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Markkula Center for Applied Ethics

Does Big Pharma Need Reform?

A pile of generic tablet and capsule medication in pre-packaged foil cards.

A pile of generic tablet and capsule medication in pre-packaged foil cards.

Noah Kuehn ’23

Noah Kuehn is majoring in biomedical engineering with a concentration in biomolecular engineering and is a 2022-23 health care ethics intern at the Markkula Center for Applied Ethics. Views are his own.


It is no secret that drug development is expensive. The mean estimates of investment needed to bring a new drug to market range from $1.3 billion to $2.8 billion. These costs are created by the intensive discovery, development, and clinical trial processes required by the FDA’s New Drug Application (NDA). The time spent on these processes infringes on the original 20-year patent exclusivity, adding pressure for companies to regain their investments. Without their patent, companies lose their exclusivity and experience a severe reduction in revenue called the “patent cliff.” The active ingredient can become “generic” through the Drug Price Competition and Patent Term Restoration Act of 1984, more commonly known as the Hatch-Waxman Amendments. Other manufacturers may join the market and produce the drug through the Abbreviated New Drug Application (ANDA). These new manufacturers do not need to repeat the expensive NDA process. Generic manufacturers need to only prove bioequivalence to the original approved therapeutic. 

This added competition brings the price of the drug down. The entry of generics lowers the price by a median of 30% at the entry of the first manufacturer to the market and more than 95% when multiple manufacturers start producing. In a for-profit health care system, generics play a vital role in making therapeutics affordable and accessible. To delay the “patent cliff,” pharmaceutical companies prevent generic formation through evergreening. Evergreening is the process in which companies artificially extend the lifetime of their monopolies through strategic patents or other exclusivities. 

How Evergreening Works

Pharmaceutical companies often create small adjustments to the delivery, uses, and packaging of their products. These improvements result in patents, which may be valid improvements or inappropriately applied to the drug. Either way, these patents are required to be filed in the Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the Orange Book). This is the FDA’s database of active drugs. Pharmaceutical companies use these patents to retain exclusivity past the original 20 years. Generic manufacturers must disprove or invalidate each of the patents listed within the Orange Book if they want to begin seeking FDA approval to produce their bioequivalent. This practice of adding patents is widespread and growing. From 2005 to 2015, the number of drugs with added patents increased by 53%

Patent protection is not the only mechanism by which pharmaceutical companies maintain exclusivity. A large number of exclusivities exist to promote research in non-economically viable diseases. These exclusivities are strategically exploited. New patient population exclusivity, new product exclusivity, pediatric exclusivity, and indication exclusivity are all methods used by companies to increase the amount of time they may hold exclusivity. This practice is on the rise. Both the number of drugs with added orphan drug exclusivity and the number of times intended use codes, which allow for indication exclusivities, have been added have tripled from 2005 to 2015

In addition to patent protection and exclusivity, regulatory requirements are another barrier to entry for generics. Biologics are a rapidly growing class of complex drugs made from other organisms. The generic process for biologics has been nearly unattainable by stiff regulation constraints. In 2009, an “abbreviated approval pathway” was created through the Biologics Price Competition and Innovation Act. This seeks to make the generic process easier to navigate in the expanding field of biologics. 

Insulin as an Example

The harm of exclusivity-induced high drug prices on patients cannot be overstated. Insulin is a life-saving biologic drug used to treat diabetes. Three companies, Eli Lilly, Novo Nordisk, and Sanofi, produce three separate drugs that mimic the effects of insulin. In doing so, they control 90% of the global insulin market.

The additional protection time prevents generics from entering the market and the dramatic decrease in price caused by competition. 

In recent years, these manufacturers have created “authorized generic” versions of their insulin products, such as Insulin Lispro and Insulin Aspart Mix. Confusingly, “authorized generics” are not generics. Authorized generics are approved brand name drugs that are marketed without the brand-name on their label. These drugs may be marketed by the brand-name drug company or with the brand name company’s permission. Although oftentimes marketed as less expensive than the brand-name product, they still cost more than true generics.

The Effects of Evergreening

For patients, high prices have a huge toll on their financial and bodily well-being. 14% of American insulin users spend more than 40% of their disposable income on treatment. 17% of insulin users in the U.S. had ration insulin for economic reasons. Rationing has devastating effects including heart disease, blindness, lower limb amputations, and death. There have been recent attempts to counteract insulin exclusivity by changing its biologics classification. Insulin is only one example of a drug with heavy evergreening and over-patenting. Commonly used drugs such as Inomax (nitric oxide), Definity (perflutren), and Sucraid (sacrosidase) are just three in a long list of drugs to receive multi-decade extensions of exclusivity. As evergreening restricts and delays generics, it limits the expansion of access. Evergreening therefore causes harm to patients who are financially unable to obtain their needed medication.

In addition to violating non-maleficence, limitations on access also interact with the bioethical principle of justice. In health care, justice is the group of values and norms used to distribute benefits, risks, and costs fairly. The effects of evergreening are unfair as it distributes aid solely on free-market exchanges, disregarding each individual's need, effort, contribution, merit, or right to equal share. Evergreening, through restriction of access, harms low-income individuals more than those who can afford treatment.

Implied in this discussion about intellectual protections is that beneficence does not motivate the pharmaceutical industry. In a healthcare system built within a capitalistic society, beneficence may never be the primary motivation of the pharmaceutical industry. Perhaps it should. Intellectual property protections may always have to exist to reward innovation. Under the current arrangement, evergreening harms patients, is unjust, and disregards the medical obligation of beneficence. Therefore, reform of the regulatory apparatus, such as the Biologics Price Competition and Innovation Act and recent changes to insulin classification, is needed to prevent the continued and growing exploitation of exclusivity. 


Mar 9, 2023

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