[Ip-health] Just the Medicine: How the next president can lower drug prices with the stroke of a pen.

Zack Struver zack.struver at keionline.org
Wed Oct 26 11:37:41 PDT 2016


http://washingtonmonthly.com/magazine/novemberdecember-2016/just-the-medicine/

​Just the Medicine: How the next president can lower drug prices with the
stroke of a pen.

by Alicia Mundy

It’s hard to watch television or read a newspaper these days without seeing
stories about outrageous prescription drug price increases. This past
summer, the company Mylan was in the spotlight for hiking the price of its
EpiPen, an injector containing cheap but life-saving allergy medicine, from
$94 for a two-pack in 2007 to over $600 today. Last fall, Martin Shkreli,
CEO of Turing Pharmaceuticals, became the face of greed when his company
purchased the AIDS drug Daraprim and promptly raised its price from $13.50
to $750 per pill—an increase of some 5,000 percent. Prior to that, Valeant
Pharmaceuticals drew widespread scorn for jacking up the prices of two
heart medications, Nitropress and Isuprel, by 212 percent and 525 percent
respectively. Meanwhile, Medicare, Medicaid, and private insurers were
buckling under the $84,000 per-dosage-cycle price of Sovaldi, Gilead
Sciences’ treatment for Hepatitis C, and of Medivation’s prostate cancer
drug Xtandi, which costs $129,000 for an
annual treatment.

These are not isolated incidents. List prices for drugs in general rose 12
percent last year, on top of similar increases over the previous five
years. That increase is helping to drive up health insurance premiums and
patient deductibles. According to an August 2015 report by Kaiser Health
News, 24 percent of Americans taking prescription drugs reported being
unable to afford a prescription from their doctors in 2015 over the
previous year.

The only thing more depressing than these out-of-control drug prices is the
seeming inability of politicians to do anything about the problem.
President Barack Obama has called for, among other things, faster approvals
of generic copies of expensive biologic drugs and new authority to drive
down prices for Medicare Part B. His proposals have gone nowhere in the
GOP-controlled Congress. This summer, Hillary Clinton released a more
aggressive plan for statutory changes that would make drugs cheaper and cut
some advertising tax breaks for the drug industry. Even Donald Trump said
he would break with his own party and support changing the law to allow
Medicare to bargain with the pharmaceutical industry over drug prices.

Yet none of these proposals has even the slightest chance of being taken up
by Congress during the lame-duck session, and the chances will be hardly
better in the new Congress, given Big Pharma’s power over lawmakers in both
parties. Indeed, legislation introduced in September by a bipartisan group
of lawmakers that would merely require drug companies to give warning about
upcoming price increases—an effort just to give incumbents up for
reelection something they could tell voters they were doing—was widely seen
as DOA.

But what if the next president doesn’t need Congress’s approval in order to
act? What if previous statutes have already given the executive branch the
authority it needs to beat back extreme drug price increases? And what if
the Obama administration, which otherwise has not been shy about using
executive power aggressively—to battle climate change, to reform
immigration, and to defend transgender rights, for example—simply hasn’t
used that power to curb drug prices, even though it could?

That’s exactly what a group of progressive Democratic lawmakers, including
Massachusetts Senator Elizabeth Warren and Vermont Senator Bernie Sanders,
have been saying for months. The source of that authority, they say, comes
from provisions in a thirty-six-year-old law, the Bayh-Dole Act, that
empower the executive branch to get pharmaceutical companies to reduce
prices on drugs invented with the help of federal research funds. “We
already have leverage in the law to force down prices—why isn’t President
Obama using it?” asks the group’s leader, Texas Representative Lloyd
Doggett.

According to a months-long investigation by the Washington
Monthly—including interviews with a dozen current and former Obama
administration officials as well as scores of outside experts—these
progressive Democrats have a case. If they’re right, the next president
could have leverage not only to bring down excessive drug prices, but also
to reform the increasingly dysfunctional federally funded biomedical
research and commercialization system that gives rise to those insane
prices in the first place.

