Big Pharma fights patent disclosure demand from investors

Several of the world’s biggest pharmaceutical companies are fighting shareholder proposals to force them to disclose information on their use of a controversial patent strategy that can delay rivals from launching cheaper versions of blockbuster drugs.

A coalition of ethical investors have asked Johnson & Johnson, Merck, Pfizer, Eli Lilly, Gilead, Amgen, Regeneron, Bristol Myers Squibb and AbbVie to publish a report on the process they follow when applying for multiple patents on a single drug.

The reports should provide details on whether their patent strategies are designed to extend the exclusivity of top-selling drugs and what impact this is likely to have on patient access, according to the shareholders, which include Mercy Investment Services and Trinity Health.

Eight of the nine companies are fighting the proposals at the Securities and Exchange Commission. Companies routinely challenge shareholder proposals at the SEC and often win. BMS is still involved in discussions with the investors.

The shareholder proposals come amid a public debate over drug companies’ use of so called “patent thickets”, whereby they file multiple and sometimes hundreds of patents beyond the primary patent covering a particular compound. Critics allege the strategy delays the launch of generic medicines by rivals even after the 20-year exclusivity period on the primary patents of blockbuster drugs elapses.

“If you don’t have competition then manufacturers can just run prices amok and that is what you have seen in the US, which is the single most expensive healthcare system in the world,” said Lydia Kuykendal, director of shareholder advocacy at Mercy Investment Services.

She said differences in the patent systems between the US and EU mean European patients typically gain access to cheaper, generic drugs up to five years before their American counterparts.

Humira, the world’s best-selling drug, which has amassed $200bn in global sales for AbbVie, faced competition in Europe in 2018. But the first biosimilar competitors were only able to launch this year in the US due to an extensive “patent thicket” created around the drug, claim rivals.

“You can’t litigate through 100 patents: its just too expensive and too risky,” said Rachel Goode, head of legal and Intellectual Property at Fresenius Kabi, a healthcare company which makes generic drugs.

She said many branded drug companies deployed a so-called “double patenting” technique, whereby they claimed the same or an obvious variation of an invention in more than one patent. These are not incremental innovations that improve therapies for patients, said Goode.

The US Patent and Trademark Office and Food and Drug Administration are reviewing their work practices to ensure more timely access to market of generic and biosimilar drugs following a request from the Biden administration, which is targeting high drug prices.

Big pharma defends their patent strategies, arguing that intellectual property protection is required to justify continuing investment in existing drugs. These investments drive innovations that benefit patients, such as new dosing regimens, delivery methods and combinations with other drugs that provide real benefits to patients, they say.

The eight companies have told the SEC the shareholder proposals should be excluded for several reasons, including that they are an attempt to “micromanage the business” and involve complex scientific and legal topics outside the expertise of shareholders. Implementing the proposals could undermine the company’s core business model, said Merck in response to a proposal made by The Capuchin Franciscan Province of St. Joseph.

The Capuchin Order’s proposal cites a 2021 study by I-Mak, a research group focusing on health inequity, which found Merck had filed 95 secondary patents on its cancer drug Keytruda. Two out of five of these patent applications relate to “methods of production and processes that can be used to manufacture the drug”, which can thwart competition even after the primary patent on the drug has expired, said the Order in its proposal.

I-Mak research suggests Merck has sought up to 180 patents on Keytruda, which is forecast to be the world’s top-selling drug this year, notching up about $24bn in sales. The drug is scheduled to lose exclusivity provided by its primary patent in 2028 but many analysts believe Merck will be able to use its “patent thicket” to delay the introduction of competitor drugs.

“The Keytruda patent estate really does go well beyond 2028,” said Umer Raffat, analyst at Evercore ISI. “They are innovating beyond the existing drug compound and this strategy should support Merck’s earnings into the next decade.”

Last week US Senator Elizabeth Warren sent the director of the US patent office, Kathi Vidal, a letter urging closer scrutiny of Merck’s requests for new patents on Keytruda, including a new delivery method — an injection under the skin.

“It is not at all clear that Merck is doing anything other than extending its monopoly power over the drug,” Warren said.

A Merck spokesperson said the company had developed many innovations that enhanced the benefits of Keytruda to reach a greater number of patients and increase efficacy of the treatment. “When appropriate, Merck seek to protect its additional innovation,” he added.

Merck said it continued to point to late 2028 as the most likely timeframe for biosimilar entry into the market.