June 1, 2020
Pharmaceutical Patenting Practices: A Legal Overview
Pharmaceutical manufacturers frequently obtain intellectual
and distribution processes are designed to ensure the same.
property (IP) rights in their products. IP law provides
Like Hatch-Waxman, the Biologics Price Competition and
exclusive rights in a particular invention or product for a
Innovation Act of 2009 (BPCIA) created an abbreviated
certain time period, potentially enabling the rights holder
process to encourage early market entry of sufficiently
(e.g., a brand-name drug manufacturer) to charge higher-
similar biologics by relying on FDA’s prior approval of a
than-competitive prices. If rights holders are able to charge
biologic. A biological product is sufficiently similar if it is
such prices, they may have an incentive to lengthen the
“biosimilar” to or interchangeable with an approved
period of exclusive rights. Some commentators allege that
biologic. The BPCIA also created a process for biologic and
pharmaceutical manufacturers have engaged in patenting
biosimilar manufacturers to resolve patent disputes
practices that unduly extend the period of exclusivity.
following the filing of an abbreviated BLA.
These critics argue that these patenting practices are used to
keep drug prices high, without any benefit for consumers or
Patent Law Basics
innovation. Defenders of these patenting practices contend
Patents, which are available for a wide variety of inventions
that patents are generally necessary to allow manufacturers
beyond pharmaceuticals, grant the patent holder the right to
to recoup their investments in research, development, and
exclude others from making, using, selling, or importing a
regulatory approval, and that concerns regarding these
patented invention within the United States for a defined
practices are either overstated or unjustified. This In Focus
term of years (generally, twenty years from the date a
provides an overview of the relevant legal background and
patent application was filed). A person who does so without
describes four such alleged patenting practices.
the patent holder’s permission infringes the patent and is
potentially liable for monetary damages and other legal
Legal Background
remedies. Patent exclusivity allows the patent holder to
recoup any expenses incurred during research and
FDA Regulation of Pharmaceutical Products
development, and is intended to incentivize innovation. The
The U.S. Food and Drug Administration (FDA) must
exclusivity may also shield patentees from competition,
approve new drugs and biologics (i.e., pharmaceutical
thus allowing them to charge higher-than-competitive
products derived from biological materials, such as a virus
prices for goods protected by patents. Patent incentives are
or blood component) prior to their being marketed in
said to be particularly necessary for products like
interstate commerce. The approval processes for drugs and
pharmaceuticals, which are costly to develop but may be
biologics are similar, but distinct.
easily copied once marketed.
To obtain FDA approval, a drug manufacturer must submit
Pharmaceutical patents may cover many different features
a new drug application (NDA) that demonstrates, among
of a drug or biologic beyond the active ingredient itself.
other things, that the drug is safe and effective for its
Such “secondary patents” may claim, among other things:
intended use. The clinical studies necessary to establish
safety and efficacy are often expensive and lengthy; the
1. formulations of the drug or biologic (e.g., an
average cost to develop a new drug has been generally
administrable form or dosage);
estimated to be between $1 billion to $3 billion, and the
2. methods of using the pharmaceutical (e.g., to
average length of the FDA approval process is over twelve
treat a particular disease);
years. To encourage competition and lower drug prices
through generic drug entry, the Drug Price Competition and
3. methods of manufacturing or technologies
Patent Term Restoration Act of 1984 (Hatch-Waxman)
used to make the pharmaceutical;
created a streamlined approval process that allows generic
4. methods or technologies for administrating
drugs to be approved through an abbreviated new drug
the pharmaceutical; or
application (ANDA) that establishes the drug’s safety and
efficacy by relying on FDA’s prior approval of a drug with
5. other chemicals related to the active
the same active ingredient. In certain circumstances, the
ingredient, such as intermediaries.
generic’s ANDA filing constitutes an act of “artificial”
patent infringement, allowing the brand manufacturer to sue
Pharmaceutical Patenting Practices
the generic drug manufacturer.
From the patent holders’ perspective, the practices
described below are appropriate uses of the legal rights
Similarly, a biologic may only be marketed in the United
granted by their patents. Critics , however, view these
States after FDA approves a biologics license application
practices as harmful strategies that exploit the patent system
(BLA). To approve a BLA, FDA must determine that the
in ways that Congress did not intend.
biologic is “safe, pure, and potent,” and that the production
https://crsreports.congress.gov

