Last week’s “listening session” on pharmaceutical competition, hosted jointly by the U.S. Justice Department (DOJ) and Federal Trade Commission (FTC), may go down as an important precursor to the Trump administration’s promised campaign to lower drug prices. While billed as a fact-finding exercise, the discussion revealed competing visions to reform the U.S. pharmaceutical ecosystem, with potentially far-reaching implications for innovation incentives and patient access.
Patent Reform Proposals: Rebalancing or Overcorrection?
Sneha Dave, founder and executive director of advocacy group Generation Patient, proposed reframing the U.S. Patent and Trademark Office’s (PTO) mission as a public-interest agency. Toward that end, she endorsed increased patent-examiner time, ostensibly in an effort to deny allegedly incremental applications. Most provocatively, she argued that “strengthening patent protections reduces rather than increases pharmaceutical innovation,” in what constitutes a direct challenge to conventional intellectual-property theory.
These sorts of criticisms are borne of a patient-centric view of the health-care system, which is understandable. But the empirical foundations for sweeping patent reform remain contested.
Hans Sauer from the Biotechnology Innovation Organization presented data showing that small-molecule drugs still average only four-to-six “Orange Book” patents—that is, those listed in the U.S. Food and Drug Administration’s (FDA) Approved Drug Products with Therapeutic Equivalence Evaluations list. While that is double the count seen in the early 1990s, it’s hardly evidence of runaway “thicketing”—i.e., the alleged practices of filing multiple overlapping patents on a single drug to extend market exclusivity and delay generic competition.
More importantly, Sauer also noted that effective-market exclusivity for new chemical entities remains roughly 13 years, unchanged over the last three decades. This stability suggests that the system’s existing checks may already be calibrating exclusivity periods more effectively than critics acknowledge. These include challenges brought by generic drug makers under Paragraph IV of the Hatch-Waxman Act to expedite market access, as well as reviews performed by the Patent Trial and Appeal Board (PTAB).
The Price-Control Temptation
More concerning for the future of pharmaceutical innovation was the praise Stephen Schondelmeyer of the University of Minnesota College of Pharmacy heaped on European health technology assessment (HTA) regimes. By insisting that “value must always include an accounting for price” and urging U.S. agencies to replicate such European practices, he invited the kinds of administrative ceiling prices that other jurisdictions use HTA to accomplish.
In the United Kingdom, for instance, the National Institute for Health and Care Excellence (NICE) will reimburse a new therapy only if its incremental cost-effectiveness ratio falls below a rather low threshold of cost per quality-adjusted life year (QALY).
In Germany, the process set by the German Medicines Market Reorganization Act (AMNOG) follows a similar template. The independent Institute for Quality and Efficiency in Health Care (IQWiG) issues a clinical-benefit score, which sets a hard boundary for the price that the agency negotiates; failure to reach accord triggers a statutory discount that locks the product into “reference-price” status.
These arrangements are not neutral yardsticks. They are monopsony bargaining chips that cap launch prices and propagate globally through external-reference pricing rules. These price controls have had deleterious effects on the production of innovative pharmaceuticals abroad.
When Schondelmeyer urges U.S. policymakers to “do that in America as well,” he is therefore calling, whether explicitly or not, for a centralized cost-effectiveness gatekeeper whose primary instrument would be a price veto. Such a veto would compress the very revenue streams that finance next-generation cures and that, by design, shift the risk of underpricing innovation onto those patients who never see therapies that become unviable under an HTA cap.
This approach would fundamentally alter the American pharmaceutical equilibrium that Markus Meier, a former assistant director at the FTC, aptly summarized: the 90% of prescriptions that are filled with generics account for only 20% of spending, while brand-name pharmaceuticals capture 80% of revenue from the remaining 10% of prescriptions. The U.S. pharmaceutical ecosystem couples incentives to launch new drugs with the deep discounts on generics.
It’s also the system that cross-subsidizes the lion’s share of global clinical R&D. Superimposing European-style reimbursement ceilings in the U.S. market could choke off the revenue streams that would finance next-generation cures.
Policy Implications
The most important challenge to addressing drug affordability and other issues that U.S. patients confront lies in distinguishing which reforms amount to surgical corrections and which represent systemic disruption. At a high level, weakening patents or importing European price controls risks broad damage to the research ecosystem.
The United States remains the world’s biomedical engine because it rewards both breakthrough molecules and meaningful incremental advances. Before accelerating every reform proposal, policymakers should apply empirical discipline: will the change in question actually accelerate generic entry, or simply inject legal uncertainty into R&D without shortening effective exclusivity? Sauer’s data suggests a stable system, not one in crisis, and counsels for measured rather than radical intervention.
Further legitimate competition concerns can be addressed through targeted enforcement without dismantling patent incentives wholesale. The cleaner path to lower prices lies in bringing cases against specific anticompetitive conduct and proving those cases in court, not in grafting European-style price controls onto an already-functioning generic-transition mechanism.
The listening session’s subtitle—”Lowering Americans’ Drug Prices Through Competition”—captures an important policy goal. But the conversation at times conflated competition with de-propertization and ex-ante price setting. True competition harnesses rivalry within a predictable patent framework and lets price erosion occur only after innovators have earned returns sufficient to finance the next generation of therapies. The stakes for getting that balance right have never been higher.
