The unique American intellectual property (IP) system – including patent protections – promotes biopharmaceutical innovation and affordability, giving U.S. patients more medicine choices than anywhere else in the world. And medicine costs have remained a small and stable 14% share of health care spending that is on par with other countries.
Despite this reality, some organizations and individuals are pressuring the U.S. Department of Health and Human Services (HHS) to break patent rights by utilizing the statute 28 U.S.C. § 1498 – more commonly referred to as “section 1498” – to allow generic production of medicines before patent protections expire.
Here are five things you should know about section 1498 and why it’s not a viable way to address health care affordability:
- Section 1498 does not create a right for the government to infringe patents so that it can commercially sell patented products to non-governmental buyers, like health care plans or hospitals. The statute was enacted over a century ago to give patent holders a way to receive “reasonable and entire compensation” should the government infringe a patent. Until the law was enacted, private patent holders had no recourse for government violation of patent rights due to the government’s sovereign immunity.
- The premise that section 1498 could be used as a price reduction tool in the health care market is baseless and has no precedent. Historically, this law has been utilized for national defense purposes, and applied in the 1990s by the Department of Defense to ensure a sufficient stockpile of night-vison goggles were available following Operation Desert Storm.
- Attempting to use section 1498 to break biopharma patent rights would also create substantial uncertainty for the biopharmaceutical companies, universities and other research institutions that make up America’s world-leading innovation ecosystem, chilling the pace of innovation. Most medicines are developed in the United States because of this ecosystem – built on strong IP protections – that rewards risk taking and fosters collaboration.
- This dubious approach would not quickly increase patient access to innovative products or save the health system money. By the time the government pays “reasonable and entire compensation” to the innovator, identifies and pays a contracted generic manufacturer, gets FDA approval on the unauthorized version, and manages other legal and regulatory hurdles, American patients would not be better off.
- This effort does nothing to address the abusive tactics by insurers and PBMs who decide what medicines people can get and set the price that people pay at the pharmacy. Multiple investigations have shown these middlemen are driving up costs, blocking access to generics and biosimilars, and using medicines as a profit center while forcing patients to pay more than they should.
Medicines improve health and help patients avoid the most expensive parts of our health care system. Policymakers should protect our world-leading innovation and IP ecosystem and address the root causes of patient affordability challenges. It’s middlemen like PBMs and insurers – not patents – blocking patient access and driving up costs.
Megan Van Etten
Megan Van Etten is Vice President of Public Affairs. She is responsible for leading the association’s public affairs efforts on international issues, including trade, intellectual property and access to medicines. Prior to joining PhRMA, Megan was director of media and external communications at the U.S. Chamber of Commerce and communications director at the Beer Institute. She has also worked as a communications consultant for global public relations firms. When not at the office, Megan enjoys exploring new Washington, D.C. restaurants and traveling with her husband and friends.
Megan Van Etten
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Intellectual Property
Patents
What to know about the latest effort to break patents using a legally dubious avenue
What to know about the latest effort to break patents using a legally dubious avenue