The Supreme Court Blesses Inter Partes Review, And The Possibilities For Pharma Reform

One of my big complaints about medicine is the ongoing problems with patents (general complaints here, a more specific example here) needlessly driving the costs of pharmaceuticals higher. The Supreme Court recently delivered some good news on this front in the case of Oil States Energy Services v. Greene's Energy Group. Essentially, the 7-2 decision said that the USPTO can revoke its own granted patents in a process called Inter Partes Review.

The basic idea behind the IPR process was an admission that the USPTO is historically bad at properly reviewing patents before granting them. It grants a lot of bad patents. The IPR process allows anyone to present evidence to the PTO that it made a mistake and granted a patent that should never have been granted. If the PTAB is convinced, it can invalidate the patent. Seems pretty straightforward. Except that the usual patent lovers (mainly patent trolls and big pharma) insisted that this was some sort of unconstitutional taking of property, without the review of a court. This is wrong for a whole bunch of reasons -- starting with the incorrect view of patents as traditional "property."

 The reaction of the pharmaceutical business, which is often predicated on shabby patents, is highly negative, but it’s unclear whether there’s enough momentum behind the process, as “Pfizer, Merck, Novartis and Sanofi are among the companies to have used the IPR process” to invalidate patents. Unfortunately, because IPR is a strictly bureaucratic creature, it is also subject to regulatory capture, i.e. if Big Pharma (say) gets hold of it, it will actually result in worse outcomes than appeals before Article III judges. A study by BiologicsHQ shows that “despite widespread concerns about the PTAB operating as a patent death squad in IPRs, ‘such concern is not justified for drug patents.’” The study found that

According to the March 2017 IPR statistics issued by the PTAB, 53 percent of IPRs resolved as of March 31, 2017 were instituted; the rest were either denied institution or reached some other resolution prior to the institution decision. 35 percent of all resolved IPRs resulted in final written decisions and 23 percent led to findings of all claims unpatentable. Only 7 percent of all resolved IPRs led to final written decisions finding that no claim was unpatentable, and 5 percent led to mixed claim findings.

This suggests that only the most obscenely obvious patents will end up invalidated, and even among those patents that do go through the process, not all of them end up being instituted! But the numbers are even worse for pharmaceutical patents:

By contrast, drug patents fare better under PTAB scrutiny in terms of having claims upheld. Of the 4,563 resolved IPRs, BiologicsHQ reports that 222 petitions (5 percent) involved patents covering drugs listed in the Orange Book. Focusing on just the IPRs involving Orange Book patents, 44 percent were instituted and 38 percent reached a final written decision, but only 16 percent led to final written decisions where all claims were found unpatentable. No instituted claim was found unpatentable in 50 percent of final written decisions (19 percent of the total number of resolved Orange Book IPRs).

 (The Orange Book is the list of FDA-accepted drugs.) Far from being a salvation, IPR might prove to be an industry Trojan Horse. To be clear, there’s no immediate evidence that regulatory capture is currently running rampant at the USPTO,  but the outcomes certainly point in the same direction.