) to deflect blame away from the drug companies, although he acknowledged that the prescription drug system could be improved. Professor Michael Carrier followed him and eloquently laid out the various anticompetitive behaviors that are used to stifle competition. Brand drug companies pay generic companies not to bring their generic drugs to market in pay-for-delay settlements, brand companies make tiny modifications to get new patents, and they file fraudulent citizen petitions that the FDA has to review in order to delay generics. Professor David Olson concluded by echoing many of the same points earlier witnesses had made, and emphasizing the need to promote competition.

The Senators then asked questions, and there was an overwhelming sentiment in support of the CREATES Act. Even the counsel representing PhRMA acknowledged that denying samples to generic companies was a bad practice. Senators Chuck Grassley (R-IA) and Richard Blumenthal (D-CT) urged that Congress pass a bill to end for pay for delay settlements. Senator John Cornyn (R-TX) was appalled by the sheer number of patents that Humira had filed on its bestselling drug AbbVie, and said the status quo was unacceptable.

The last Senator was John Kennedy (R-LA). He was visibly angry and told the counsel for PhRMA that while he respected the innovation and lifesaving medicines that drug companies made, "we have a problem!...The American people are being played for chumps! If you don't step up and offer some meaningful solutions, then we're going to end up with price controls."

This Senate hearing was yet another example of how angry both Democrats and Republicans are about rising drug prices and patent abuse. A bipartisan consensus is developing on ending patent abuse and anticompetitive actions by drug companies. Congress should seize the moment and pass reforms as quickly as possible.

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