“Medicines and IP: Balancing Innovation and Access”

1[House Hearing, 119 Congress]2[From the U.S. Government Publishing Office]34                           MEDICINES AND IP:5                    BALANCING INNOVATION AND ACCESS6=======================================================================78                                HEARING910                               BEFORE THE1112                  SUBCOMMITTEE ON COURTS, INTELLECTUAL13                 PROPERTY, ARTIFICIAL INTELLIGENCE, AND14                              THE INTERNET1516                                 OF THE1718                       COMMITTEE ON THE JUDICIARY1920                     U.S. HOUSE OF REPRESENTATIVES2122                    ONE HUNDRED NINETEENTH CONGRESS2324                             SECOND SESSION2526                               __________2728                         THURSDAY, JUNE 4, 20262930                               __________3132                           Serial No. 119-713334                               __________3536         Printed for the use of the Committee on the Judiciary3738[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]3940               Available via: http://judiciary.house.gov4142                               __________4344                  U.S. GOVERNMENT PUBLISHING OFFICE4563-912                    WASHINGTON : 202646=======================================================================4748                       COMMITTEE ON THE JUDICIARY4950                        JIM JORDAN, Ohio, Chair5152DARRELL ISSA, California             JAMIE RASKIN, Maryland, Ranking53ANDY BIGGS, Arizona                      Member54TOM McCLINTOCK, California           JERROLD NADLER, New York55THOMAS P. TIFFANY, Wisconsin         ZOE LOFGREN, California56THOMAS MASSIE, Kentucky              STEVE COHEN, Tennessee57CHIP ROY, Texas                      HENRY C. ``HANK'' JOHNSON, Jr.,58SCOTT FITZGERALD, Wisconsin              Georgia59BEN CLINE, Virginia                  TED LIEU, California60LANCE GOODEN, Texas                  PRAMILA JAYAPAL, Washington61JEFFERSON VAN DREW, New Jersey       J. LUIS CORREA, California62TROY E. NEHLS, Texas                 MARY GAY SCANLON, Pennsylvania63BARRY MOORE, Alabama                 JOE NEGUSE, Colorado64HARRIET M. HAGEMAN, Wyoming          LUCY McBATH, Georgia65LAUREL M. LEE, Florida               DEBORAH K. ROSS, North Carolina66WESLEY HUNT, Texas                   BECCA BALINT, Vermont67RUSSELL FRY, South Carolina          JESUS G. ``CHUY'' GARCIA, Illinois68KEVIN KILEY, California              SYDNEY KAMLAGER-DOVE, California69GLENN GROTHMAN, Wisconsin            JARED MOSKOWITZ, Florida70BRAD KNOTT, North Carolina           DANIEL S. GOLDMAN, New York71MARK HARRIS, North Carolina          JASMINE CROCKETT, Texas72ROBERT F. ONDER, Jr., Missouri       Vacancy73DEREK SCHMIDT, Kansas74BRANDON GILL, Texas75MICHAEL BAUMGARTNER, Washington76                                 ------7778             SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY,79               ARTIFICIAL INTELLIGENCE, AND THE INTERNET8081                    DARRELL ISSA, California, Chair8283THOMAS MASSIE, Kentucky              HENRY C. ``HANK'' JOHNSON, Jr.,84SCOTT FITZGERALD, Wisconsin              Georgia, Ranking Member85BEN CLINE, Virginia                  ZOE LOFGREN, California86LANCE GOODEN, Texas                  TED LIEU, California87LAUREL LEE, Florida                  JOE NEGUSE, Colorado88RUSSELL FRY, South Carolina          DEBORAH ROSS, North Carolina89KEVIN KILEY, California              SYDNEY KAMLAGER-DOVE, California90MICHAEL BAUMGARTNER, Washington      Vacancy9192               CHRISTOPHER HIXON, Majority Staff Director93                ARTHUR EWENCZYK, Minority Staff Director9495                            C O N T E N T S9697                              ----------9899                         Thursday, June 4, 2026100101                           OPENING STATEMENTS102103                                                                   Page104The Honorable Darrell Issa, Chair of the Subcommittee on Courts,105  Intellectual Property, Artificial Intelligence, and the106  Internet from the State of California..........................     1107The Honorable Henry C. ``Hank'' Johnson, Jr., Ranking Member of108  the Subcommittee on Courts, Intellectual Property, Artificial109  Intelligence, and the Internet from the State of Georgia.......     3110The Honorable Jamie Raskin, Ranking Member of the Committee on111  the Judiciary from the State of Maryland.......................     4112113                               WITNESSES114115Krista Hessler Carver, Partner, Covington & Burling LLP116  Oral Testimony.................................................     7117  Prepared Testimony.............................................    10118Jamie Simpson, Chief Policy Officer, Counsel, Council for119  Innovation Promotion120  Oral Testimony.................................................    34121  Prepared Testimony.............................................    36122Rachel Goode, Senior Vice President, Head of Legal and123  Intellectual Property, Fresenius Kabi124  Oral Testimony.................................................    50125  Prepared Testimony.............................................    52126Michael A. Carrier, Professor, Rutgers Law School127  Oral Testimony.................................................    57128  Prepared Testimony.............................................    59129130          LETTERS, STATEMENTS, ETC. SUBMITTED FOR THE HEARING131132All materials submitted for the record by the Subcommittee on133  Courts, Intellectual Property, Artificial Intelligence, and the134  Internet are listed below......................................    81135136Materials submitted by the Honorable Darrell Issa, Chair of the137  Subcommittee on Courts, Intellectual Property, Artificial138  Intelligence, and the Internet from the State of California,139  for the record140    An Opinion Hikma Pharmaceuticals USA Inc., et al. v. Amarin141        Pharma, Inc., et al., Supreme Court of the United States,142        Jun. 4, 2026143    A statement from the Hon. Jodey Arrington, Texas, Jun. 4,144        2026145    A copy of Bill HR 3269, 119th Congress 1st Session,146        Eliminating Thickets to Increase Competition Act (ETHIC147        Act), May 8, 2025148    A copy of Bill HR 6485, 119th Congress 1st Session, Skinny149        Labels, Big Savings Act, Dec. 5, 2025150A study entitled, ``Drug Patent and Exclusivity Study,'' Jun. 12,151  2024, United States Patent and Trademark Office (USPTO),152  submitted by the Honorable Kevin Kiley, a Member of the153  Subcommittee on Courts, Intellectual Property, Artificial154  Intelligence, and the Internet from the State of California,155  for the record156Materials submitted by the Honorable Henry C. ``Hank'' Johnson,157  Jr., Ranking Member of the Subcommittee on Courts, Intellectual158  Property, Artificial Intelligence, and the Internet from the159  State of Georgia, for the record160    A statement from the Council for Innovation Promotion (C4IP),161        Jun. 3, 2026162    A statement from the National Association of Manufacturers163        (NAM), Jun. 4, 2026164    A statement from the ERISA Industry Committee (ERIC), Jun. 4,165        2026166    A statement from the Center for Medicine in the Public167        Interest, Jun. 2, 2026168    A statement from Families USA, Jun. 4, 2026169    A letter to the Honorable Darrell Issa, Chair of the170        Subcommittee on Courts, Intellectual Property, Artificial171        Intelligence, and the Internet from the State of172        California, and the Honorable Henry C. ``Hank'' Johnson,173        Jr., Ranking Member of the Subcommittee on Courts,174        Intellectual Property, Artificial Intelligence, and the175        Internet from the State of Georgia, from the Alliance for176        Aging Research, regarding the ETHIC Act, Jun. 3, 2026177    A statement from Luis Abinader, Policy Director, Generation178        Patient, Jun. 4, 2026179    A statement from Peyton Miles, Peer Support Facilitator,180        Generation Patient, Jun. 4, 2026181    A letter to the Honorable Jim Jordan, Chair of the Committee182        on the Judiciary from the State of Ohio, the Honorable183        Jamie Raskin, Ranking Member of the Committee on the184        Judiciary from the State of Maryland, the Honorable185        Darrell Issa, Chair of the Subcommittee on Courts,186        Intellectual Property, Artificial Intelligence, and the187        Internet from the State of California, and the Honorable188        Henry C. ``Hank'' Johnson, Jr., Ranking Member of the189        Subcommittee on Courts, Intellectual Property, Artificial190        Intelligence, and the Internet from the State of Georgia,191        from the U.S. Chamber of Commerce, Jun. 3, 2026192    A statement from Patients for Affordable Drugs Now, Jun. 4,193        2026194    A statement from AARP, Jun. 4, 2026195    A statement from the Biotechnology Innovation Organization,196        Jun. 4, 2026197    A statement from the Biosimilars Forum, Jun. 3, 2026198    A letter to the Honorable Jim Jordan, Chair of the Committee199        on the Judiciary from the State of Ohio, the Honorable200        Jamie Raskin, Ranking Member of the Committee on the201        Judiciary from the State of Maryland, from the Alliance202        of U.S. Startups and Inventors for Jobs (USIJ), Jun. 2,203        2026204    A statement from the American Society of Health-System205        Pharmacists (ASHP), Jun. 4, 2026206    A statement from the Campaign for Sustainable Rx Pricing,207        Jun. 4, 2026208    A statement from the Center for American Principles, May 28,209        2026210Materials submitted by the Honorable Darrell Issa, Chair of the211  Subcommittee on Courts, Intellectual Property, Artificial212  Intelligence, and the Internet from the State of California,213  and the Honorable Henry C. ``Hank'' Johnson, Jr., Ranking214  Member of the Subcommittee on Courts, Intellectual Property,215  Artificial Intelligence, and the Internet from the State of216  Georgia, for the record217    A letter to the Honorable Darrell Issa, Chair of the218        Subcommittee on Courts, Intellectual Property, Artificial219        Intelligence, and the Internet from the State of220        California, and the Honorable Henry C. ``Hank'' Johnson,221        Jr., Ranking Member of the Subcommittee on Courts,222        Intellectual Property, Artificial Intelligence, and the223        Internet from the State of Georgia, from the Taxpayers224        Protection Alliance, Jun. 1, 2026225    A letter to the Honorable Darrell Issa, Chair of the226        Subcommittee on Courts, Intellectual Property, Artificial227        Intelligence, and the Internet from the State of228        California, and the Honorable Henry C. ``Hank'' Johnson,229        Jr., Ranking Member of the Subcommittee on Courts,230        Intellectual Property, Artificial Intelligence, and the231        Internet from the State of Georgia, from the American232        Intellectual Property Law Association, Jun. 3, 2026233    A letter to the Honorable Darrell Issa, Chair of the234        Subcommittee on Courts, Intellectual Property, Artificial235        Intelligence, and the Internet from the State of236        California, and the Honorable Henry C. ``Hank'' Johnson,237        Jr., Ranking Member of the Subcommittee on Courts,238        Intellectual Property, Artificial Intelligence, and the239        Internet from the State of Georgia, from Blood Cancer240        United, Jun. 4, 2026241    A letter to the Hon. Jodey Arrington of Texas, from the242        National Federation of Independent Business (NFIB), Jun.243        2, 2026244    A letter to Senate Majority Leader John Thune, Senate245        Minority Leader Honorable Chuck Schumer, Speaker of the246        House Mike Johnson, and House Minority Leader Hakeem247        Jeffries, from Patients For Affordable Drugs Now, AARP,248        and The ERISA Industry Committee, May 21, 2026249    A letter to the Honorable Jim Jordan, Chair of the Committee250        on the Judiciary from the State of Ohio, the Honorable251        Jamie Raskin, Ranking Member of the Committee on the252        Judiciary from the State of Maryland, the Honorable253        Darrell Issa, Chair of the Subcommittee on Courts,254        Intellectual Property, Artificial Intelligence, and the255        Internet from the State of California, and the Honorable256        Henry C. ``Hank'' Johnson, Jr., Ranking Member of the257        Subcommittee on Courts, Intellectual Property, Artificial258        Intelligence, and the Internet from the State of Georgia,259        from a coalition of organizations, Apr. 6, 2026260    A statement from the Pharmaceutical Care Management261        Association (PCMA), Jun. 4, 2026262    A statement from the Pacific Research Institute,J un. 4, 2026263    A statement from We Work for Health, Jun. 3, 2026264    A statement from Dr. Anne Pritchett, Founder and President,265        Pritchett Policy Associates, LLC, Senior Associate,266        Center for Strategic and International Studies, Jun. 3,267        2026268    A statement from Biocom, May 29, 2026269    A statement from Public Citizen, Jun. 4, 2026270    A statement from the U.S. Public Interest Research Group271        (USPIRG), Jun. 4, 2026272    A statement from the Association for Accessible Medicines and273        its Biosimilars Council (AAM), Jun. 4, 2026274    A Brief entitled, ``Cap Issue Brief: Biopharmaceutical275        Patents,'' Jun. 4, 2026, Center for American Principles276    A letter to the Honorable Darrell Issa, Chair of the277        Subcommittee on Courts, Intellectual Property, Artificial278        Intelligence, and the Internet from the State of279        California, and the Honorable Henry C. ``Hank'' Johnson,280        Jr., Ranking Member of the Subcommittee on Courts,281        Intellectual Property, Artificial Intelligence, and the282        Internet from the State of Georgia, from the Intellectual283        Property Owners Association, Jun. 2, 2026284    An article entitled, ``Biological patent thickets and delayed285        access to biosimilars, an American problem,'' Sept. 1,286        2022, Journal of Law and the Bioscience287    A statement from Dr. Rachel Goode, SVP, IP and Legal,288        Fresenius Kabi Biopharmaceuticals, Jun. 11, 2026289    A Research Letter entitled, ``Biological Patent Thickets and290        Terminal Disclaimers,'' Dec. 14, 2023, Journal of the291        American Medical Association (JAMA)292    A article entitled, ``The Long Con: An Empirical Analysis of293        Pharmaceutical Patent Thickets,'' Fall 2024, University294        of Pittsburgh Law Review295296                 QUESTIONS AND RESPONSES FOR THE RECORD297298Questions and responses Krista Hessler Carver, Partner, Covington299  & Burling LLP, submitted by the Honorable Darrell Issa, Chair300  of the Subcommittee on Courts, Intellectual Property,301  Artificial Intelligence, and the Internet from the State of302  California, the Honorable Deborah Ross, a Member of the303  Subcommittee on Courts, Intellectual