Recent changes in discretionary denials of drug patent challenges

Abstract

Recent policy shifts at the U.S. Patent and Trademark Office (USPTO) have sharply limited the use of two administrative pathways for patent reviews, inter partes review (IPR) and post-grant review (PGR). Congress created these administrative pathways to provide a faster and less costly way to challenge weak patents. Recently, the USPTO has expanded the use of “discretionary denials,” invoking a new “settled expectations” rationale that blocks IPR petitions for patents more than about six years old. From May to September 2025, 60% of 506 requests for discretionary denial were granted, triple historical levels, including one-third involving drug patents. These changes are especially consequential for biologic drugs, where large “patent thickets” can delay biosimilar entry and sustain high drug prices. Additional procedural reforms, such as reducing allowable brief length by 60% and consolidating all institution decisions under the Director, further constrain challengers and reduces transparency. Together, these policies undermine the congressional purpose of ensuring that invalid patents do not block competition. Congress should clarify when discretionary denials are appropriate and prohibit non-merits-based rationales like “settled expectations” to preserve effective patent oversight and timely access to affordable medicines.

Patents provide market exclusivity to brand-name drug companies for their drugs, allowing them to exercise monopoly power.¹ Brand-name manufacturers build up “patent thickets,” which are dozens, or sometimes even hundreds, of patents directed to one product. Patent thickets often include “secondary” patents on metabolites, methods of use, or delivery systems, many of which are filed after FDA approval of the product.² These thickets often extend exclusivity for many years past the exclusivity on the patent covering the drug's active ingredient. As a result, generic or biosimilar competitors have to challenge these brand-name drug patents in litigation to enter the market, which can take years and costs millions.³ In the U.S., competition is the primary way drug prices are lowered, sometimes by 80% or more for generic drugs, after competition enters the market. But competition can begin only after key patents in a brand-name manufacturer's thicket are invalidated, designed around, or expire.

Inter partes review: an administrative pathway to challenge patents

In 2011, to address the growing number of potentially invalid patents being issued by the US Patent and Trademark Office (USPTO), Congress created two lower-cost administrative procedures called inter partes review (IPR) and post-grant review (PGR) to challenge such patents. The process was designed to be faster and less expensive than litigation.

Unlike traditional litigation, administrative patent review is conducted by specialized administrative patent judges within the Patent Trial and Appeal Board (PTAB) at the USPTO, who often have relevant scientific and technical backgrounds. The legal standard used to determine whether a patent should be invalidated is whether the case is proven with a “preponderance of the evidence,” which is less challenging to meet than the “clear and convincing evidence” standard required in court. This makes IPR an efficient way to eliminate invalid patents that might otherwise block competition. Additionally, as measured by their high affirmance rate on appeal, PTAB determinations on validity are also likely to be accurate.⁴

The administrative patent challenge pathway plays an important role in accelerating the entry of biosimilars and generic drugs into the market, thereby lowering costs for patients and payers. Life sciences patent administrative challenges cost about $725 000 and take only 12 months.³ By contrast, life sciences patent litigation costs about $6.1 million and typically takes years to resolve.³ Previous studies have shown that administrative reviews have played important roles in invalidating erroneously granted biologic drugs, resulting in invalidation of 14 of 20 (70%) patents that prevented biosimilar market entry. Biosimilar market entry likely saved patients and payers billions of dollars, with median revenues for the branded drugs dropping by 79% in the year after patent invalidation via IPR.⁵ Previous studies have shown similar price drops for small molecule drugs after IPR patent invalidation.⁶

Discretionary denials and settled expectations

In the summer of 2025, the current administration started constraining the administrative patent review pathway by invoking a once-rare procedure known as “discretionary denial” to block such challenges. While in 2024, the PTAB approved nearly 75% of all requests, that rate declined to approximately 35% by September 2025 due to aggressive application of discretionary denials. These denials were based on determinations by USPTO Deputy Director Coke Morgan Stewart (then serving as the Acting Director) or her delegates, who adjudicated 506 requests for denial through September 30, 2025, granting 304 (60%). By contrast, from 2018-2021, there were an average of only 105 discretionary denials per year.⁷ Among the 506 decisions on requests for discretionary denial in 2025, drug patents accounted for 42 (8%), of which 14 (33%) were discretionary denials (Table 1).

Table 1.

Rationales for discretionary denials/discretionary referrals.

