Issues

Medical innovation fuels economic growth and has positioned U.S. companies as the global leader in life sciences technology. The strength of medical innovation, however, depends upon the strength of underlying intellectual property rights protecting these novel inventions. As our health economy continues to grow and innovate, our patent laws also need to grow and adapt to the speed and requirements of the 21st century.

The life science enterprise requires long term development, research and investment that can span decades as a molecule or process is proven safe and effective in treating or disrupting a disease. Strong patents are the basis of the entire enterprise. The ability to invest and attract capital as well as to openly collaborate, experiment, and test a life science product in the clinical trial process are all dependent on a patent system that protects the rights of the inventor and creates certainty that the patented invention will have economic viability.

Other industries and inventors do not rely on the patent system in the same way. Quicker non-regulated development timelines in industries like computer software and hardware do not have to undergo the clinical trial process and federal regulatory approval from agencies like the FDA in order to bring a new product to market. These products involve hundreds of various components to the invention rather than the handful of patents which may support the development of the next treatment for cancer or AIDS. Additionally, the innovation cycle of these industries is significantly shorter than the life sciences. Consequently, the value of patents in their innovation cycle are significantly less, and are sometimes seen as an impediment to the next cycle of innovation. And many of the policy concepts advanced by the high-tech industries have therefore focused on patent avoidance and ways to shortcut the defense of patents in court. To the contrary, the ability of a life science company to defend its patents through a predictable legal system is paramount.

The American Life Science Innovation Council has supported efforts to improve on our nation’s patent system, and will continue to do so. ALSIC supported the bipartisan America Invents Act, which was signed into law in September 2011, which modernized our nation’s patent laws as well as harmonized them with the rest of the world’s to maintain our global leadership position. Congress’s deliberations around this legislation spanned more than five years and eventually struck a balance between various inventors and industries that are affected by patent laws. The law represents the most significant change to the U.S. patent system since 1952.

Since then Congress has continued to push for additional changes even while the effects of the new law are not fully understood. Congress should fully consider the still-emerging impact of recent judicial and administrative developments before considering further changes to the patent system.

For decades, The Food and Drug Administration has helped to protect Americans’ health. New medicines and medical technologies have revolutionized health care and helped millions of patients live longer, healthier lives; and with a greater understanding of the human genome, America’s life science community is on the cusp of even more profound advancements in human health.

ALSIC believes the next generation of treatments and cures should be reviewed and approved through a modernized regulatory structure that promotes innovation, transparent science-based decision-making, cutting edge science, and accountability to both patients and taxpayers.

Since Congress enacted the Prescription Drug User Fee Act and the Medical Device User Fee Act, the FDA has gained the resources and additional staffing it needs to review new medicines and devices more efficiently while also maintaining its stringent safety and efficacy standards.  As these bills are reauthorized, it is essential to return to the original mission of PDUFA. New drug reviews must be accomplished in a way that is efficient, predictable and well-coordinated across different divisions within FDA, helping to ensure that patients have timely access to safe and effective medicines. The FDA must also develop pre-market approval policies for medical devices that speed patient access to new technologies, while ensuring post-market safety programs are in place which are reasonable.

For the first forty years of Medicare, American seniors had no coverage for prescription drug costs outside a hospital or physician office. In 2006, the competitive, market-driven Medicare Part D program was adopted, providing beneficiaries with access to virtually all pharmaceutical products in a variety of prescription drug plans. By 2010, nearly 90 percent of seniors had signed up for Part D drug coverage or its equivalent. The average beneficiary had several low-premium, high-value drug plans and many comprehensive Medicare Advantage plans to choose from and the program significantly moderated prescription drug costs.

Medicare Part D has worked so well that it’s come in 46 percent under its projected budget—a first for a federal program. It makes up less than 9 percent of total Medicare expenditures, and enjoys 90 percent satisfaction rates in regular surveys of beneficiaries. The Part D system also provides seniors with the most innovative therapies to treat increasingly-difficult diseases like leukemia or multiple sclerosis, rare blood and genetic disorders. Importantly, disease management tools to control expensive chronic diseases are also part of the program.

Because competition and not price controls provide pressure on costs, innovator manufacturers also are incentivized to continue their significant research and development efforts. The Part D marketplace has become a model program, and efforts to disrupt this carefully balanced system should be avoided.

Yet, some policymakers want to fundamentally alter this efficient, popular program by requiring ‘rebates’ on covered Part D products – a tax on pharmaceutical manufacturers. Rebating pharmaceuticals also serves as a price control. This scheme would disrupt the market orientation of Medicare Part D and would have the unintended consequence of raising prices for all other consumers. Most notably, seniors would not see any benefit from this policy—the Congressional Budget Office actually predicts monthly premiums would rise—and access to novel therapies would shrink for future generations if Part D rebates go into effect.

Created under the Patient Protection and Affordable Care Act, the $32 billion+ excise tax on medical device companies already is having a harmful impact on America’s health care innovation sector.

This tax  is applied to total revenues of medical device companies, regardless of whether or not they make a profit. That means even if those innovation-centered companies operate at a loss – because they are investing millions of dollars into research and development – they still will be forced to pay the tax.

Leading medical device companies already have said they will reduce their workforce to prepare for the heavy costs of the medical device tax. Moreover, the thousands of venture-funded device start-up companies acknowledge reduced capital-appreciation for their novel technologies. The medical device sector has been one of the few reliable job creators in America’s struggling economy. Unless this new tax is repealed, it threatens thousands of well-paying jobs. A report from consulting firm Battelle says this tax will cost nearly 39,000 jobs and more than $8 billion in economic output.

To avoid further job cuts and impediments to the medical innovation relied on by patients, Congress should repeal the tax.

Since the beginning of the Medicare program, seniors have benefited from innovative medical products and services provided through their Part B plans. This outpatient care program provides millions of Americans with access to physicians, including generalists and specialists, certain high-value drugs—such as cancer therapies and immunosuppressive products—durable medical equipment, dialysis, home health services, and other medical services.

Congressional proposals to cut substantially the amount medical providers receive for administering pharmaceutical therapies to those in Medicare Part B, if enacted into law, would jeopardize patients’ access to innovative treatments and services for cancer, osteoporosis, arthritis, and other devastating illnesses—especially in rural areas.

In fact, previous cuts have already had an impact especially in patients in rural America. A study on osteoporosis found that when the payment for treating Medicare Part B patients was cut, Medicare seniors lost access to vital testing that could have prevented thousands of fractures between 2007 and 2009. Similar negative effects are expected if Congress would again decide to cut the amount for treating Medicare Part B patients.