Public Comment: The Practice of Waiving Final Rights to Avoid Unlawful Double Patenting

On May 10, 2024, the United States Patent and Trademark Office (PTO) proposed changes to the way pharmaceutical companies patent their products. The proposed rules would make it easier for generic or biosimilar companies to challenge patents on brand-name drugs, reducing a key barrier to entry for cheaper drugs. In the following commentary, Niskanen Lawson Mansell Health Policy Analyst and Senior Associate Zachary Norris explain how the proposed rules would benefit patients and streamline the administration of drug patents.

Dear Katherine K. Vidal
Undersecretary for Trade and Intellectual Property
Director of the United States Patent and Trademark Office

United States Patent and Trademark Office
600 Dulany Street
Alexandria, Virginia 22314

RE: Practice of Disclaimer of Final Liability to Avoid Unlawful Double Patenting (89 FR 40439)

Dear Director Vidal,

The Niskanen Center is grateful for the feedback on the proposed rule, which would add a new requirement to the implementing regulations at 37 CFR 1.321(c) and (d). This amendment to the current guidance will help level the playing field for generic and biosimilar manufacturers by lowering barriers to entry and saving them time and money during the patent process. These changes will also improve the functioning of the patent system by encouraging more efficient use of the patent examination and grant process. We therefore commend the agency’s proposed rule.

The Niskanen Center is a nonprofit organization that advocates for public policies that encourage innovation, competition, and effective governance. In keeping with this mission, we support regulatory efforts to expand access to lower-cost products. Throughout the healthcare industry, restrictions on the availability of lower-cost care increase costs for patients and taxpayers without providing the benefits of additional quality.

In this case, current disclaimer practices force competitors to fight onerous legal battles to bring generic products to market, delaying their arrival and adding unnecessary administrative costs. Ultimately, patients bear the brunt of the higher costs of needed medicines.

Pharmaceutical companies are among the most sophisticated users of the patent process. Under current law, brand-name drugmakers use the patent process to delay the entry of lower-cost generic drugs into the market, thereby stifling competition. They do this by filing multiple continuation patents to cover minor changes to their drug, creating a “patent thicket” tied together by a final disclaimer that helps extend the duration of their monopoly.¹ As a result, competitors seeking to produce drugs already on the market must win difficult legal battles. This delays the introduction of drugs to the market and increases unnecessary litigation costs—even if enforced patent claims are ultimately found to be invalid. These costs are directly borne by competing drugmakers but are ultimately passed on to patients and taxpayers through higher prices and delayed access to life-saving treatments. The PTO’s efforts to crack down on this practice are crucial because, while many consider it anticompetitive, the Seventh Circuit has found that patent thickets do not violate the antitrust laws.²

The current disclaimer rules have allowed for a significant increase in the number of continuation patents over the past 20 years. Between 2000 and 2015, the rate of continuation patents per approval increased by 200 percent, while the rate of original patents increased by only 15 percent.³ The increase in the number of continuation patents further burdens generic competitors with litigation, as evidenced by the rate of continuation patents subject to litigation, which increased by 213 percent during the same period.⁴

Reducing the regulatory burden on generic companies will not only reduce unnecessary administrative costs, but it could also speed up the entry of cheaper generic drugs into the market. More than 30 percent of Americans report that they have underdosed or not bought prescription drugs because of the cost.⁵ These high costs can be reduced through competition from generics and biosimilars. In 2021, the FDA reported that generic drug approvals led to $16.6 billion in savings.⁶ Strategies like patent thickets, which delay cheaper drugs from entering the market, stand in the way of future savings.

Requiring drug manufacturers to include language in their final disclaimers that ensures that primary patents will no longer be enforceable if a related secondary patent is successfully challenged would reduce the financial and legal barriers to entry. Drug manufacturers rely on the quantity, not the quality, of their patents under the current system. The USPTO proposal would encourage drug manufacturers to direct their resources toward developing more novel drugs that are not subject to obviousness-type double patenting, knowing that a successful challenge to a reference patent or patent claim would have a greater impact on the subject patents. Improving the competitive environment for drug patents would help lower the cost of drugs to patients and reduce the administrative burden of extensive legal battles.

These proposed changes are consistent with Congress’s intent to facilitate generic drug market entry, as expressed in the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act. That legislation explicitly addressed concerns about the difficulty generic companies had in obtaining approval for their drugs. It has been 40 years since the enactment of that law, but generic companies still face unnecessary barriers to market entry. By increasing the efficiency with which invalid patent claims can be challenged and removed from the universe of inventions covered by the exclusive rights of patent owners, the proposal is also consistent with the Leahy-Smith America Invents Act of 2011.

We appreciate your time and consideration of these comments. We look forward to your actions supporting a more competitive medicines market and more effective regulatory design.

Yours faithfully,

Lawson Mansell
Health Policy Analyst
Niskanen Center
[email protected]

Zachary Norris
Senior Legal Counsel
Niskanen Center
[email protected]

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