Property, Artificial304  Intelligence, and the Internet from the State of North305  Carolina, and the Honorable Henry C. ``Hank'' Johnson, Jr.,306  Ranking Member of the Subcommittee on Courts, Intellectual307  Property, Artificial Intelligence, and the Internet from the308  State of Georgia, for the record309310Questions submitted by the Honorable Darrell Issa, Chair of the311  Subcommittee on Courts, Intellectual Property, Artificial312  Intelligence, and the Internet from the State of California,313  and the Honorable Henry C. ``Hank'' Johnson, Jr., Ranking314  Member of the Subcommittee on Courts, Intellectual Property,315  Artificial Intelligence, and the Internet from the State of316  Georgia, for the record317  Questions and responses from Michael A. Carrier, Professor,318      Rutgers Law School319  Questions and responses from Rachel Goode, Senior Vice320      President, Head of Legal and Intellectual Property,321      Fresenius Kabi322  Questions and responses from Jamie Simpson, Chief Policy323      Officer, Counsel, Council for Innovation Promotion324325                           MEDICINES AND IP:326                    BALANCING INNOVATION AND ACCESS327328                              ----------329330                         Thursday, June 4, 2026331332                        House of Representatives333334           Subcommittee on Courts, Intellectual Property, and335336               Artificial Intelligence, and the Internet337338                       Committee on the Judiciary339340                             Washington, DC341342    The Committee met, pursuant to notice, at 10:12 a.m., in343Room 2141, Rayburn House Office Building, the Hon. Darrell Issa344[Chair of the Subcommittee] presiding.345    Members present: Representatives Issa, Fitzgerald, Cline,346Gooden, Kiley, Lee, Fry, Baumgartner, Johnson, Raskin, Lofgren,347Ross, and Kamlager-Dove.348    Mr. Issa. Good morning, the Subcommittee will come to349order. Without objection the Chair is authorized to declare350recess at any time. We welcome everyone here today for a351hearing on intellectual property as it relates to352pharmaceutical and biotechnology products, biosimilars and the353like.354    Without objection Mr. Onder, who is not currently here,355will be permitted to participate in today's hearing for356purposes of questioning the witnesses if a Member yields him357such time as they may have.358    I now recognize myself for a brief opening statement, well359it is never brief, but for an opening statement. For decades360the United States has led the world both in original361innovations, and in generic development. The FDA has ensured362that we have products that are both safe and have efficacy. We363are proud of that, but like anything else, pride in the past364does not equal competitiveness for the future.365    Time and cost have dramatically increased for bringing366products to market. In addition to that, patterns based on367existing laws related to patents have caused behavior that will368be looked at here today. The term thickets may be used more369than once, but in fact what we are really talking about is the370same invention stated many, many ways. I take personal pride in371the fact that when I invented something, I thought about how I372could State it differently.373    If a competitor wanted to produce a similar product, I had374already determined and said in my original patent filing375multiple ways the product could be. That is different than376preferred embodiment, but in fact the two can go hand in hand.377Nothing here today is likely to cause us to change the fact378that an inventor has the ability to State multiple ways to make379a fine product.380    That exists in electronics, it exists in the pharmaceutical381industry. We encourage that because the more disclosures of the382more ways to make a product, the more you are enabling future383inventors to see how it can be done. The problem we will be384looking at with our witnesses, and I might note that our385witnesses are deliberately evenly balanced by people who will386speak perhaps with some bias toward the patent holder pharma387big names.388    The other two will speak mostly about the impediments to389bringing biosimilars and generics to market. We do so because390we have an obligation, the obligation under the Constitution is391to promote useful development. Promote the meaning that it is392not a right, but in fact an inducement by the government. We393need to balance that inducement to maximize new innovation, and394in fact benefit the consumer.395    The consumer clearly does pay more for a product during its396first 20 years than it pays when biosimilars and generics397become available. However, that is a longstanding part of our398technology, and one that we accept. Under the Hatch-Waxman Act,399which we have had for four decades, we have a process for the400transfer, and that too is a balancing act that this Committee401will likely not open Pandora's box on.402    We do so because in fact our problems in many cases are403outside of this Committee's jurisdiction. The slowness, and the404great cost at the FDA is beyond our scope, but there are some405things that we can do. One of them that will be proposed is the406real question of whether pharma should have the same407prohibition on make, use, or sell.408    Rather than a broader exemption for export outside the409United States to places in which the patent may not have410validity. This concept doesn't always work, but as someone who411believes in on shoring products, in investing in America, in412getting more products, including critical medicines made in413America, we have an obligation to ask that question. That is a414major change in the law that will be discussed today.415    However, one other last thing that will be discussed, over416the last nearly two years, year and a half, almost half of all417the examiners at the Patent and Trademark Office that do PTAB,418those judges have been dismissed or allowed to leave. As a419result, what we are seeing is a systematic disabling of a420process that was outside of Article III, that often cleared up421discrepancy about whether a portion of a patent was valid or422not.423    There will be questions before all four of our witnesses,424at least by the Chair, as to whether or not that works to the425detriment of clear and good patents. If there needs to be426improvements in the PTAB process, this Committee stands ready427to offer legislation. The idea that the Leahy legislation428enacted more than a decade ago will simply be cast aside by one429administration or not in fact--thank you.430    I am getting the SCOTUS update from today, I apologize, we431will deal with that in a minute. The fact is that we are going432to discuss all of that, and we are going to ask our very433knowledgeable witnesses to opine on it. The Subcommittee's434jurisdiction though, is in fact limited to patents, it does not435include the FDA.436    In spite of the fact that you may hear complaints about437both the FDA and middle man insurance reimbursement, please438understand this is not something we can deal with today, and we439would encourage all our witnesses and Members of the Committee440to concentrate to the greatest extent possible on that which is441in the Committee's jurisdiction, because it is broad and442significant.443    With that, I take pleasure in introducing the Ranking444Member of the Subcommittee for his opening statement, Mr.445Johnson.446    Mr. Johnson. Thank you, Mr. Chair, and good morning ladies447and gentlemen. Our Nation's founders understood that when448inventors are rewarded for their contributions, economic growth449and human progress follow. More than two centuries later the450success of that vision is self-evident. From the lightbulb, to451the airplane, to the medicines that save lives, patents have452helped transform ideas into products that improve the lives of453millions of Americans.454    Patents have been at the heart of America's greatest455innovation moments. The Industrial Revolution, the Innovation456Age, the biotech and mobile telecommunications revolutions in457the 21st century were all driven by transformative458breakthroughs backed by patent law. By rewarding individuals'459ingenuity, patents continue the innovation cycle by also460encouraging investment in new ideas.461    A patent must be reliable enough for an inventor to be able462to convince the investors to help transform a sketch on a463napkin to a product that changes the world, but it is not464always easy. Anyone who works with innovators and inventors can465tell you that unpredictability is the hallmark of innovations.466    Patents are granted to creations that are, among a few467other requirements, new. To invent, one must do something that468has never been done before. Individuals need the resources,469investment, and most of all the promise that if they discover470something new, they can own their idea without someone stealing471it.472    Nowhere is this uncertainty more apparent than in the473health-care industry, where bringing a single new treatment to474market can require billions of dollars in investment, and more475than a decade of research and development. Total R&D expenses476for one single drug have been estimated to be 2.6 billion477dollars invested over an average of 10-15 years of research,478testing, and development.479    This all occurs before the company even knows whether the480treatment will ultimately succeed or fail. Most drug candidates481don't make it through the FDA's clinical trial process, so why482do so many companies invest money and time to undertake the483high risk, high cost, high-cost work necessary to develop the484next generation of cures for patients?485    Patents, when medical companies have an exclusive property486right in their innovations, it can be financially worthwhile to487go down the long road to approval for use. Strong patent488protections are why the United States has been a global leader489in the discovery and development of life saving medications,490with more than one half of all new drugs invented in the United491States.492    Reliable protections also encourage companies to continue493to invest in improving existing treatments, because medical494invention should not end when a drug reaches the market.495Whether it is developing a safer formulation, reducing side496effects, improving dosing schedules, or expanding a drug's use497to treat additional conditions, patents help create the498incentives necessary to continue research long after the499initial breakthrough.500    Manufacturers must be incentivized to continue investing in501their product, ultimately leading to safer and more effective502treatments for patients. Perhaps most importantly, this503innovation paves the way for future competition, because504patents were never intended to be the end of the story, but505rather the beginning of a cycle of innovation, competition, and506progress.507    Encouraging investment in new medicines, while also508ensuring that competitors can enter the market when the life509span of the patent is complete is essential. Competition helps510lower drug costs, expand access, and deliver enormous cost511savings to patients. This is a symbiotic process, without512strong patent protections to encourage innovation, there would513be no new treatments for generic drug manufacturers to514replicate and bring to market at a lower cost.515    Getting this balance right is extremely important because516the cost of prescription drugs has soared too high for too long517in this country. We spend more on prescription medications than518residents of any other developed nation. The fact is that519affordable health-care is simply out of reach for many520Americans.521    Congress has made various attempts over the years to522streamline and simplify the patent process, such as allowing523the government to negotiate drug prices for Medicare Part D,524which went into effect earlier this year. Rising healthcare525costs from companies simply seeking to raise their bottom line526are still a problem outside of the patent space.527    PBM middlemen raise drug prices, insurance companies have528increased discretionary denials, while decreasing coverage, and529mergers among healthcare providers prevent Americans from530having options as to where they get their care. We should not531have to accept high priced healthcare as an inescapable532American burden.533    I look forward to hearing from the witnesses about how to534best address this delicate balance and ensuring that we have a535system that continues to reward breakthrough discoveries, while536ensuring that these discoveries are available to those they are537meant to help.538    With that, Mr. Chair, I yield back.539    Mr. Issa. Gentleman yields back.540    We now recognize the Ranking Member of the Full Committee541for his opening statement, Mr. Raskin.542    Mr. Raskin. Thank you, Chair Issa, thanks to all the543witnesses for joining us today. Since I became the Ranking544Member, I have met with some superb IP lawyers, bringing their545perspectives on a wide variety of issues to me from suits546against AI companies for training large language models, from547authors' works to the U.S. Patent and Trademark Office Director548filing for a trademark on behalf of the Board of Peace.549    The various issues percolating before this excellent550Subcommittee are important and essential to the practice of551law. As I have told every single of the people who has come to552see me, I never took patent law in law school, much less taught553it when I was there, and so the field is new to me, and my mind554is open, and so I welcome very much the perspectives being555advanced at this hearing.556    We are often called to weigh in on important issues that we557need to learn about quickly, and it is easiest when we have got558a personal connection to the problem. As an author myself, it559is easy for me to understand why having your words stolen is560unfair. As a former common law professor, I know that a Member561of the Executive Branch contorting his position to personally562benefit the sitting President is a dangerous abuse of power.563    While facially, one might expect patents for medical564innovation to be somehow an opaque, esoteric, or inaccessible565topic, in fact all of us have benefited from the medical patent566system. As small children we got a polio vaccine, a smallpox567vaccine, a measles vaccine, among others. If we cut our568fingers, we got a tetanus shot. When we were sick, we enjoyed569access to antibiotic treatments.570    When we were hit by the global COVID-19 epidemic, we all571got access to the innovative MRNA vaccines. We are fortunate572and grateful to be living in a time of medical discovery, where573things that killed people in our grandparent's generation are574now survivable to us. Before insulin was discovered in the5751920s, diabetes Type 1 was devastating.576    HIV/AIDS was a death sentence when I was in college, but577modern antiretroviral therapy now can help people who are able578to get early treatment reduce the virus to almost undetectable579levels. Bacterial pneumonia, lymphoma, breast