Medicines and IP: Balancing Innovation and Access

Good morning. The subcommittee will come to order. Without objection, the chair is authorized to declare recess at any time. We welcome everyone here today for uh a hearing on intellectual property as it relates to pharmaceutical and bio uh technological products. biosimilars and the like. Without objection, Mister Onder, who is not currently here, will be permitted to participate uh in today's hearing for purposes of questioning the witnesses if a member yields him such time as they may have. I now recognize myself for a brief opening state- well, it's never brief, but for an opening statement. For decades the United States has led the world both in original innovations and in generic development. The FDA has ensured that we have products that are both safe and have efficacy. We are proud of that. But like anything else, pride in the past does not equal competitiveness for the future. Time and cost has dramatically increased for bringing products to market. In addition to that, patterns based on existing laws related to patents have caused behavior that will be looked at here today. The term " thickets" may be used more than once, but in fact what we're really talking about is the same invention stated many, many ways. I take personal pride in the fact that when I invented something, I thought about how I could state it differently, so that if a competitor wanted to produce a similar product, I had already determined and said in my original patent filing, multiple ways the product could be. That's different than preferred embodiment, but in fact, the two can go hand in hand. Nothing here today is likely to cause us to change the fact that an inventor has the ability to state multiple ways to make a fine product that exist in electronics, it exist in the pharmaceutical industry. We encourage that, because the more disclosures of the more ways to make a product, the more you are enabling future inventors to see how it can be done. The problem we will be looking at with our witnesses and I might note that our witnesses are deliberately evenly balanced by people who will speak perhaps with some bias toward the patent holder pharma big names, and others will sp- the other two will speak mostly about the impediments to bringing biosimilars and and generics to market. We do so because we have an obligation. The obligation under the Constitution is to promote useful uh development. Promote meaning it is not a right, but in fact an inducement by the government. And we need to balance that inducement to maximize new innovation and in fact, benefit the consumer. The consumer clearly does pay more for a product during its first twenty years than it pays when uh biosimilars and generics become available. However, that is a long-standing part of our technology and one that we accept. Under the Hatch-Waxman Act, uh, which we have had for four decades, we have a process for the transfer. And that, too, is a balancing act that this committee will likely not open Pandora's box on. And we do so because, in fact, our problems in many cases are outside of this committee's jurisdiction. The slowness and the great cost at the FDA is beyond our scope. But there are some things that we can do. One of them that will be proposed is the real question of whether pharma should have the same prohibition on make, use, or sell rather than a broader exemption for export outside the United States to places in which the patent may not have validity. This concept doesn't always work, but as someone who believes in unshoring products, in investing in America, in getting more products, including critical medicines made in America, we have an obligation to ask that question. That's a major change in the law that will be discussed today. However, one other last thing that will be discussed. Over the last nearly two years, year and a half, almost half of all the examiners at the Patent and Trademark Office that do PTAB, those judges, have been dismissed or allowed to leave. As a result, what we're seeing is a systematic disabling of a process that was outside of Article three, that often cleared up discrepancy about whether s- a pa- portion of a patent was valid or not. there will be questions before all four of our witnesses, at least by the chair, as to whether or not that works to the detriment of clear and good patents. If there needs to be improvements in the PTAB process, this committee stands ready to offer legislation. But the idea that the Leahy legislation, enacted more than a decade ago, will simply be cast aside by one administration or not. In fact, um Thank you. Oh. Um, I'm getting a SCOTUS update from today. I apologize. We'll deal with that in a minute. Um, the the fact is that we're going to discuss all of that and we're gonna ask our very knowledgeable witnesses to opine on it. The subcommittee's jurisdiction, though, is in fact limited to patents. It does not include the FDA. And so in spite of the fact that you may hear complaints about both uh both the FDA and Middleman Insurance reimbursement, please understand this is not something we can deal with today and we would encourage all of our witnesses and members of the committee to concentrate to the greatest extent possible on that which is in the c- uh committee's jurisdiction because it is broad and significant. With that, I take pleasure in uh introducing the ranking member of the subcommittee for his opening statement, Mister Johnson.

Thank you, Mister Chairman, and good morning, ladies and gentlemen. Our nation's founders understood that when inventors are rewarded for their contributions, economic growth and human progress follow. More than two centuries later, The success of that vision is self-evident. From the light bulb to the airplane to the medicines that save lives,

Not the C.

patents have helped transform ideas into products that improve the lives of millions of Americans. Patents have been at the heart of America's greatest innovation moments. The Industrial Revolution, the Innovation Age, the biotech and mobile tech telecommunications revolutions in the twenty-first century were all driven by transformative breakthroughs backed by patent law. By rewarding individuals' ingenuity, patents continue the innovation cycle by also encouraging encouraging investment in new ideas. A patent must be reliable enough for an inventor to be able to convince the investors to help transform a sketch on a napkin to a product that changes the world. But it is not always easy. Anyone who works with innovators and inventors can tell you that unpredictability is the hallmark of innovations. Patents are granted to creations that are, among a few other requirements, new. To invent, one must do something that has never been done before. Individuals need the resources, investment, and most of all the promise that if they discover something new, they can own their idea without someone stealing it. Nowhere is this uncertainty more apparent than in the healthcare industry, where bringing a single new treatment to market can require billions of dollars in investment and more than a decade of research and development. Total R and D expenses for one single drug

Sure.

have been estimated to be two point six billion dollars invested over an average of ten to fifteen years of research, testing and development. This all occurs before the company even knows whether the treatment will ultimately succeed or fail. Most drug candidates don't make it through the FDIA's clinical trial process. So why do so many companies invest money and time to undertake the high risk, high cost, high cost work necessary to develop the next generation of cures for patients? Patents. When medical companies have an exclusive r- property right in their innovations, it can be financially worthwhile to go down the long road to approval for use. Strong patent protections are why the United States has been a global leader in the discovery and development of life-saving medications, with more than one half of all new drugs invented in the United States. Reliable protections also encourage companies to continue to invest in improving existing treatments because medical invention should not end when a drug reaches the market. Whether it is developing a safer formulation, reducing side effects, improving dosing schedules, or expanding a drug's use to treat additional conditions, patents help create the incentives necessary to continue research long after the initial breakthrough. Manufacturers must be incentivized to continue investing in their product, ultimately leading to safer and more effective treatments for patients. Perhaps most importantly, this innovation paves the way for future competition because patents were never intended to be the end of the story, but rather the beginning of a cycle of innovation, competition, and progress. Encouraging investment in new medicines while also ensuring that competitors can enter the market when the life span of the patent is complete is essential. Competition helps lower drug costs, expand access, and deliver enormous cost savings to patients. But this is a symbiotic process, without strong patent protections to encourage innovation There would be no new treatments for generic drug manufacturers to replicate and bring to market at a lower cost. Getting this balance right is extremely important because the cost of prescription drugs has soared too high for too long in this country. We spend more on prescription medications than residents of any other developed nation. The fact is that affordable health care is simply out of reach for many Americans. Congress has made various attempts over the years to streamline and simplify the patent process, such as allowing the government to negotiate drug prices for Medicare Part D, which went into effect earlier this year, but rising health care costs from companies simply seeking to raise their bottom line are still a problem outside of the patents. PBM middlemen raise drug prices. Insurance companies have increased discretionary denials while decreasing coverage and mergers among health care providers prevent Americans from having options as to where they get their care. We should not have to accept high-priced health care as an inescapable American burden. I look forward to hearing from the witnesses about how to best address this delicate balance and ensuring that we have a system that continues to reward breakthrough discoveries while ensuring that these discoveries are available to those they are meant to help and with that Mister Chairman I yield back.

Gentlemen yields back. We now recognize the ranking member of the full committee for his opening statement. Mister Raskin.

