Bad Medicine? Humira Article Fuels Debate Over Patent System "Gaming"

An eyebrow-raising headline in the New York Times this week (link to non-paywalled text on BusinessStandard.com) noted that the rheumatoid arthritis drug Humira has earned its parent company, AbbVie, over $114 billion over its 20-year lifetime.

With many of the key patents on Humira, and settlement agreements suppressing similar drugs, set to expire in 2023, the article questions whether AbbVie improperly manipulated patent and IP laws to leverage the powerhouse drug and monopolize the market. But, as with so many things related to intellectual property, the question isn't as cut and dried as it appears on the surface. Let's take a deep dive into the thrust of the article and what it got right...and wrong...about how patents work and whether AbbVie used them properly and in accordance with the law.

A Brief Primer on Patents

Monopolization, or total control of a specific industry space, is generally prohibited by a complex system of federal and state laws. When a company becomes too large or has too much control over its niche, regulators can step in and force the company to break up, downsize, and/or cease anticompetitive action that would disallow smaller companies from gaining market share on an equal footing.?

However, IP and patent law offers an exemption from this, albeit a temporary one.

When the creator of a given innovation is granted a patent, the patent essentially functions as a license to temporarily monopolize that innovation. This is intended to allow the creator or creators to maximize the rewards of their innovation, and recoup the time and money investment in its development, by preventing others from copying the innovation and flooding the market with cheap knock-off versions. During the patent's lifespan, the person or legal entity controlling the patent can do what they wish with it. They can charge whatever the market will bear. They can keep it in a vault and do nothing at all with it. They can give it away. As long as they defend their IP from unauthorized use, they have absolute control over how their innovation is used and by whom...including what price they choose to levy on the end user for access to their innovation.??

In the medical field, R&D is expensive. Pharmaceutical companies spend billions of dollars on research annually, and most of the avenues they evaluate turn out to be dead ends. Therefore, when a new drug successfully demonstrates safety and value for patients by navigating the labyrinth of hurdles to federal approval, it is only logical that the company would set the price point high enough to: a) pay for the drug's research and development from inception to market; b) fund further R&D for other innovations; c) recoup losses incurred by pursuing fruitless avenues of inquiry; and d) provide maximum value to shareholders and stakeholders alike. No one is interested in pharmaceuticals that don't do what the patient needs them to do, so why would people pay for them? Thus, patenting drugs extensively is as much a matter of corporate survival as providing patients access to drugs that work.

In the New York Times article, the author notes that AbbVie applied for 313 patents for Humira or the proprietary compounds that comprise it. Out of these, 165 patents were approved. This may seem like overkill to a layperson, and certainly seems to have struck the original author this way, but as I said above, this makes a lot more sense when we consider that drugs don't exist in a vacuum. Every chemical compound, biological extract, and the mechanisms for creating and binding them into an effective medication is a part of the final product. It would be foolish only to patent the final drug and ignore the pathways, processes, and prima materia that led to its ultimate existence in the first place. Thus, as Humira was refined to be more effective and safer, every revision to the original formulation needed further protection. This is perfectly legal and well within both the purview of the law and AbbVie's rights as the creator of Humira. AbbVie also sued competitors who were threatening to release similar drugs, settling with them to only release this year, after key primary patents to Humira expire, further cementing its dominance in the RA treatment arena.

It's legal...but is it right?

It is worth noting that Humira accounts for more than 1/3 of AbbVie's total revenue, making it an outsized success story in any industry, but especially in pharmaceutical circles. The article noted that Humira's price has increased eight times since its introduction to the market, including an 18% price hike in January of this year. Again, there is nothing in the law preventing this. Looking strictly at the law and what it allows, AbbVie has the right to set the price of Humira as it deems fitting and proper. The obvious question in the author's mind was whether AbbVie illicitly, improperly, or unethically manipulated the law to its own ends.?

One key fact about the law that most people are confused about is that patent law is by its very nature designed to be anti-competitive, albeit for a limited time.

To visualize this in lay terms, imagine playing a fighting video game like Mortal Kombat. Oftentimes, a player character can be trapped against the side of the screen while the opponent player character uses the same move or combination of moves over and over again to win the match. By the rules and deterministic internal logic of the game's programming, the player has done nothing wrong. If the player had, this would not be permitted. But from the perspective of avid players, "one-moving" is unfair and unsporting.??

In much the same way, accusing AbbVie of "one-moving" or gaming the patent process and the IP law system betrays a fundamental misunderstanding of how patents work and what they are intended to do. They are by their very nature designed to be anti-competitive, albeit for a limited time.

The Bottom Line

Where no law is broken, no crime exists. Working from a strictly text-based perspective, IP law doesn't disallow AbbVie's actions, and therefore, they are permitted. While this case may provoke argument about the underlying ethics, and will almost certainly resurrect efforts for the government to intervene in pharmaceutical pricing to make access to drugs like Humira more equitable across the socioeconomic spectrum, the fact remains that AbbVie simply used the law as written to its best advantage, as any innovator and indeed any person can and should...and as I would advise my clients to do in a similar situation.

Ultimately, I believe this is good for patients as it is precisely the monopoly provided by patents that allow the huge investment in research and development needed for new treatment.

When the bean counters calculate a company's cost of producing and bringing a particular new innovative drug to market, they typically only look at the successful launches and don't take into account all of the sunk costs that go into the ones that fail.

ABOUT JOHN RIZVI, ESQ.

John Rizvi is a Registered and Board Certified Patent Attorney, Adjunct Professor of Intellectual Property Law, best-selling author, and featured speaker on topics of interest to inventors and entrepreneurs (including TEDx).

His books include "Escaping the Gray" and "Think and Grow Rich for Inventors" and have won critical acclaim including an endorsement from Kevin Harrington, one of the original sharks on the hit TV show - Shark Tank, responsible for the successful launch of over 500 products resulting in more than $5 billion in sales worldwide. You can learn more about Professor Rizvi and his patent law practice at www.ThePatentProfessor.com

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