Last September, as public outrage over price hikes by Valeant and Martin
Shkreli was spiking, Doggett invited a few fellow Democratic
representatives, including Rosa DeLauro of Connecticut, Jan Schakowsky of
Illinois, and Peter Welch of Vermont, along with staffers, for a series of
meetings in his Rayburn Building office. Doggett is a former Texas state
supreme court judge with a bit of a laconic western drawl who represents a
safe liberal district that includes Austin. He enjoys a reputation among
his colleagues as a non-flashy legislative workhorse who fights hard behind
the scenes for his causes. One of those causes is lowering drug costs; he
has been pushing legislation to that end since he entered Congress in 1995.

At one of these meetings in Doggett’s office, researchers from the Center
for American Progress (CAP), a liberal think tank, gave the group an
eye-opening presentation on the extent to which federal—meaning
taxpayer—dollars support critical drug research. Government funding played
a role in nearly half of the 478 drugs approved by the FDA between 1998 and
2005, according to one study, and almost two-thirds of the most important
and cutting-edge ones. These more innovative drugs, such as the critical
oncology medication Gleevec, not only originated through federal support
but continue to receive it thanks to Medicare, Medicaid, and other
government programs that subsidize their purchase. Taxpayers, in other
words, are paying for these drugs on both the front and back ends, even as
the prices drug companies charge escalate seemingly without end. The CAP
researchers also explained how the Bayh-Dole Act—officially the Patent and
Trademark Law Amendments Act of 1980—could be utilized to lower those
prices.

A complex piece of legislation that took four years to write and pass,
Bayh-Dole was designed by its sponsors, Indiana Democratic Senator Birch
Bayh and Republican Robert Dole of Kansas, to encourage the
commercialization of federally sponsored research. At the time, much of
that research was sitting on shelves in university and federal labs because
companies could not get secure enough title to the discoveries to be
willing to invest the extra dollars necessary to turn them into salable
products. Bayh-Dole mandated that the labs and universities could patent
their discoveries and sell the royalty rights to private-sector firms.

The law was, by most accounts, a big success. Over the next two decades,
U.S. universities increased their patent output tenfold and founded more
than 2,200 companies to exploit those patents, thus creating 260,00 new
jobs and contributing $40 billion to the economy (though some of this
increase is probably due to the biomedical revolution, which gave
university researchers tools such as gene splicing to more easily create
patentable medical applications).

Bayh-Dole also mandated, however, that the federal government retain its
own rights to the patents, which it could exercise under certain
conditions. If, for instance, a company failed to use a federally funded
discovery to get a product to the market, the federal agency could “march
in” and offer the rights to another company to commercialize and sell the
drug to the public. Or it could offer “royalty-free rights” on any patent
to companies that would manufacture products strictly for government
use—say, a drug sold only to the military.

Yet in the thirty-six-year history of Bayh-Dole, there had only been five
attempts (petitions from patients, advocacy groups, or corporations) to get
the government to invoke march-in or royalty-free rights—together referred
to as “retained rights”—against a pharmaceutical company. All five
petitions had been rejected by the National Institutes of Health (NIH), an
agency of the Department of Health and Human Services (HHS).

The main reason for the NIH’S hesitation, Doggett and his team learned, is
that the agency has powerful institutional reasons not to want to exercise
its retained rights. The NIH’s main mission—the thing Congress funds it to
do and holds it accountable for—is encouraging medical advances. It
achieves this by partnering with university researchers and pharmaceutical
companies. Anything that upsets these partnerships is seen within the
agency as hampering its mission, and as a threat to its budget. “NIH won’t
ever agree to exercise march-in or royalty-free rights, no matter the
strength of the case,” says James Love of the think tank Knowledge Ecology
International, who led three of the five failed NIH petitions and was
involved in the other two. In briefings with Doggett and his team, Love
suggested that the only way to get the NIH to use its power would be to
convince higher-ups in the Obama administration to force it to do so.

So that’s what the lawmakers decided to do. In early January, fifty-one
House Democrats, including Doggett and his group, sent a letter to HHS
Secretary Sylvia Mathews Burwell and NIH director (and Nobel laureate)
Francis Collins, saying, “We respectfully urge you to use your existing
statutory authority to respond to the soaring cost of pharmaceuticals.”
Specifically, they asked the NIH and HHS to finally propose guidelines for
triggering the use of march-in rights, saying, “We believe that just the
announcement of reasonable guidelines in response to price gouging would
positively influence pricing across the pharmaceutical industry.”