Thank you, Chairman Issa. Uh, thanks to all the witnesses for joining us today. since i became the ranking member i've met with some superb i p lawyers bringing their perspectives on a wide variety of issues to me from uh suits against ai companies for training large language models um from authors works to the us patent and trademark office director filing for a trademark on behalf of the board of peace um the various issues percolating before this excellent committee are important and essential to the practice of law. Uh, but as I've told every single one of the people who's come to see me, um, I never, uh, took patent law in law school, much less taught it when I was there. And so the field is new to me and my mind is open, and so I welcome very much the perspectives being advanced at this hearing. We're often, uh, called to weigh in on important issues that we need to learn about quickly, and it's easiest when we've got a personal connection to the problem. Uh, as an author, myself, it's easy for me to understand why having your words stolen uh is unfair. Um, as a former Khan Law professor, I know that a member of the executive branch contorting his position um to personally benefit the sitting president is a dangerous abuse of power. And while facially one might expect patents for medical innovation to be somehow an opaque or esoteric or inaccessible topic, In fact, all of us have benefited from the medical patent system. As small children, we got a polio vaccine, a smallpox vaccine, a measles vaccine, among others. Um When we cut our fingers, uh we got a tetanus shot. Um, when we were sick, we enjoyed access to antibiotic treatments, and when we were hit by the global COVID-19 epidemic, we all got access to the innovative MRNA vaccines. So we are fortunate and grateful to be living in a time of medical discovery, where things that killed people in our grandparents' generation are now survivable to us. Before insulin was discovered in the nineteen twenties, diabetes type one was devastating. Uh, HIV AIDS was a death sentence, uh, when I was in college. But modern antiretroviral therapy now can help people who are able to get early treatment, reduce the virus to almost undetectable levels. bacterial pneumonia uh pneumonia lymphoma breast cancer cystic fibrosis uh which has affected people in my family all of these have been downgraded from uh certain killers to manageable diseases but i also understand that as a person with good health insurance i have a type of access to vaccines and medical innovations that not many people around the world and not everybody in the united states can match Cures and treatments mean little to people who cannot access and afford them. Efforts to reform our health care system to cover more people have been steadily eroded since Congress passed the Affordable Care Act in two thousand ten and in part because of this too many Americans are forced to forgo a treatment simply because they can't afford it. It's imperative that we continue to innovate and produce new cures. It's also vital that we find a way to ensure people can access new medicines, therapeutics, and diagnostics. I know some people believe the answer is to change the way drug patents work in the United States so that generic drug manufacturers can access protected inventions earlier. Others argue that if we allow generic and biosimilar drug manufacturers to more readily take advantage of others' work, we're not just taking inventors' property, but dramatically changing the incentive structure for future research and development. How to strike the right balance between promoting universal access and incentivizing incentivizing new research and discovery isn't a new question. When the framers wrote the constitution, they were already familiar with the basic idea of promoting the public interest by protecting individual patent rights. In England, the parliament passed the statute of monopolies in sixteen twenty-four, which allowed the monarch to issue letters of patent to single persons. In the constitution, the framers bequeathed to Congress the power to promote the progress of science and useful arts by securing for limited times to authors and investors the exclusive right to their respective writings and discoveries. In Federalist forty-three, Madison wrote, quote, " The utility of this power will scarcely be questioned. The copyright of authors has been solemnly adjudged in Great Britain to be a right of common law. The right to useful invention seems with equal reason to belong to the inventors. The public good fully coincides in both cases with the claims of individuals." This utilitarian approach is reflected in our patent system today. Throughout our history, legislators have asked how we can ensure inventors are able to protect their creations in exchange for meaningful public access to the use of those ideas. Today, drugs remain exclusive or covered by a patent for an average of twelve years, as opposed to the statutory twenty. I understand that's because of the complicated nature of market entry, extensive research and development, and other relevant factors. I'm looking forward to hearing from our witnesses today how this system is working, how it's not working, and how we can ensure our system continues to promote the public good, um, through the individual and through our laws. I close with the words of Thomas Jefferson, who in addition to being our third president, was our first patent examiner. In eighteen thirteen he wrote, quote, " Considering the exclusive right to invention is given not of natural right, but for the benefit of society, I know well the difficulty of drawing a line between the things which are worth to the public, the embarrassment of an exclusive patent, and those which are not. I thank the witnesses for helping us to draw that same line in the twenty-first century, and let us all hope for the wisdom and discernment of the third president of the United States, Thomas Jefferson. Thank you, Mr. Chairman, and I yield back to you.

I want to thank the professor for proving that he could have taught patent, uh, law. It is time as a university professor. And with that, uh all other uh members will have uh the ability to put their uh opening statements into the record. Um. And Mister Jordan may come uh shortly, but he isn't here yet, so with that I'd like to introduce our professors. Professor Michael Carrier, Professor Carrier is on the Board of Governors, Professor of Law at Rutgers Law School. He specializes in antitrust, intellectual property law, particularly with respect to pharmaceuticals and the technology industry. Uh Professor Carrier is the co-author of a leading IP antitrust treatise, um and the author of more than one hundred and sixty uh book chapters. Miss Krista Carver, Miss Carver is a partner at Covington and Burling where she co-chairs the firm's food and drug and device practice group and is the firm's pharmaceutical and biotechnology industry group leader. She has represented by her by her pharmaceutical clients for nearly two decades. Miss Carver also teaches courses on FDA law at the College of William and Mary. Doctor Rachel Good, Doctor Good is a senior president and head of legal and intellectual property at, and I'm gonna butcher this, Frientu Cabba?

Frizenius.

Frizenius Cabba. Anyhow, bio- biopharmaceuticals, where she leads work on uh company's patent and legal strategies for its biosimilar business. She is a licensed attorney uh here in Washington, DC, as well as the United Kingdom, and the european union she holds a phd in molecular biology uh very qualified to talk about areas outside in addition to areas inside our jurisdiction miss jamie simpson miss simpson is the chief policy officer and counsel for the counsel for innovative promotions a non-profit organization that advocates on intellectual property matters she previously served as a staffer here for uh chairman nadler and mister johnson and on the senate judiciary committee and the us patent and trademark office basically she's been around and we all know her well um we will we will begin pursuant to the committee's hearing and miss simpson you know this very well by rising to take the oath please raise your right hands Do you solemnly swear or affirm, under penalty of perjury, that the testimony you are about to give will be true and correct to the best of your knowledge, information and belief, so help you God. Thank you. Please let the record uh uh recognize that all answered in the affirmative. Um, and now I'm supposed to say please be seated, but you are. As many of you know, uh, we have a five li- minute limit. I do not interrupt people if they're finishing a sentence, but would ask you to not finish more than one sentence at the end of your five minutes. The same would be true in the case of your opening statement. I'm not gonna gavel if you run slightly over, but try to stay as close as you can to the five minutes. Your entire opening statements will be placed in the record in addition to additional supplemental material you may choose to add later, and answers to questions, which at the end of this we will ask you if you will answer questions of members who either aren't here or who have follow-up questions without enough time.

Mister Chairman.

Yes.

Point of order.

Yes.

Does a sentence include a semicolon?

Any comma will exceed your time if that's your question. No, please, uh, we we tried, this is a very friendly, very nonpartisan committee.

Chairman Issa, Chairman Issa, Ranking Member Johnson, Ranking Member Johnson, and members of the subcommittee. And members of the subcommittee. Thank you for inviting me to participate in today's hearing. Thank you for inviting me to participant in today's hearing. My name is Krista Carver. I am a partner at the law firm of Covington and Burling, where I have worked for nearly two decades on regulatory issues affecting innovative biopharmaceutical companies. Let me begin with a simple point. As the subcommittee recognized in the title of today's hearing, the question is not whether we should have innovation or access. We must have both. The challenge is ensuring that US policies continue to support innovation for the medical breakthroughs of tomorrow while also ensuring that patients have access to the medicines they need today. The United States has made extraordinary progress on both fronts. Bio-pharmaceutical companies have brought more than nine hundred new medicines to American patients since two thousand. Patients are living longer, healthier, and more productive lives because of these advances. At the same time, ninety percent of all drugs dispensed in Amer- to Americans today are generic. That number is particularly impressive when viewed against a level of forty-one percent in comparable OECD countries. Biosimilars also are generating significant and growing savings for the healthcare system. These outcomes benefit patients and are the result of Congress's carefully crafted policy choices, as reflected in the Hatch-Waxman amendments, the Biologics Price Competition and Innovation Act, and the US patent laws. We should focus on ensuring the system works well for patients, and we should be thoughtful about proposals that seek to change this careful balance of promoting competition while preserving incentives for medical innovation. To this end, let me make three points. First, medical innovation is inherently risky and resource-intensive. Developing a drug takes more than a decade and requires substantial investment with a high likelihood of failure along the way. Intellectual property protections are essential to making this investment possible. They allow companies to take risks, recover cost, and reinvest in the next generation of treatments. Second, innovation does not stop at the initial approval of a drug. After a medicine reaches the market, companies continue to invest in improving it, developing new formulations, new delivery methods, and new uses. These advances can improve safety, enhance effectiveness, and expand treatment options for patients, including those with unmet medical needs. So it is not unusual and it is certainly not problematic for a single medicine to be associated with multiple patents. Those patents reflect real innovations that benefit patients. As a prime example, as many as sixty to seventy-five percent of oncology drugs are later approved to treat additional types of cancer. That's precisely the kind of innovation we should want to see continue. Third, proposals based on the concept of so-called patent thickets are based on flawed premises. As the US Patent and Trademark Office has concluded, the number of patents does not, by itself, determine when generic or biosimilar competition will occur. Nor does that number estab establish a causal link to the prices that patients pay. Major legislative changes grounded in these incorrect premises would discourage investments in pharmaceutical in innovation to the detriment of patients. Some of these proposals would force innovators to relinquish valid patent rights or limit their ability to enforce valid patent rights. These proposals represent a significant departure from long-standing principles of American patent law and encourage new kinds of gamesmanship. In closing, I would emphasize this. The United States leads the world in biopharmaceutical information, uh innovation, because our country has maintained frameworks that encourage both innovation and competition. Our continued leadership is not guaranteed. As Congress evaluates potential reforms, I encourage you to build on what works, addressing access and affordability in an evidence-based manner that benefits patients and preserves incentives for continued medical progress. Thank you again for the opportunity to testify. I look forward to your questions.

Thank you. Before I go on to the next witness, I would ask unanimous consent that today's Supreme Court opinion on skinny labels be placed in the record and distributed to all the members of the committee, since it's uh timely and we have the right panel. Without objection, so ordered. Miss Simpson, you're you're here at a moment in time. Please begin.