cancer, cystic580fibrosis, which has affected people in my family, all these581have been downgraded from certain killers to manageable582diseases.583    I also understand that as a person with good health584insurance, I have a type of access to vaccines and medical585innovations that not many people around the world, and not586everybody in the United States can match. Cures and treatments587mean little to people who cannot access and afford them.588Efforts to reform our healthcare system to cover more people589have been steadily eroded since Congress passed the Affordable590Care Act in 2010.591    In part because of this, too many Americans are forced to592forego a treatment simply because they can't afford it. It is593imperative that we continue to innovate and produce new cures.594It is also vital that we find a way to ensure people can access595new medicines, therapeutics, and diagnostics.596    I know that some people believe that the answer is to597change the way drug patents work in the United States so that598generic drug manufacturers can access protected inventions599earlier. Others argue that if we allow generic and biosimilar600drug manufacturers to more readily take advantage of others'601work, we are not just taking inventors' property but602dramatically changing the incentives structures for future603research and development.604    How to strike the right balance between promoting universal605access and incentivizing new research and discovery isn't a new606question. When the framers wrote the Constitution, they were607already familiar with the basic idea of promoting the public608interest by protecting individual patent rights.609    In England the parliament passed the Statute of Monopolies610in 1624, which allowed the monarch to issue letters of patent611to single persons. In the Constitution the framers bequeathed612to Congress the power to promote the progress of science and613useful arts by securing for limited times to authors and614investors the exclusive right to their respective writings and615discoveries.616    In the Federalist 43, Madison wrote quote,617618        The utility of this power will scarcely be questioned the619        copyright of authors has been solemnly judged in Great Britain620        to be a right of common law. The right to useful inventions621        seems with equal reason to belong to the inventors. The public622        good fully coincides in both cases with the claims of623        individuals.624625    This utilitarian approach is reflected in our patent system626today. Throughout our history legislators have asked how we can627ensure inventors are able to protect their creations in628exchange for meaningful public access to the use of those629ideas. Today, drugs remain exclusive or covered by a patent for630an average of 12 years, as opposed to the statutory 20.631    I understand that is because of the complicated nature of632market entry, extensive research and development, and other633relevant factors. I am looking forward to hearing from our634witnesses today how this system is working, how it is not635working, and how we can ensure our system continues to promote636the public good through the individual, and through our laws.637    I close with the words of Thomas Jefferson, who in addition638to being our third President, was our first patent examiner. In6391838 he wrote quote,640641        Considering the exclusive right of invention is given not of642        natural right, but for the benefit of society, I know well the643        difficulty of drawing a line between the things which are worth644        to the public, the embarrassment of an exclusive patent, and645        those which are not.646647    I thank the witnesses for helping us to draw that same line648in the 21st century. Let us all hope for the wisdom and649discernment of the third President of the United States, Thomas650Jefferson.651    Thank you, Mr. Chair, and I yield back to you.652    Mr. Issa. I want to thank the professor for proving that he653could have taught patent law in his time as a university654professor. With that, all other Members will have the ability655to put their opening statements into the record.656    Mr. Jordan may come shortly, but he isn't here yet. With657that, I would like to introduce our professors.658    Professor Michael Carrier. Professor Carrier is on the659board of Governors, Professor of Law at Rutgers Law School. He660specializes in antitrust, intellectual property law,661particularly with respect to pharmaceuticals and the technology662industry.663    Professor Carrier is the Co-author of a Leading IP664Antitrust Treatise, and the author of more than 160 book665chapters.666    Ms. Krista Carver. Ms. Carver is a Partner at Covington &667Burling, where she Cochairs the firm's food and drug and device668practice group, and is the firm's pharmaceutical and669biotechnology industry group leader.670    She has represented Byer Pharmaceutical clients for nearly671two decades. Ms. Carver also teaches courses on FDA law at the672College of William and Mary.673    Dr. Rachel Goode. Dr. Goode is the Senior Vice President,674and head of legal and intellectual property at, and I am going675to butcher this, Fresenius Kabi Biopharmaceuticals, where she676leads work on the company's patent and legal strategies for its677biosimilar business.678    She is a licensed attorney here in Washington, DC, as well679as the United Kingdom, and the European Union. She holds a680Ph.D. in molecular biology and is very qualified to talk about681areas outside, in addition to areas inside our jurisdiction.682    Ms. Jamie Simpson. Ms. Simpson is the Chief Policy Officer683and Consul for the Consul for Innovative Promotions, a684nonprofit organization that advocates intellectual property685matters.686    She previously served as a staffer here for Chair Nadler,687and Mr. Johnson, and on the Senate Judiciary Committee, and the688U.S. Patent and Trademark Office. Basically, she has been689around, and we all know her well. We will begin pursuant to the690Committee's hearing, and Ms. Simpson, you know this very well,691by rising to take the oath. Please raise your right hands.692    Do you solemnly swear or affirm under penalty of perjury693that the testimony you are about to give will be true and694correct to the best of your knowledge, information, and belief,695so help you God?696    Thank you, please let the record recognize that all697answered in the affirmative, and now I am supposed to say698please be seated, but you are. As many of you know, we have a699five-minute limit.700    I do not interrupt people if they are finishing a sentence701but would ask you to not finish more than one sentence at the702end of your five minutes. The same would be true in the case of703your opening statement, I am not going to gavel if you run704slightly over but try to stay as close as you can to the five-705minutes.706    Your entire opening statements will be placed in the707record, in addition to additional supplemental material you may708choose to add later, and answers to questions. Which at the end709of this we will ask you if you will answer questions of Members710who either aren't here, or who have followup questions without711enough time.712    Mr. Raskin. Mr. Chair?713    Mr. Issa. Yes?714    Mr. Raskin. Point of order. Does a sentence include a715semicolon.716    Mr. Issa. Any comma will exceed your time if that is your717question. No, please, this is a very friendly, very nonpartisan718Committee even though we have strong views on both sides. The719idea is to get your full statement out, and so we will endeavor720to do so to the greatest extent possible without running over721the time that would allow everyone to ask their questions.722    With that, we will start over here, Professor Carver may go723first.724725                   STATEMENT OF KRISTA CARVER726727    Ms. Carver. Chair Issa, Ranking Member Johnson, and the728Members of the Subcommittee, thank you for inviting me to729participate in today's hearing. My name is Krista Carver, I am730a partner at the Law Firm of Covington & Burling, where I have731worked for nearly two decades on regulatory issues affecting732innovative biopharmaceutical companies.733    Let me begin with a simple point. As the Subcommittee734recognized in the title of today's hearing, the question is not735whether we should have innovation or access, we must have both.736The challenge is ensuring that U.S. policies continue to737support innovation for the medical breakthroughs of tomorrow,738while also ensuring that patients have access to the medicines739they need today.740    The United States has made extraordinary progress on both741fronts. Biopharmaceutical companies have brought more than 900742new medicines to American patients since 2000. Patients are743living longer, healthier, and more productive lives because of744these advances. At the same time, 90 percent of all drugs745dispensed to Americans today are generic.746    That number is particularly impressive when viewed against747a level of 41 percent in comparable OECD countries. Biosimilars748are also generating significant and growing savings for the749healthcare system. These outcomes benefit patients and are the750result of Congress' carefully crafted policy choices as751reflected in the Hatch-Waxman amendments, the Biologics Price752Competition and Innovation Act, and the U.S. patent laws.753    We should focus on ensuring the system works well for754patients, and we should be thoughtful about proposals that seek755to change this careful balance of promoting competition while756preserving incentives for medical innovation. To this end, let757me make three points.758    First, medical innovation is inherently risky and resource759intensive. Developing a drug takes more than a decade, and760requires substantial investment, with a high likelihood of761failure along the way.762    Intellectual property protections are essential to making763this investment possible. They allow companies to take risks,764recover costs, and reinvest in the next generation of765treatments.766    Second, innovation does not stop at the initial approval of767a drug. After a medicine reaches the market, companies continue768to invest in improving it, developing new formulations, new769delivery methods, and new uses.770    These advances can improve safety, enhance effectiveness,771and expand treatment options for patients, including those with772unmet medical needs. It is not unusual, and it is certainly not773problematic for a single medicine to be associated with774multiple patents. Those patents reflect real innovations that775benefit patients. As a prime example, as many of 60-75 percent776of oncology drugs are later approved to treat additional types777of cancer.778    That is precisely the kind of innovation we should want to779see continue.780    Third, proposals based on the concept of so-called patent781thickets are based on flawed premises. As the U.S. Patent and782Trademark Office has concluded, the number of patents does not783by itself determine when generic or biosimilar competition will784occur.785    Nor does that number establish a causal link to the prices786that patients pay. Major legislative changes grounded in these787incorrect premises would discourage investments in788pharmaceutical innovation to the detriment of patients. Some of789these proposals would force innovators to relinquish valid790patent rights or limit their ability to enforce valid patent791rights.792    These proposals represent a significant departure from793longstanding principles of American patent law and encourage794new kinds of gamesmanship.795    In closing, I would emphasize this, the United States leads796the world in biopharmaceutical innovation because our country797has maintained frameworks that encourage both innovation and798competition, our continued leadership is not guaranteed.799    As Congress evaluates potential reforms, I encourage you to800build on what works, addressing access and affordability in an801evidence-based manner that benefits patients, and preserves802incentives for continued medical progress. Thank you again for803the opportunity to testify, I look forward to your questions.804    [The prepared statement of Ms. Carver follows:]805    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]806807    Mr. Issa. Thank you. Before I go onto the next witness, I808would ask unanimous consent that today's Supreme Court Opinion809on skinny labels be placed on the record and distributed to all810the Members of the Committee since it is timely, and we have811the right panel. Without objection, so ordered.812    Ms. Simpson, you are here at a moment in time, please813begin.814815                   STATEMENT OF JAMIE SIMPSON816817    Ms. Simpson. Thank you. Chair Issa, Ranking Member Johnson,818and the Members of the Subcommittee, thank you for the819opportunity to testify today on biopharmaceutical patents and820American medical innovation. Drug affordability is a real and821serious concern for American families. As Congress considers822proposals to weaken pharmaceutical patents like the ETHIC Act,823it should also recognize this.824    The United States leads the world in developing new825medicines, and that leadership is not accidental. The result is826meaningful increases in treatments and cures for patients.827Within living memory, as Chair Raskin noted,828829        HIV was a death sentence, hepatitis C was often incurable,830        patients with cystic fibrosis, multiple sclerosis, and diabetes831        are living longer, better lives because of sustained832        biopharmaceutical innovation.833834    Each of these breakthroughs took substantial time to835develop, and cost billions of dollars. The patent system is836what made the investment possible. At the same time, the United837States has the most robust generic drug market in the developed838world, that is actually a congressional success story, the839result of landmark laws like the Hatch-Waxman Act, and BPCIA,840which created pathways for generic and biosimilar competition841while preserving incentives for innovation.842    Hatch-Waxman took generics from roughly 13 percent of the843market in 1983 to about 90 percent today. Under these dispute844resolution procedures, the average drug faces roughly 12-14845years of effective market exclusivity before generic entry,846well short of a 20-year patent term. By contrast, many current847legislative proposals rely more on catch phrases like patent848thickets and evergreening than on evidence.849    Congressional Budget Office analysis from 2024 suggest850patent focused proposals like these would do very little to851lower drug prices, in many cases less than one percent. They852could meaningfully reduce investment in the next generation of853treatments. Consider the debate over patent thickets, the854concern that the sheer number of patents covering a product855prevents generic competition.856    A 2024 USPTO FDA study found no clear relationship between857the number of patents on a drug, and when generic competition858begins. The argument that terminal disclaimer linked patents859are