“That’s the point,” says Doggett. “Just the threat” of exercising these
rights, or even of reviewing the amount of U.S. government support that
over the years has gone to the companies holding exclusive patents, would
probably “cause the pharmaceutical companies to blink.”

Like a lot of policy battles in Washington, the one over the government’s
retained rights on patents to federally funded research revolves around
contested interpretations of a few words in a long statute. The Bayh-Dole
Act states that the federal government can exercise its retained rights
only under certain conditions. The main one is if the company that holds
the patent rights has failed to make the fruits of the discovery “available
to the public on reasonable terms.” Another is if the agency that
originally disbursed the research funds determines that exercising its
retained rights “is necessary to alleviate health or safety needs” of the
public. The fundamental legal dispute is whether, under Bayh-Dole,
exorbitant drug prices constitute a violation of “reasonable terms” and/or
a threat to “public health and safety.”

It is fair to say that the vast majority of attorneys who know anything
about Bayh-Dole have concluded that the answer is no: high drug prices are
not one of the conditions that would trigger the government’s ability to
exercise its retained rights.

It is also fair to say that most of the attorneys who make this argument
represent drug companies. This is the case even of the law’s cosponsors. In
2002, Birch Bayh and Bob Dole, by then retired from the Senate and working
as lobbyists for law firms representing drug companies (Dole himself was
starring in ads for Viagra), wrote a letter to the editor in the Washington
Post. In it they stated that Bayh-Dole “did not intend that government set
prices on resulting products” and that government could exercise its
retained rights “only when the private industry collaborator has not
successfully commercialized the invention as a product.” A few years
earlier, Bayh had argued the opposite when he was representing a firm that
would have benefited from the government’s exercise of royalty rights.

Opposed to the industry’s position is a small group of lawyers,
researchers, and scholars who have long argued that the government does
have pricing rights under Bayh-Dole. They include public interest lawyers
such as Love and Robert Weissman, the president of the advocacy group
Public Citizen; law professors such as Michael Davis of Cleveland-Marshall
College of Law and Rachel Sachs of Washington University in St. Louis;
medical policy experts such as Peter Arno of the University of
Massachusetts Amherst and Aaron Kesselheim and Jerome Avorn of Harvard
Medical School; and the philanthropist and former pharmaceutical patent
attorney Alfred Engelberg.

These experts have their differences. The latter three, for instance,
believe march-in rights apply only to drugs based on patents that all
derive directly from government research. That’s a small portion of the
drugs on the market, though many of those are the most pricey. (If a drug’s
patent has expired, as was the case with Daraprim, Bayh-Dole no longer
applies.)

In general, however, these experts all agree that “reasonable terms” and
“health and safety” can include price, for several reasons. For one, many
U.S. laws other than Bayh-Dole use the phrase “reasonable terms,” and
courts have typically defined that phrase as including price. Also, when
the legislation was being considered, many lawmakers and witnesses at
hearings raised the very issue of price, out of worry that granting private
companies lengthy, exclusive patents on government-funded research—that is,
monopolies—would lead them to jack up the prices. March-in and royalty-free
rights were the provisions these lawmakers demanded in order to secure
their votes for the bill. Finally, there’s the fact that the NIH, in its
written rejections, has never explicitly stated that Bayh-Dole prohibits
using pricing as a factor. Instead, the agency has come right up to the
line—stating, for instance, that march-in rights are “not an appropriate
means of controlling prices.” This, say advocates, suggests that the NIH
knows that its own case is not legally ironclad.

So, which side is right? The proponents of march-in rights power certainly
have a reasonable case. But it’s impossible to say with certainty, because
the question has never been litigated. The only way to know for sure would
be for the government to actually test its powers. It could do so by
proposing a regulation, or even just a regulatory guideline, based on those
rights; evaluating the arguments that come back from the public and
interested parties; and waiting to see how the courts ultimately decide any
lawsuits that challenge those regulations or guidelines. The problem is
that, for thirty-six years, the government has been too scared to try.

