*This letter was also sent to the House of Representatives

September 18, 2015

Dear Senator:

On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I am writing to ask you to oppose including a pharmaceutical industry exemption from the inter partes review (IPR) process in S. 1137, “The Protecting American Talent and Entrepreneurship Act of 2015.”

The IPR process was created by the America Invents Act in 2011 to provide an expedited alternative to costly patent litigation in federal district courts. According to a 2013 Government Accountability Office study, technology companies estimated that the legal and filing fees for using expedited mechanism such as IPR was between $166,000 and $390,000 compared to $5 million for an infringement case filed in district court. Additionally, the expedited review processes could substantially reduce the time it takes to conclude patent disputes. Technology companies report it takes an average of 2 ½ years just to get to trial in district court. In contrast, by law IPR is concluded no later than 16 months after the initiation of the expedited review. This means that generic competitors can challenge bad patents more readily and get their products on the market faster creating savings for payers and, ultimately, consumers.

The need for a less costly alternative to expensive litigation to challenge weak brand patent is only becoming greater as more high cost “specialty drugs” hit the market. Specialty drug spending is driving a recent uptick in overall drug spending. In 2014, pharmacy benefits manager Express Scripts reported a more than 30-percent spike in specialty prescription drug spending. Many specialty drugs are complex biologics which commonly cost upwards of $100,000 for a course of treatment. Biologics are often covered by a multiplicity of patents, making it difficult for makers of biosimilars to gain legal certainty about patent status. The IPR process can play an important role in helping biosimilar makers challenge weak biologic patents facilitating the development of the nascent biosimilar market.

The National Committee is particularly concerned about the potential for an exemption to further increase already exorbitant drug costs for Medicare and Medicaid. According to the Center for Medicare and Medicaid Services, total Part D costs per capita grew by almost 11 percent in 2014, driven mostly by specialty drugs. Approximately half of all specialty spending occurs under the medical benefit rather than the pharmacy benefit because many specialty drugs are administered by physicians. As a result, this hike in specialty drug spending threatens to drive up Medicare part B spending as well as Part D spending. And these trends will only get worse as hundreds of new expensive specialty drugs are estimated to be in the development pipeline.

State Medicaid budgets have already been hard hit by just by one new treatment for hepatitis C. States are projected to spend more than $55 billion if they provide all Medicaid patients with hepatitis C therapies Sovaldi and its next generation successor, Harvoni. To put this into perspective, total state Medicaid spending for acute care was approximately $275 billion in 2012. This is clearly unsustainable for our health care system.

For these reasons, the National Committee strongly opposes efforts to exempt brand name pharmaceutical makers from the IPR process. Medicare and Medicaid are vitally important programs for seniors. Soaring prescription drug prices threaten to undermine their stability and an IPR carve-out for brand drug manufacturers would only make matters worse. The National Committee therefore urges you to oppose including the exemption of brand pharmaceutical makers from the IPR review process in S. 1137.


Max Richtman
President and CEO