Patent-Law Change Would Raise Medical Costs

Congressional Budget Office estimates $1.3 billion increase in federal health-care costs over a decade

A patent law change sought by the pharmaceutical industry could cost federal health-care programs $1.3 billion over a decade by delaying new generic medicines, an analysis by the Congressional Budget Office found this summer, according to people familiar with the matter.

Pharmaceutical trade groups are asking Congress to exempt drug patents from being challenged through an administrative process that is cheaper and faster than the federal courts. The procedure has become popular with generic-drug companies looking to sell copies of brand-name products.

Drug makers say hedge-fund manager Kyle Bass used the procedure to challenge companies whose shares he is betting against, or selling short. The Coalition for Affordable Drugs, a group created by Mr. Bass, has this year challenged more than 20 patents held by companies including Biogen Inc., Celgene Corp., and Jazz Pharmaceuticals PLC.

The Pharmaceutical Research and Manufacturers of America, also known as PhRMA, and the Biotechnology Industry Organization, or BIO, say brand-name pharmaceutical patents should be excluded from the procedure, called Inter Partes Review, or IPR, through patent legislation that Congress is considering.

“Our solution,” said Mit Spears, general counsel at trade group PhRMA, “is to essentially exempt [pharmaceutical] products” from IPR challenges.

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