In addition to parsing the language of the statute, the drug companies
deploy a second argument against the government’s use of retained rights to
regulate prices. It is they, not the government, who put up the lion’s
share of R&D funding for new drugs, say the companies. So it would be
unjust and confiscatory for the government to use its retained rights to
lower prices.

As a matter of pure law, advocates note, this is beside the point.
Bayh-Dole does not set out any percentages or other metrics for what the
government’s share of R&D on a drug must be before its retained rights kick
in. “It doesn’t matter if the government grant was for millions of
dollars,” James Love says, “or for a few thousand.”

In any event, the government’s impact on R&D and the amount spent to
support drug development is much higher than the drug industry likes to
acknowledge and most voters understand. This is especially true of
breakthrough drugs (of which there are far fewer coming online than in
years past) as opposed to the “me too” variety—
modest tweaks on existing treatments—that the drug industry has
increasingly produced. A 2011 study published in the journal Health Affairs
found that government-funded research contributed to most of the new
medications that, because of their innovative nature, qualified for
“priority review” by the Food and Drug Administration between 1998 and
2005. A 2014 study in the same journal found that the majority of the
twenty-six most transformative drugs—those judged by medical experts both
to be innovative and to have groundbreaking effects on patient
care—developed between 1984 and 2009 were discovered with the help of
federal research funding.

The drug industry will on occasion grant that the most innovative drugs
require federal research funding—usually when they’re lobbying Congress for
more such funding. Still, they say, government’s share of the research and
development costs behind any particular such drug is small compared to the
drug company’s own R&D costs, which, the industry says, typically exceed $1
billion.

Independent researchers, however, have challenged that $1 billion–plus
figure. They note that it is derived from unverifiable industry data, that
half is accounted for by federal tax breaks pharmaceutical companies
receive, and that a substantial portion of the rest comes from dubiously
counting such expenses as “cost of capital”—what companies theoretically
would have earned investing in something else. The drug industry vigorously
defends the figure.

Whatever the merit of Big Pharma’s claim to be a big investor in drug
innovation, that claim is less true every year. In the past decade, major
drugmakers have cut R&D costs in order to slash expenses and maintain high
returns to shareholders. Nine of the top ten drugmakers spend more on
marketing than R&D. A McKinsey & Company report called even this reduced
level of R&D spending “a luxury that investors no longer tolerate.” In
general, the big drugmakers are leaving the innovation to small
pharmaceutical and biotech firms, which originated 64 percent of the new
drugs approved by the FDA last year, up from less than 50 percent a decade
ago.

Figuring out the pharmaceutical industry’s share of drug R&D costs is made
even more difficult by the fact that the government doesn’t bother to tote
up the overall value of all of its subsidies. Beyond research grants to
academia, medical centers, and small start-up companies, Washington spends
millions of dollars on the infrastructure that keeps the drug discovery
process moving globally. The NIH helps many drug researchers in the earlier
stages get through the maze of federal bureaucracy in order to advance a
novel medicine. The NIH and the Food and Drug Administration work with drug
developers to create frameworks for testing for safety and efficacy, in
order for companies to be certain of the data they must collect and the
standards they must meet for approval. The NIH strikes “cooperative
research and development agreements” with commercial firms, sharing
resources and work on projects that might ultimately lead to new medicines.
Many modern medical devices and prosthetics marketed by major corporations
start as experiments in Department of Veterans Affairs hospitals and
laboratories. The VA and the Department of Defense have conducted large
clinical trials in cardiology, diabetes, prostate cancer, and smoking
cessation that help shape the direction of industry research in those
areas. And universities and medical consortiums win government grants for
disease “awareness” and “testing” programs, which all contribute to the
ongoing market success of a drug invented to treat a certain condition. Add
to this the multitude of tax breaks and seemingly endless extensions of
patent exclusivity that government showers on drug companies, strengthening
their monopolies. Most of this government largesse is not counted in the
many (often industry-funded) studies of drugmakers’ R&D investment floating
around Washington; government programs like Medicare that subsidize the
purchase of the industry’s products are also rarely considered.

