Big Pharma, it’s time to talk: Investors demand transparency on patent thickets

Pharmaceutical companies are running into pushback for their “patent thicket” tactics, designed to maintain exclusive rights and delay cheaper generics. The Financial Times reported that an ethical investor coalition is pushing for greater transparency and urging major drug makers to disclose their patent strategies.

Unraveling the patent thicket mystery

Patent thickets are a common intellectual property tactic in pharma. Companies file numerous patents beyond the primary one for a specific compound. Critics say this cunning approach stalls the introduction of generics even after the 20-year exclusivity of primary patents expires. Consequently, drug prices remain high, and affordable medications remain out of reach for many.

Drugs like Humira (adalimumab) and Keytruda (pembrolizumab), for example, have experienced extended periods without biosimilar or generic competition, leading to steep prices and limited patient access. Earlier this month, Sandoz, a Novartis (NYSE:SIX) subsidiary, received FDA approval for its Humira biosimilar Hyrimoz (adalimumab-adaz).

Ethical investors demand answers

A powerful ethical investor coalition, featuring Mercy Investment Services and Trinity Health, is questioning major pharmaceutical companies like Johnson & Johnson (NYSE:JNJ), Merck & Co. (NYSE:MRK), Pfizer (NYSE:PFE), Eli Lilly (NYSE:LLY), Gilead Sciences, (Nasdaq:GILD), Amgen (Nasdaq:AMGN), Regeneron (Nasdaq:REGN), Bristol Myers Squibb (NYSE:BMY) and AbbVie (NYSE:ABBV). They want reports on single-drug patent application processes and answers about whether these strategies intentionally prolong exclusivity for top-selling drugs and how they impact patient access.

Big Pharma resists patent thicket scrutiny

Eight of the nine targeted companies are fighting shareholder proposals at the Securities and Exchange Commission (SEC). It’s a common tactic among corporations. Bristol Myers Squibb, however, is taking a different approach, engaging in talks with the investors, as reported in the Financial Times.

In June, six U.S. senators from both parties urged the U.S. Patent and Trademark Office (USPTO) to act against patent thickets that allegedly suppress competition and inflate drug prices. They criticized granting multiple patents for minor variations on a single invention and called on the USPTO to issue proposed rules or request public comment by September, according to Reuters.

Public debate and healthcare costs: A heated exchange

Patent thickets have ignited a public debate about their role in perpetuating high drug prices and limiting access to affordable generics. Lydia Kuykendal, director of shareholder advocacy at Mercy Investment Services, argues that the lack of competition resulting from patent thickets lets manufacturers inflate prices, contributing to the U.S.’ costly healthcare system.

This ongoing debate highlights the need to balance intellectual property rights with affordable patient access to medications. Ethical investors are championing change, advocating for more transparency and accountability in the pharmaceutical industry. They demand fair drug pricing and broader patient access to essential medications and show no signs of backing down.