Drug- Industry Rule Would Raise Medicare Costs - WSJ
`
`Page 1 of 5
`
`THE WALL STREET JOURNAL.
`This copy le for your persas, non- commerdel use only. To older panarttallomaidy coffee for dletrbulbn to your colleagues, gimlets customers Wea
`hflpl wwwAßepnnta aom.
`latpl www.watoomlertlrAnM rug -Industry -tak oulckalse medicare- caele- 144100329E
`
`BUSINESS
`
`Drug -Industry Rule Would Raise
`Medicare Costs
`
`Congressional Budget Office estimates $1.3 billion increase in federal
`health-care costs over a decade
`
`A new estimate suggests federal health-care spending would rise $1.3 billon over 10 years If a drug -Industry
`backed proposal to exempt brand -name drug patents from certain challenges takes effect. PHOTO: ERICA
`YOON/rHE ROANOKE TIMES/ASSOCIATED PRESS
`
`By JOSEPH WALKER
`Aug. 31, 2015 7:20 p.m. ET
`
`A patent law change sought by the pharmaceutical industry could cost federal health -care
`programs $t 3 billion over a decade by delaying new generic medicines, an analysis by
`the Congressional Budget Office found this stunner, according to people familiar with
`the matter.
`
`Pharmaceutical trade groups are asking Congress to exempt drug patents from being
`challenged through an administrative process that is cheaper and faster than the federal
`courts. The procedure has become popular with generic -drug companies looking to sell
`copies of brand -name products.
`
`httpi /www.wsj.com/articles/drug- industry-bill- would -raise -medicare-costs -1441063248
`
`NCI Exhibit 2040
`
`

`

`' Drug- Industry Rule Would Raise Medicare Costs - WSJ
`
`Page 2 of 5
`
`Drug makers say hedge -fund manager Kyle Bass used the procedure to challenge
`companies whose shares he is betting against, or selling short. The Coalition for
`Affordable Drugs, a group created by Mr. Bass, has this year challenged more than zo
`patents held by companies including Biogen Inc., Celgene Corp. , and Jazz
`Pharmaceuticals PLC.
`
`The Pharmaceutical Research and Manufacturers of America, also known as PhRMA,
`and the Biotechnology Industry Organization, or BIO, say brand -name pharmaceutical
`patents should be excluded from the procedure, called Inter Partes Review, or IPR,
`through patent legislation that Congress is considering.
`
`"Our solution," said Mit Spears, general counsel at trade group PhRMA, "is to essentially
`exempt [pharmaceutical] products" from IPR challenges.
`
`RELATED
`
`Biotech Pushes Back Against Hedge Fund Manager
`(http: // waw.wsj.com /articles/ SB11154342288816824014704581070103071104900)
`Acorde Therapeutics Shares Surge After Denial of Patent Challenge ( http : //www.wsJ.com /articles/acorda-
`therapeutics- shares -surge -after- denial -of- patent -challenge- 1440457321)
`Novartis Can Sell Copycat of Amgen's Neupogen, Court Rules (http:/Mnvw.wsJ.com/articieslnovartis-can-
`sell-capycatof- amgens -neupogen -ln september- court -m les- 1437503115)
`Doctors Object to High Cancer -Drug Prices (http: //www,wej.com /articles /doc tors -object- to-Mghcancer-
`drug- prices- 1437824080)
`
`The potential for such an exemption to increase drug spending has intensified opposition
`from some lawmakers, health insurers, and consumer advocates alarmed by rising drug
`costs. This summer, Rep. Mimi Walters (R., Calif.) withdrew her proposal to include an
`exemption in a U.S. House of Representatives' patent bill after it was opposed by Rep.
`Bob Goodlatte (R., Va.), the bill's lead sponsor and chairman of the House Judiciary
`Committee.
`
`The IPR system went into effect in September 2012 with the support of many technology
`companies, which saw it as a way to combat patent trolls -nonoperating companies that
`profit by accusing companies of patent infringement. Under IPR, judges employed by the
`U.S. Patent and Trademark Office evaluate patent challenges that would be heard in
`lengthier court proceedings.
`
`http: / /www.wsj.com/articles /drug -industry- bill -would- raise -medicare- costs -1441063248
`
`