Thank you. Um, Chairman Issa, Ranking Member Johnson, and members of the subcommittee, thank you for the opportunity to testify today on biopharmaceutical patents and American medical innovation. Drug affordability is a real and serious concern for American families. But as Congress considers proposals to weaken pharmaceutical patents like the Ethic Act, it should also recognize this. The United States leads the world in developing new medicines, and that leadership is not accidental. The result is meaningful increases in treatments and cures for patients. Within living memory, as Chair Raskin noted, HIV was a death sentence. Hepatitis C was often incurable. Patients with cystic fibrosis, multiple sclerosis, and diabetes are living longer, better lives because of sustained biopharmaceutical innovation. Each of these breakthroughs took substantial time to develop and cost billions of dollars. The patent system is what made the investment possible. At the same time, the United States has the most robust generic drug market in the developed world. That's actually a congressional success story. The result of landmark laws like the Hatch-Waxman Act and BPCIA, which created pathways for generic and biosimilar competition while preserving incentives for innovation. Hatch Waxman took generics from roughly thirteen percent of the market in nineteen eighty-three, to about ninety percent today. Under these dispute resolution procedures, the average drug faces roughly twelve to fourteen years of effective market exclusivity before generic entry, well short of a twenty year patent term. By contrast, many current legislative proposals rely more on catchphrases like " patent tickets" and " evergreening" than on evidence. Congressional Budget Office analysis from twenty twenty four suggests patent-focused proposals like these would do very little to lower drug prices in many cases less than one percent but they could meaningfully reduce investment in the next generation of treatments. Consider the debate over patent tickets, the concern that the sheer number of patents covering a product prevents generic competition. But a twenty twenty four USPTO FDA study found no clear relationship between the number of patents on a drug and when generic competition begins. The argument that terminal disclaimer linked patents are a separate kind of thicket problem, overlooks that patentees agree to limits for these patents, specifically they agree to give up patent term. And multiple patents on a complex product is normal across industries, not just in biopharmaceuticals. Similar concerns apply to the evergreening narrative. Improvements to medicine are often portrayed as subsuspect, simply because they come after the original product. But in every other industry, we call that product improvement. New formulations and better delivery devices that allow patients to take a drug at home instead of a hospital, as well as treatments that reduce side effects, all required additional research. They have genuinely improved patient care. And importantly, patents on improved versions do not prevent generics from competing on the original product once exclusivity expires. Congress should also approach the skinny label legislation with caution. Um, uh, this is the subject of the the HICMA decision that was apparently just, uh, issued and which, uh, we will all be studying soon. Um, and I think that will probably greatly influence whether legislation is needed. Um, we have concerns with the bill that may be worth discussing. I'm happy to do so on the questions. Finally, um, I urge the committee to keep the global competitive landscape in mind. Forty years ago, the United States was not the world leader in biopharmaceutical innovation. We became the leader because Congress made deliberate policy choices, through laws like the Baidol Act and Hatch-Waxman that strengthened innovation incentives and commercialization pathways. Today, countries like China are investing aggressively to overtake the United States in biotechnology. At a moment when global competitors are racing to surpear surpass us in medical innovation, Congress should be especially cautious in weakening the framework that made America the leader in the first place. Drug affordability matters, but weakening the patent system based on claims the evidence does not support is unlikely to fix it. And it risks undermining the innovation ecosystem that has delivered extraordinary advances for American patients. Thank you and I look forward to your questions.

Thank you. Doctor Good.

Chairman, Ranking Member, and distinguished members of the subcommittee, thank you for the opportunity to appear before you today. My name is Rachel Good and I work for the Biopharmaceuticals business of Fresenius Carby, which is a global health care company dedicated to bringing high quality and affordable generic drugs and biosimilars, so the off-patent medicines, to patients with chronic and critical conditions. Zennius Carby employs over four thousand people in the United States and has invested over one billion dollars in US-based manufacturing. And today I'm grateful for the chance to talk about how abuse of the patent system contributes to high drug prices and how the Ethic Act and the skinny label bill offer balanced and pro-innovation solutions. So it's well known that not all patents are valid, Patent examiners only have a limited amount of time to review each patent application, and peer-reviewed data shows that about a quarter of pharmaceutical patents are later invalidated and cancelled after being challenged and litigated to a final court decision. Generic and biosimilar companies challenge low-quality patents to help bring affordable drugs to medis to market sooner. The problem is that the branded drug companies The ones that own the patents can litigate duplicative and repetitive patents on the same feature of the drug. This is driving up litigation costs. It's increasing business uncertainty, and it seemingly traps generics and biosimilars into an endless trap of litigation. This bureaucracy is slowing down getting affordable drugs to patients. So when I say duplicate I'm referring to something called obviousness type double patenting, which is exactly what it sounds like. This type of double patenting is when a company has two or more patents on the same invention. And so that's actually called non-patentably distinct invention. And so this is not allowed in other countries, but in the United States, an a company can overcome a rejection from the patent office against this type of double patenting by filing routine paperwork called a terminal disclaimer, which is a formal statement that the duplicate patents will expire on the same day. The problem is, if one of those duplicates is defeated and cancelled in litigation, the other duplicate sister patents stay in force and can be litigated again. Now, the correct name for these types of patents is terminally disclaimed continuation patent. That's quite technical, so that's why I'm calling them duplicate patterns. But that's a fair name to call them. Because continuation patterns have a copy, paste, description, specification, and drawings of the invention. They only differ from each other on the last page. Uh, they use different descriptive terms or obvious variations to claim essentially the same invention. There are real examples of duplicate patterns. where one claims treating a human and the other claims treating a patient, and one claims treating the named disease, and the other claims reducing symptoms of the same disease. This is not even incremental innovation. Continuation patterns provide no new information to the public. We colloquially call this strategy " patent thickets". Patent thickets are not a myth. They have been proven to exist by numerous pieces of empirical research that have been rigorously peer-reviewed and published in highly reputable journals. Peer-reviewed data shows that the ratio of these duplicate patterns being litigated against by the pharmaceutical industry is increasing over time compared to the ratio of unique patterns litigated on drugs which is decreasing over time. This is also a problem for innovation. The solution is the Ethic Act, which is also a pro-innovation solution. Under the Ethic Act, pharmaceutical companies can litigate one patent per cluster, so it eliminates the duplicate litigations. At the same time, this incentivizes innovation because the more unique patents that a company gets on the same drug, the more patents they can litigate against competition. The Ethic Act maintains full flexibility for patent owners. If a company believes that its inventions are different from its earlier patents, it can explain that to the patent examiner and avoid grouping them together with terminal disclaimers. And if that's not possible, it can put its all of its duplicative claims into a single patent. This reform will bring billions of dollars in healthcare savings, which most importantly will help patients to afford their drugs. Separately and just briefly, I want to address skinny labelling. Congress created this pathway as a way to expedite generics and biosimilars into the hands of patients as soon as the branded drug had some uses that were no longer on patent while some uses were still on patent carefully balancing the interests of the branded drug companies with the gener generic drug entrant. Today this about balance is starting to break down with seemingly simple conduct such as

Thank you. Professor Carrier.

Well, thank you for holding this hearing. For the past twenty-six years I've been a professor at Rutgers Law, thank you for giving a short version of my bio. It's save twelve seconds from my opening statement. But one thing I will mention is that I have co-authored amicus, friend of the court briefs, on behalf of dozens, usually fifty to eighty professors, including in Ameren V. Hickma. So less than an hour ago, the Supreme Court, nigh nothing, decided the case based on what I and my co-authors said in our amicus brief. And so generally when we think about generic competition we think about affordable drugs. We all are on prescription drugs or know someone who is. Historically the rules were clear. Historically the Hatch-Waxman Act, based on drug substitution laws at the time, was designed to promote generic competition while also fostering brand-firm innovation. And, sure, I s- I completely agree with you, if we were to sum up the Hatch-Waxman Act in one word, it is balance. The problem now is that there isn't balance, because the stuff that was in there for generics is no longer there the skinny label pathway is drying up patent tickets are rising in ways that they were not at the time of the hatch waxman act and so let me briefly talk about skinny labels, patent tickets and the patent office. First in terms of skinny labels there are a couple ways that generics can enter the market while a patent is in force. The first is through litigation, this is difficult. The brand firm gets to file a lawsuit gets an automatic thirty month stay two and a half years. in which there's no generic on the market at all, the litigation path is difficult. That's why the skinny label path is so important, because it allows generics to enter the market without the hassle of litigation, without that two and a half year delay. Skinny labels are absolutely crucial to lowering prices for US patients. The problem is that the federal circuit has said that this commonplace activity of a label of calling the product a generic equivalent of sales figures. So this can induce patent infringement. The Supreme Court less than an hour ago said no, that's not right, but the court decided this based on the pleading standards in court, which is different than what you as a Congress can do. What you can do gives more certainty than what the Supreme Court did about fifty minutes ago. The second thing to consider is patent thickets. patent tickets are most concerning in the pharmaceutical industry. There's no other industry in which the company can collect as many patents as it wants just to keep competitors off the market. Compare pharma to high-tech. Compare pharma to electronics, semiconductors, computers, in those industries, companies collect patents. Why? Because they cross-license. They all come to the table and they say, " I have a patent, you have a patent, let's trade." That's different. in pharma. In pharma, the brand firm doesn't need to collect patents to negotiate with the generic. It's not like the generic has patents that the brand firm needs. So there's something unique about thickets in the pharmaceutical industry. I've done empirical research with Sean, too, where we found that continuations, which are based on the earlier patent, there's less innovation going on here, are a lot more frequent in the pharma industry than other settings. The ethic act would be a very effective way of dealing with anti-competitive tickets. Finally, with the patent office, there are many patents that are issued that are not valid. Interpartis review was essential to the America Invents Act, which said that the patent system needed to reflect the constitutional imperative of patents that of a system that will improve patent quality. So the American Invents Act was designed to do that. Interpartis review has fallen dramatically. In the past year or so we see these new unsettled expectations that basically make it impossible to challenge these patents in the pharma setting. And this is really a concern. It's also a concern given that the industry itself knows that patents play a crucial effect on pricing. So you look at the recent statement from the Pfizer CEO, we have a loss of exclusivity, wave coming, seventeen to eighteen billion dollars in annual revenues. Patents have a crucial effect on price, or how about the ticket? you look at the comment from the merc ceo recently you're losing the patent on the active ingredient no worries we have the estate the estate is something that we are going to firmly promote they know what's up we know what's up at the end of the day generic competition is crucial to the hatch waxman act we're not getting it like we used to before and the legislation before us today could make a significant difference thank you for your attention

Thank you. Uh, we now go to the gentleman from Wisconsin for his round of questioning.