“Industry always compares individual federal research grants to what they
claim to be their overall cost—which they greatly exaggerate,” says a
senior NIH official who didn’t want to be identified by name. “But we
finance the whole system that basically keeps global drug development on
track and launching successful drugs.”

The industry defends high drug prices as necessary for companies to recoup
the R&D costs of the many drugs they invest in that don’t ever make it onto
the market—the “risk-adjusted price.” There may be some truth in this. But
the same logic also applies to the government’s investment. For every
federal research grant that leads to a patent sold to a drug company, there
are hundreds of others that don’t (even if they extend the boundaries of
scientific knowledge). Drug companies are beneficiaries of that
winnowing-out process, too.

The drug companies’ third argument is that any attempt by government to
exercise its retained rights on a drug patent would wreak havoc on the
whole pharmaceutical industry. Without the certainty of a patent term and
end date, pharmaceutical companies would be reluctant to invest in new
drugs coming out of universities and biotech start-ups. Moreover, even a
whisper of such threats would spook the Wall Street banks and hedge funds
that have become increasingly big investors in the pharmaceutical industry.

It’s not just the drug companies who make this argument. You hear it from
insiders at the NIH, even if they won’t say it on the record. You hear it
from the Department of Defense, which also funds medical research. In a
letter this summer opposing a march-in rights petition, the Defense
Department mentioned the concerns of investors three times, saying, “NIH
has consistently declined to exercise march-in authority because market
dynamics could be affected for all products subject to the provisions of
the Bayh-Dole Act.”

You hear it from independent market researchers like Ira Loss at Washington
Analysis. If the government were to use march-in rights to exercise pricing
power, even once, “there’d be widespread panic,” predicts Loss. “It would
really impact investment in pharma/bio, maybe even the overall medical
sector.”

Views like this are so widespread that it would be folly to ignore them.
Nevertheless, there are good reasons to take them with a grain of salt.
Similar warnings were voiced by the telecommunications industry during the
long “net neutrality” debate over whether the Federal Communications
Commission should apply the same strict regulations to cable broadband
providers that it does to telephone companies. In 2015, the FCC ruled in
favor of net neutrality. Since then, the telecoms have issued reports based
on proprietary data that, indeed, broadband investment has declined. But
the current FCC chairman, Tom Wheeler, citing public SEC data, has
countered that there has been a 35 percent increase in investment in
internet-specific businesses and sizable increases by large network
companies like AT&T.

In the case of drugs, as we’ve seen, pharmaceutical companies have already
been cutting back their R&D investments. If Big Pharma’s profits can only
be supported by greater and greater federal subsidies and monopoly rents
that gouge the public, the industry is operating with an unsustainable
business model—one that bears an alarming likeness to a real estate sector
that, a decade ago, could only be propped up by predatory mortgages. The
greater folly, says Robert Weissman of Public Citizen, would be to allow
“us to be kept locked into the status quo, because of threats of a market
collapse from pharma any time the government tries to control drug prices.”

The letter that Lloyd Doggett and fifty other House members sent to the
heads of HHS and the NIH in early January of this year landed at a
propitious moment for advocates. Martin Shkreli had recently been indicted
on securities fraud. The pharmaceutical behemoth Pfizer had just announced
major price increases on 100 of its drugs. And the president was unveiling
another in a flurry of new executive actions, this one narrowing the
loophole that allowed guns to be sold privately—at gun shows, for
instance—without licensing or background checks. It seemed at least
plausible that he would soon take similar unilateral action on drug prices.

That possibility appeared to become a near certainty later that month, when
the New York Observer quoted New York Democratic Representative Charles
Rangel saying that Obama would “use his executive powers, to deal with this
thing [high drug prices] as soon as he gets back” from a trip to Detroit.

Rangel’s statements put the pharmaceutical industry and its battalion of
Washington lobbyists on red alert. According to one lobbyist, the
biopharmaceutical lobby and Big Pharma’s official trade group were
scrambling to answer angry calls from corporate drug company headquarters
around the world. How had they missed this? Who could get information from
the White House? The lobbyist said that pharmaceutical CEOs were
particularly annoyed that Obama hadn’t warned them first. Didn’t the
president owe them something for their having supported the passage of
Obamacare?

