Australia, like most countries, faces high and rapidly-rising drug costs. There are longstanding concerns about pharmaceutical companies inappropriately extending their monopoly position by “evergreening” blockbuster drugs, through misuse of the patent system. There is, however, very little empirical information about this behaviour. We fill the gap by analysing all of the patents associated with 15 of the costliest drugs in Australia over the last 20 years. Specifically, we search the patent register to identify all the granted patents that cover the active pharmaceutical ingredient of the high-cost drugs. Then, we classify the patents by type, and identify their owners. We find a mean of 49 patents associated with each drug. Three-quarters of these patents are owned by companies other than the drug's originator. Surprisingly, the majority of all patents are owned by companies that do not have a record of developing top-selling drugs. Our findings show that a multitude of players seek monopoly control over innovations to blockbuster drugs. Consequently, attempts to control drug costs by mitigating misuse of the patent system are likely to miss the mark if they focus only on the patenting activities of originators.

This study analysed patenting activity around 15 of the costliest drugs in Australia over the last 20 years. Specifically, we determined the number, nature and ownership of these patents. The analysis included consideration of the patents granted to both the originator of the high-cost drugs under study and to other parties. Our goal was to contribute to the evidence base for understanding the potential misuse of patents in the pharmaceutical industry.

However, there are longstanding concerns about the misuse of patents by pharmaceutical companies to inappropriately extend their monopoly position [5] . Tactics such as “evergreening” and “patent thickets” have generated much speculation and debate [6] , [7] , [8] , [9] , [10] , [11] . But aside from several widely-publicised examples of suspect patenting activity [12] , there is virtually no empirical information identifying this behaviour, estimating its frequency, or revealing its nature. To the extent it does occur, misuse of drug patents may be both costly and inefficient for health systems.

Most high-cost drugs enjoy patent protection. A key rationale for the patent system is that it creates incentives for socially-valuable research and innovation by granting inventors time-limited monopoly rights to make, use and sell their inventions, thereby providing them with the potential to recoup investments and reap profits. New drugs, particularly commercially successful ones, require large capital investments to develop, test and bring to market [4] .

Like most countries, Australia faces high and rapidly-rising drug costs [1] . In the decade to 2010, the cost of prescription drugs covered by Australia's universal insurance scheme grew at 8% per annum to reach $8.4 billion [1] . The costs were remarkably concentrated: each year, the 10 drugs on which the government spent the most accounted for about a third of total drug expenditures, and the 25 costliest drugs accounted for about half of total drug expenditures [2] . The Australian situation is not unusual: a relatively small number of blockbuster drugs absorb a large proportion of pharmaceutical budgets in the United States and many other developed countries [3] .

Methods

Identification of High-Cost Drugs We used a publicly available source of information, the Australian Statistics on Medicines series [13], to identify a sample of the most costly drugs in Australia. Specifically, from among all drugs sold in Australia we calculated which 20 drugs accounted for the highest cumulative expenditures during the period 1990–2000. The expenditure data used to identify these “high-cost” drugs included both the subsidy paid by government and patients' out-of-pocket payments. We wished to capture patents obtained after as well as before expiry of the original patent associated with each high-cost drug. We therefore dropped from further consideration any high-cost drug whose original patent had not expired by 31 December 2005 (n = 5). This left 15 drugs in the study sample. Table 1 describes the drugs and shows their cumulative costs over the period 1991–2008. PPT PowerPoint slide

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Identification of Original Patent We defined the “original patent” for each sampled drug as the patent in Australia on the drug's Active Pharmaceutical Ingredient (API). To identify the original patent, we searched the Merck Index [14] to obtain the patent number for the patent granted by the United States Patent and Trademark Office (USPTO) on the sampled drug's API. It is virtually certain that the patent on the API of all of the drugs in our sample would first or contemporaneously have been filed in the USPTO. Next, to identify the original patent in Australia, we used the PATSTAT [15] and INPADOC Patent Family and Legal Status [16] databases to match the USPTO patent number with the corresponding patent application filed in the Australian Patent Office (APO). For two drugs in our sample – Beclomethasone and Glyceryl Trinitrate – there was no original patent.