a separate kind of thicket problem overlooks that patentees860agree to limits for these patents, specifically they agree to861give up patent term.862    Multiple patents on a complex product are normal across863industries, not just in biopharmaceuticals. Similar concerns864apply to the evergreening narrative, improvements to medicine865are often portrayed as suspect simply because they come after866the original product. In every other industry we call that867product improvement.868    New formulations and better delivery devices that allow869patients to take a drug at home instead of a hospital, as well870as treatments that reduce side effects all required additional871research, they have genuinely improved patient care.872Importantly, patents on improved versions do not prevent873generics from competing on the original product once874exclusivity expires.875    Congress should also approach the skinny label legislation876with caution. This is the subject of the Hikma decision that877was apparently just issued, and which we will all be studying878soon. That will probably greatly influence whether legislation879is needed. We have concerns with a bill that may be worth880discussing, happy to do so in the questions.881    Finally, I urge the Committee to help the global882competitive landscape in mind. Forty years ago, the United883States was not the world leader in biopharmaceutical884innovation. We became the leader because Congress made885deliberate policy choices through laws like the Bayh-Dole Act,886and Hatch-Waxman that strengthened innovation incentives, and887commercialization pathways.888    Today, countries like China are investing aggressively to889overtake the United States in biotechnology. At a moment when890global competitors are racing to surpass us in medical891innovation, Congress should be especially cautious in weakening892the framework that made America the leader in the first place.893    Drug affordability matters but weakening the patent system894based on claims the evidence does not support is unlikely to895fix it, and it risks undermining the innovation ecosystem that896has delivered extraordinary advances for American patients.897Thank you, and I look forward to your questions.898    [The prepared statement of Ms. Simpson follows:]899    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]900901    Mr. Issa. Thank you. Dr. Goode?902903                   STATEMENT OF RACHEL GOODE904905    Ms. Goode. Chair, Ranking Member, and the distinguished906Members of the Subcommittee, thank you for the opportunity to907appear before you today. My name is Rachel Goode, and I work908for the biopharmaceuticals business of Fresenius Kabi, which is909a global healthcare company dedicated to bringing high quality910and affordable generic drugs and biosimilars, so the off-patent911medicines, to patients with chronic and critical conditions.912    Fresenius Kabi employs over 4,000 people in the United913States and has invested over one billion dollars in U.S. based914manufacturing. Today I am grateful for the chance to talk about915how abuse of the patent system contributes to high drug prices,916and how the ETHIC Act, and the Skinny Label Bill, offer balance917and pro-innovation solutions.918    It is well known that not all patents are valid, patent919examiners only have a limited amount of time to review each920patent application, and peer review data shows that about a921quarter of pharmaceutical patents are later invalidated and922canceled after being challenged and litigated to a final court923decision.924    Generic and biosimilar companies challenge low quality925patents to help bring affordable drugs to market sooner. The926problem is that the branded drug companies, the ones that own927the patents can litigate duplicative and repetitive patents on928the same feature of the drug. This is driving up litigation929costs, it is increasing business uncertainty, and it seemingly930traps generics and biosimilars into an endless trap of931litigation.932    This bureaucracy is slowing down getting affordable drugs933to patients. When I say duplicate patent, I am referring to934something called obviousness type double patenting, which is935exactly what it sounds like. This type of double patenting is936when a company has two or more patents on the same invention,937and so that is actually called a nonpatentably distinct938invention. This is not allowed in other countries, but in the939United States a company can overcome a rejection from the940patent office against this type of double patenting by filing941routine paperwork called a terminal disclaimer, which is a942formal statement that the duplicate patents will expire on the943same date.944    The problem is if one of those duplicates is defeated and945canceled in litigation, the other duplicate sister patents stay946in force, and can be litigated again. Now, the correct name for947these types of patents is terminally disclaimed continuation948patent. That is quite technical, so that is why I am calling949them duplicate patents, but that is a fair name to call them.950    Because continuation patents have a copy paste description,951specification, and drawings of the invention. They only differ952from each other on the last page; they use different953descriptive terms or obvious variations to claim essentially954the same invention. There are real examples of duplicate955patents, where one claims treating a human, and the other956claims treating a patient, and one claims treating the named957disease, and the other claims reducing symptoms of the same958disease.959    This is not even incremental innovation. Continuation960patents provide no new information to the public. We961colloquially call this strategy patent thickets. Patent962thickets are not a myth; they have been proven to exist by963numerous pieces of empirical research that have been rigorously964peer reviewed and published in highly reputable journals.965    Peer review data shows that the ratio of these duplicate966patents being litigated against by the pharmaceutical industry967is increasing over time compared to the ratio of unique patents968litigated on drugs, which is decreasing over time. This is also969a problem for innovation. The solution is the ETHIC Act, which970is also a pro-innovation solution.971    Under the ETHIC Act, pharmaceutical companies can litigate972one patent per cluster, so it eliminates the duplicate973litigations. At the same time this incentivizes innovation,974because the more unique patents that a company gets on the same975drug, the more patents they can litigate against competition.976    The ETHIC Act maintains full flexibility for patent owners.977If a company believes that its inventions are different from978its earlier patents, it can explain that to the patent examiner979and avoid grouping them together with terminal disclaimers. if980that is not possible, it can put all its duplicative claims981into a single patent.982    This reform will bring billions of dollars in healthcare983savings, which most importantly will help patients to afford984their drugs. Separately and just briefly I want to address985skinny labeling. Congress created this pathway as a way to986expedite generics and biosimilars into the hands of patients as987soon as the branded drug had some uses that were no longer on988patent, while some uses were still on patent, carefully989balancing the interests of the branded drug companies with the990generic drug entrance.991    Today this balance is starting to break down with seemingly992simple conduct such as calling a drug a generic drug or talking993about the sales of the branded drug company amounting to patent994infringement. We need Congress to step in and clarify the995skinny label pathway. On behalf of Fresenius Kabi, our996employees, and the millions of patients who depend on access to997affordable medicines, thank you for your attention to these998important matters.999    [The prepared statement of Ms. Goode follows:]1000    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]10011002    Mr. Issa. Thank you. Professor Carrier?10031004                STATEMENT OF MICHAEL A. CARRIER10051006    Mr. Carrier. Well, thank you for holding this hearing. For1007the past 26 years, I have been a Professor at Rutger's law1008school, thank you for giving a short version of my bio, it1009saved 12 seconds from my opening statement. One thing I will1010mention is that I have co-authored amicus friend of the court1011briefs on behalf of dozens, usually 50-80 professors, including1012in Amarin v. Hikma.1013    Less than an hour ago the Supreme Court nine nothing1014decided the case based on what I and my co-authors said in our1015Amicus Brief. Generally, when we think about generic1016competition, we think about affordable drugs, we all are on1017prescription drugs, or know someone who is. Historically the1018rules were clear, historically the Hatch-Waxman Act, based on1019drug substitution loss at the time, was designed to promote1020generic competition, while also fostering brand firm1021innovation.1022    Chair Issa, I completely agree with you, if we were to sum1023up the Hatch-Waxman Act in one word, it is balance. The problem1024now is that there isn't balance, because the stuff that was in1025there for generics is no longer there. The skinny label pathway1026is drying up, patent thickets are arising in ways that they1027were not at the time of the Hatch-Waxman Act.1028    Let me briefly talk about skinny labels, patent thickets,1029and the Patent Office.1030    First, in terms of skinny labels, there are a couple ways1031that generics can enter the market while a patent is in force.1032The first is through litigation, this is difficult. The brand1033firm gets to file a lawsuit, gets an automatic 30-month stay,10342\1/2\ years in which there is no generic on the market at all.1035    The litigation path is difficult, that is why the skinny1036label path is so important, because it allows generics to enter1037the market without the hassle of litigation, without that 2\1/10382\-year delay. Skinny labels are absolutely crucial to lowering1039prices for U.S. patients. The problem is that the Federal1040circuit has said that this common place activity of a label, of1041calling the product a generic equivalent, of sales figures,1042that this can induce patent infringement.1043    The Supreme Court less than an hour ago said no, that is1044not right. The court decided this based on the pleading1045standards in court, which is different than what you as a1046Congress can do. What you can do gives more certainty than what1047the Supreme Court did about 58 minutes ago.1048    Second, to consider is patent thickets. Patent thickets are1049most concerning in the pharmaceutical industry.1050    There is no other industry in which the company can collect1051as many patents as it wants just to keep competitors off the1052market. Compare pharma to high tech, compare pharma to1053electronics, semiconductors, and computers, in those industries1054companies collect patents, why? Because they cross license.1055They all come to the table, and they say, ``I have a patent,1056you have a patent, let us trade.''1057    That is different in pharma. In pharma the brand firm1058doesn't need to collect patents to negotiate with the generic,1059it is not like the generic has patents that the brand firm1060needs. There is something unique about thickets in the1061pharmaceutical industry.1062    I have done empirical research with Sean Chu where we found1063that continuations which were based on the earlier patent,1064there is less innovation going on here, are a lot more frequent1065in the pharma industry than other settings. The ETHIC Act would1066be a very effective way of dealing with anticompetitive1067thickets.1068    Finally, with the Patent Office, there are many patents1069that are issued that are not valid.1070    Inter Partes Review (IPR) was essential to the America1071Invents Act, which said that the patent system needed to1072reflect the constitutional imperative of a system that will1073improve patent quality. The America Invents Act was designed to1074do that, Inter Partes Review has fallen dramatically in the1075past year or so. We see these new doctrines, settled1076expectations, that basically make it impossible to challenge1077these patents in the pharma setting, and this is really a1078concern.1079    It is also a concern given that the industry itself knows1080that patents play a crucial effect on pricing. You look at the1081recent statement from the Pfizer CEO, we have a loss of1082exclusivity wave coming, 17-18 billion dollars in annual1083revenues. Patents have a crucial effect on price. Or how about1084the thicket?1085    You look at the comment from the Merck CEO recently, you1086are losing the patent on the active ingredient, no worries, we1087have the estate, the estate is something that we are going to1088firmly promote. They know what is up, we know what is up, at1089the end of the day generic competition is crucial to the Hatch-1090Waxman Act, we are not getting it like we used to before.1091    The legislation before us today could make a significant1092difference. Thank you for your attention.1093    [The prepared statement of Ms. Carrier follows:]1094    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]10951096    Mr. Issa. Thank you. We now go to the gentleman from1097Wisconsin for his round of questioning.1098    Mr. Fitzgerald. Thank you, Chair. Recent reports have found1099that nearly 100 million prescriptions are abandoned by patients1100each year due to surprise costs. For example, the Journal of1101Managed Care and Specialty Pharmacy found that increased cost1102sharing above 100 dollars was associated with up to 75 percent1103abandonment rate for certain specialty drugs.1104    This suggests that cost is a prevailing consideration for1105patients' medication purchasing. It is fair to say that none of1106us want to see patients abandoning necessary prescriptions due1107to high costs. Similarly, we do not want to block the pipeline1108of continuing America's longstanding history of creating1109innovative lifesaving drugs and therapies that benefit millions1110of patients.1111    I am grateful to Chair Issa for calling today's hearing so1112we can take a look, and kind of scrutinize policy ideas that1113vow to lower drug prices, and ensure America continues leading1114in pharmaceutical innovation. Dr. Goode, do you believe1115reforming patent law, rather than looking toward market-based1116solutions, could present a more effective way to lower drug1117prices for all Americans?1118    Ms. Goode. There are two issues going on. You are talking1119about also the market access issue. Once complex generics and1120bio-similars get on the market, they also have to get market1121share, and there is an issue at that stage as well. First, they1122need to get on the market in the first place, and so that is1123what this patent system reform is about.1124    With respect to the issue of getting market share, the free1125market is starting to evolve around that now, but the market1126cannot evolve around patent system abuse. You have got