[Ip-health] Senator Sanders offers amendment to create compulsory licenses on medical inventions, for veterans

Thiru Balasubramaniam thiru at keionline.org
Fri Jul 24 05:51:05 PDT 2015


Senator Sanders offers amendment to create compulsory licenses on medical
inventions, for veterans

http://keionline.org/node/2290

Submitted by James Love on 23. July 2015 - 22:51


On Wednesday, July 22, 2015, the Senate Veterans Committee held a mark-up
to consider several bills. During the mark-up, Senator Sanders offered an
amendment, attached below, that would create a compulsory license mechanism
in the Department of Veterans Affairs, for patents on medical inventions.
(See amendment text below). The motivation for the amendment was a crisis
in the VA involving access to drugs for the hepatitis C virus (HCV).

The high cost of the new HCV drugs from Gilead and AbbVie combined with the
large number of Veterans living with HCV depleted the VA budget for drugs,
and blocked enrollment of patients for treatment. The VA then proposed
transferring $500 million from the VA Choice Program, which was set up to
allow veterans to get health care from non-VA doctors. Since May, Senator
Sanders has been pushing to VA to consider breaking the patents on
sofosbuvir and other HCV drugs, as an alternative to cutting benefits from
another VA program for veterans.

On May 12, 2015, Sanders asked the VA to consider using the "Government
use" provisions in the U.S. patent law, to authorize the VA to buy generic
versions of the HCV drugs. Sanders referred to 28 USC 1498(a), a section of
U.S. law that allows any federal agency to authorize the use of a patent
"by or for the United States without license of the owner." The statute
covers "a contractor, a subcontractor, or any person, firm, or corporation"
taking actions for a government entity. Courts have extended this power
even to institutions like the Smithsonian or the Federal Reserve.

The VA subsequently rejected Sander's proposal, citing the uncertainty over
the compensation required under 28 USC 1498(a). At the July 22, 2015
hearing, Sanders offered an amendment to that would have added language to
Title 38 of the U.S. Code, the statutes for Veterans Benefits. The
amendment would have created a compulsory licensing mechanism in Title 38,
and provide statutory guidance on the "reasonable and affordable royalty"
used to compensate the patent holder, "taking into account the budgetary
resources of the Department for the fiscal year in which the Secretary
seeks to acquire the medical technology." This was defined as follows:

"(c) REASONABLE AND AFFORDABLE ROYALTY.—In determining a reasonable and
affordable royalty under subsection (a), the Secretary shall consider the
following:

"(1) The impact of paying the royalty on the budget of the Department for
providing hospital care and medical services to veterans under chapter 17
of this title.

"(2) The extent to which the owner of the patented invention has recovered
or is expected to recover, through sales other than under this section, the
research and development costs incurred by such owner.

"(3) Such other factors as the Secretary considers appropriate, including
the impact of the patented invention on improving health outcomes for
individuals.".

While the amendment gave the Secretary of Veterans Affairs discretion to
determine if a price is "excessive or a barrier to care," it required such
a determination if:

"(1) the price of the technology is the primary factor prohibiting the
Secretary from being able to provide access to the technology to all
veterans for whom the technology is considered clinically appropriate; and
"(2) there is no comparable and equally efficacious technology available to
the Department at a reasonable and affordable price.

The amendment offered by Sanders made explicit and concrete the policy
objective of providing access for "all veterans", and ensured that the
agencies limited budget would be considered a constraint on the royalty
payments, rather than on access. Instead of putting patients at risk, the
amendment put the patent monopoly at risk.

The debate on the amendment took place from 1:04.10 to 1:23.31, and was
also referenced later in the mark up.

As is clear from the video, the Senators on the Committee were sympathetic
to Sanders' efforts to ensure that Veterans "did not die" because the
prices of medicines were too high. Senator Blumenthal (D-CT), a former
state attorney general offered to work with Senator Sanders on the
specifics of the amendment, and the Chair agreed to schedule a hearing on
the issue. After nearly 20 minutes of discussion, Senator Sanders agreed to
withdraw the amendment, and to work with others on the language, and on the
promised hearing.