Thank you, Chairman. Recent reports have found that nearly one hundred million prescriptions are abandoned by patients each year due to surprise costs. For example, the Journal of Managed Care and Specialty Pharmacy found that increased cost sharing above one hundred dollars was associated with up to seventy-five percent abandonment rate for certain specialty drugs. This suggests that cost is a prevailing consideration for patients, medication purchasing. Uh, I think it's fair to say that none of us want to see patients abandoning necessary prescriptions, uh, due to high costs. Uh, similarly, uh, we do not want to block the pipeline of continuing American's long-standing history of creating innovative, life-saving drugs and therapies that benefit millions of patients. Uh, I'm grateful to Chairman Issa for calling today's hearing so we can uh take a look and kind of scrutinize policy ideas that vow to lower drug prices and ensure America continues leading in pharmaceutical innovation uh Doctor Good, do you believe reforming Patton law rather than looking towards market-based solutions could present a more effective way to lower drug prices for all Americans?

So I think, so there are two issues going on, I think you're talking about also the market access issue, once gener complex generics and biosimilars get on the market, they also have to get market share. And there is an issue at that stage as well. But first they need to get on the market in the first place. And so that's what this patent system reform is about. So with respect to the issue of getting market share, the free market is starting to evolve around that now, but the market cannot evolve around patent system abuse. So you've gotta get the generics onto the market in the first place. So even though ninety percent of prescriptions today are filled by generics, what the Ethic Act would do is it's about timing. It would bring these drugs onto the market sooner. And that's important because patents don't last forever. This is about getting the timing right and making sure that there are no inappropriate delays or extra monopolies being eked out. And so the reason we need patent system reform is because we've got a lot of peer review data that links patent thickets to delayed access to generics, especially in this country. So I co-authored a paper that with Professor Chow and it was peer-reviewed, so it was rig rigorously studied. We counted patents and we compared how many patents were litigated in Canada, the UK and the US on the same set of drugs, and it was all of the regulatory approved biosimilars at that time. In Canada and the UK it was forty-six and twenty-four patents. In the US on the same drugs, three hundred and forty-four patents, head and shoulders above the other countries, but most of these were the duplicate patents. We then counted how many months delayed were those same biosimilars in getting access to market. And we found in the UK and Canada it was five months and seven months, and that's beyond expiry of the basic patents on the drug, so they have some patents there as well. But in the US it was two years and ten months.

So, so let me interrupt you there. So, is the expectation that expediency and getting those pharmaceuticals to the patients is the most important thing. Are there any other other benefits that the Ethic Act could uh could result in?

Yes. So the Ethic Act is pro-innovation, because right now we see pharmaceutical companies stacking duplicate patents on their old cash cows. And what they should be doing is innovating more unique patents looking for new uses of these drugs. So this would incentivize them more. Because under the Ethic Act, if a pat- if a drug had fifty patents on it, and twenty of them were duplicates and thirty were unique, under the Ethic Act, they could litigate those thirty unique patents, and they could still litigate one duplicate from each cluster. So the more patents that they innovate, the more unique inventions, then the more patents they can litigate against competition. So the Ethic Act is discouraging this behavior of spreading out duplicate patents, and encouraging them to invent more and more unique patterns on the same drug. So it does it works both sides. They don't lose anything.

Yeah. Thank you. Uh, Miss Carver, trials for a new drug treatments typically take years, as was just stated, uh and cost hundreds of millions of dollars. If legislation like Ethic Act was signed into law, what behavioral changes would you expect? Pharmaceutical companies, if they have I I'm not sure how this would work. But uh what type of changes would they have to make the way they f- they function, or operate, I guess is the best way to put it.

So the Ethic Act would harm innovation. It would allow generics and biosimilars to infringe valid patents with no recourse for the innovator to enforce those valid patents. And it would be a a s- substantial shift, a seismic shift in the balance of hatchwaxmen. Um, it would also invite gamesmanship. We see that um the way the bill is structured, an innovator would need to pick a patent to enforce from a patent group with no information on which to do it there would be no obligation for a generic or biosimilar to provide technical information for the innovator to make a decision about which patent to enforce and there's also nothing preventing them from changing their product as soon as the decision is made so my view of the ethic act is that it would undermine innovation

I yield back

Thank you gentlemen yields back we now go to the gentleman from Georgia for five minutes.

Thank you, Mr. Chairman. Doctor Good, in a twenty twenty four research letter you wrote quote, although the US Patent and Trademark Office is required to reject patents that are obvious follow-ons from earlier versions, they may grant such patents when applicants file terminal disclaimers. Doctor Good, doesn't a patent applicant have to demonstrate the claimed invention is new? useful and non-obvious over prior art.

Yes. They have to demonstrate that for the first of the duplicate patents. After that what we see, and there's peer review data on this as well, is once the patent owners start filing and duplicating the patents, it's a given because the first patent was already examined. The is the issue is that these duplicates add nothing more than the first patent.

Well you will will will now patents with a terminal disclaimer do demonstrate uh some new or useful or n- non-obvious uh use of a prior right. Isn't that correct? Prior art.

They're equivalent to their parent patent. So

Well, let me ask you, Miss Simpson. In some situations a patent applicant can receive a patent that is an obvious variant when compared to a portion of its own work that isn't in the prior art. So long as a terminal disclaimer is filed. How is this different from uh what Miss Good uh Doctor Good has said?

Well, I I think the the first thing to understand here is I think the version of um what is going on with terminal disclaimers that Doctor Good has described i- is an oversimplification of what is happening. Um and I think a really important clarification um is that first of all, terminal disclaimers are an agreement by a patent owner to give a patent term um if a a second patent they're claiming has an overlap um with another patent they have and this means you can have two patents that are actually fairly different if they have a small overlap that the patent applicant doesn't think is worth fighting over they'll agree to this. Um the the second thing to bear in mind is that terminal disclaimers Um they're a valuable tool for the patent office to help manage the process of patent prosecution it helps them uh helps the office and the applicants kind of break it down into bite size pieces so you have a big patent application you'll examine part of it, get that patent issued you'll continue to examine maybe different parts of it um in a second patent and maybe again some of that will overlap so there's a terminal disclaimer, but not all of it. So these patents are not duplicates of each other, and and that's why the Ethic Act goes a lot further than I think is being suggested. And it would really take away um innovators' rights to get the benefit of what they're disclosing to the public and actually have protection over everything they've invented.

Uh, thank you. Miss Simpson, uh, total R and D expenditures for each new drug are estimated to be two point six billion dollars, invested over an average of ten to fifteen years of research, testing and development before the first patient is prescribed the drug by a doctor. How do revenues from successful drugs help offset the cost of the many research programs that fail? And isn't it correct that uh most drug candidates never become approved drugs after the two point six billion dollar average expenditure?

Um, that that's exactly right, and it's a an interesting feature of of this market, which is that so many so many um drug candidates fail. Um, so I think when you're looking at this, um, the only way that uh drug companies can afford to take all of the bets they take, is to be able to rely on strong patents to um recover investment for the drugs that do succeed.

Thank you. Miss Carver, what role do patents play in giving companies the stability to make substantial uh investments in research and development.

Patents are crucial to the substantial research and development.

Your mike.

Sorry. Uh, patents are crucial to enabling companies to make those substantial investments in research and development. As as you pointed out, the failure rate is extremely high for medicines in clinical trials going all the way back to the beginning of development. Patents help uh provide an opportunity for companies to recoup those

Thank you. Uh, I yield back.

Thank you.

Thank you. I now recognize myself for five minutes. Americans want two things that should not be mutually exclusive. They want access to lifesaving medications, and they want continued medical innovation. Our challenge is not choosing one over the other. It is making sure the legal framework that Congress enacts continues to deliver on both. I know our witnesses today have some areas disagreement on important issues, but I also think there is a shared recognition that patients benefit when new treatments are developed, and when those treatments in the long term become accessible and affordable. So I appreciate all of you for being here today and for sharing your substantial insight on our pathway forward. Ms. Simpson, I'd like to start with you. In more than forty years since Congress enacted Hatch-Waxman, What aspects of that framework have been most successful in promoting both pharmaceutical innovation and patient access to lower-cost medicines?