to get1127the generics onto the market in the first place. Even though 901128percent of prescriptions today are filled by generics, what the1129ETHIC Act would do is about timing, it would bring these drugs1130onto the market sooner.1131    That is important because patents don't last forever, this1132is about getting the timing right, and making sure that there1133are no inappropriate delays, or extra monopolies being eked1134out. The reason we need patent system reform is because we have1135got a lot of peer review data that links patent thickets to1136delayed access to generics, especially in this country.1137    I co-authored a paper with Professor Chow and it was peer1138reviewed, so it was rigorously studied. We counted patents, and1139we compared how many patents were litigated in Canada, the1140U.K., and the U.S. on the same set of drugs, and it was all of1141the regulatory approved biosimilars at that time. In Canada and1142the U.K., it was 46 and 24 patents.1143    In the U.S. on the same drugs, it was 344 patents, head and1144shoulders above the other countries, but most of these were the1145duplicate patents. We then counted how many months delayed were1146those same biosimilars in getting access to market. We found in1147the U.K. and Canada it was five months and seven months, and1148that is beyond expiry of the basic patents on the drug.1149    They have some patents there as well, but in the U.S., it1150was two years and 10 months.1151    Mr. Fitzgerald. Let me interrupt you there. Is the1152expectation that expediency in getting those pharmaceuticals to1153the patients is the most important thing, are there other1154benefits that the ETHIC Act could result in?1155    Ms. Goode. Yes. The ETHIC Act is pro-innovation, because1156right now we see pharmaceutical companies stacking duplicate1157patents on their old cash cows, when they should be doing is1158innovating more unique patents, looking for new uses of these1159drugs. This would incentivize them more, because under the1160ETHIC Act if a drug had 50 patents on it, and 20 of them were1161duplicates, and 30 were unique, under the ETHIC Act they could1162litigate those 30 unique patents.1163    They could still litigate one duplicate from each cluster.1164The more patents that they innovate, the more unique1165inventions, then the more patents they can litigate against1166competition. The ETHIC Act is discouraging this behavior of1167spreading out duplicate patents and encouraging them to invent1168more and more unique patents on the same drug. It works both1169sides; they don't lose anything.1170    Mr. Fitzgerald. Thank you. Ms. Carver, trials for new drug1171treatments typically take years, as was just stated, and cost1172hundreds of millions of dollars. If legislation like ETHIC Act1173was signed into law, what behavioral changes would you expect1174pharmaceutical companies, I am not sure how this would work,1175but what type of changes would they have to make to the way1176they function or operate I guess is the best way to put it?1177    Ms. Carver. The ETHIC Act would harm innovation. It would1178allow generics and biosimilars to infringe valid patents with1179no recourse for the innovator to enforce those valid patents,1180and it would be a substantial shift, a seismic shift in the1181balance of Hatch-Waxman. It would also invite gamesmanship, we1182see that the way the bill is structured, an innovator would1183need to pick a patent to enforce from a patent group with no1184information on which to do it.1185    There would be no obligation for a generic or biosimilar to1186provide technical information for the innovator to make a1187decision about which patent to enforce, and there is also1188nothing preventing them from changing their product as soon as1189the decision is made. My view of the ETHIC Act is that it would1190undermine innovation.1191    Mr. Fitzgerald. I yield back.1192    Mr. Issa. The gentleman yields back. We now go to the1193gentleman from Georgia for five minutes.1194    Mr. Johnson. Thank you, Mr. Chair. Dr. Goode, in a 20241195research letter, you wrote quote,11961197        Although the U.S. Patent and Trademark Office is required to1198        reject patents that are obvious follow ons from earlier1199        versions, they may grant such patents when applicants file1200        terminal disclaimers.12011202Dr. Goode, doesn't a patent applicant have to demonstrate the1203claimed invention is new, useful, and nonobvious over prior1204art?1205    Ms. Goode. Yes, it has to demonstrate that for the first of1206the duplicate patents. After that what we see, and there is1207peer reviewed data on this as well, is once the patent owners1208start filing and duplicating the patents, it is a given,1209because the first patent was already examined. The issue is1210that these duplicates add nothing more after the first patent.1211    Mr. Johnson. Well, now patents with a terminal disclaimer1212do demonstrate some new, or useful, or nonobvious use over1213prior art, isn't that correct?1214    Ms. Goode. They are equivalent to their parent patent.1215    Mr. Johnson. Well, let me ask you, Ms. Simpson. In some1216situations, a patent applicant can receive a patent that is an1217obvious variant when compared to a portion of its own work that1218isn't in prior art so long as a terminal disclaimer is filed,1219how is this different from what Dr. Goode has said?1220    Ms. Simpson. Well, I think the first thing to understand1221here is I think the version of what is going on with terminal1222disclaimers that Dr. Goode has described is an1223oversimplification of what is happening. A really important1224clarification is that first, terminal disclaimers are an1225agreement by a patent owner to give up patent term if a second1226patent claiming has an overlap with another patent they have.1227    This means you can have two patents that are actually1228fairly different if they have a small overlap that the patent1229applicant doesn't think is worth fighting over, they will agree1230to this. The second thing to bear in mind is that terminal1231disclaimers are a valuable tool for the Patent Office to help1232manage the process of patent prosecution. It helps the office1233and the applicants kind of break it down into bite sized1234pieces.1235    You have a big patent application, you will examine part of1236it, get that patent issued. You will continue to examine maybe1237different parts of it in a second patent, and maybe again some1238of that will overlap, so there is a terminal disclaimer, but1239not all of it. These patents are not duplicates of each other,1240and that is why the ETHIC Act goes a lot further than is being1241suggested.1242    It would really take away innovators' rights to get the1243benefit of what they are disclosing to the public and actually1244have protection over everything they have invented.1245    Mr. Johnson. Thank you. Ms. Simpson, total R&D expenditures1246for each new drug are estimated to be 2.6 billion dollars1247invested over an average of 10-15 years of research, testing,1248and development before the first patient is prescribed the drug1249by a doctor. How do revenues from successful drugs help offset1250the cost of the many research programs that fail?1251    Isn't it correct that most drug candidates never become1252approved drugs after the $2.6-billion average expenditure?1253    Ms. Simpson. That is exactly right, and it is an1254interesting feature of this market, which is that so many drug1255candidates fail. When you are looking at this, the only way1256that drug companies can afford to take all of the bets they1257take is to be able to rely on strong patents to recover1258investment for the drugs that do succeed.1259    Mr. Johnson. Thank you. Ms. Carver, what role do patents1260play in giving companies the stability to make substantial1261investments in research and development?1262    Ms. Carver. Patents are crucial to the substantial1263research--1264    Mr. Johnson. Your mike.1265    Ms. Carver. Sorry. Patents are crucial to enabling1266companies to make those substantial investments in research and1267development. As you pointed out, the failure rate is extremely1268high for medicines in clinical trials going all the way back to1269the beginning of development. Patents help provide an1270opportunity for companies to recoup those R&D costs and bring1271new therapies to patients.1272    We have a very strong drug industry here, pharma companies1273have invested more than $850 billion in research and1274development in the last decade, and that has led to many1275important innovations for patients, including drugs that cure1276hepatitis C, drugs that have improved cancer outcomes greatly1277in the past few years, and major improvements in cardiovascular1278health.1279    Mr. Johnson. Thank you, I yield back.1280    Ms. Lee. [Presiding.] Thank you. I now recognize myself for1281five minutes.1282    Americans want two things that should not be mutually1283exclusive. They want access to lifesaving medications, and they1284want continued medical innovation. Our challenge is not1285choosing one over the other, it is making sure the legal1286framework that Congress enacts continues to deliver on both. I1287know our witnesses today have some areas of disagreement on1288important issues.1289    I also think there is a shared recognition that patients1290benefit when new treatments are developed, and when those1291treatments in the long term become accessible and affordable. I1292appreciate all of you for being here today, and for sharing1293your substantial insight on our pathway forward. Ms. Simpson, I1294would like to start with you.1295    In more than 40 years since Congress enacted Hatch-Waxman,1296what aspects of that framework have been most successful in1297promoting both pharmaceutical innovation and patient access to1298lower-cost medicines?1299    Ms. Simpson. Well, thank you for the question,1300Congresswoman. What that law did, as many have mentioned, is1301that it created a balance between respecting the patent rights1302of the innovators and providing a pathway to resolve disputes1303over the patents that still cover drugs once the regulatory1304exclusivity expires.1305    It has been particularly effective because it encourages1306all the disputes to be litigated together in one forum.1307    Ms. Lee. Ms. Goode, I would like to present this same1308question to you from the perspective of a biosimilar and1309generic manufacturer. What aspects of the Hatch-Waxman1310framework do you believe have been the most successful in1311protecting innovation, and achieving patient access to lower-1312cost medications, and what lessons should Congress keep in1313mind?1314    Ms. Goode. The Hatch-Waxman Act was established in 1984,1315and it worked really well to begin with for the first few1316decades. We have seen in the last 10 years that patent thickets1317have become an entrenched strategy. If you look at data going1318back to 1984, generics are getting on the market quite soon1319after basic product patent expiry.1320    If you look at the last 10 years it is a very different1321picture now that we see these continuation patents and terminal1322disclaimers increasing. Right now, the litigation framework is1323not cut out to handle patent thickets, and that is why we are1324now seeing delays compared to other countries in the world.1325    Ms. Lee. Ms. Goode, how important is regulatory and legal1326certainty when companies are making decisions that may take1327years or even decades to come to fruition?1328    Ms. Goode. It takes eight years to develop a biosimilar,1329even though we are only copying, it still costs around $1001330million. When we start our development program, there are1331usually just a handful of unique patents that we are looking1332at. By the time we get to the end we are faced with huge1333numbers of these duplicate patents, and I wrote a paper that1334showed that there is this really interesting strategy.1335    A huge spike in these duplicate patents issuing out of the1336Patent Office at year twelve. The scale and the timing of this1337spike shows it must be a strategy to put patents in place at1338year 12, which is when FDA exclusivity expires on biologics.1339That is the time when the biosimilars are trying to get to the1340market. There is clearly a strategy, and so it makes it very1341difficult for companies who need that business certainty.1342    Because if you are going to face litigation multiple times1343you need to get onto the market, but the risk that you pay, the1344branded drug company's lost profits could be more money than1345you would ever make. If you have a volatile patent system it1346makes launching more difficult. It also makes manufacturing in1347the United States more difficult, because patents also block1348manufacturing.1349    Ms. Simpson. Congresswoman, could I respond to that?1350    Ms. Lee. Yes, Ms. Simpson, you read my mind, I was just1351about to come back to you to ask specifically on the question1352of certainty, and the importance of having a regulatory1353framework that you can anticipate with clarity.1354    Ms. Simpson. Thank you. Well, one thing I would like to1355highlight about the Hatch-Waxman Act and the structure it1356provides, is that it doesn't matter how many patents you have,1357they can all be in that suit. What typically happens in a case1358like this is as the case develops, the scope of the dispute1359will narrow, often the judge will require a couple of claims to1360be litigated before a jury.1361    That is how all these cases normally progress, and at least1362what the data shows is that it has been steady over the past1363three decades, that period of exclusivity that drugs have1364enjoyed has been between 12-14 years, and numerous studies have1365shown this. If there is an increase in patent thickets, which I1366am not sure that the data--well regardless of that, it hasn't1367changed when generics get on the market.1368    Like I said in my opening, this is a real success story for1369Congress, and I don't think the evidence shows that Hatch-1370Waxman has somehow stopped working.1371    Ms. Lee. Thank you, we are now out of time. I now recognize1372the Ranking Member, the gentleman from Maryland, Mr. Raskin.1373    Mr. Raskin. Thank you very much, Madam Chair. Dr. Goode, I1374wanted to start with you, because as I am understanding your1375point, you think that there should be one patent per cluster,1376because the more patents you get, even if they are all cutoff1377at the same time, the more you can litigate, and it is the1378litigation that is time consuming.1379    In theory if all the litigation could be done in one day,1380then you would have no objection to the proliferation of new1381patents under the thicket, is that right?1382    Ms. Goode. Not exactly, because patents can continue, these1383duplicates can issue during litigation, after litigation, there1384has been an example of a drug, Myrbetriq, where the first1385litigation was in 2016, there was subsequent litigation1386starting with duplicate patents in 2020, and in the end a1387three-year litigation took nine years, because patents can