The Nation: House Democrats Launch a Challenge to Big Pharma
A bill from Representative Lloyd Doggett (D-TX) has the potential to start a new national conversation about the federal government’s relationship to intellectual property, monopoly power, and human needs. The bill, HR 6505, would allow Medicare to negotiate with drug companies to secure reasonable prices for medications—and, if pharmaceutical companies refuse, the bill permits the government to suspend exclusivity for drug patents and authorize other companies to offer generic competition.
The measure has already picked up more than 80 co-sponsors, including Representatives Keith Ellison, Raul Grijalva, John Garamendi, and Jan Schakowsky, and is backed by a broad coalition of progressive organizations. Representatives Ro Khanna (D-CA), Peter Welch (D-VT), and Elijah Cummings (D-MD) helped craft the bill, according to Doggett staffers.
Drug prices in the United States are nearly twice what they are in the rest of the world; the 20 top-selling drugs cost three times more in the United States than they do in Great Britain. This is in large part because of the exclusive patents given to drug companies for medicines often developed through publicly funded research. In other words, drug companies are shielded from competition, and so are able to charge US citizens high prices for the intellectual property their tax dollars helped to create. (A Project HOPE study found that government funding played an indirect role—”for example, by funding basic underlying research”—for almost half of the drugs approved between 1988 and 2005.) Lobbying efforts have so far dissuaded elected officials from regulating drug prices, or even from allowing Medicare—which pays for nearly a third of all prescription drugs in the United States—to negotiate with pharmaceutical companies.
Donald Trump has repeatedly promised to cut “ripoff drug prices.” Yet so far his administration has enacted no major policy to do so. In contrast, Doggett’s bill could mark a significant advance in the fight to bring down drug prices. It requires the secretary of Health and Human Services to negotiate Medicare drug prices with pharmaceutical corporations. If a pricing agreement is not reached, the bill instructs the secretary to override the license holder’s exclusivity and give other companies the right to manufacture and sell the same drug, after paying royalties to the patent holder.
Public Citizen estimates the bill would save $16 billion per year. It would be the first measure that permits the government to override drug-company patents since 1980’s Bayh-Dole Amendment, a law that applies only to pharmaceuticals developed with government funding. Bayh-Dole’s so-called “march-in” authority gives the government the right to override exclusive patents and bring prices down when manufacturers fail to meet public “health and safety needs.” Despite high drug prices, no presidential administration has exercised this authority. Doggett told The Nation that he sought action to bring down drug prices under Bayh-Dole from the Obama administration but his request was denied. A letter sent early in the Trump administration from 50 members of Congress asking the president to use what Doggett calls “taxpayer rights” also failed to provoke action.
“If it’s taxpayer-funded research, then the taxpayer ought to get a fair deal on the purchase of the product,” Doggett said.
“If it’s taxpayer-funded research, then the taxpayer ought to get a fair deal on the purchase of the product”—Texas Representative Lloyd Doggett
The bill’s intent is to reconsider the role of intellectual property in health care, by weighing the privilege of an exclusive, government-granted patent against other factors in the public interest. “We’re saying that the government granted you a monopoly. If you insist on monopoly prices, [if] there’s no restraint and this is denying access, you’re abusing that monopoly,” Doggett said. “The government can then come in and license competitors to use your intellectual property, and they have to pay you fair value for your property.”
“We’re not taking it,” Doggett added. “We set out standards in the bill for how that would be paid. And we provide an incentive to reach reasonable negotiations so you never get to that point.”
If negotiations fail, the bill sets a price for the drug based on what’s paid in other developed countries. Those prices are almost always significantly lower than those paid in the United States. This concept employs what is known as “compulsory licensing,” where government makes an otherwise patent-protected invention available to others under certain conditions. Doggett, however, prefers the term “competitive pricing.” HR 6505 would weaken the anti-competitive nature of drug monopolies and force manufacturers to compete for market share.
The bill uses the principle of “reasonable compensation” to set royalties that other manufacturers would pay to the patent holder. Rates would be based on the level of government funding in the research that led to the drug, as well as the manufacturer’s level of investment in its development. The effect of pricing on public health would also be considered.
“This bill recognizes that the vast majority of drug innovation takes place in universities and research centers,” Representative Khanna told The Nation. But once a new drug has been discovered, Khanna continued, “a bunch of Penn Wharton Business School grads try to figure out how to sell it and make money, and it’s the salesmanship that’s rewarded. Salesmanship should be rewarded–but it shouldn’t capture an absurd price.”
Khanna added, “The goal is to eliminate the rent capture that special interests are currently given. Doggett’s bill is pro-competition. It says, ‘Let’s not have a state-sanctioned monopoly like China has.’”
Big Pharma usually defends the patent system as a necessary incentive for innovation. But as Doggett and Khanna noted, record profits have not led to higher R&D budgets. “After the billions of dollars of unjustified windfall that the drug companies got out of the Trump tax bill,” Doggett told The Nation, “we haven’t seen any significant increase in research. We’ve seen their executives and stockholders profit nicely, but prices haven’t gone down and research hasn’t gone up.”
James Love, director of Knowledge Ecology International (KEI) and a leading voice in government patent innovation, said in a blog postthat the Doggett bill represents a political “turning point,” noting that it reflects “broad support for using robust compulsory licensing authority to protect access if negotiations on prices break down.”
The number and breadth of the bill’s co-signers–including mainstream Democrats like Tim Ryan and Debbie Wasserman-Schultz–suggests that the idea is gaining wider political acceptance. Doggett is realistic about the hurdles the bill would face, however, even if Democrats regain the House in November. One is the Senate’s 60-vote “roadblock” to overcoming a filibuster, as well as the influence of drug manufacturers. “One cannot underestimate the duplicity, or the lobbying and campaign-finance power, of the pharmaceutical lobby,” Doggett said.” They concentrate it on those committees that have the biggest say here, and they don’t discriminate against Democrats. They give generously to both sides.”
Doggett called upon “whoever has [House] leadership in January” for immediate hearings. “We want a full and open process,” he said, “where Pharma can come forward and discuss this–and so can the victims of Pharma.” He added that even under a Democratic majority, public demand will be crucial to action.
Medicare, which covers 16 percent of the population, pays for roughly 30 percent of all drug purchases in the United States, according to the Kaiser Family Foundation. What about everyone else? Khanna says he is developing a bill that builds on Doggett’s approach and applies it to all US insurance coverage.
Doggett’s bill reframes, for the better, the debate between patent rights and the impact of monopoly abuse on the public interest. (That debate need not be confined to pharmaceuticals. KEI lists a number of statutes that involve the “non-voluntary use of patented inventions,” particularly in the energy field.) Each patent granted to a private company is, in effect, a stand-alone monopoly granted by the US government. The people who pay the price for those monopolies, with their money and their bodies, deserve a vigorous debate about their future.