Identification of Associated Patents On various dates between May and August 2010, we searched the INPADOC Patent Family and Legal Status, Derwent World Patents Legal [17] and CAS SciFinder [18] databases for all patents, granted anywhere in the world at the date of the search, that contained a reference to the API of the drugs in our sample. To find the API we used its international non-proprietary name (INN) – a unique, globally recognised name assigned to the API by a specialist committee of the World Health Organization [19]. This set of searches produced a very large number of patent records. We extracted the Australian records, eliminated duplicates, and identified the status of the patent application at the date we made the extraction (which was between May and August 2010). Many more drug patent applications are filed than are ultimately granted, often for commercial reasons (e.g. the patent application is filed prior to any clinical testing and regulatory approval of the drug, and is later abandoned when it becomes clear the prospective drug will not reach the market). We excluded all records for patent applications that had not proceeded to grant – i.e. that had not been examined and accepted by the APO – on the basis that only granted patents have legal effect. This process of elimination left a set of candidate patents for analysis. To determine which of the candidate patents were actually associated with the sample drug named in their specification, we obtained the text of all published Australian patent specifications from AusPat Beta and AusPat [20], and from the State Library of Victoria, and then examined claim 1 in the patent specification. Claim 1 typically represents the broadest claim in a patent, and encompasses the fundamental concept of the invention. Thus, if claim 1 of a patent is not associated with a drug in our sample then it is almost certain that no other claim of that patent will be. We defined a patent as “associated” with a drug in our sample if claim 1 of that patent has an integer (i.e. an element of the claimed subject matter) that covers, or “reads onto”, the API of the drug. Determining the subject matter that an integer of a claim covers is an objective assessment routinely undertaken by patent lawyers and patent attorneys (and our research team had one of each). A patent may be – and, in the case of our sample, sometimes was – associated with more than one drug (e.g. because claim 1 of the patent covered a combination of the APIs of two drugs in our sample). In that situation, we treated the patent as associated with each of those drugs. Because of the prevalence of such multiple associations in our sample, the total number of associated patents is greater than the total number of unique patents identified by our searching.

Classification of Patents We evaluated claim 1 of each patent associated with each drug in our sample to identify its nature. In doing so we observed claims on seven types of inventions: (1) the API of the drug (i.e. the drug's chemical compound); (2) an intermediate or a different form of the API (e.g. an isomer, or a salt or crystalline form, of the drug's chemical compound); (3) a combination of the API, or an intermediate or a different form of it, with another drug (e.g. the drug's chemical compound combined with the chemical compound of another drug); (4) a delivery mechanism or a formulation for the API, or an intermediate or a different form of it (e.g. a trans-dermal patch containing, or a slow-release formulation of, the drug's chemical compound; (5) a process for making or formulating the API, or an intermediate or a different form of it (e.g. a method of preparing or purifying the drug's chemical compound); (6) a method of treatment using the API, or an intermediate or a different form of it, for an indication in an Anatomical Therapeutic Chemical [21] (ATC) class the same as the ATC class of the indication for which the relevant sample drug was listed for government subsidy (e.g. a method of treating asthma using a drug that was subsidized for treatment of obstructive airway disease); and (7) a method of treatment using the API, or an intermediate or a different form of it, for an indication in an ATC class different from the ATC class of the indication for which the relevant sample drug was listed for government subsidy (e.g. a method of treating obesity using a drug that was subsidized for treatment of depression). A small number of patents were for inventions that did not fall into any of these seven categories (e.g. use of the API for a veterinary purpose), and were classified as “other”.

Identification of Unique Patentees The names of patent owners (“patentees”) were available in the databases used to identify the patents. After assembling a list of patentee names and eliminating duplicates, we checked whether each patentee on the list was linked to the corporate identity of another patentee through, for example, changes of company name, mergers and acquisitions, and holding company and subsidiary arrangements. Information to enable these checks came from the Mint Global [22] and Mergent [23] databases. When different patentee names proved to be of the same or a closely-linked entity, we collapsed them together under a common patentee name for classification purposes.