Well, thank you for the question, Congresswoman. Um, I think what that, uh, law did, um, as as many have mentioned, is that it created, um, a balance between, um, respecting the patent rights of the innovators and providing a pathway to resolve disputes. over the the patents that still cover drugs um once the regulatory exclusivity expires, and I think it's been um particularly effective because it encourages all the disputes to be um litigated together in one forum.

Ms. Goode, I'd like to present the same question to you from the perspective of a biosimilar and generic manufacturer. What aspects of the Hatch-Waxman framework do you believe have been the most successful in protecting innovation and achieving patient access to lower cost medications, and what lessons should Congress keep in mind?

So the Hatchwell Xmen Act was established in nineteen eighty-four, and it worked really well to begin with for the first few decades. We've seen in the last ten years that patent tickets has become an entrenched strategy. So if you look at data going back to nineteen eighty-four, generics are getting on the market quite soon after basic product patent expiry. But if you look at the last ten years, it's a very different picture, now that we see these Continuation patents and terminal disclaimers increasing. So right now, the litigation framework is not cut out to handle patent tickets, and that's why we're now seeing delays compared to other countries in the world.

And Ms. Good, how important is regulatory and legal certainty when companies are making decisions that may take years or even decades to come to fruition?

So it takes eight years to develop a bias similar, even though we're only copying, it still costs around one hundred million. And so, when we start our development program, there are usually just a handful of unique patterns that we're looking at. By the time we get to the end, we're faced with huge numbers of these duplicate patterns. And I wrote a paper that showed that there's this really interesting strategy, a huge spike in un- in these duplicate patterns issuing out of the patent office at year twelve. The scale and the timing of this spike shows it must be a strategy to put bi- put patents in place at year twelve, which is when FDA exclusivity expires on biologics. That's the time when the biosimilars are trying to get to the market. So this is clearly a strategy. And so it makes it very difficult for companies who need that business certainty, because if you are going to face litigation multiple times, you need to get onto the market, but the risk that you pay, the infringi the branded drug companies' lost profits could be more money than you would ever make. So if you have a volatile patent system, it makes launching more difficult. It also makes manufacturing in the United States more difficult, because patents also block manufacturing.

Well, Congresswoman, um, could I respond to your question?

Yes, Miss Simpson, you read my mind, I was just about to come back to you to ask, specifically on the question of certainty and the importance of having a regulatory framework that, uh, you can anticipate with clarity.

Thank you. Um, well, one thing I'd like to highlight about the HHWAC, and the structure it provides um is that um it it doesn't matter how many patents you have um they can all be in that suit um and what typically happens in a case like this um is as the case develops um the um scope of the dispute will narrow often a judge will require a couple of claims to be litigated before a jury so that that's how all of these cases normally progress. And at least what the data shows is that uh it's been a study over the past three decades that um that period of exclusivity that drugs have enjoyed has been between twelve and fourteen years. And numerous studies have shown this. And so if there is a an increase in in patent tickets, which I'm not sure that the data well, regardless of that, it hasn't changed when generics get on the market. So um I I think Like I said in my opening, I think this is a real success story for Congress, and I don't think the evidence shows that Hatch Waxman has somehow stopped working.

Thank you. We are now out of time. I now recognize the the ranking member, the gentleman from Maryland, Mister Roskin.

Thank you very much, Madam Chair. Um, Doctor Good, I wanted to start with you, cuz as I'm understanding your point, you think that there should be one patent per cluster, because the more patents you get, even if they're all cut off at the same time the more you can litigate and it's the litigation that's time-consuming so in theory if all the litigation could be done in one day then you would have no objection to the proliferation of uh of new patents under the thicket is that right

so not exactly because patents can continue these duplicates can issue during litigation after litigation there's been an example of a drug mybetric where the first litigation was in twenty sixteen, there were subsequent litigations starting with duplicate patents in twenty twenty, and in the end a three year litigation took nine years, because patents can keep issuing even during an after litig

I got you, but uh but uh I'm just trying to isolate what your issue is, you don't have a problem in theory with the idea that there are good faith um new, patentable discoveries taking place as they do more and more research on a particular drug, your problem is that you don't want that, uh, you don't want it to be used as an excuse to continue monopoly control over the original patent and profiting from it, and you're saying that's possible because of the length of litigation. But if l- if somehow there were a litigation or administrative process that could reduce that time, just hypothetically to a day, then you would have no problem with doing that right other than whatever the cost of going to court that day would be

not exactly cause we like the unique patents the innovative different ones innovation is good for us as well the branded drugs innovation builds our pipeline

right so what should they do when they make what they view as a substantial new discovery within the process you should file a unique new patent

yeah so that's fine but yes they should and they do and that's fine under the ethic act that would continue and it would even be encouraged

Okay.

I think I does not like

I will miss Simpson with it. Does that work for you? They're just saying file a unique new patent and then and then the process starts over. Is that right?

Well, I I think um I I think again that's oversimplifying what's going on with terminally disclaimed patents. Um and I I think there are a number of of issues here in terms of are you litigating them all at once or is there serial litigation. Um and importantly too, I always think all the time we're talking about generics not being on the market, sometimes we're talking about generics being on the market and then it's just two companies litigating um but I I think it the the main point I think I'd like to make with the terminally disclaimed patents is that it's it really is um a procedure that benefits the office in making it easier to go through a big patent application in smaller pieces. a separate thing than having a different patent that's on just a different invention. Both of those things are happening, you know, the these are very complex inventions. Um, but I think, um, given that there's no real data showing that the number of patents relates to how long it takes a generic to get on the market, I don't think there's a real problem to solve here, and that's the main problem I have with these bills.

Mm-hmm. I got you. OK, uh, Miss Carver, let me come to you, will you tell us how the so-called

Sure. So the patent dance is a phrase that's used to refer to the patent provisions of the Biologics Price Competition and Innovation Act, that were enacted by Congress in twenty ten. Um, as described in the statute, the first step of the patent dance is for the biosimilar applicant to provide access to the reference product sponsor to their application and manufacturing process information about the product. then the reference product sponsor needs to provide a list of all the patents they believe could reasonably be infringed by by a similar manufacturer's product. Um, in practice we have seen, though, that first of all the Supreme Court did interpreted this provision to be, uh, voluntary, so applicants need not use it. And as a result we are seeing that that happens, where some companies opt out entirely and others only participate in the patent dance to some extent. This undermines the purpose of the original BPCIA patent dance that Congress enacted.

So then,

It

well, what alternatives are available to you at that point?

Um, well, what happens is if the company doesn't have enough information to know which patents might be infringed, the only the only option they have is to bring suit on the ones that they believe may be infringed based on no information. So it'll it misses an opportunity to narrow the scope of patents that could be at issue.

So what do you think that the the dance should be a mandatory dance? Forgive me.

Um, yes.

Okay. I yield back.

Thank you. I now recognize the gentleman from South Carolina, Mister Fry.

Thank you, Madam Chair. I um I don't think I've ever had a hearing before where a Supreme Court decision drops at the same time. So we're like real time trying to figure this out. I and I know that you're sitting here and you haven't read the opinion, but um Professor Carrier, what do you uh make of uh at least the top line of the Supreme Court's decision that just came out five minutes ago?

Well, uh actually I did read it, thanks to phones, and uh I think it is a very positive decision decision. It was unanimous. It made clear that certain types of conduct, at least in this case, did not lead to a finding of induced infringement. But there still is a different role for Congress to play. If I were the brand firm, I would go back to the way back machine and find one tiny piece of evidence that the Supreme Court didn't talk about file another lawsuit and we're off to the races. The Supreme Court, even though it was unanimous, cannot act with the certainty that Congress can, the Supreme Court also, only apply to one context, not the biosimilar context. So I s- still think even today's decision does not displace the role for Congress.

So maybe a step, at least according to your opinion, maybe a step in the right direction, but Congress ha- we can't punt and say the Supreme Court has has already

Exactly.

says, okay.

Yes.

What um uh Miss Simpson, you discussed major changes uh to patent laws related to generic competition in the eighties and the twenty tens. Uh you also discussed how investment in R and D has shifted from Europe to the United States uh in the last fifty years. How was uh how has balancing patent rights for inventors uh and generic competition affected US investment trends in the uh in the biopharma sector?

Well, um, a- as I mentioned, I I think these laws um really transformed the United States into a place that attracted investment and brought the biopharmaceutical industry here. Um, and those were laws that were largely passed in the nineteen eighties. Um and since that time and it most recently I'd say over the last um ten to fifteen years, um through things that Congress has done and especially the courts have done, have in a number of ways dramatically weakened patent law. Um and I think um we might not be seeing the effects yet, and and this is not specific to the biopharmaceutical industry, this is across all industries. Um but it's pro- um providing a real opportunity for other countries to take the lead. And um China most notably has been filling in the void. Um not only have they strengthened their domestic patent system, but as um a an economy that's largely state driven, they've just been investing money. Um and as I laid out in my testimony, they're making real moves to try and take the biopharmaceutical industry from us using both the state money and their patent system. And our country relies on the patent system to fuel investment. Um, and that's why I think taking, um, any measures to further weaken the patent system on top of what's already happened in the absence of strong evidence would would be, um, a mistake.

