Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Congressional hearings are frequently exercises in grandstanding, and high drug prices are near-universally unpopular. So it was no surprise, then, that drug pricing featured prominently in a Senate confirmation hearing Wednesday for Alex Azar, President Donald Trump's nominee to run the Department of Health and Human Services.

The pharma industry likely took heart when Azar, a former Eli Lilly & Co. executive, blamed the whole health-care system, rather than drugmakers alone, for high prices. 

But Azar also went off the standard pharma script when he said he planned to target industry efforts to unnaturally extend drug monopolies by "gaming" the patent system. That suggests he's not as pharma-friendly as some may assume. 

Arrested Development
Drug stocks are working to climb out of a slump

Azar suggested he'll try to make sure drugs face generic competition soon after their guaranteed period of market exclusivity and principal patent run out. Follow-on patents and delaying tactics should not be able to preserve monopolies as they currently do, he argued. He cited a rule change during his Bush-era HHS stint, which made it harder for drugmakers to delay generic entry, as a possible blueprint for future action.

Any step he takes on this front could have major consequences. Many of the world's best-selling medicines were approved nearly 20 years ago and are still going strong. Wall Street expects they have more years of strong sales ahead of them -- particularly in the U.S. -- even though the lead patent on some of these medicines has expired or will soon.

Long Life
Several of the world's best-selling drugs were approved 15 or more years ago
Source: Bloomberg

Some of this prolonged dominance is because many of these are complicated and heavily regulated drugs made in living cells; it's not easy to replicate them. But drugmakers have also put patent roadblocks in the way of competitors; AbbVie Inc.'s heavily patented Humira is a prime example. Azar's former employer has used similar techniques to extend the lifespan of its 20-year-old best-selling drug Humalog.

Barrier
AbbVie has amassed a formidable array of patents around its inflammation bestseller
Source: Bloomberg

If Azar is serious about making it tougher to game the patent system, then drugmakers would have a harder time squeezing years of extra revenue out of medicines. With the industry's R&D productivity continuing to plummet, that could take a bite out of profitability.

His remarks might have just been a show for skeptical senators -- Azar likely wanted to come out strong on drug pricing because of his industry connection.

But he emphasized he would have different priorities as a public servant than as a pharma executive and suggested his inside knowledge would help him make a real impact. If that ends up being the case, then old drugs might be in trouble. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net