But Rangel’s story also surprised the White House. Over the next few days,
the administration let it be known that there were no immediate plans for
an executive order affecting drug prices.

Still, Doggett and his allies had another card to play, one they thought
would give the president the perfect opportunity to take executive action,
were he so inclined. James Love’s organization, Knowledge Ecology
International, along with another nonprofit, the Union for Affordable
Cancer Treatment, had just filed a petition with the NIH and the Department
of Defense, arguing that the U.S. government should use march-in rights on
the prostate cancer drug Xtandi.

There could hardly be a better example to trigger Bayh-Dole rights than
Xtandi. The drug targets a widespread disease; according to the American
Cancer Society, prostate cancer attacks one in seven American men, and
killed 27,500 in 2015. It is also outrageously expensive—$129,000 for a
year’s supply, about four times higher than the same drug sells for in
Japan and Canada—putting it in the top ten most expensive drugs for
Medicare. Best of all, from a legal point of view, all the patents on the
drug came directly from government-funded research at UCLA; no pharma
companies had added on patents, which would have weakened—at least in the
eyes of some experts—the government’s ability to exercise its retained
rights.

In February, while Love’s petition was making its way through the system,
HHS Secretary Sylvia Burwell came to Congress to testify before the Ways
and Means Committee, on which Lloyd Doggett serves. The Texan used the
opportunity to ask her pointedly if she could assure him and his fifty
colleagues that their earlier letter requesting guidelines on march-in
rights was “receiving thorough consideration.” Burwell answered carefully.
“We are continuing to try and pursue every administrative option,” she
said, adding, “We welcome your letter and your suggestion.”

But just a couple of weeks later, she sent Doggett her official dismissal.
While the administration had not ruled out using Bayh-Dole rights “when
presented with a case where the statutory criteria are met,” Burwell wrote,
after consulting with the NIH the administration had decided that “the
statutory criteria are sufficiently clear and additional guidance is not
needed.” Doggett said he wished she had just given him a straight “Hell,
no!” to begin with.

Love’s petition on Xtandi was still alive, though, so Doggett’s group
decided to bring in the big guns. On March 28, they sent another letter to
Burwell, this time including six Democratic senators—among them then
presidential candidate Bernie Sanders (who had tried to clarify Bayh-Dole
language protecting taxpayer rights in 2001) and Elizabeth Warren.

The lawmakers weren’t just requesting general guidelines. They wanted to
hear what the NIH had to say about Xtandi. “We do not think that charging
U.S. residents more than anyone else in the world meets the obligation to
make the invention available to U.S. residents on reasonable terms,” they
said. They asked HHS to review the facts and issues in the Xtandi case in a
public hearing, not behind closed doors.

Burwell rebuffed that request, too, writing on June 7 that “the NIH
believes [the current] process allows the agency to collect sufficient
information to consider the [Xtandi] petition without a public hearing.”
The NIH formally rejected Love’s petition two weeks later.

The financial press trumpeted the decision as “good news” for Astellas and
Medivation, the two firms that share the blockbuster drug’s profits. And
indeed it was. In August, Pfizer Inc. announced it was buying Medivation
for $14 billion, nearly double what the company had been worth six months
earlier. This was a pretty good return for a drug that would never have
existed without $31.5 million in NIH grants.

Why did the Obama administration refuse to exercise—or even hint at
exercising—its power under Bayh-Dole to bring down excessively high drug
prices? A White House spokesperson would only say that the president
“deferred to HHS,” which is more a statement of the obvious than an answer.

One possibility is that administration lawyers looked at the statute, read
all the relevant pro and con arguments, and came to the conclusion that
Bayh-Dole does not, in fact, give government that power. This seems
unlikely, though: Sylvia Burwell’s February letter certainly stops short of
saying that.

Another possibility is that the administration had political reasons not to
want to cross Big Pharma. To be sure, the White House did deals with the
industry to pass Obamacare. But with that law secured, the need for the
president to play nice with the industry significantly lessened. In fact,
taking on the pharmaceutical industry would have been excellent politics in
an election year, especially with the Democratic base. Moreover, Obama
hasn’t been shy about signing executive orders that have infuriated other
powerful interests, such as the energy industry and the National Rifle
Association.