I hear that, Miss Good. Do you think, um, just broadly, do you think our patent system is too restrictive? I think, uh, Miss Simpson obviously has a different view of that, but do you think it's too restrictive for generics and and biosimilars?

So, with the Ethic Act being pro-innovation, these patents are duplicative. They would not issue without terminal disclaimers. They would be rejected. But terminal disclaimers make it easy to flood the market, flood the system with these duplicate patents. When we talk about China, we should think not about the quantity of American patents, but we should Ameri- we should measure American innovations by the quality of its patents. And this is what the Ethic Act goes to. So,

Uh, do you um uh Professor Carrier, what role do you think that intellectual property policy plays um in promoting that competition? Obviously we've got these three bills that we've talked about a little bit today, uh but what role do we have in promoting that competition and then lowering prices relative to other factors like PBMs or insurers regulatory barriers?

The pharmaceutical system is incredibly complex. and there's more than enough blame to go around. There's blame to be placed at the feet of the PBMs. There is blame to be placed at the feet of drug companies. The legislation here would be really helpful because the Hatch-Waxman Act was designed to be a compromise between promoting generic competition and fostering brand firm innovation there was a lot in Hatch-Waxman for for brand firm innovation patent term extension, thirty month stays and all that. It's just the stuff on the generic side, now the latter's Yeah.

I'm trying to f- uh uh last question, just wanna make sure I I get it and um just to boil this down, you know the compromise uh l uh act that was created that we're operating under, is it is it your belief that that pharmaceutical companies have used that and then maybe structurally or procedurally use it to gain the system to to to get a monopoly by another way? Is that kind of what you're articulating at the time.

Yes to all

Time has expired, but you may answer.

Yes to all of the above. Hatch Waxman has been incredibly successful in certain ways. Look at the percentage of generics on the market. Hatch Waxman also has been gamed. It's not just me that say that says it. Hatch and Waxman themselves have said that the system has been gamed.

Thank you for that, Mister Chairman, I yield back.

I thank the gentleman for yielding back. We now go to the gentlelady from California, Miss Lofgren.

Uh, thank you, Mister Chairman. Uh, Americans are facing uh, a drug uh prescription drug affordability crisis really americans are paying more for prescription drugs than almost anyone else in the world uh us drug prices are nearly three times higher than prices in peer countries and nearly one in three americans report not taking their medication as prescribed because of cost so these issues are very important to the american

right

people and it's one of the reasons why i was glad to join congress in introducing the skinny labels big savings act. This is a bipartisan bill, and I believe it would get lower cost generics to patients sooner, while preserving valid patents and real innovation, which is important to me and every member of this panel. Um, I for people who are watching uh online, I guess I I feel sorry for those who are watching online, um, but I think it's important to describe what is a skinny label, uh it allows a generic company to uh compete for uses of a drug that are no longer under patent while leaving the patented uses protected. Um it's interesting that the court decided this morning, it was good to to see it, so uh Professor uh Carrier do you think um I you addressed this a little bit but the bill that we've introduced is partly solved by what the court did this morning, but would it add certainty to - to make this bill law? Because as you pointed out, you could litigate further and further. Would - part of this is the expectation game. Are you gonna put a lot of time and effort into developing a generic if the risk of litigation continues? What's your thought on that?

Absolutely. Certainty is needed. And so even though the Supreme Court issued what I would call a favorable decision, what did Ameren say in oral argument, we're just gonna repeat our complaint. They're gonna go back to the drawing board, they're gonna find another piece of evidence, and they're gonna do it all over again. And so they can't give the certainty that Congress can give. And just to be clear, even the earlier decision, GSK v. Teva a few years ago, has already led to a reduction in skinny labeling, according to one peer review survey from fifty-six

Doctor, uh good. Would the spit skinny labels uh bill restore certainty to the pathway in your judgment to help get lawful generics to patients sooner?

Yes, it would, because what it does is it puts a safe harbor around the label itself. So as long as so it's also incentivizing good behavior. So as long as you do the label carve-out and you don't mention the patented patented disease in any promotional material, then you're safe. So that incentivizes, via similars and generic drugs, to stay in their lane and stay away from the patented material, which is the exact same compromise that was made in nineteen eighty-four that worked so well for four decades until the recent case law started to erode this balance. So we want to move it back to how it was working before.

So just to be clear, the bi- the bill that we're we've uh sponsored does not allow a generic to market a patented use, correct?

Exactly.

Uh it it does not erase valid patents on new uses of medicine,

Exactly.

correct? Um so I think that the practical effect is is straightforward. Uh it follows the FDA approved label, leaves the patented use out, doesn't promote the patented use, and it can reach patients sooner uh that are for uses that are no longer under a patent. It seems to me that um reducing the cost of pharmaceuticals for Americans is a really important goal. Um and I have not uh sponsored the other bill, I think that's a more complicated measure and I think this hearing's been very helpful in um outlining the issues uh to help us sort through that. But to me, uh, I think reinforcing what the court did this morning would add certainty to a decision that was unanimous on the part of the court, but also keep, um, keep the solid reasoning that they had, uh, in place as part of the law and would be very helpful. So, uh, with that, Mister Chairman, I yield back and thanks for this hearing.

I thank the gentlelady. We now go to the gentleman from Virginia, Mister Klein, for five minutes.

Thank you, Mr. Chairman. I'm gonna tag team with my colleague from California and uh celebrate this ruling, but recognize that it is a step and not uh a finish line. And uh, you know, this this is a pleading stage ruling, not a safe harbor. Uh, the c- by holding that Ameren failed to state a claim on facts and said inducement can be implicit. Um, the next brain can still sue on different marketing. The generic still spends years and money proving its carve-out was lawful. Codifying a clear rule. stops those suits at the front-end. And that's what we want, is certainty. We want, uh, to make sure that, uh, generics continue to drive down costs. As was argued in the case, uh, um, generics have saved patients and insurance payers an estimated two point nine trillion dollars over the past decade. Uh, this is something that has benefited my constituents, constituents of every member up here, all Americans, and we should, um, enact laws that continue to encourage their use. Um, but, uh, the decision today does not reach biosimilars, but our bill does, the skinny labels bill does. Um, the decision today is a small molecule hatch waxman case says nothing about biosimilar carve-outs. Our bill amends section two seventy-one to extend the same safe harbor to biologics approved under section three fifty-one K, closing a gap that the ruling leaves wide open. The statute that uh we need is is would provide something that is absent from the court decision, durability, uh and because even a unanimous ruling leaves the line to be drawn uh fact by fact in the lower courts. And and that drift is how the federal circuit got crosswise here in the first place, arguably. So a miscarver in practice to sell a generic company has to communicate that its product is a generic of or therapeutically equivalent to the brand. It's a routine, necessary part of marketing, any generic, correct?

Um, the uh th- therapeutic equivalence of the generic would be listed in FDA's orange book, um, for - for everyone to see. Um, I think i- from the - on the skinny labels act, um, one - one thing that was brought up previously is the - the question of whether the label does or does not mention the patented use. And to me that's - that's a really critical part of this question. Um, It's FTA that's reviewing the labeling of a generic,

Mm.

and they are not um equipped, both from an authority perspective as well as an expertise perspective, in determining whether labeling infringes or induces infringement of a patent. And so that's a concern I have with this, with the bill. I I it's also very important that we continue to incentivize in uh t n new uses of existing drugs. And that's what we're talking about here. Um in oncology in particular we see that sixty to seventy-five percent of drugs are later approved to d to treat additional types of cancer, and it's important that we maintain those incentives.

Right, but the FDA itself does not review a generics carve-out for patent inducement adequacy. In fact, hasn't the FDA said it lacks the authority and expertise in the courts or the appropriate forum?

Yes.

Okay. Uh, Ms. Simpson, um, as, or, Ms., yeah, Ms. Simpson, uh, as, as, uh, we have been talking about, um, with the decision doesn't after the fact court victory give generics the upfront certainty that a statutory safe harbor would?

Well, I I think the issue here is, and I I've not read the ruling, um but yes I I

Well, it's I mean you can say yes or no.

I'm I'm I'm sorry.

Does does a court decision give the certainty that a statute would?

Well, I I think the issue here is that the bill um would go

Well, answer my question, then you can tell me what you think the issue is.

Um, well, I I think it doesn't necessarily give you the certainty, but I think the bill would do more harm than good.

OK. Um, Professor Carrier, the skinny label carve-out has worked alongside method of use patents for forty years and by one estimate, fifteen carve-outs saved Medicare roughly fifteen billion in five years. The Supreme Court just reversed the federal circuit and protected Hikma's carve-out this morning as some will say that ends the matter. So you can tell the committee plainly why doesn't a single favorable pleading stage decision give generics the certainty they need?

Ameren said in oral argument that they are just going to go back to the drawing board and file another complaint. The Federal Circuit can do what it does and not follow the Supreme Court's decision. Congress can act and give certainty in a way that the court cannot, cuz there's always another tweak to the system. We hear a lot about innovation, but this piece was not about innovation in the Hatch-Waxman Act. you look at what the Solicitor General said in the Ameren case, Congress was willing to accept the risk of reduced innovation incentives rather than delaying generic entry until all method of use patents have expired. In other words, there's a ton in hatch waxman about brand firm innovation. Skinny label is not that, and that's the trade-off that Congress specifically made.

