By LAURIE MCGINLEY
Staff Reporter of THE WALL
STREET JOURNAL
WASHINGTON -- Patent protection for drugs has increased substantially over the past two decades, resulting in hefty increases in industry profits and consumer drug bills, but not necessarily in innovation, says a new report by a nonprofit group.
Because of federal intellectual-property-protection laws adopted over the past two decades, new brand-name drugs now have effective patent lives of about 13 to 15 years, compared with eight years for drugs approved in the early 1980s, says the report by the National Institute for Health Care Management. As a result, the laws have significantly delayed the entry of some cheaper generic drugs into the market, the report said.
Effective patent lives are the parts of patent terms remaining after drugs are approved by the Food and Drug Administration.
The organization that prepared the report, a health-care research group based here, is funded by foundations, the government and managed-care companies. The managed-care industry has complained about financial strains caused by rising costs of medications.
The report, to be released Monday, also found that, over the past decade, only 36% of new-drug applications approved by the FDA were for compounds never sold on the U.S. market. The rest were for drugs whose active ingredients already were on the market, to be marketed in new dosages and combinations, or by new manufacturers.
"Congress has passed a lot of laws, all well-intentioned, but they have been a great windfall for the pharmaceutical industry," said Nancy Chockley, president of the nonprofit group. "The current system appears to be out balance and it's costing Americans billions of dollars."
Pharmaceutical Research and Manufacturers of America, the main industry trade group, sharply criticized the report. Referring to the fact that the nonprofit group gets some funding from managed-care companies, the group's president, Alan Holmer, said: "The sponsors' self-serving agenda is to reduce patent terms for medicines to save money for themselves."
Mr. Holmer called the report "inaccurate and misleading," saying that the average patent term for drugs is about 11 years, far less than the 18 years for most products. "Pharmaceutical companies have far less time than other industries to recoup their huge research and development costs," he said.
The report comes as Congress is embroiled in an election-year debate over how to lower drug costs, especially for the uninsured elderly. Ms. Chockley said it is important for lawmakers to scrutinize the repercussions of shielding the pharmaceutical industry from competition in the making and marketing of drugs.
The report examined six laws enacted between 1983 and 1997 that strengthened the patents of brand-name drugs, extended their exclusivity on the market or eased the transfer of government discoveries to pharmaceutical companies. Brand-name drugs account for about 90% of total spending and about three-fifths of prescriptions in the U.S. market.
The laws also have helped the industry maintain its position as the most profitable in the nation. "These laws have been a key driver in the industry's profits," Ms. Chockley said.
The industry, however, faces challenges. According to Mr. Holmer, 150 drugs with $50 billion in combined annual sales will lose patent protection over the next five years. That development will offer "even greater choice to consumers," he said, as generics come on the market. The report notes that many manufacturers are seeking to extend their patents.
Write to Laurie McGinley at laurie.mcginley@wsj.com1
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