keep1388issuing even during and after litigation.1389    Mr. Raskin. I got you, but I am just trying to isolate what1390your issue is. You don't have a problem in theory with the idea1391that there are good faith new patentable discoveries taking1392place as they do more and more research on a particular drug,1393your problem is that you don't want it to be used as an excuse1394to continue monopoly control over the original patent and1395profiting from it.1396    You are saying that is possible because of the length of1397litigation. If somehow there were a litigation or1398administrative process that could reduce that time, just1399hypothetically to a day, then you would have no problem with1400doing that, right? Other than whatever the cost of going to1401court that day would be.1402    Ms. Goode. Not exactly because we like the unique patents,1403the innovative, different ones. Innovation is good for us as1404well; the branded drug's innovation builds our--1405    Mr. Raskin. What should they do when they view as a1406substantial new discovery within the process? You said file a1407unique, new patent?1408    Ms. Goode. Yes, they should and they do, and that is fine.1409Under the ETHIC Act that would continue, and it would even be1410encouraged. The ETHIC Act does not--1411    Mr. Raskin. OK, Ms. Simpson, does that work for you? They1412are just saying file a unique, new patent, and then the process1413starts over, is that right?1414    Ms. Simpson. Well, again, that is oversimplifying what is1415going on with terminally disclaimed patents. There are a number1416of issues here in terms of are you litigating them all at once,1417or is there serial litigation? Importantly too, I don't think1418all the time we are talking about generics not being on the1419market, sometimes you are talking about generics being on the1420market, and then it is just two companies litigating.1421    The main point I would like to make with the terminally1422disclaimed patents, is that it really is a procedure that1423benefits the office in making it easier to go through a big1424patent application in smaller pieces, and that is a separate1425thing than having a different patent that is on just a1426different invention. Both of those things are happening; these1427are very complex inventions.1428    Given that there is no real data showing that the number of1429patents relates to how long it takes a generic to get on the1430market, I don't think there is a real problem to solve here,1431and that is the main problem I have with these bills.1432    Mr. Raskin. I got you. OK, Ms. Carver, let me come to you.1433Will you tell us how the so-called patent dance works, and what1434that is?1435    Ms. Carver. Sure. The patent dance is a phrase that is used1436to refer to the patent provisions of the Biologics Price1437Competition and Innovation Act that were enacted by Congress in14382010. As described in the statute, the first step of the patent1439dance is for the biosimilar applicant to provide access to the1440reference product's sponsor, to their application, and1441manufacturing process information about the product.1442    Then, the reference product sponsor needs to provide a list1443of all the patents they believe could reasonably be infringed1444by the biosimilar manufacturer's product. In practice we have1445seen though that first, the Supreme Court interpreted this1446provision to be voluntary, so applicants need not use it.1447    As a result, we are seeing that this happens where some1448companies opt out entirely, and others only participate in the1449patent dance to some extent. This undermines the purpose of the1450original BPCIA patent dance that Congress enacted--1451    Mr. Raskin. Then, what alternatives are available to you at1452that point?1453    Ms. Carver. Well, what happens is if the company doesn't1454have enough information to know which patents might be1455infringed, the only option they have is to bring suit on the1456ones that they believe may be infringed based on no1457information. It misses an opportunity to narrow the scope of1458patents that could be at issue--1459    Mr. Raskin. Do you think that the dance should be a1460mandatory dance? Forgive me.1461    Ms. Carver. Yes.1462    Mr. Raskin. OK, I yield back.1463    Ms. Lee. Thank you. I now recognize the gentleman from1464South Carolina, Mr. Fry.1465    Mr. Fry. Thank you, Madam Chair. I don't think I have ever1466had a hearing before where a Supreme Court decision drops at1467the same time, so we are real time trying to figure this out. I1468know that you are sitting here, and you haven't read the1469opinion, but Professor Carrier, what do you make of at least1470the top line of the Supreme Court's decision that just came out1471five minutes ago?1472    Mr. Carrier. Well, actually I did read it, thanks to1473phones, and I think it is a very positive decision, it was1474unanimous. It made clear that certain types of conduct, at1475least in this case, did not lead to a finding of induced1476infringement. There still is a different role for Congress to1477play. If I were the brand firm, I would go back to the Way Back1478Machine and find one tiny piece of evidence that the Supreme1479Court didn't talk about, file another lawsuit, and we are off1480to the races.1481    The Supreme Court, even though it was unanimous, cannot act1482with the certainty that Congress can. The Supreme Court also1483only applied to one context, not the biosimilar context. I1484still think even today's decision does not displace the role1485for Congress.1486    Mr. Fry. At least according to your opinion, it may be a1487step in the right direction, but Congress, we can't punt and1488say the Supreme Court has already addressed this?1489    Mr. Carrier. Exactly, yes.1490    Mr. Fry. OK. Ms. Simpson, you discussed major changes to1491patent laws related to generic competition in the 1980s and the14922010s, you also discussed how investment in R&D has shifted1493from Europe to the United States in the last 50 years. How has1494balancing patent rights for inventors and generic competition1495affected U.S. investment trends in the biopharma sector?1496    Ms. Simpson. Well, as I mentioned, these laws really1497transformed the United States into a place that attracted1498investment, and it brought the biopharmaceutical industry here.1499Those were laws that were largely passed in the 1980s. Since1500that time, and most recently I would say over the last 10-151501years through things that Congress has done, and especially the1502courts have done, have in a number of ways dramatically1503weakened patent law.1504    We might not be seeing the effects yet, and this is not1505specific to the biopharmaceutical industry, this is across all1506industries, but it is providing a real opportunity for other1507countries to take the lead. China most notably has been filling1508in the void. Not only have they strengthened their domestic1509patent system, but as an economy that is largely State driven,1510they have just been investing money.1511    As I laid out in my testimony, they are making real moves1512to try and take the biopharmaceutical industry from us using1513both State money, and their patent system. Our country relies1514on the patent system to fuel investment. That is why taking any1515measures to further weaken the patent system on top of what has1516already happened in the absence of strong evidence would be a1517mistake.1518    Mr. Fry. Thank you for that. Ms. Goode, just broadly, do1519you think our patent system is too restrictive? I think Ms.1520Simpson obviously has a different view of that, but do you1521think it is too restrictive for generics and biosimilars?1522    Ms. Goode. With the ETHIC Act being pro-innovation, these1523patents that are duplicative, they would not be issued without1524terminal disclaimers, they would be rejected. Terminal1525disclaimers make it easy to flood the market, flood the system1526with these duplicate patents. When we talk about China, we1527should think not about the quantity of American patents, but we1528should measure American innovations by the quality of its1529patents, and this is what the ETHIC Act goes to.1530    Mr. Fry. Professor Carrier, what role do you think1531intellectual property policy plays in promoting that1532competition? Obviously, we have got these three bills that we1533have talked about a little bit today, but what role do we have1534in promoting that competition, and lowering prices relative to1535other factors like PBMs, or insurers, regulatory barriers?1536    Mr. Carrier. The pharmaceutical system is incredibly1537complex, and there is more than enough blame to go around.1538There is blame to be placed at the feet of the PBMs, there is1539blame to be placed at the feet of drug companies. The1540legislation here would be really helpful because the Hatch-1541Waxman Act was designed to be a compromise between promoting1542generic competition and fostering brand firm innovation.1543    There was a lot in Hatch-Waxman for brand firm innovation,1544patent term extension, 30-month stays, and all that. It is just1545the stuff on the generic side, now the ladder is pulled up1546behind them, when, for example, they try to get rid of skinny1547labels. We are trying to restore that balance.1548    Mr. Fry. Last question, just want to make sure I get it,1549just to boil this down, the compromise act that was created,1550that we are operating under, is it your belief that1551pharmaceutical companies have use that, and then maybe1552structurally, or procedurally used that to game the system to1553get a monopoly by another way, is that kind of what you are1554articulating?1555    Mr. Issa. [Presiding.] Time is expired, but you may answer.1556    Mr. Carrier. Yes, to all the above. Hatch-Waxman has been1557incredibly successful in certain ways, look at the percentage1558of generics on the market. Hatch-Waxman also has been gamed,1559and it is not just me that says it, Hatch and Waxman themselves1560have said that the system has been gamed.1561    Mr. Fry. Thank you for that, Mr. Chair, I yield back.1562    Mr. Issa. I thank the gentleman for yielding back. We now1563go to the gentlelady from California, Ms. Lofgren.1564    Ms. Lofgren. Thank you, Mr. Chair. Americans are facing a1565prescription drug affordability crisis really. Americans are1566paying more for prescription drugs than almost anyone else in1567the world, U.S. drug prices are nearly three times higher than1568prices in peer countries, and nearly one in three Americans1569report not taking their medication as prescribed because of1570costs.1571    These issues are very important to the American people, and1572that is one of the reasons why I was glad to join Congressman1573Cline in introducing the Skinny Labels Big Savings Act, this is1574a bipartisan bill, and I believe it would get lower-cost1575generics to patients sooner, while preserving valid patents and1576real innovation, which is important to me, and every Member of1577this panel.1578    For people who are watching online, I guess I feel sorry1579for those who are watching online, but I think it is important1580to describe what is a skinny label. It allows a generic company1581to compete for uses of a drug that are no longer under patent,1582while leaving the patented uses protected. It is interesting1583that the court decided this morning, it was good to see it.1584    Professor Carrier, you address this a little bit, but the1585bill that we have introduced is partly solved by what the court1586did this morning, but would it add certainty to make this bill1587law? Because as you pointed out, you could litigate further and1588further, part of this is the expectation game. Are you going to1589put a lot of time and effort into developing a generic if the1590risk of litigation continues? What is your thought on that?1591    Mr. Carrier. Absolutely. Certainty is needed, and so even1592though the Supreme Court issued what I would call a favorable1593decision, what did Amarin say in oral argument, we are just1594going to re-plead our complaint. They are going to go back to1595the drawing board, they are going to find another piece of1596evidence, and they are going to do it all over again. They1597can't give the certainty that Congress can give.1598    Just to be clear, even the earlier decision, GSK v. Teva a1599few years ago, has already led to a reduction in skinny1600labeling according to one peer review survey from 56 percent1601down to 20 percent over a couple of years. Why? Because the1602generic is on the hook for not just its revenues, but the brand1603firm's profits as well, triple the case in the case of GSK.1604    Ms. Lofgren. Dr. Goode, would the Skinny Labels Bill1605restore certainty to the pathway in your judgment to help get1606lawful generics to patients sooner?1607    Ms. Goode. Yes, it would. Because what it does is it puts a1608safe harbor around the label itself. It is also incentivizing1609good behavior. As long as you do the label carve outs, and you1610don't mention the patented disease in any promotional material,1611then you are safe. That incentivizes biosimilars and generic1612drugs to stay in their lane and stay away from the patented1613material.1614    Which is the exact same compromise that was made in 19841615that worked so well for four decades until the recent case law1616started to erode this balance. We want to move it back to how1617it was working before.1618    Ms. Lofgren. Just to be clear, the bill that we have1619sponsored does not allow a generic to market a patented use,1620correct?1621    Ms. Goode. Exactly.1622    Ms. Lofgren. It does not erase valid patents on new uses of1623medicine, correct?1624    Ms. Goode. Exactly.1625    Ms. Lofgren. The practical effect is straight forward. It1626follows the FDA approved label, leaves the patented use out,1627doesn't promote the patented use, and it can reach patients1628sooner for uses that are no longer under patent. It seems to me1629that reducing the cost of pharmaceuticals for Americans is a1630really important goal, and I have not sponsored the other bill,1631I think that is a more complicated measure.1632    This hearing has been very helpful in outlining the issues1633to help us sort through that. To me, reinforcing what the court1634did this morning would add certainty to a decision that was1635unanimous on the part of the court but also keep the solid1636reasoning that they had in place as part of the law and would1637be very helpful.1638    With that, Mr. Chair, I yield back, and thanks for this1639hearing.1640    Mr. Issa. I thank the gentlelady. We now go to the1641gentleman from Virginia, Mr. Cline, for five minutes.1642    Mr. Cline. Thank you, Mr. Chair. I am going to tag team1643with my colleague from California, and celebrate this ruling,1644but recognize that it is a step, and not a finish line. This is1645a pleading stage ruling, not a safe harbor, by holding that1646Amarin failed to State a claim on facts, and said inducement1647can be implicit, the next brand can still sue on different1648marketing.1649    The generic still spends years and money proving its carve1650out was lawful, codifying a clear rule