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When the US drugs company Abbott Laboratories acquired a small division of the German chemicals group BASF for $6.9bn 23 years ago, its shares fell on fears that it had overpaid. But the deal was an amazing bargain.

Humira, the promising medicine that came with it, is now the industry’s biggest blockbuster, with cumulative revenues of more than $200bn. The anti-inflammatory drug used to treat rheumatoid arthritis and a range of other autoimmune conditions, is very expensive, costing more than $80,000 a year per patient in the US.

Humira has stretched government budgets all around the world: Abbott’s successor AbbVie was this week accused by a public interest group in the Netherlands of making excess profits of €1.2bn there. The case is one of many challenges the company has faced to what the Dutch Pharmaceutical Accountability Foundation calls its “goose with golden eggs”.

The drug that emerged out of Nobel Prize-winning research at Cambridge university is a specialist medicine. It has been prescribed to 1.4mn patients, compared with hundreds of millions now taking statins to reduce cholesterol. Biologics such as Humira, genetically engineered with living cells, can change patients’ lives but their price is now a painfully high barrier.

Unless it is lowered by changes to patent systems or tougher limits on prices, many will miss out. Pharma companies are increasingly focusing their efforts on medicines that are expensive to develop and are targeted at smaller sets of people. It is becoming a winner-takes-all system in which prices get pushed out of ordinary reach.

The US price of Humira, which AbbVie has increased more than 20 times to exploit its monopoly there, is finally under pressure. Having been legally shielded until now, the drug this year faces competition from nine “biosimilars” such as Amgen’s Amjevita. This may bring relief to patients who have faced bills of thousands of dollars, despite being insured.

Healthcare should not be like this, and would not be if the patent system worked as intended. The case demonstrates how drug companies have stretched out patents and monopoly profits for longer than the 20 years they are allowed to support risky research and development. Humira’s US patents started to expire in 2016, but AbbVie kept its hold over the world’s most lucrative market.

The company settled with competitors that had developed biosimilars to Humira: they could start selling them in the EU from 2018, provided they left the US market alone until this year. It erected such high legal barriers around Humira, with a “patent thicket” of more than 130 US patents, that rivals agreed to a global pricing truce.

This is the irony of this week’s Dutch legal action. The foundation says that AbbVie was wrong to make such high returns in the Netherlands between 2004 and 2018. “It has a duty of care to society. It should not just extract profits because it can,” says Ellen ‘t Hoen, director of Medicines Law & Policy, who advises the foundation.’

But the patent principle was followed in Europe: Humira’s protection lasted no longer than due and prices tumbled as rivals entered. The effect was similar to the “patent cliffs” of the mid-2000s when drugs such as Pfizer’s statin Lipitor lost billions in sales to generics (biosimilars are less exact substitutes).

Perhaps AbbVie struck lucky with Humira and the industry should not be judged by one company with net revenues of $58bn last year. But nearly half of new drugs launched in the US in 2020-21 were priced at more than $150,000 a year, so others have followed its lead. An entire industry has moved towards making products that are breathtakingly expensive.

AbbVie has not broken US law: one effort to challenge it on antitrust grounds failed in August when an appeals court ruled that it was entitled to hold so many patents. Tactics such as patent thickets and “product hopping” by launching new drugs based on the original medicine are not barred, as long as a company is careful and employs enough lawyers

But if drug companies push the system this hard, citizens are bound to lose faith. The Affordable Care Act of 2010 was intended to foster biosimilar competition, but did not live up to its title. The US government has now mandated Medicare, the health insurance system for over-64s, to start negotiating prices with companies later this year, with caps from 2026.

It might also ask whether the patent framework is fit for purpose. Drug companies say that high rewards are required to offset the high risks of drug development. But most early stage research is done in university laboratories or at small biopharma companies. Do big companies that acquire the likely winners merit more than 20 years of patent protection?

It is not easy to design a system that rewards innovation without pushing up prices so far that societies lose more than they gain. But the one that made $200bn for AbbVie cannot be right.

john.gapper@ft.com

 

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