The Evergreening Myth: Claims that drug innovators extend their patents obscure a radical policymaking goal.

• Author: Lietzan, Erika
• Position: HEALTH & MEDICINE

In recent years, U.S. policymakers have considered proposals intended to prevent--or at least reduce--"evergreening" by pharmaceutical companies. Some proposals would change the antitrust enforcement landscape, others the intellectual property landscape, and still others the regulatory framework that governs new medicines. Some proposals--such as those creating new causes of action under the antitrust laws or limiting the availability of patents for discoveries--are profound and their proponents cite a body of academic and policy literature that decries supposed "evergreening" by companies to justify their ideas.

The term "evergreening" is a metaphor, meant to remind audiences of evergreen trees, which have green foliage year-round. It implies that something has been extended, and users of the metaphor view this extension as improper or undesirable. When offering descriptions and examples of evergreening, they focus on drug companies continuing to innovate after first introducing a new molecule, and on the broader marketplace for medicines after subsequent innovations have been introduced to the market. But proponents are frustratingly inconsistent and unclear about what, exactly, has been "extended" in these situations. A close look at the regulatory landscape in which continuing pharmaceutical innovation occurs shows that arguments for reform are grounded in myths, such as the myth that pharmaceutical companies continuing to innovate somehow "extend" their patents.

Once the myths of "evergreening" are laid bare, it becomes apparent that proponents of these proposals really want for the government to limit medical innovators to one medical product in the marketplace for each useful new molecule discovered. They are arguing that an innovator should not enjoy an exclusive market--and the resulting advantageous pricing--for innovations that, though discrete and independently satisfying the standard for a patent under U.S. law, stem in some fashion from an earlier innovation for which that innovator separately enjoyed exclusivity and the resulting pricing advantages. Or, at least, that drug innovators should not. This is a radical proposal that merits careful reflection and discussion, and it is not ripe for action.

Understanding that this is the true policymaking objective requires unpacking the regulatory landscape and market more carefully, and paying closer attention to word choice, than proponents of reform often do.

THE EVERGREENING ALLEGATION

In the United States, every new medicinal product requires premarket approval from the Food and Drug Administration. The drug statute refers to approval of a "new drug," and ambiguity in the term "drug" provides fertile ground for confusion and rhetorical mischief, as discussed later in this article. A firm that wants to market a new drug must prove to the FDA that the drug is safe and effective. Generating this information takes years, beginning with work in the laboratory and on animals, and progressing through several rounds of "clinical" testing in humans. For new molecules, the clinical portion of this research and development program averages six years. The process is also expensive: the Tufts Center for the Study of Drug Development now estimates the average cost of developing a new molecular entity at $2.6 billion. That figure includes average out-of-pocket costs of $1.4 billion and reflects the cost of unsuccessful projects. Most research and development programs fail.

When new drugs are first launched by innovators, they tend to be sold under brand names and protected by patents as well as statutory rights in the data that supported FDA approval (known as "data exclusivity"). Although the pricing of these products may reflect competitive pressure from other branded products, it also reflects the fact that patent rights and statutory data exclusivity delay the launch of cheaper copies. But no more than five years later, and often earlier, the innovator's competitors may file applications seeking approval of their own products based on the innovator's research, rather than performing their own. They file what are known as "abbreviated applications"--abbreviated because they omit some, or all, of the research needed to prove safety and effectiveness. Abbreviated applications are much less expensive and time-consuming to assemble, and the competitors' drugs correspondingly much less expensive than the original drugs they copy. When a competitor seeks to market an exact copy through an abbreviated application, we call its drug a "generic" drug. Pharmacists usually dispense generic copies even when doctors prescribe the corresponding branded products by name.

Some people use the "evergreening" label when an innovator holds more than one patent protecting its product, especially if some patents expire later than others. More often, though, these people use the label when an innovator introduces a newer version of its own product that is already on the market. These newer products tend to be sold under brand names and protected by their own patents and statutory data exclusivity. Sometimes the innovator also stops selling its older product. If purchasers shift to the innovator's newer product rather than purchasing cheap copies of the innovator's older product, some say the innovator has engaged in evergreening.

Although the term "evergreening" is a metaphor and signifies an extension of something, proponents of reform proposals do not agree on the particulars of the term's use. Some say the company has evergreened its invention, its drug, or its product. Others say the company has evergreened the drug's patent or patent life, or its exclusivity. Some say it has extended the drug's patents, or the drug's patent coverage or patent life, or the drug's exclusivity period. Some say the company has evergreened the drug's price, or its own profits or monopoly, or the company has extended its market power. Many argue that through evergreening--whatever the term means--the innovator has improperly blocked other firms from competing with it. On this basis, they seek govern ? ment intervention. For instance, one recent proposal would allow the Federal Trade Commission to bring antitrust actions against innovators who introduced newer products to replace their older products.

THREE MYTHS OF EVERGREENING

The circumstances that trigger the "evergreening" label occur at the intersection of several complex bodies of law: the federal framework requiring premarket approval...