stops those suits at the1651front end, and that is what we want, is certainty. We want to1652make sure that generics continue to drive down costs, as was1653argued in the case. Generics have saved patients and insurance1654payers an estimated 2.9 trillion dollars over the past decade.1655    This is something that has benefited my constituents,1656constituents of every Member up here, all Americans, and we1657should enact laws that continue to encourage their use. The1658decision today does not reach biosimilars, but our bill does,1659the Skinny Labels Bill does. The decision today was a small1660molecule Hatch-Waxman case, it says nothing about biosimilar1661carve outs.1662    Our bill amends Section 271 to extend the same safe harbor1663to biologics approved under Section 351K, closing a gap that1664the ruling leaves wide open. The statute that we need would1665provide something that is absent from the court decision,1666durability. Because even a unanimous ruling leaves the line to1667be drawn fact by fact in the lower courts, and that drift is1668how the Federal circuit got crosswise here in the first place1669arguably.1670    Ms. Carver, in practice selling a generic company has to1671communicate that its product of a generic of or therapeutically1672equivalent to the brand, it is a routine, necessary part of1673marketing any generic, correct?1674    Ms. Carver. The therapeutic equivalence of the generic1675would be listed in FDA's Orange Book for everyone to see. I1676think on the Skinny Labels Act, one thing that was brought up1677previously is the question of whether the label does or does1678not mention the patented use. To me that is a really critical1679part of this question.1680    It is FDA that is reviewing the labeling of generic, and1681they are not equipped, both from an authority perspective, as1682well as an expertise perspective, in determining whether1683labeling infringes, or induces infringement of a patent, and so1684that is a concern I have with the bill. It is also very1685important that we continue to incentivize new uses of existing1686drugs, and that is what we are talking about here.1687    In oncology in particular, we see that 60-75 percent of1688drugs are later approved to treat additional types of cancer,1689and it is important that we maintain those incentives.1690    Mr. Cline. Right, the FDA itself does not review a1691generic's carve out for patent inducement adequacy, in fact1692hasn't the FDA said it lacks the authority and expertise, and1693that courts are the appropriate form?1694    Ms. Carver. Yes.1695    Mr. Cline. OK. Ms. Simpson, as we have been talking about1696with the decision, does an after the fact court victory give1697generics the upfront certainty that a statutory safe harbor1698would?1699    Ms. Simpson. Well, the issue here is, and I have not read1700the ruling--1701    Mr. Cline. Well, you can say yes or no.1702    Ms. Simpson. I am sorry--1703    Mr. Cline. Does a court decision give the certainty that a1704statute would?1705    Ms. Simpson. Well, the issue here is that the bill would1706go--1707    Mr. Cline. Well, answer my question, then you can tell me1708what you think the issue is.1709    Ms. Simpson. Well, it doesn't necessarily give you the1710certainty. The bill would do more harm than good.1711    Mr. Cline. OK. Professor Carrier, the skinny label carve1712out has worked alongside method or use patents for 40 years,1713and by one estimate 15 carve outs saved Medicare roughly 151714billion in five years. The Supreme Court just reversed the1715Federal circuit, and protected Hikma's carve out this morning,1716some will say that ends the matter.1717    You can tell the Committee plainly why doesn't a single1718favorable pleading stage decision give generics the certainty1719they need to keep that savings pipeline going, and what would1720codifying the carve out add that the ruling does not?1721    Mr. Carrier. Amarin said in oral argument that they are1722just going to go back to the drawing board and file another1723complaint. The Federal circuit can do what it does and not1724follow the Supreme Court's decision. Congress can act and give1725certainty in a way that the court cannot, because there is1726always another tweak to the system.1727    We hear a lot about innovation, but this piece was not1728about innovation in the Hatch-Waxman Act. You look at what the1729solicitor general said in the Amarin case, Congress was willing1730to accept the risk of reduced innovation incentives rather than1731delaying generic entry until all method of use patents have1732expired.1733    In other words, there is a ton in Hatch-Waxman about brand1734firm innovation, skinny label is not that, and that is the1735tradeoff that Congress specifically made.1736    Mr. Cline. Thank you, I yield back.1737    Mr. Issa. I thank the gentleman. We now go to the1738gentlelady from North Carolina, Ms. Ross.1739    Ms. Ross. Thank you, Mr. Chair. I am really glad that our1740Committee is discussing this topic today, and clearly it is1741very timely with the Supreme Court's decision. It also concerns1742one of the main economic engines in my district in the research1743triangle of North Carolina. The research triangle is home to1744one of the most vibrant life sciences and biotechnology sectors1745anywhere in the world.1746    My constituents are clinicians, researchers, entrepreneurs,1747students, and drug trial candidates, each playing a vital role1748in the discovery and development of the next generation of1749medicines. We have small, scrappy startups putting it all on1750the line for the potential to find transformative cures, as1751well as large companies that leverage their resources to invest1752in creating the next blockbuster medicine.1753    We also have a strong base of generic drug manufacturers1754who play an important role in supplying affordable medicines1755for all Americans. We have to be clear, underlying all of this1756innovation, and the hundreds of billions of dollars in economic1757activity it generates is our Nation's robust patent system.1758Strong intellectual property protections are the foundation1759that that success is built on.1760    Congress worked thoughtfully and cautiously on a bipartisan1761basis to create the current system governing intellectual1762property rights. This framework recognizes that ownership of1763these groundbreaking ideas is crucial to ensuring that they are1764pursued here in the United States. That the jobs, economic1765value, and lifesaving discoveries they generate ultimately1766reward American citizens and taxpayers like my constituents for1767doing the hard work that allowed these innovations to exist in1768the first place.1769    This leads me to the consequence of weakening patent1770protections for our national and economic security. Over the1771last year and a half, we have experienced a loss of talent due1772to misguided immigration and trade policy, combined with1773funding cuts to academic research. Now, we are beginning to see1774the flight of investment and capital from the United States,1775alarmingly it is moving to our adversaries like China.1776    I cannot stress enough that ensuring that these1777advancements exist in the American domain is paramount. Losing1778IP to China and other countries would be a critical strategic1779failure. Ms. Simpson, could you please expand on the1780consequences of American innovation moving overseas, and1781keeping strong patent protection for innovation that occurred1782here?1783    Ms. Simpson. Well, thank you for the question, and I think1784that is exactly right, it is a huge concern if the1785biopharmaceutical industry were to move overseas. Strategically1786it would mean that the difficult choices we face now would be1787compounded if someone like our adversary, like China were1788controlling all the drugs.1789    It would make decisions we have within our own borders1790today, decisions that they would have over us. Economically,1791this is a hugely important industry to our country, it supports1792over a million jobs directly, and many more others by1793association. Related to what you said too, a lot of what we are1794talking about is kind of death by a thousand cuts to this1795industry.1796    The Skinny Label Bill for example, it might seem like a1797relatively small thing, but there was a big research study that1798came out last year that found out that additional uses of1799drugs, or what they call the missing market, that were losing1800100-400 billion dollars a year in lost value for drugs that1801already exist that we just don't know what all they can be used1802for.1803    This bill would undermine one of the last incentives we1804have to keep companies trying to do that research. I have not1805read the Supreme Court case yet today, but what they are doing1806is preserving the balance by letting companies pursue the1807highly fact intensive question of intent.1808    Which the Skinny Label Bill that we have been talking1809about, unfortunately because of its categorical exemptions1810would not allow. This is yet again another step that we should1811not take, because it is slowly eroding our lead.1812    Ms. Ross. My time is expired, and I yield back.1813    Mr. Issa. The gentlelady yields back. We now got to the1814gentleman from Texas for five minutes.1815    Mr. Gooden. Thank you, Professor Carrier. Some argue that1816the issues of evergreening and patent thickets are largely1817nonexistent myths, is that an accurate characterization?1818    Mr. Carrier. No, it is not.1819    Mr. Gooden. Could you explain that further to me so normal1820people can understand what that means?1821    Mr. Carrier. Sure. The patent system is designed to promote1822innovation, and we should be grateful for all that the1823pharmaceutical industry has done to promote innovation. When1824you collect a whole bunch of patents, and then use it in an1825abusive way, I think that is a problem. If I can take just a1826second, we have heard a lot about terminal disclaimers, it is a1827bit wonky, tough to understand what that is.1828    Let me give you one concrete example, so Eylea is a drug1829that treats an eye disease, and Regeneron here sued Amgen in a1830patent over Eylea. The patent had a buffer, they controlled the1831acid, and it ensured safety. The biosimilar, Amgen, did not1832have the buffer. In other words, it did not infringe. Court1833said you are fine, no injunction, keep doing what you are1834doing.1835    The very next day Regeneron went back to the drawing board,1836got a new patent, new terminal disclaimer, and sued them again.1837They didn't have it in the first place, they got the idea from1838their competitor, and they filed another lawsuit. This is not1839about innovation; this is about playing games with these1840terminal disclaimers.1841    Mr. Gooden. Ms. Simpson, do you have a thought on that?1842    Ms. Simpson. I do. One of the things that is important to1843bear in mind with this idea of repetitive lawsuits that1844Professor Carrier just mentioned is that courts have a lot of1845doctrines specifically to deal with repetitive lawsuits. Issue1846preclusion, claim preclusion, and if they are not dismissing1847those cases on these grounds, it means these cases aren't truly1848duplicative.1849    It means someone is going to court with a different enough1850property right that it is worth pursuing. This goes back to an1851even more fundamental point, that civil litigation is,1852especially in this space, it is complicated. It is due to1853choices that both sides make, and I think having--to that end I1854don't think there is actually, again, I don't think there is a1855real problem here to be solved that the courts themselves don't1856already have tools to deal with.1857    Mr. Gooden. Some argue that the U.S. patent law makes it1858too easy for brand manufacturers to prevent generic and1859biosimilar competitors from entering the market. Would you1860agree with that thought?1861    Ms. Simpson. I would not. For this I go back to the data1862that shows that generics enter the market on average between186312-15 years, which is less than the length of a term of a1864patent, and that number has held steady for about 30 years. If1865there were evidence that it were harder for them to get in1866markets, we would see it.1867    Ninety percent of prescriptions are filled by generics; we1868have an extremely robust generic industry in this country which1869we should be proud of. That is because the system we have is1870working.1871    Mr. Gooden. Thank you. Ms. Goode, go ahead, I see you have1872something to say.1873    Ms. Goode. Yes, I just want to give an example. There was a1874patent which was a method of purifying a drug, and the method1875was you put it through column A, then column B, then column C.1876That was shown to not be new, the patent was canceled. Then,1877the duplicate came along, the duplicate patent said you put it1878through column A, then directly through column B, and then1879directly through column C.1880    This one-word difference, the word directly then needs to1881be litigated again. When it comes to judges narrowing down1882claims, that takes years. That is time when patients abroad are1883getting the drugs, and patients in America are waiting for the1884patent litigations to be resolved.1885    Talking about a difference between a human and a patient in1886two different patents, patents that would be rejected by the1887Patent Office if they weren't filing terminal disclaimers. The1888ETHIC Act does not weaken patents; it encourages unique1889patents. It stops clogging up the system with repetitive1890patents. The branded drugs would not lose anything other than1891the ability to game the system.1892    Mr. Gooden. Thank you, I yield back.1893    Mr. Issa. Will the gentleman yield?1894    Mr. Gooden. Yes, have it all.1895    Mr. Issa. Ms. Simpson, you said 14 years had been, isn't it1896true that it is 21-22 years for biosimilars, it is much longer1897if you look specifically at the largest, new, growing area?1898    Ms. Simpson. At least the data I have seen suggests that it1899is also more like 14 years, so slightly longer.1900    Mr. Issa. Dr. Goode, do you have any information on that?1901Because our information shows it is more like 20.1902    Ms. Goode. Are you talking about the exclusivity of the1903branded drug, how long they are exclusive for?1904    Mr. Issa. Yes, how long it takes to get to market, which is1905what Ms. Simpson opined that it was 14 years. Our information1906on biosimilars is much more like 20-21.1907    Ms. Goode. Yes, old data shows 14 years or less, because1908that is going back to 1984, when there were less entrenched1909patent thickets. The latest data dated 2026 show in the last 101910years how long it took biosimilars to get on the market was 181911years of exclusivity for the brand. Congress thought 12 years1912was appropriate with FDA exclusivity.1913    Congress allowed patent term extension up to 14 years.1914Eighteen years is four years longer than Congress ever1915contemplated.1916    Mr. Issa. Thank you. The gentleman from California, Mr.1917Kiley.1918    Mr. Kiley. Thank you, Mr. Chair. We