Big Pharma Exploited Patent Laws to Keep Medicare Drug Prices High, Report Finds

Manufacturers of the 10 medications listed under the novel Medicare price-negotiation program exploited patent laws to keep costs high for patients, according to a new report from the watchdog group Accountable.US.

The report comes nearly two years after President Joe Biden signed the Inflation Reduction Act and with it launched the historic Medicare negotiation program, which allows the Department of Health and Human Services to directly negotiate with drug companies to lower the prices of some of the most expensive but commonly used prescription drugs.

“Despite taking billions of taxpayer dollars for drug development, these Big Pharma companies unleashed an army of patent attorneys to keep life-saving medicine exclusive and more expensive for seniors and other patients,” Tony Carrk, executive director of Accountable.US, said in a statement.

The initial negotiation list included 10 drugs under Medicare Part D, which covers the cost of prescription drugs. When Biden announced the list, companies raced to ensure their life-saving medication remain “expensive and exclusive,” Carrk said at a press conference hosted by Accountable.US on Wednesday.

The companies bent patent law to maintain a monopoly on certain drugs and prevent competition from entering the market, the report found.

For example, Johnson & Johnson reached several confidential agreements to delay generic competition for the blood thinner Xarelto. Known as a ”pay-to-delay agreement,” this entails a company paying its competitors to not release a generic version of their drug at a lower price. Johnson & Johnson also applied for nearly 50 patents on Xarelto, a tactic known as “patent thicketing,” which creates barriers to competitors developing a similar product.

The drug Imbruvica, used to treat cancers like Leukemia, is protected by nearly 150 patents, giving manufacturers Johnson & Johnson and AbbVie market exclusivity on the drug until 2036.

Companies also used a strategy called “evergreening,” which is making “small, insignificant changes to their drugs to acquire new patents to extend their exclusivity,” according to the report.

AstraZeneca’s Farxiga is the most “evergreened” drug on the Medicare negotiation list and is protected by 36 patents until 2030. Farxiga costs over four times as much in the United States as it does in Canada or the United Kingdom, both countries where the government can negotiate for lower prices.

These tactics are a part of an apparent strategy to boost medication prices heading into negotiations with the DHHS. The negotiated prices for the 10 drugs are set to be released in September, with prices set to go into effect in 2026.

Spokespersons for AstraZeneca and Johnson & Johnson did not immediately respond to requests for comment.

“They’re negotiated to a price that is affordable for patients, but also allows for plenty of pharma profit,” Merith Basey, executive director of Patients for Affordable Drugs, said at the press conference Wednesday. “But in the United States, as we’ve heard, Big Pharma manipulates the system loopholes and extends patents far beyond their normal limits.”

The average price of the 10 drugs listed on the Medicare negotiation list is three to eight times the price of those drugs in Australia, Germany, France, the U.K., Canada and Switzerland, according to a study by the Commonwealth Fund.

Allowing Medicare to negotiate “alters the trajectory of drug pricing in the United States,” Basey said. Though price negotiation is likely to have a bigger impact over the long term, the IRA has already made a difference in the lives of Medicare Part D enrollees, even with some companies’ efforts to avoid lower prices.

Jackie Trapp, who has been treating her incurable blood cancer with Xarelto, a drug manufactured by Johnson & Johnson, said Wednesday that she cannot “overstate the significance” the legislation has had on her life.

The IRA introduced a price cap on out-of-pocket drug costs at $3,500 a year. Before the cap, the co-pay for her medication cost her $15,000-$22,000 a year. She and her husband had to sell their cars and refinance their homes to afford the medication.

But the price of Xarelto and other brand-name drugs in the United States is still extremely high. In 2022, one in five U.S. adults aged 65 or older were forced to skip or delay filing a prescription due to high drug costs.

“It’s not hyperbole to say these are life and death changes for people,” she said at the press conference.

Pharmaceutical companies have long argued that patents protect innovation and are necessary to further research and development. Yet the report points out that a good chunk of research for these drugs has been funded by tax-payers, not the companies themselves.

A study by The Institute for New Economic found the federal government spent a combined $11.7 billion on basic and applied research that led to the development of these drugs. Some $6.5 billion of that was spent on developing Stelara, a Johnson & Johnson drug used to treat Crohn’s disease, arthritis and psoriasis.

“Pharma lobbyists and lawyers continue insisting innovation depends on price-gouging seniors, even though the industry’s investment in R&D pales in comparison to their spending on politics, lobbying, and advertising,” Carrk said in a statement. “This is a stark reminder that Big Pharma won’t put seniors and other patients ahead of their profits without Medicare’s historic new authority to regulate their greed.”