A third possibility, and a plausible one, is that Obama was briefed on
retained rights, concluded that he might indeed have the power to use them
to lower drug prices, but then chose not to do so, out of fear of spooking
the markets and putting the economy at risk in an election year.

A final possibility—one that fits the known facts and may be familiar to
anyone who’s served in government—has to do with timing. The issue of high
drug prices, though long simmering, didn’t reach a political boiling point
until last year. By then, many of the long-serving White House officials
who might have been most able to see the bubbling crisis as an opportunity
to take action—those with policy chops, knowledge of the bureaucracy, and
close relationships with the president—were cycling out. And as happens in
any administration, those who have taken their place are younger, more
inexperienced staffers with less inclination, and less of a mandate, to
take risks. It’s entirely possible that none of them even raised the idea
of exercising march-in rights with the president.

“I know Barack Obama very well,” says a former senior Obama White House
official. “When he said he wanted to do something about high drug prices, I
believe him.” This official also believes that the executive branch
probably does have the power to use Bayh-Dole to bring down drug prices,
and should have at least tried to exercise it by proposing regulations or
guidelines. “My guess is [his current staff] told him there’s nothing he
can do unilaterally.” Evidence for that view is that the president never
publicly voiced support for march-in rights, as he did for net neutrality.

On January 20, 2017, a new president will enter the White House, along with
a fresh—and, one hopes, capable—White House staff. The new administration
will then begin a months-long dance with Congress to win approval of its
agency nominees and to build support for its agenda. One item near the top
of that list should be high drug prices. The administration’s need to woo
lawmakers will bring with it a temptation to forswear any intention to act
unilaterally on that issue.

It should resist that temptation, however. Long experience shows that
Congress is extremely unlikely to take any meaningful steps toward reeling
in drug prices. The clout of the pharmaceutical industry and the fear of
upsetting Wall Street and the markets are simply too strong. In such an
environment, a president who wants to get something done needs leverage.

The threat to exercise the government’s retained rights under Bayh-Dole
would do the trick. And some powerful lawmakers would like a president to
take that step. “March-in rights provide a powerful tool to improve access
to federally funded medicines, but that tool has lain dormant for decades,
even while drug prices soar out of reach for millions of Americans,”
Elizabeth Warren told the Washington Monthly. “While Congress needs to do
more,” she added, the executive branch “needs to step up.”

There are other statutory powers the next president could draw on. One is
the authority of the Medicine Equity and Drug Safety Act of 2000 to allow
the re-importation of lower-priced drugs from countries like Canada. (The
Canadian drugmaker Biolyse Pharma has already offered to sell a generic
version of Xtandi to the U.S. government at a roughly 90 percent discount.)
Another is a section of the United States Code that allows government
agencies to buy generic versions of drugs at steep discounts. In 2001,
during the anthrax scare, then HHS Secretary Tommy Thompson used the threat
of this power to force drugmaker Bayer AG to cut the price of its
anti-anthrax medication Cipro in half.

By threatening to invoke Bayh-Dole and other existing powers broadly, the
next president could get price reductions on a range of outrageously
expensive medications. But perhaps even more importantly, the threat may be
the only way to force the drug companies and lawmakers in both parties to
sit down with the administration and hammer out a broader array of reforms.

Bayh-Dole was in many ways an inspired piece of legislation, giving rise to
a biomedical and commercial research system that has produced some
miracles. But in the intervening thirty-six years, that system has grown
increasingly dysfunctional, predatory, and dependent on public largesse.
Fortunately, the legislation that created the system provides the tools we
need to reform it.

Alicia Mundy is a former Wall Street Journal reporter and author of
Dispensing with the Truth, about a drug industry scandal. She is writing a
new book on the pharmaceutical business and consults for health care
analysts.​

-- 
Zack Struver, Communications and Research Associate
Knowledge Ecology International
zack.struver at keionline.org
Twitter: @zstruver <https://twitter.com/zstruver>
Office: +1 (202) 332-2670 Cell: +1 (914) 582-1428
keionline.org



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