Thank you. And you, Beck.

I thank the gentleman. We now go to the gentlelady from North Carolina, Miss Ross.

Thank you, Mister Chairman, um, and I'm really glad that our committee is discussing this topic today, um and clearly it is very timely with the Supreme Court's decision. It also concerns one of the main economic engines in my district in the Research Triangle of North Carolina. The Research Triangle is home to one of the most vibrant life sciences and biotechnology sectors anywhere in the world. My con- constituents are clinicians, researchers, entrepreneurs, and drug trial candidates, each playing a vital role in the discovery and development of the next generation of medicines. We have small scrappy start-ups putting it all on the line for pot- for the potential to find transformative cures, as well as large companies that leverage their resources to invest in creating the next blockbuster medicine. We also have a strong base of generic drug manufacturers, who play an important role in supplying affordable medicines for all Americans. But we have to be clear. Underlying all of this innovation and the hundreds of billions of dollars in economic activity it generates is our nation's robust patent system. Strong intellectual property protections are the foundation that that success is built on. Congress worked thoughtfully and cautiously on a bipartisan basis to create the current system governing intellectual property rights. This framework recognizes that ownership of these groundbreaking ideas is crucial to ensuring that they're pursued here in the United States, that the job jobs, economic value, and lifesaving discoveries they generate ultimately reward American citizens and taxpayers, like my constituents, for doing the hard work that allowed these innovations to exist in the first place. This leads me to the consequence of weakening patent protections for our national and economic security. Over the last year and a half, we have experienced a loss of talent due to misguided immigration and trade policy, combined with funding cuts to academic research. Now we're beginning to see the flight of investment and capital from the United States. Alarmingly, it is moving to our adversaries, like China. I cannot stress enough that ensuring that these advancements exist in the American domain is paramount. Losing IP to China and other countries would be a critical strategic failure. Ms. Simpson, could you please expand on the consequences of American innovation moving overseas and keeping strong patent protection for innovation that occurred here?

Well, thank you for the question. And I I think that's exactly right. It is a huge concern if the biopharmaceutical industry were to move overseas. Um, strategically, it would mean that the difficult phase is choices we face now would be compounded if someone like our um adversary like China were controlling all the drugs. Um, they would make decisions we have within our own borders today decisions that they would have over us. Um, economically, this is a hugely important industry to our country. It supports over a million jo- jobs directly and, um, many more others by association. And and I think related to what you said too, a lot of what we are talking about is kind of death by a thousand cuts to this industry. Um the skinny label bill for example, it might seem like a relatively small thing, but there was a big research study that came out last year that found out that additional uses of drugs um are what they called a missing market, that were us- losing one hundred um one hundred to four hundred billion dollars a year in lost value for drugs that already exist that we just don't know what all they can be used for. And and this bill would undermine one of the last incentives we have to keep um companies trying to do their research. And I have not read the Supreme Court case yet today, but I think what they're doing is preserving the balance by letting companies pursue the highly fact-intensive question of intent, which the skinny-labeled bill that we've been talking about, I think unfortunately, because of its categorical exemptions would not allow. So I think this is yet again another step that we should not take because it is slowly eroding our lead.

Uh, my time has expired and I yield back.

The gentlelady yields back. We now go to the gentleman from Texas for five minutes.

Thank you, Professor Carrier. Some argue that the issues of evergreening and patent tickets are largely non-existent myths. Is that an accurate characterization?

No, it is not.

Could you explain that further to me, so normal people could understand what that means?

Sure. So, the patent system is designed to promote innovation, and we should be grateful for all that the pharmaceutical industry has done to promote innovation. But, when you collect a whole bunch of patents and then use it in an abusive way, I think that is a problem. if I can take just a a second, we've heard a lot about terminal disclaimers, it's a bit wonky, tough to understand what that is. Let me give you one concrete example. So, Ilia is a drug that treats an eye disease. And Regeneron here sued Amgen in a patent over Ilia. The patent had a buffer that controlled the acid and ensured safety. The biosimilar Amgen did not have the buffer. In other words, it did not infringe. Court said, " You're fine, no injunction. Keep doing what you're doing the very next day." Regener- Regeneron went back to the drawing board, got a new patent, new terminal disclaimer, and sued them again. They didn't have it in the first place, they got the idea from their competitor, and they filed another lawsuit. This is not about innovation. This is about playing games with these terminal disclaimers.

Miss Simpson, do you do you have a thought on that?

I I do. Um, I think one of one of the things that's important to bear in mind with this idea of repetitive lawsuits um that Professor Carrier just mentioned is that courts have a lot of doctrines specifically to deal with repetitive lawsuits. Um, issue preclusion, claim preclusion. And if they're not dismissing these c- those cases on these grounds, it means these cases aren't truly duplicative. It means someone is going to court with a different, enough property right that it's worth, um, pursuing. Um, and I think this goes back to an even more fundamental point that civil litigation is um especially in this space it's it's complicated um it's due to choices that both sides make um and and i think um having um it and to that end i i don't think there is actually again i don't think there is a real problem here to be solved that the courts themselves don't already have tools to deal with

some of these uh some argue that the us patent law makes it too easy for brand manufacturers to prevent generic and bio-similar competitors from entering the market Would you agree with that thought?

Um, I I would not, um, and for this I go back to the data that shows that generics enter the market on average between twelve to fourteen years which is less than the length of a term of a patent and that number is held steady for about thirty years so I I think if there were evidence that were harder for them to get on markets we would see it um ninety percent of prescriptions are filled by generics we have an extremely robust generic industry in this country which we should be proud of but that's because the system we have is working.

Thank you. Miss Good, go ahead. I see you have something to say.

Yeah, I just wanna give an example. So there was a patent which was a method of purifying a drug. And the method was you put it through column A, then column B, then column C. That was shown to not be new. The patent was cancelled. Then the duplicate came along. The duplicate patent said you put it through column A, then directly through column B, then directly through column C. This one word difference, the word directly, that then needs to be litigated again. And when it comes to judges narrowing down claims, that takes years. So that's time when patients abroad are getting the drugs and patients in America are waiting for the patent litigations to be resolved. We're talking about difference between a human and a patient in two different patents, patents that would be rejected by the patent office if they weren't filing terminal disclaimers. The Ethic Act does not weaken patents, it encourages unique Thank you. I yield back.

Uh would the gentlemen yield?

Yes.

Uh Miss Simpson you uh you said fourteen years have been staying. Isn't it true that it's twenty one, twenty two years for biosimilars, it's much longer if you look specifically at the largest new growing area?

Um, at least the data I've seen um suggests that it's also more like fourteen years, so slightly longer,

Mm-hmm.

Mi- Doctor Good,

but

had you have any information on that, because our information shows it's more like twenty.

Yeah, you're talking about the exclusivity of the branded drug, how long they're exclusive for?

Yes.

Yeah, so

Uh, how long it takes to get to market, which is what uh Miss Simpson opined that it was fourteen years, our information on biosimilars is much more like twenty twenty one.

Yeah. Old data shows at fourteen years or less, because that's going back to nineteen eighty four, when there were less entrenched patent tickets. The latest data, dated twenty twenty six, showing the last ten years of how long it took by a stimulus to get on the market, was eighteen years of exclusivity for the brand. But Congress thought twelve years was appropriate with FTA exclusivity, and Congress allowed patent term extension up to fourteen years. So eighteen years is four years longer than Congress ever contemplated.

Thank you. Uh, The gentleman from California, Mister Keiley.

Uh, thank you, Mister Chair. I think we can all uh agree here, and we all share the goal of uh getting as many people as possible access uh to the most uh efficacious drugs uh possible at the lowest cost and you know we're actually living at a time that's incredibly exciting for drug discovery with uh timelines for drug discovery and and testing uh rapidly accelerating and with uh a lot of new, uh potential discoveries and applications. uh happening all the time and maybe even more uh exciting ones ahead of us so um i think there's a lot to actually be uh optimistic about despite the frustration that so many people with uh you know the price of prescription drugs uh but uh miss simpson kind of continuing on the last set of questions so uh you know whatever the number is you you it's eleven years or so uh maybe a little more as the time it takes uh for the generic competition to begin but i mean uh you know if there was no original innovator who created the underlying drug, uh, what would be the opportunity for the generic to come along?

Right, e- exactly, and that's why the, um, why balance is so important here, because we can't have a generic industry if there's not a branded industry to begin with.

And if we didn't have, you know, patent protection or if those protections were viewed as as inadequate, I suppose you could try to protect your, uh, IP through trade secret law, right? Um, but what would that do for the ability to develop generics? Cuz, uh, you know, one of the sort of, uh, virtues of the patent system or or the the trade-off inherent in it is the requirement of disclosure. That's how these generics make their their drugs, right? Is that the the the, uh, the uh, the patent holder has to actually tell you how to do it. Uh, whereas with trade circle, well, you don't necessarily have that access, do you?