can all agree here, and1919we all share the goal of getting as many people as possible1920access to the most efficacious drugs possible at the lowest1921cost, and we are actually living at time that is incredibly1922exciting for drug discovery, with the time lines for discovery1923and testing rapidly accelerating, and with a lot of new1924potential discoveries and applications happening all the time,1925and maybe even more exciting ones ahead of us.1926    There is a lot to actually be optimistic about, despite the1927frustration that so many people with the price of prescription1928drugs. Ms. Simpson, kind of continuing on the last set of1929questions, whatever the number is, 11 years or so, maybe a1930little more is the time it takes for the generic competition to1931begin, but if there was no original innovator who created the1932underlying drug, what would be the opportunity for the generic1933to come along?1934    Ms. Simpson. Exactly, that is why balance is so important1935here, because we can't have a generic industry if there is not1936a branded industry to begin with.1937    Mr. Kiley. If we didn't have patent protection, or if those1938protections were viewed as inadequate, I suppose you could try1939to protect your IP through trade secret law, right? What would1940that do for the ability to develop generics? Because one of the1941sorts of virtues of the patent system, or the tradeoff inherent1942in it is the requirement of disclosure, that is how these1943generics make their drugs, right?1944    Is the patent holder having to actually tell you how to do1945it, whereas with the trade secret, you don't necessarily have1946that access, do you?1947    Ms. Simpson. That is right, that is an easy to forget part1948of the patent system, is that it promotes disclosure, as1949opposed to incentivizing people to keep things as trade1950secrets. It allows other people to directly copy, that is part1951of why generics can get on the market so quickly, they see1952exactly how to do it in patents.1953    Mr. Kiley. Assuring that innovators have the incentive to1954utilize the patent system to protect their IP actually enables1955the creation of generics much more readily than trying to1956protect those secrets through trade secrets laws, is that1957right?1958    Ms. Simpson. That is right, and there is no time limit on1959trade secrets either, as opposed to patents. If you were able1960to successfully keep your drug or treatment secret, you could1961have it theoretically forever.1962    Mr. Kiley. Right, so that would be higher cost for people1963if we didn't have an effective patent system potentially?1964    Ms. Simpson. Yes.1965    Mr. Kiley. Another area where maybe we are seeing an1966unnecessary limit on innovation in a way that reduces access1967and raises cost is when it comes to the issue of subject matter1968eligibility for patents. I have sought to address this through1969the Patent Eligibility Restoration Act, bipartisan and1970bicameral legislation. Could you just give us a little insight1971into that specific issue, subject matter eligibility?1972    Ms. Simpson. Yes, that is an incredibly important issue1973that a bill like PERA is critical to address. The Supreme Court1974made a number of changes to patent eligible subject matter in1975the last decade, and it has impacted several industries1976relevant to this hearing, medical diagnostics and other parts1977of the life science. It is not as clear, and for diagnostics,1978it is very unclear whether or not you can get adequate patent1979protection in the U.S.1980    You can get a greater scope in Europe, in China, in Korea,1981and in Japan. As I mentioned earlier in discussions with Ms.1982Ross, there is a real risk that we are going to lose our1983industries to other countries that provide better protection1984unless something like PERA is enacted.1985    Mr. Kiley. Yes, you just mentioned a few, but the key1986industries, the key innovations that we could lose access to,1987or lose at least being the home to?1988    Ms. Simpson. Yes, so the diagnostic industry is a very1989clear one where it has gotten much harder to get patent1990protection at all in the U.S. Other parts of the life sciences1991industry have also been affected, and various parts of computer1992implemented inventions have also been affected, which is also1993clearly a very important area of the economy.1994    Mr. Kiley. Yes, absolutely. This issue is really, really1995important right now from the perspective of global1996competitiveness. We have China, and the E.U., and others that1997have much more stability, predictability, rationality when it1998comes to the matter of what is and is not patentable, it really1999puts us at a disadvantage. Hopefully, we can get this2000legislation through this Congress.2001    Thank you for your testimony, I yield back.2002    Mr. Issa. The gentleman yields back. I will recognize2003myself--2004    Mr. Kiley. Actually, Mr. Chair, sorry, can I seek unanimous2005consent to enter into the record, this study, ``Drug Patent and2006Exclusivity Study,'' from the USPTO?2007    Mr. Issa. Too late. I am just kidding, without objection,2008so ordered.2009    Mr. Kiley. Thanks.2010    Mr. Johnson. As not to fall victim to that ruling, Mr.2011Chair--2012    Mr. Issa. The gentleman is recognized for his unanimous2013consent.2014    Mr. Johnson. Thank you, it is rather lengthy. A letter from2015the Council for Innovation Promotion; a letter from the2016National Association of Manufacturers; a statement from the2017ERISA Industry Committee; a letter from the Center for Medicine2018in the Public Interest; a statement from Families USA; a letter2019from Alliance for Aging Research; two statements from2020Generation Patient; a statement from the U.S. Chamber of2021Commerce on the ETHIC Act and patent policy; a statement from2022Patients for Affordable Drugs now; a statement from AARP; a2023statement from the Biotechnology Innovation Organization; a2024statement from the Biosimilars Forum; a statement from the2025Alliance of U.S. Startups and Inventors for Jobs; a statement2026from the American Society of Health System Pharmacists; a2027statement from the Campaign for Sustainable RX pricing; and2028last but not least, a letter and issue brief from the Center2029for American Principles, and these are offered for unanimous2030consent.2031    Mr. Issa. Without objection they will be included in the2032record.2033    Mr. Johnson. They are as bipartisan as this hearing, and2034this panel, Mr. Chair.2035    Mr. Issa. Thank you for noting that.2036    With that I will recognize myself. Dr. Goode, the ETHIC Act2037has been alluded to not being good, being good, whatever, let2038me just ask a work around question. If we narrowed the act to2039requiring that all claims be brought at one time, that a2040pharmaceutical company couldn't sequentially sue, would that be2041a partial conclusion?2042    Is there any level of unfairness considering if I charge2043someone with a crime, I don't have the ability to sequentially2044charge them with crimes, I have to bring all known crimes at2045the same time. Is that one of many solutions that could be2046ordered by this Committee?2047    Ms. Goode. A couple of thoughts, that is actually bad for2048innovation, because we want branded drug companies to continue2049innovating new uses of old drugs, and the ETHIC Act would allow2050that.2051    Mr. Issa. I am saying that all known at that time, in other2052words in the case where they actually already have two patents,2053and they are bringing one set, and then when they lose,2054bringing the similar one.2055    Ms. Goode. It overcomplicates the case when you go from2056five patents to 75 patents like in the case of the drug--2057    Mr. Issa. Tens of thousands of claims.2058    Ms. Goode. Yes, in the case of the drug Symbravo, there are2059five unique patents, and 70 duplicate patents. Federal courts2060cannot handle that number of patents, so they try to narrow it2061down, but that takes years. This is slowing down patients2062getting access to affordable medicines, it is just extra2063bureaucracy. You can take all those claims and put them into a2064single patent. You don't need to spread them out unless you are2065trying to game the system.2066    Mr. Issa. Thank you, you have made our case for the bill as2067it is. We obviously are dealing with the unanimous Supreme2068court ruling just a few minutes ago. Ms. Carver doesn't like it2069and opined on how they are going to work around it, and I am2070fine with that; that is their right.2071    Would you say in spite of all the good work that your2072companies do, that the history of doctors prescribing for2073patients if you will, off patent, is in fact a huge part of2074innovation, and that so much of what pharma takes credit for,2075in fact around the world, are doctors making discovery that2076then lead to that innovation? I would like to hear both of your2077ideas on that.2078    Ms. Goode. Yes, so the skinny label, it has been available2079for four decades, and innovation continued. Despite today2080pharma is saying that it is a problem for innovation, for the2081last four decades they kept innovating, and finding new uses,2082and that was against the backdrop of all this.2083    Mr. Issa. Professor Carrier, I was deviating slightly in2084the question to skinny labels and physicians making decisions2085off patent have been around for a long time, and they are2086really first cousins, aren't they, when it comes to finding2087ways to help the patient?2088    Mr. Carrier. Absolutely. In advance of the Hatch-Waxman2089Act, in the early 1980s just about every State had a2090substitution law.2091    Mr. Issa. OK, I am going to get to my unanimous consents in2092a moment. There has been a lot said about competitiveness, and2093there is a few people up here who have a history in2094competitiveness. I want to ask each of the witnesses to answer2095briefly in one sentence.2096    If the United States market is the most excluded market2097from, if you will, generics, and as a result the original2098patent holder keeps their price high longer, because they2099clearly do keep their price higher than the generic, because2100they have the right on the day the patent expires to lower a2101price to exclude generics from even entering the market if they2102wanted to.2103    If the United States, call it 20 percent of the world's2104market, if we continue to have our price here, and notoriously2105China, India, and other countries have a much higher barrier to2106getting a patent, a much higher barrier to enforcing, and as a2107result, other products arrive in their market much sooner, are2108we in fact doing ourselves a favor?2109    Are we effectively excluding the development of those2110products here in the United States, while around the world the2111consumer is getting that less expensive product years earlier?2112Start with Dr. Goode.2113    Ms. Goode. Because the U.S. patent system is so volatile,2114American patients get access to cheaper drugs later, and less2115manufacturing can happen in the U.S.2116    Mr. Issa. Professor?2117    Mr. Carrier. Innovation is crucial, but so is generic2118competition, and so I would consider both of them together.2119    Mr. Issa. Ms. Simpson, you are a great scholar, but if you2120would try to narrow your answer to the competitive situation in2121a global market in which China ignores our patents and produces2122their products in real time if they can figure out how to2123reverse engineer them.2124    Ms. Carver. Yes, I would say that that is a very big2125problem to our competitiveness.2126    Mr. Issa. Ms. Carver?2127    Ms. Carver. I would say that America is doing a great job2128with balancing those two types of innovation and access2129compared to other countries, with American patients having2130access to 85 percent of new medicines, compared to an average2131of 38 percent in patients across G-20 countries.2132    Mr. Issa. That is a very good point that other countries2133simply keep the generics and lock out big pharma in order to2134lower costs, no question at all. One question that I am going2135to submit for the record for all of you, if you don't mind, is2136under current law, universally, my old company, any company,2137the patent standard is make, use, or sell.2138    Under the idea that America needs to be competitive, if a2139product is legal, and off patent in countries other than the2140United States, should this Committee consider a narrow carve2141out for what I would call a bonded manufacturing facility?2142Meaning that American companies should be allowed to produce in2143America for sales to countries where the product is already2144available, could be available legally?2145    The concept being that if you are not making in America2146until later, you probably won't make in America at all. If you2147make in America in real time, you will hit the ground running2148when it becomes available in the U.S. I personally have2149observed that China has that advantage, they make the products,2150as does India, years ahead of being able to sell them in2151America.2152    It means they are prepared on day one. I would ask you to,2153as lengthy and as scholarly as you can, please give me your2154answers on that, because it is a serious consideration for what2155we would not necessarily apply to nonregulated products. In2156other words, we are not going to open the floodgates for making2157in America and selling around the world. This highly regulated2158product in which the opportunity occurs at different times, I2159would want to have that considered.2160    Since I took extra time, does the Ranking Member have any2161followup?2162    Mr. Johnson. I do not, thank you.2163    Mr. Issa. With that I would ask unanimous consent that it2164be placed into the record, Mr. Arrington of Texas' statement,2165and a copy of the maligned H.R. 3269, the ETHIC Act, and the2166now perhaps to be modified H.R. 6485, the Skinny Label Act.2167Without objection those are ordered to be placed in the record.2168    Without rereading them, we will place into the record some2169of them that Mr. Johnson opined on, but there is a total of 202170records, letters will be placed in the record, and they will be2171made available to all of our witnesses.2172    Now, for the closing. This concludes our hearing, and I2173want to thank all our witnesses for being here before the2174Subcommittee today. Without objection, all Members will have2175five legislative days in which to submit additional written2176questions for our witnesses, and additional materials for the2177record.2178    As is my tradition, do you all agree to accept those, and2179come back in as timely a fashion as you can? They have all2180answered in the affirmative. I thank the witnesses, and we2181stand adjourned.2182    [Whereupon, at 12:02 p.m., the Subcommittee was adjourned.]21832184    All materials submitted for the record by Members of the2185Subcommittee on Courts, Intellectual Property, and the Internet2186can2187be found at: https://docs.house.gov/Committee/Calendar/ByEvent2188.aspx?EventID=119346.21892190                                 [all]