The Washington Post: A rare deterrent to limitless drug price increases may die under Trump
As drug prices have soared, lawmakers and patient advocates have pushed the federal government to deploy for the first time a powerful deterrent: a legal provision that allows it to suspend a drugmaker’s patent and license someone else to produce the drug.
Now, responding to industry alarm over those demands, the Trump administration is proposing to strictly limit the little-known power.
The move by the Department of Commerce is supported by drug manufacturers and research universities but could undermine Trump’s populist message of attacking drug prices. He declared in his first news conference after his inauguration that drug companies are “getting away with murder” and has called lowering prices one of his “greatest priorities.’’
Critics say the Commerce Department move is a triumph for industry.
“If tough talk and tweets could stop price gouging, consumers could celebrate,’’ said Rep. Lloyd Doggett (D-Tex.), who said the administration is being swayed by drug company influence.
The Commerce draft plan would prohibit the government from suspending a drugmaker’s exclusive patent over excessive pricing. It targets an obscure, never-used provision of a 40-year-old law called Bayh-Dole that is supposed to protect taxpayer interests in government-funded inventions, such as drugs discovered using federal grant money.
The law gives the government “march-in rights’’ to circumvent a patent (and license someone else to market a drug) if the original therapy is not made available to the public “on reasonable terms.’’ But the phrase “reasonable terms’’ is not defined in the law and for years has been the subject of competing interpretations.
The Trump administration plan, which was published as a “summary of intended actions’’ in December but received little attention, would come down clearly in favor of drug companies and major research universities.
March-in rights have never been used by the government, which historically has encouraged the flow of discoveries to private business for development. The National Institutes of Health, the leading drug research agency, has declined multiple times to use march-in rights to control prices — including under Democratic President Barack Obama.
But in today’s hyper-charged debates over the costs of U.S. prescription drugs, especially with the advent of biotechnology and gene therapies that cost hundreds of thousands of dollars a year, the government’s powers are getting a closer look.
Consumer advocates argue the threat of government action is one of the few checks on drug prices and could give drug companies second thoughts about gouging consumers on drugs that were invented with public funding.
“The pharmaceutical manufacturer takes taxpayers’ money that was invested, and takes the government monopoly that is granted, and charges monopoly prices without any countervailing force,’’ Doggett, the Democratic chairman of the House Ways and Means subcommittee on health, said in an interview.
Constituents in his west Texas district, he said, “think they are getting ripped off by the same company that used their tax money.’’
Doggett led 50 Democrats who wrote to Trump in 2017 urging the president to order NIH to create guidelines on when excessive pricing would trigger government action. The letter cited Trump’s own declaration after his 2017 inauguration that drug companies were on the White House target list.
The nation’s research universities, where federally sponsored research is conducted, have pushed the Trump administration to head off these initiatives. Universities reap millions of dollars a year from royalties on inventions they license to private companies.
The industry and academic institutions argue that march-in rights, or even the threat of march-in rights, raise the specter of price controls and will discourage private investors from backing new discoveries.
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“If there is a trap door that makes that intellection property useless, and there is a fear that might occur, then you can imagine a company is not going to invest the funds necessary to bring the invention to market,’’ said Stephen J. Susalka, chief executive of the AUTM, which advocates for research institutions over patents and licensing.
They have found a friendly audience in Trump’s Department of Commerce, where the president’s populist political rhetoric is colliding with his equally strong desire for industry-friendly deregulation.
The department’s National Institute of Standards and Technology (NIST) is scheduled to issue a final draft this month of its proposal, which it is calling a “discussion document.’’ The draft plan would block any government agency from exercising march-in rights based on the price of a product. Exclusivity rights could still be suspended in times of national emergency — such as an epidemic.
NIST’s director, Undersecretary of Commerce Walter G. Copan, is a Trump appointee and a longtime expert in the transfer of technology from government-sponsored labs to the private sector. He was unavailable for comment for this article, pending the release of a final document, expected later this month. The final framework will serve as a starting point for drafting new regulations, a process that would take months.
March-in rights “are unfortunately not well defined in current legislation, [which] has led to ambiguities and the attempts to use march-in rights as price control mechanisms,’’ Copan said at a public hearing last year. Holding back prices, he said, “was not the intent at all of the authors’’ of the law.
Industry and university officials who support NIST’s approach say march-in rights were never intended to be used for pricing. The proposal has also galvanized fervent property rights activists such as Andrew Schlafly, son of the late conservative activist Phyllis Schlafly.
“March-in must never be twisted into a means of enacting price controls,’’ Schlafly wrote in public comments to the government.
But there are plenty of patent experts who disagree that the law’s “reasonable terms’’ should be narrowly applied.
“We have march-in rights for a reason, as a safety valve, and pricing is one of just many issues that could make something not reasonably available,’’ said John R. Thomas, a professor at Georgetown Law who specializes in intellectual property and, as a visiting scholar, wrote a Congressional Research Service report on the subject. “The idea that the price is too high fits pretty comfortably in the wording of the statute.’’
A group of consumer and social justice organizations circulated an open letter to Congress this month warning against the NIST proposals.
A year ago, Trump unveiled a “blueprint’’ for lowering prescription prices, which included accelerating approvals for generic prescription drugs to provide greater competition. His administration has proposed a rule to eliminate from Medicare Part D all drug company rebates made to pharmacy insurance benefit managers, which are blamed for driving up list prices.
The administration has said it wants to use international comparisons to hold back prices on Medicare drugs delivered in hospitals and doctor’s offices. It also wants to require drug companies to include list prices in advertising.
The 1980 Bayh-Dole law is named for its Senate sponsors, Democrat Birch Bayh of Indiana and Republican Bob Dole of Kansas. It set up a framework for the modern system that allows federally funded research institutions to license discoveries.
Dole and Bayh wrote an op-ed in The Washington Post in 2002 that said controlling prices was never their intent. Advocates, however, have been quick to note that Dole and Bayh were no longer senators when they wrote that article. Dole, who left the Senate in 1996 during his campaign for president, became a Pfizer TV pitch man for Viagra in 1998; Bayh, who died this year, represented the Washington interests of numerous corporate clients after he left the Senate in 1981. In 2002, he was a registered lobbyist for multiple companies.
Democratic senators in 2016 asked the Obama administration to exercise march-in rights in response to drug prices and were rebuffed. Obama’s Health and Human Services secretary, Sylvia Mathews Burwell, rejected that request, saying, “The statutory criteria are sufficiently clear and additional guidance is not needed.’’
“It was never the intent of Congress to use the Bayh-Dole Act to exercise government price controls,’’ asserted the Pharmaceutical Research and Manufacturers of America, the drug industry lobbying group, in written comments as NIST was drawing up its proposed rules.
But Thomas, the Georgetown Law professor, said that analysis is not correct.
“Post-enactment legislative history,’’ he said, “isn’t really the way the game is played.’’