Um, that's right. I I think that's an easy to forget part of the patent system is that it promotes disclosure as opposed to incentive people to keep things as trade secrets, allows other people to directly copy, that's part of why generics can get on the market so quickly they see exactly how to do it um in patents.

So assuring that innovators uh have the incentive to utilize the patent system to protect their IP actually enables the creation of a generics much more readily than trying to protect those secrets through trade secrets law. Is that is that right?

that's right and i mean there is no time limit on trade secrets either as opposed to patents so i mean if you were able to successfully keep your drug or treatment secret um you could have it you know theoretically forever

right so that would be higher cost for people if we didn't have an effective patent system

yes

potentially uh you know another area where maybe we're um you know seeing uh an unnecessary uh limit on innovation in a way that reduces access and raises cost is when it comes to the issue of uh of subject matter eligibility uh for patents um I've sought to address this uh through the patent eligible eligibility uh restoration act bipartisan and bicameral legislation could you just give us a little insight into that that specific issue subject matter eligibility

um yes uh so I think that's an incredibly important issue that I I think um a bill like para is critical to address Um the Supreme Court made a number of changes to patent eligible subject matter, um in the last decade, and it's impacted several industries relevant to this hearing, um medical diagnostics and other part of the parts of the life science. It's not as clear and for diagnostics it's very unclear whether or not you can get adequate patent protection in the US. You can get the you can get a greater scope in Europe, in China, in Korea, in Japan. Um, and as I mentioned earlier in in discussions with Miss Ross, there's a real risk that we're are going to lose our industries to other countries that provide better protection unless something like Para is enacted.

Yeah, and what the I think you just mentioned a few, but the key industries, the key innovations that we could lose access to or lose at least uh being the home to?

Yeah, so um the diagnostic industry is a very clear one where it's gotten much harder. um to get patent protection at all in the us um other parts of the life sciences industry have also been infected um in various parts of um computer implemented inventions have also been affected which is also clearly a very important area of the economy

yeah absolutely i think this is a issue is is really really important right now um from the perspective of global competitiveness when we have you know uh china and uh and the eu and others uh that have much more stability predictability uh irrationality uh when it comes to the the matter of what is and is not patentable it really puts us at a disadvantage so hopefully we can uh we can get this uh legislation through this congress thank you for your testimony I yield back actually mister chair uh sorry can I seek

gentlemen yields back I recognize myself

I

uh unanimous consent to enter into the record this uh uh study uh drug patent and exclusivity from the us b t o thanks

too late I'm just kidding without objection so ordered

Well, so as not to fall victim to uh to that ruling, Mister Chief,

The gentleman is recognizing his unanimous consent.

I've got a few. Thank you. It's rather lengthy. A letter from the Council for Innovation Promotion, a letter from the National Association of Manufacturers, a l- a statement from the ERI SA Industry Committee, a letter f- from the Center for Medicine in the Public Interest, a statement from Families USA, A letter from Alliance for Aging Research. Two statements from Generation Patent. A statement from the US Chamber of Commerce on the Ethic Act and Patent Policy. A statement from Patients for Affordable Drugs Now. A statement from AARP. A statement from the Biotechnology Innovation Organization. A statement from the Biosimilars Forum. a statement from the Alliance of US Startups and Inventors for Jobs, a statement from the American Society of Health System Pharmacists, a statement from the Campaign for Sustainable RX Pricing, and last but not least, a letter and issue brief from the Center for American Principles, and these uh are offered for unanimous

Without objection, they will be included in the record.

consent. And they are as bipartisan as this hearing and this panel. Uh, Mr. Chair.

Thank you for noting that. W- and with that I'll recognize myself. Doctor Good, the Ethic Act has been alluded to not being good, being good, whatever. Let me just ask a a a a workaround question. If we narrowed the Act to requiring that all claims be brought at one time, that not that uh a pharmaceutical company couldn't sequentially sue would that be a partial conclusion and is there any level of unfairness considering if i charge someone with a crime i i don't have the ability to sequentially charge them with crimes, i have to bring all known crimes at the same time is that one of many solutions that could be ordered by this committee

so a couple of thoughts that's actually bad for innovation because we want companies to continue innovating new uses of old drugs, and the Ethic Act would allow that. Um.

No, I'm saying that all known, uh, at that time. In other words, i- in the case where they actually already have two patents and they're bringing one set, and then when they lose, bringing the similar one.

So it over-complicates the case when you go from five patents to seventy-five patents, like in the case of the drug Simpli-

Or tens of thousands of claims.

Yeah. So in the case of the drugs in Bravo, there are five unique patterns and seventy duplicate patterns. Federal courts cannot handle that number of patterns. So they tried to narrow it down, but that takes years. This is slowing down patients getting access to affordable medicines. It's just extra bureaucracy. You can take all of those claims and put them into a single patent. You don't need to spread them out unless you're trying to game the system.

Thank you. I think you've made our case for the the bill as it is. Um. We - we obviously are dealing with the uh - the unanimous Supreme Court ruling just a few minutes ago. Um. Ms. Carver doesn't like it, uh and uh opined on how they're gonna work around it, and I'm - I'm fine with that, that's - that's their right. But would you say, in spite of all the good work that uh y- your companies do, that the uh the history of doctors prescribing for patients, if you will, off patent is in fact a huge part of innovation and that so much of what pharma takes credit for, in fact, around the world are doctors making discoveries that then lead to that innovation. I'd like to hear both of your ideas on that.

Yeah, so the skinny label, it's been available for four decades and innovation continued. So despite f- today, pharma is saying that it's a problem for innovation, for the last four decades they kept innovating and finding new uses,

Thank you.

and that was against the backdrop of all sorts of issues.

And Professor Carrier, I was deviating slightly in the question to skinny labels and physicians making decisions uh off patent have been around for a long time. And they're really first cousins, aren't they, when it comes to finding ways to uh to help the patient.

Absolutely. In advance of the Hatch-Waxman Act in the early eighties, just about every state had a substitution law.

Okay, uh, I'm gonna get to see my unanimous consents in a moment. There's been a lot been said about competitiveness, and there's a few people up here who have a history in competitiveness. But I want to ask each of the witnesses to answer briefly in one sense. If the United States market is the most excluded market from, if you will, generics. And as a result, the original patent holder keeps their price high longer, because they clearly do keep their price higher than the generic, cuz they have the right on the day the patent expires to lower a price to exclude. uh generics from even entering the market if they wanted to but if the united states call it twenty percent of the world's market if we continue to have our price here and notoriously china india and other countries have a much higher barrier to getting a patent much much higher barrier to enforcing and as a result uh other products arrive in their market much sooner are we in fact doing ourselves a favor or are we effectively excluding the development of those products here in the United States while around the world the consumer is getting that less expensive product years earlier start with doctor good

so because the US patent system is so volatile American patients get access to cheaper drugs later and less manufacturing can happen in the US

yes sir

crucial but so is generic competition and so i would consider both of them together

uh simpson you're a great scholar but if you try to narrow your answer to the the competitive situation in a global market in which china ignores our patents and produces their products in real time if they if they can figure out how to reverse engineer them

yes i i would say that it is a very big problem to our competitiveness

And Miss Carver.

I would say that, um, America is doing a great job with balancing those two types of in- of innovation and access compared to other countries with American patients having access to eighty-five percent of new medicines compared to an average of thirty-eight percent in patients across G-twenty countries.

It's a very good point that other countries simply keep the generics and lock out, uh, big pharma, uh, in order to lower costs. There's no question at all. One question uh that I'm gonna submit for the record for all of you, if you don't mind, is under current law, universally, my old company, any company, the uh the patent standard is make, use, or sell. Under the idea that America needs to be competitive, if a product is legal and off patent in countries other than the United States, should this committee consider a narrow carve-out for what I would call a bonded manufacturing facility meaning that American companies should be allowed to produce in America for sales to countries where the product is already available, l- it could be available legally the concept being that if you're not making in America till later you probably won't make in America at all. if you make in america in real time you will hit the ground running when it becomes available in the us um i personally have observed that china has that advantage they make the products as does india years ahead of being able to sell them in america it means they're prepared on day one so i'd ask you to as lengthy and as scholarly as you can please give me your answers on that because it's a serious consideration for what we would not necessarily apply to non-regulated products. In other words, we're not gonna open the floodgates for making in America and selling around the world. But this highly regulated product in which the opportunity occurs at different times, I'd wanna have that considered. And since I took extra time, does the ranking member have any follow-up?

Uh, I do not. Thank you.

So with that, uh, I'd ask unanimous consent that we place into the record uh

mr errington's

mister errington's of texas's uh statement thank you and

this is the ethic act

and a copy of the maligned hr thirty two sixty nine the ethic act

skinny plates right

and the now perhaps to be modified hr sixty four eighty five uh the skinny label act without objection those are ordered to be placed in the record And without re-reading them, we will place into the record both the l- some of them that Mister Johnson opined on, but there's a total of twenty records, uh letters to be placed in the record and they'll be made available to all of our witnesses. And now for the closing. This concludes our hearing. And I wanna thank all of our witnesses for being here before the subcommittee today. Without objection, all members will have five legislative days in which to submit additional written questions for our witnesses and additional materials for the record and as is my tradition do you all agree to accept those and, and come back in as timely a fashion as you can. They've all answered to the affirmative. I thank their witnesses and we stand adjourned.