Coalition for Affordable Drugs Fights Patent Evergreening For Profit

What if you could stop pharmaceutical patent abuse, lower drug costs, improve accessibility, and make money in the process? That is the idea behind the company Coalition for Affordable Drugs. The founders and their goals were profiled in the New York Times Business Section in the Nov. 27th Fair Game column written by Gretchen Morgenson. J. Kyle Bass a hedgefunder, and Erich Spangenberg, a patent law flamethrower, formed this company to question and disqualify patents that they believe to be weakly justified and dubiously extended.

Their process begins with a request that a division of the US Patent and Trademark Office conduct a review of the drug patent they are targeting. They have filed requests for 33 reviews of 13 different drugs. They blend advocacy and investing seamlessly as their profit motivation is completely in line with these requests.

“On behalf of themselves and their investors, Mr. Bass and Mr. Spangenberg are short-sellers of shares in companies whose patents they consider vulnerable. They also buy stock in companies whose patents, they believe, reflect true innovation.”

Coalition for Affordable Drugs is an activist investment company. They see problematic patent extensions and attack them while simultaneously betting against the companies holding them. When a drug a patent is about to expire, a company faces a shortfall. Many companies will mount an effort to extend the patent, known as “evergreening.” At the expense of payers and consumers, this practice costs the rest of the industry untold sums while maintaining and extending record profits for the drug companies.

What Ms. Morgenson found to be “Fair Game” were two efforts of the company, acting pro-bono, that illustrate that more vigorous enforcement of patent law could reform the system and save providers and consumers from price gouging. The first case involves a drug called Propofol, an anesthetic branded as Diprivan and produced by Fresenius Kabi.

“Propofol, a 30-year-old therapy used in an estimated 80 percent of operations nationwide, is protected by a patent not on the drug itself but on the rubber stopper used in its container. Patent approval was extended in 2013 for 12 more years.”

The company maintains its patent for a piece of its container, not for something related to the drug. With 75% market share, Fresenius will make enormous amounts of money making sure generic alternatives won•t become available until 2025. Fresenius said they, “understand the importance of drug availability and affordability.” They did not admit their pricing and patent strategy had any impact on these issues. The drug industry wants to befriend consumers, overcharge payers, and blame them for limiting patient access when payers balk at drug maker’s inflated prices.

The other prescription patent they are attacking is for Suprenza, a weight loss drug. Its extension was granted in 2013 protecting its exclusivity until 2029. The patent describes the medication as “an orally disintegrating tablet with a ‘speckled appearance.'” The coalition contends that extending a patent for a speckled appearance is specious because it is basically “colored granules of water-soluble sugar” and that these type of speckles are common and therefore unpatentable. Patents like these are perfect examples of regulatory bodies failing and industry practices finding loopholes and developing abusive practices that contribute to drug price inflation.

The fight against rising drug costs is being fought on multiple fronts. For many years and decades expiring patents and newly available generics have released some pressure from constant price inflation as drug patents expire and generics make drugs more affordable. Spectacular specialty drugs are coming out every year with shocking price tags. There is also a rear battle being fought because drug companies are extending exclusivity or becoming monopolies by default that deny or delay access to affordable generic alternatives. Coalition for Affordable Drugs may be an advocacy group blended with an investment firm, but if they succeed in truly affecting change in patent law practices, limit the excesses of “evergreening,” and ultimately lower drug costs than they earned their money the right way.