A recent report from the US president’s executive office on reducing drug prices makes reassuring reading for innovators concerned about the future of pharmaceutical patents under the Trump administration. In contrast to comments previously made by the president and his new health secretary Alex Azar, the paper robustly defends innovators’ IP rights, while recommending regulatory and insurance reforms, as well as a clamp down on foreign “free-riding”, to lower medical costs.
But branded pharmaceuticals companies should not become complacent: data presented in the report underscores the urgency drug pricing issues have acquired in the minds of the US electorate – an urgency bound to keep all forms of pharmaceuticals market exclusivity under the political spotlight for the foreseeable future.
The white paper – entitled ‘Reforming Biopharmaceuticals Pricing at Home and Abroad’ – was produced by the Council of Economic Advisers, a politically-appointed group which is part of the Executive Office of the President. It fleshes out for the first time the US executive’s approach to lowering the high drug prices paid by US patients – a cause which Donald Trump has repeatedly expressed his commitment to.
Previous comments from the new Health Secretary Alex Azar – who spoke of the need to clamp down on the “gaming and exploitation of exclusivities or patents by branded drug companies” – raised the spectre of anti-patent reforms; especially made against a background of intense public controversy surrounding market exclusivity for drugs, and in the light of the president’s earlier declarations that pharma innovators were “getting away with murder”.
But the report does not blame the nature of US patent laws for the country’s high drug prices. In fact, its core message is that incentives for pharma innovation help, rather than hinder, efforts to provide cheaper – as well as better – healthcare. “It is often asserted that promoting innovation and affordable drugs are conflicting goals,” reads the second sentence of the paper, before continuing: “New innovations, however, often provide improved health that was not previously available at any price or obviate the need for more costly care.”
The US life sciences industry is celebrated as “the engine of worldwide biopharmaceutical innovation”; and patent rights, it is stressed, are essential for recouping substantial R&D investments.
The white paper emphasises instead the need to curb “government policies that hinder price competition at home”, calling for changes to state insurance schemes – such as Medicare and Medicaid – and for a number of reforms to reduce regulatory barriers to market entry for generics and biosimilars, as well as innovative products. The “outsized profits” of pharmacy benefit managers and other middlemen also come under fire.
The other side of the dual strategy recommended by the report is the exertion of pressure on foreign governments, whose citizens, it argues, are “free-riding” on the innovations paid for by US patients. American consumers, it points out, contribute to more than 70% of worldwide profits for patented pharmaceuticals, because other developed countries have “government-controlled markets”. What is termed as “under-pricing” in other jurisdictions therefore needs to be tackled.
This pro-patent analysis will reassure innovative pharmaceuticals companies, coming as it does from a major advisory council so close to the US President. Indeed, many of the report’s recommendations were reflected in this month’s White House 2019 budget proposal.
But the report also highlights the need for patent holders to remain deeply engaged in policy debates around drug pricing. It presents data showing that lowering prescription costs is now the highest legislative priority for American voters – especially independents and Democrats – suggesting that it is likely to remain at the centre of public discourse for the foreseeable future; and while President Trump’s advisers may be looking for solutions elsewhere, patent reforms as a means to lower healthcare costs in the US will continue to be advocated by many others across the political spectrum.