---

Pharmaceutical Patenting Practices: A Legal Overview
“Evergreening”
patent the use of a different medium for cell growth or an
Evergreening, also known as patent “layering” or “life-
adjustment to the dosing.
cycle management,” is a practice by which drug innovators
allegedly seek to prolong their patent monopoly on
Critics contend that these patent thickets are created by
pharmaceuticals by obtaining additional patents as former
patenting minor or secondary innovations, yet effectively
patents expire. Because different aspects of pharmaceutical
delay competition because generics or biosimilars must
products are patentable, dozens of patents can protect a
challenge or design around every patent, which can be
single pharmaceutical product from competition.
expensive or difficult. Defenders maintain that the patents
on these products reflect the type of innovations that the
Critics of evergreening maintain that secondary patents are
patent laws were designed to incentivize, and that each
often for minor improvements or ancillary aspects of a
patent has been determined to be valid through the patent
pharmaceutical product, and effectively extend patent
examination process.
protection of the original product beyond the term set by
Congress. Defenders contend that any additional patents
“Pay-for-Delay” Settlements
cover important innovations and/or improvements to
Through the procedures established by Hatch-Waxman and
existing products, and that so-called secondary patents must
the BPCIA, brand manufacturers may initiate patent
meet the same patentability requirements and examination
litigation when generic (or biosimilar) manufacturers
procedures as any other patent.
submit abbreviated applications for products covered by
certain unexpired patents. Some brand manufacturers have
“Product Hopping”
settled such litigation by paying (or otherwise
“Product hopping” is the process by which a brand
compensating) generic manufacturers in return for the
manufacturer uses its current dominant market position to
generic manufacturers agreeing to delay market entry. The
encourage doctors, pharmacists, and consumers to “hop”
Supreme Court has held that this practice, referred to as a
from one drug, protected by soon-expiring patents, to a
“reverse payment” or “pay-for-delay,” may in certain
newer version of the same (or similar) drug with later-
circumstances be a valid exercise of patent exclusivity, but
expiring patents. The new version of the product may be,
in other circumstances may violate the antitrust laws.
for example, an extended release form, a new dosage, a
different route of administration (e.g., capsules to tablets),
Critics allege that brand manufacturers use pay-for-delay to
or a minor chemical change. The brand manufacturer may
protect weak patents from invalidation; because pay-for-
encourage the transition through a marketing campaign or
delay agreements terminate the litigation, questions of
discounts and rebates. Product hopping tends to take one of
patent validity and infringement remain open. Thus, critics
two forms: a “hard switch,” where the brand manufacturer
contend that pay-for-delay adversely affects competition by
removes the original product from the market, or a “soft
allowing the brand manufacturer to (1) avoid the risk that
switch,” where the brand manufacturer leaves the original
its patents will be invalidated, (2) delay the market entry of
product on the market.
generic competition, and (3) effectively extend its exclusive
right to market the listed drug. Defenders maintain that
Critics of product hopping contend that the new product
these settlements are a legitimate way to reduce the cost and
usually adds little or no clinical benefit, and the change
risk associated with litigation; they point out that the
occurs only to avoid generic competition by eliminating the
overwhelming majority of lawsuits settle across all areas of
market for the original product by the time of expected
the law. Moreover, defenders argue that the litigation could
generic entry. Defenders maintain that manufacturers have
end with the brand manufacturer prevailing, which would
legitimate reasons to create and patent new products, and
generally bar competition until the end of the patent term.
that the new products often do have clinical benefits (for
By settling the litigation, defenders contend, generic entry
example, fewer side effects or better patient compliance).
before the end of the patent term is often guaranteed.
“Patent Thickets”
Combinations of Practices
In the pharmaceutical context, the term “patent thickets”
Although presented here separately, critics contend that
describes a brand manufacturer’s practice of amassing a
these practices are sometimes used concurrently. For
large number of patents relating to a single product, thereby
example, some brand manufacturers may combine product
discouraging competitors from entering the market, or
hopping with pay-for-delay settlements, by using a pay-for-
making it too costly and risky to do so. For example, one
delay settlement to delay generic entry while the brand
recent study of the top twelve drugs by gross U.S. revenue
manufacturer switches the market to a new product
found that manufacturers obtained an average of seventy-
protected by patent exclusivity.
one patents on each drug. Concerns about patent thickets
have commonly been raised regarding biologics, as
Conclusion
compared to small molecule chemical drugs. This may be,
For data sources, more details, and specific market
at least in part, because manufacturing a pharmaceutical
examples of the particular practices, please see CRS Report
using living cells is often complicated, offering many
R46221, Drug Pricing and Pharmaceutical Patenting
potential opportunities for patenting innovative processes or
Practices, coordinated by Kevin T. Richards.
tools (although the underlying naturally occurring
biological material itself might be not be patentable). For
Kevin T. Richards, Legislative Attorney
example, a company producing a biologic could attempt to
IF11561
https://crsreports.congress.gov

---

Pharmaceutical Patenting Practices: A Legal Overview


Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permissio n of the copyright holder if you
wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF11561 · VERSION 1 · NEW

---