[Ip-health] Patently-O: Should a patentee with market power be allowed to charge monopoly prices?: March-In Rights and the NIH

Jamie Love james.love at keionline.org
Mon Oct 29 11:37:58 PDT 2012


http://www.patentlyo.com/patent/2012/10/should-a-patentee-with-market-power-be-allowed-to-charge-monopoly-prices-march-in-rights-and-the-nih.html

Oct 28, 2012

Should a patentee with market power be allowed to charge monopoly
prices?: March-In Rights and the NIH

Patents are no longer referred to as monopolies. Rightly so because
the exclusive rights granted do not normally confer monopoly power in
any relevant market. However, sometimes patents do confer so much
market power that the owner can charge prices that bear no relation to
the cost of manufacture (except for being well above that cost).
Abbott's patents covering its antiretroviral drug ritonavir likely
serve as one such example. Although not likely a true monopoly, Abbott
is able to charge much more than its marginal costs. In the US, Abbott
charges about $12 per 100 mg pill on its drug under the brand name
Norvir. And, most patients are on a multi-pill daily regimine. In
other high-income countries around the world, the drug is ordinarily
sold at less than $2 per pill. Apparently to relieve political
pressure, Abbott also lowers its price paid by the US Gov't for
purchases under medicare and medicaid. Abbott has also apparently
refused to allow its drug to be combined with other anti-viral
treatments that would reduce cost and make life generally easier for
patients.

The drug is protected by U.S. Patent No. 5541206, No. 5635523, No.
5648597, No. 5674882, No. 5846987, and No. 588604. And, there is
little suggestion that these patents are invalid.

In a recent filing, Knowledge Economy International (KEI) has asked
the NIH to use its March-In Rights to force Abbott to lower its price
charged to US consumers. http://keionline.org/node/1573. The legal
hook for KEI is that the US government funded a substantial portion of
the initial drug development. That initial funding was critical and
Abbott only fully committed and took-over all research funding once it
realized the high likelihood that the drug would be a major profit
source. Under Bayh-Dole, the US government has "march-in rights" for
patents such as these to ensure that the innovations are reaching the
marketplace in a way that serves consumers. However, the US government
has never actually used its march-in rights. Although the US Gov't has
not actually marched-in, a prior petition to the NIH is seen as one
reason why Abbott reduced its price charged for the drug to the U.S.
Gov't.

The Norvir situation is one of many cases that KEI sees as
problematic. More generally, the organization has asked the NIH to
adopt two rules to guide the use of March-In rights.

Rule 1: Ceiling on prices to U.S. residents: The Secretary shall
normally grant open licenses to third parties to use patented
inventions that have benefited from federal funding, subject to the
payment of a reasonable royalty and an appropriate field of use, if a
product or products based upon those inventions are sold in the United
States at prices [more than 10%] higher than in other high income
countries. . . . A licensee may rebut the presumption of unreasonable
pricing by providing evidence that its actual risk adjusted R&D costs
would not be recovered, but for the charging of higher prices in the
U.S. market, or other evidence specific to the risk adjusted costs for
the licensed invention.

Rule 2: Use of invention for a dependent co-formulation technology:
The Secretary shall grant licenses to third parties to use patented
inventions that have benefited from federal funding, subject to the
payment of a reasonable royalty and an appropriate field of use, if a
product based on those patented inventions: (a) is a drug, drug
formulation, delivery mechanism, medical device, diagnostic or similar
invention, and (b) is used or is potentially useful to prevent, treat
or diagnose medical conditions or diseases involving humans, and (c)
its co-formulation, co-administration or concomitant use with a second
product is necessary to effect significant health benefits from the
second product, and (d) the patent holder has refused a reasonable
offer for a license.

I expect that the NIH will again reject this petition and refuse to
exercise any march-in rights or develop a framework for the future.
However, you may begin to wonder why Congress included march-in rights
if they are never to be used.

-- 
James Love.  Knowledge Ecology International
http://www.keionline.org, +1.202.332.2670, US Mobile: +1.202.361.3040,
Geneva Mobile: +41.76.413.6584, efax: +1.888.245.3140.
twitter.com/jamie_love




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