	All count (%)	Drug only count (%)
Total Discretionary Denials Granted (Patent Owner Wins)a	304/506 (60)	14/42 (33)
Expected IPR final written decision date after trial start date	185 (61)	5 (36)
Settled expectations	175 (58)	3 (21)
District court may not stay litigation	82 (27)	2 (14)
Meaningful investment in parallel proceedings	58 (19)	4 (29)
Inefficient use of Board resources	41 (13)	6 (43)
Multiple District Court proceedings	16 (5)	0 (0)
Total Discretionary Denials Rejected (Competitor Wins)a	202/506 (40)	28/42 (67)
No settled expectations	120 (59)	17 (61)
Early challenge to patents	93 (46)	19 (68)
Expected IPR final written decision date before trial start date	77 (38)	11 (39)
USPTO substantive error	56 (28)	11 (39)
Litigation stayed	46 (23)	5 (18)

Abbreviations: IPR, inter partes review; USPTO, US Patent and Trademark Office.

^aNumbers may add up to more than 100% because each IPR may have multiple rationales for denial or referral.

To justify granting such a wide swath of discretionary denials, Stewart introduced a novel “settled expectations” rationale, arguing that once a patent had been in force for more than about six years, the patent owner develops a reasonable expectation that it will no longer face administrative challenges. The average patent age at the time of discretionary denial was 5.6 years for drug patents, compared to 7.5 years for non-drug patents. But Stewart's approach is unprecedented. Before 2025, the settled expectations rationale never even existed; it now accounts for a large percentage of denials and is used even when administrative review petitions raise reasonable technical grounds for invalidation (Table 1).

The settled expectations justification undermines the purpose of the administrative review system by prioritizing the passage of time instead of the patent's technical merit. Administrative patent review was designed to be available throughout the life of a patent, ensuring that invalid patents could be challenged whenever they continued to harm competition or innovation. By contrast, the settled expectations justification shields older patents from review merely because they have existed for several years. This approach not only lacks statutory support, but it effectively restores the problem Congress sought to fix in 2011, in which invalid patents remained untested, thereby continuing to block generic and biosimilar entry.

Discretionary denials and procedural barriers

The USPTO has also implemented procedural and structural changes that make it harder for administrative challengers to contest a patent owner's request for discretionary denial. The USPTO has cut allowable brief lengths by 60% and has now consolidated all institution decisions before its new permanent head, Director John Squires. These actions will reduce efficiency, erode institutional expertise, and impede the consistency and predictability of administrative proceedings.

On September 1, 2025, the USPTO reduced the word count of filings from 14 000 (approximately 60 pages) to only 20 pages (approximately 5000 words). The median page count for patent owners was 36 pages (IQR 25-51), while challenger briefs averaged 45 pages (IQR 30-58). Page counts are important because patent owners can rely on just one strong reason for denial, while competitors must address all arguments against discretionary denials. When patent owners win, the USPTO usually gives only one reason (interquartile range [IQR], 1-3); by contrast, when challengers win, the USPTO gives around three reasons (IQR, 2-3). Prior to September 1, 2025, challenger briefs were 12 pages longer when successful (47 vs 35 pages), reflecting the extra arguments needed to win.

On October 17, 2025, Director Squires went even further than prior Acting Director Stewart. In a memo entitled “Bringing the USPTO Back to the Future,” Squires announced that he would personally decide whether to institute every IPR proceeding, thereby centralizing power not only over discretionary denials, but also over institution on the merits.⁸ By the terms of the IPR statute, this initial power cannot be reviewed judicially. Even more troubling, the Director's new policy allows him to issue “summary notices” that contain little to no explanation of denials. Since October 2025, Director Squires has issued 34 decisions, denying all 34 petitions (100%) with no explanation, no reasoning and no analysis. Now, the public may never learn why a patent challenge was rejected.

Policy recommendations

Administrative patent review is an important pathway for ensuring drug competition. But these pathways are being severely restricted by the current administration. By aggressively invoking discretionary denials, the USPTO is subverting an important administrative pathway that Congress specifically created to check weak patents. Despite limits on judicial review, seven different parties have brought lawsuits challenging the USPTO's increasing application of discretionary denials as not supported by the statutory framework.⁹

In the face of these new policies, Congress should step in and clarify when the USPTO Director can issue discretionary denials. Additionally, Congress should explicitly prohibit denials based on non-merits-based criteria open to interpretations such as “settled expectations.”

Administrative challenge institution should turn on patent validity, not the whim of the administrator in charge. Administrative challenges should be allowed to continue to work, as designed by Congress, to ensure that drug patents are valid and that competition from generic and biosimilar drugs emerges in a timely fashion to help patients gain access to affordable medicines.

Supplementary material

Supplementary material is available at Health Affairs Scholar online.

Funding

S.S.T. and A.S.K.'s research is funded in part by Arnold Ventures and the Commonwealth Fund. The funder had no role in the design or conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.