Evergreening at-Risk

Brand-name pharmaceutical manufacturers leverage patent protection, regulatory loopholes, and the atypical economics of the prescription drug market to strengthen and prolong market exclusivity for their products. These phenomena, commonly known as “evergreening,” are among the most pressing and unsolved public policy challenges on the national agenda. With far-reaching implications on public health, social justice, and innovation policy, the evergreening epidemic has captured growing attention from Congress, the president, the judiciary, regulatory authorities, and the general public. Irrespective of nationwide uproar, the concept of evergreening remains surprisingly misunderstood and grossly undertreated. This article fills these gaps. First, this article defines evergreening—thus far a confused and obscure concept—as a problem of skewed overpatenting incentives. It explains how brand-name manufacturers leverage follow-on “improvement” patents to strengthen and prolong market exclusivity for existing drugs. In light of this leverage, brand-name manufacturers’ incentives to pursue improvement patents far exceed the social value of such improvements. Then, inspired by generic manufacturers’ “at-risk” market launches, this article proposes an original remedial approach to scale back brand-name manufacturers’ overpatenting incentives. When generic manufacturers venture into the drug market to compete with a branded drug that is still under patent protection, they expect to earn generous duopoly profits alongside brand-name manufacturers. At the same time, however, they also risk losing these profits if an infringement lawsuit materializes against them and the challenged patents are proved valid and infringed. Mirroring this logic, this article proposes that brand-name manufacturers be required to evergreen at risk. Thus, brand-name manufacturers making monopoly profits by enforcing follow-on patents that prolong market exclusivity for existing drugs, would also expect to lose these additional profits if the challenged patents are subsequently proved invalid. Instead, these wrongly obtained monopoly profits would be vested with the first generic manufacturer to successfully invalidate the patent and open the market to price-reducing competition. This approach aligns the divergent interests of brand-name and generic manufacturers with the social interest—enforcing follow-on patents that are likely to cover nontrivial improvements while invalidating those patents that are likely to cover trivial improvements.