By: Andrew Glenny
Pharmaceutical patents are an important part generating innovation in the pharmaceutical technology. It costs a great deal of money and investments to develop a new drug. The Constitution allows Congress to allow inventors to have a monopoly on their inventions for a limited period of time. This provision of the Constitution was established to promote the advancement of the arts and sciences, or in other words incentivize invention. Giving the companies a patent after developing a drug essentially amounts to a reimbursement for the time, money and energy they invested into creating new drugs. This is particularly important in the pharmaceutical field because it is so easy to reverse engineer pharmaceuticals and create a generic brand without having to spend the money on the research and development required to invent the drug.
Normally when a party is found guilty of patent infringement, the court will require the infringer to pay the patent holder the profits lost by the infringement and a reasonable royalty fee. The patent statute also provides that these damages can be tripled at a court’s discretion, usually depending on the level of willfulness involved in the infringement. This usually gives a patent holder the protection necessary to recoup the losses they incurred in developing their invention.
In June of 2006, the Federal Drug Administration (FDA) announced the Unapproved Drugs Initiative. This initiative effectively bans drugs that have not been approved by the FDA. It has gone so far as to reduce the number of drugs not approved by the FDA on the market to less than 1 percent. This gives an obvious benefit to society by ensuring that drugs on the marketplace are safe to consumers. It also gives savvy entrepreneurs the ability to extend exclusivity in their market.
Pyrimethamine is a medicine found on the World Health Organization’s List of Essential Medicines. It was developed in 1953 by Nobel Prize winner Gertrude Elion to combat malaria. It is currently used to treat a disease called toxoplasma gondii, which can be fatal to individuals with weakened immune systems, such as those suffering from HIV. The trade name for Pyrimethamine is Daraprim. Currently the market for Pyrimethamine is small, however it is essential to the lives of those who need it.
There is currently no patent coverng the drug but there is also no competition to produce the drug due to the small market size. Daraprim was approved by the FDA in 1953 when it was first discovered. At present, no generic versions of this drug are approved by the FDA.
In August of 2015, Martin Shkreli, the CEO of the privately held company called Turing Pharmaceuticals, purchased the rights to Daraprim. When he purchased the drug the price for each pill was $13.50. He swiftly increased the price by more than 5,000% to $750 per pill. Without any competition, those who depend on the drug were required to pay that price.
In most instances insurance was covering the cost of the drug for their patients, which meant that many of those who needed the drug were able to obtain it. Insurance companies are far from keen on losing money though, so when they receive increased costs the expenses are made up for by increasing insurance prices for customers.
The Unapproved Drugs Initiative does not restrict generics from becoming approved, however for them to become approved they must be developed and submitted to the FDA. This takes time. During this time Turing Pharmaceuticals has the only product in a market that people’s lives depend on.
Section 2 of the Sherman Antitrust Act states:
“Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.”
This section can be broken down into three components: (1) any person who shall monopolize; (2) any part of the trade or commerce; (3) among the several states or with foreign nations is guilty of a felony. In this circumstance, Mr. Shkreli monopolized the Pyrimethamine market which extends to interstate and international commerce. The act makes no mention of whether a monopoly must be sustained for an indefinite period of time. After large public outcry Turing stated that they would reduce the price of the drug but still keep it high enough to make a profit. Unfortunately, the damage has already been done.
At this point, there is no reason to have exclusive rights to the drug. Pyrimethamine was created over 50 years ago and any rights to reimbursement for research and development have expired. That is why patent terms are limited, to allow competition in the market. This is especially important in a field where people’s lives depend on the product.
The Courts have established that there is a difference between a business that has passively come to dominate the market and one that has coerced itself through some sort of misconduct. Here, Turing Pharmaceuticals clearly exploited a loophole in the FDA’s Unapproved Drugs Initiative to establish a monopoly.
Student Bio Andrew is the Website Administrator for the Journal of High Technology Law. He is currently a 3L at Suffolk University Law School concentrating in Intellectual Property Law. He has a double major in Electrical and Computer Engineering from Roger Williams University.