KEI Commentary

The Senator Sanders proposal to have a specialized compulsory licensing
statute for patents can be seen as one of many specialized statutes that
provide mechanisms that weaken, limit or eliminate patent monopolies.
Several of these provisions in U.S. law are limited to specific contexts.
For example, there are at least four compulsory licensing statutes in Title
42 of the U.S. Code, including those involving (1) nuclear energy
technologies, (2) the Clean Air Act, and more recently, statutes involving
the (3) "Next Generation Lighting Initiative" and (4) "Energy Storage
Competitiveness." There is a special provision on patents and other
intellectual property in Title 30 relating to Black Lung Disease. The
Affordable Care Act create a system of compulsory licenses of patents on
biologic drugs, when the patents are not disclosed on a timely basis to
potential suppliers of biosimiliar drugs. There are general statutes for
cases where federal funds are involved (the Bayh-Dole March-In rights), for
government use (28 USC 1498(a)), or for when goods are imported into the
United States (19 USC 1337). The US statute on injunctions has turned into
a general purpose compulsory licensing statute following a Supreme Court
Decision in eBay v MercExchange. A half dozen federal antitrust laws are
used to mandate compulsory licensing of patents in diverse circumstances. A
more detailed a complete list of examples is available here:
http://keionline.org/cl

What Senator Sanders is proposing is to add one more mechanism in U.S. law
to overcome abuses of patent monopolies. Sanders wants to end the monopoly
if the price to Veterans is excessive, or is a barrier for their access.
Given the sacrifices that veterans have made for this country, Sanders
thinks they deserve this consideration. We agree.

More context:

May 12, 2015. Letter from Senator Bernie Sanders to the VA, asking for
compulsory licenses on Hepatitis C drugs.http://keionline.org/node/2230
May 12, 2015. Ed Silverman, Sanders Asks VA to Break Patents on Gilead and
AbbVie Hep C Drugs, WSJ.
June 19, 2015, Dennis Wagner, VA to outsource care for 180,000 vets with
hepatitis C, The Republic.

AMENDMENT NO.____ Calendar No.____

Purpose: To authorize the Secretary of Veterans Affairs to pay a reduced
amount in royalty to use a patented invention relating to certain medical
technologies.

IN THE SENATE OF THE UNITED STATES—114th Cong., 1st Sess.

S. _________

(title) _________________________

Referred to the Committee on _____________ and ordered to be printed

Ordered to lie on the table and to be printed

AMENDMENT intended to be proposed by Mr. SANDERS

Viz:

At the appropriate place, insert the following:

SEC. ___. USE BY DEPARTMENT OF VETERANS AFFAIRS OF PATENTS ON CERTAIN
MEDICAL TECHNOLOGIES.

(a) IN GENERAL.—Subchapter II of chapter 73 of title 38, United States
Code, is amended by adding at the end the following new section:

"§ 7330B. Use by Department of patents on certain medical technologies

"(a) IN GENERAL.—Notwithstanding any other provision of law, for purposes
of providing hospital care and medical services to veterans under chapter
17 of this title, if the Secretary determines that the price of a medical
technology is excessive or presents a barrier to care, the entire
compensation for the use of a patented invention relating to such medical
technology to be paid by the Department to the owner of such invention
shall be set by the Secretary and be limited to the royalty that is
reasonable and affordable taking into account the budgetary resources of
the Department for the fiscal year in which the Secretary seeks to acquire
the medical technology.

"(b) EXCESSIVE PRICE OR BARRIER TO CARE.—In addition to any other
circumstance in which the Secretary may determine that the price of a
medical technology is excessive or presents a barrier to care under
subsection (a), the Secretary shall determine that such price is excessive
or presents a barrier to care if—

"(1) the price of the technology is the primary factor prohibiting the
Secretary from being able to provide access to the technology to all
veterans for whom the technology is considered clinically appropriate; and

"(2) there is no comparable and equally efficacious technology available to
the Department at a reasonable and affordable price.

"(c) REASONABLE AND AFFORDABLE ROYALTY.—In determining a reasonable and
affordable royalty under subsection (a), the Secretary shall consider the
following:

"(1) The impact of paying the royalty on the budget of the Department for
providing hospital care and medical services to veterans under chapter 17
of this title.

"(2) The extent to which the owner of the patented invention has recovered
or is expected to recover, through sales other than under this section, the
research and development costs incurred by such owner.

"(3) Such other factors as the Secretary considers appropriate, including
the impact of the patented invention on improving health outcomes for
individuals.".

(b) CLERICAL AMENDMENT.—The table of sections at the beginning of chapter
73 of such title is amended by inserting after the item relating to section
7330A the following new item:

"7330B. Use by Department of patents on certain medical technologies.".



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