`

`' Drug -Industry Rule Would Raise Medicare Costs - WSJ
`
`Page 3 of 5
`
`Several U.S. senators, including John Cornyn (R., Texas) and Chuck Schumer (D., N.Y.),
`asked the CBO this summer to estimate how much a pharmaceutical exemption for IPR
`would cost, according to congressional aides. The CBO's conclusion, communicated
`orally to Senate staffers in July, was that federal spending would increase by $1.3 billion
`over to years because the exemption would delay the launch of certain generic products,
`the aides said,
`
`Generic drugs can cost 90% less than their brand -name equivalents.
`
`The CBO, a nonpartisan federal research agency, provides "thousands" of preliminary
`analyses each year to Congress as early drafts of new laws are hashed out, according to
`the CBO's website. A CEO spokeswoman declined to comment.
`
`'We won't have any new drugs come along at all if we don't support the
`investment that's needed... '
`
`-Bart Newland, Biogen counsel
`
`Some senators backing the broader patent law are open to the idea of an IPR exemption
`for drug patents and to finding ways that offset the projected increase in drug costs,
`congressional aides said. In July, 79 House members called for exempting drug patents
`in a letter to congressional leadership.
`
`Tom DiLenge, BIO's general counsel, said the trade group is aware of the CBO estimate
`and disagrees with it because the IPR system is unlikely to lead to faster generic
`approvals. Mr. Spears of PhRMA also said he was aware of the CEO estimate.
`
`Drug makers say the IPR process, in which judges employed by the U.S. Patent and
`Trademark Office evaluate challenges, is being used to circumvent a decades -old system
`for settling patent disputes between generic and brand -name drug companies. That
`system, created by a 1984 law, requires the FDA to wait 3o months, or 2.5 years, before
`approving generic versions of medicines whose patents are being challenged in court.
`
`IPR challenges are usually decided within 15 to 18 months, using a different legal
`standard than what is used in the federal courts, and which legal experts and drug
`makers say is less favorable to patent owners. Patents can be challenged through the IPR
`system and in the federal courts simultaneously, forcing drug makers to defend
`themselves on two fronts.
`
`httpi /www.wsj.com/articles /drug- industry -bill- would -raise -medicare- costs- 1441063248
`
`

`

`' Dnug- Industry Rule Would Raise Medicare Costs - WSJ
`
`Page 4 of 5
`
`"We agreed on a system 3o years ago for how generic drugs should be litigated," said Mr.
`DiLenge. "Now we're seeing generic drug companies trying to skirt those rules."
`
`'Generally speaking it seems easier to invalidate patents in IPR than in federal
`courts. '
`
`-Jacob S. Sherkow, New York Law School
`
`Individual drug companies, including Amgen Inc., AbbVie Inc. and Biogen, have
`lobbied lawmakers about changes to the IPR system, according to federal disclosure
`documents. Companies say IPR challenges have created new uncertainty as they evaluate
`which experimental drugs to invest in.
`
`"I understand people being concerned about drug prices, but we won't have any new
`drugs come along at all if we don't support the investment that's needed to make them
`happen," Bart Newland, chief counsel for intellectual property at Biogen, said in an
`interview.
`
`But opponents of the exemption, such as the health insurance industry, say drug makers
`often use the slow pace of the federal courts to delay generic launches. The IPR system "is
`a critical consumer protection," said Matthew Eyles, executive vice president of policy
`and regulatory affairs at America's Health Insurance Plans, say: "An exemption would be
`really bad for consumers and really bad for the system."
`
`Other groups opposing an exemption include AARP, an advocacy group for retirees,
`insurers represented by the Blue Cross and Blue Shield Association, and the
`Pharmaceutical Care Management Association, an industry group for pharmacy- benefit
`managers.
`
`Mylan NV, a generic drug maker, has filed more than a dozen IPR challenges against
`brand -name drug patents and has lobbied against the exemption, according to federal
`disclosure documents. IPR challenges "could eliminate a lot of these patents that are
`frivolous, which would allow more access to affordable medicines," Mylan Chief
`Executive Heather Bresch said in an interview.
`
`http: / /www.wsj.com/articles /drug -industry- bill -would -raise -medicare- costs -1441063248
`
`

`

`' Drug- Industry Rule Would Raise Medicare Costs - WSJ
`
`Page 5 of 5
`
`It is too soon to say if the IPR system will significantly alter the industry. Many
`challenges to technology patents have been successful, but most pharmaceutical cases
`haven't been decided yet, said Jacob S. Sherkow, an associate law professor at New York
`Law School. Among pharmaceutical challenges that have been decided, the patent office
`has upheld most of them, he said.
`
`In August, the patent office declined to review the first of Mr. Bass's challenges against
`patents for Acorda Therapeutics Inc. 's multiple sclerosis treatment Ampyra, but agreed
`to consider a challenge brought by Mylan against Teva Pharmaceutical Industries Ltd. 's
`drug Copaxone.
`
`"Generally speaking it seems easier to invalidate patents in IPR than in federal courts,"
`Mr. Sherkow said. "For pharma patents, the jury is still out."
`
`-Andrea Fuller contributed to this article.
`
`Write to Joseph Walker at joseph.walker @wsj,com
`
`Copyright 20t4 Dow Jones & Company, Inc. All Rights Reserved
`This copy is for your personal, noncommercial use only. Distribution end use of this material are governed by our Subscriber Agreement and by copyright
`law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at l- 800443 -0008 or visit www.dpepnnts.com.
`
`http: / /www.wsj.com/articles /drug- industry- bill- would -raise -medicare -costs -1441063248
`
`