[Ip-health] Will sky-high drug prices spur the US to use an obscure power over patents?

Claire Cassedy claire.cassedy at keionline.org
Thu Dec 5 09:35:24 PST 2019


Will sky-high drug prices spur the US to use an obscure power over patents?

AUTHOR: Jonathan Gardner
PUBLISHED: Dec. 4, 2019

In 2010, people with a rare enzyme disorder called Fabry found supply of
the only treatment rationed. Those taking Genzyme's drug Fabrazyme could
only get a third of their normal dose, and new patients couldn't get any.

The reason? Viral contamination at the company's Allston, Mass. plant.

Patients on rationed doses suffering a resumption of symptoms like pain,
high blood pressure and vision problems petitioned the federal government
to invoke long-standing authority to "march in" to revoke Genzyme's patent
and give it to another company that could meet demand. The National
Institutes of Health declined, reasoning that in spite of Genzyme's clear
mishandling of supply, it would take another drugmaker years of clinical
work to catch up.

With the major Democratic 2020 candidates campaigning on lowering drug
prices, march-in rights are now back in focus as a tool to achieve that
goal. Biopharmas are setting too-high prices for drugs discovered with
taxpayer support, the argument goes, which ought to spur the government to
take possession of their patents to lower costs. The Trump administration
also has shown some interest in pharma patents.

The calls are only growing thanks to "patent thickets," the expansive
intellectual property estates that drugmakers use to shield drugs from
generic competition well beyond the date of first patent expiration. For
example, Abbvie holds more than 100 patents for its $20-billion-a-year
injection Humira, which has allowed it to stretch its monopoly out to 2023.

The problem with appealing to march-in rights as a solution is the
government has always refused to use the power it holds — as the Genzyme
case illustrates.

"A lot of people saw the NIH's refusal to march in in that case and said
they're not going to ever invoke those rights," said Rachel Sachs, an
assistant law professor at Washington University in St. Louis, in an

"That argument will always be true in the context of prescription drugs,"
she said of the government's explanation for its response to petitions
concerning Fabrazyme. "If that's going to always be true, the NIH should
just come out and say that, unless the company is actually going to go out
of business and refuse to sell the drug at all, they will never invoke
march-in rights."

Thirty-nine year old law

NIH's march-in powers are derived from the Government Patent Policy Act of
1980, commonly known as Bayh-Dole for its congressional sponsors. The aim
was to speed the transfer of patented inventions like new drugs from
government-funded research institutions to the private sector.

When the private sector licensor doesn't take steps to "alleviate health or
safety needs" through the use of the patent in question, the government can
take possession of the license and offer it to another company.

Patient advocates have long argued prohibitively high drug prices should
trigger march-in authority — a case made in the past for the HIV drug
Norvir, glaucoma treatment Xalatan and prostate cancer therapy Xtandi. The
NIH's response in every case has been that the drug's price does not
interfere with its availability.

Four of the six march-in petitions received by the NIH have been based on

The fact that NIH, a research agency, holds Bayh-Dole authority doesn't
help, either, said Joshua Sharfstein, vice dean for public health practice
and community engagement at Johns Hopkins University, in an interview.

"I think NIH is worried about creating cures. They're not worried about
drug costs," said Sharfstein, who served as deputy commissioner of the Food
and Drug Administration under President Barack Obama. "And then you have
FDA, which certainly isn't either. They're doing their job of approving
generics as a mechanism for reducing drug costs."

"There's not really an agency that's thinking about drug costs other than
the payment agencies like the [Department of Veterans Affairs] or Medicare
or Medicaid," he said. "There's no real central authority."

The Pharmaceutical Research and Manufacturers of America has long opposed
use of march-in powers, although it may find itself increasingly ignored as
lawmakers search for ways to restrain drug prices.

"Circumventing patent rights on medical innovation with march-in — which
has never been used — threatens our country's ability to remain
competitive," said PhRMA spokesman Tom Wilbur.

For its part, the NIH won't describe what circumstances, if any, would
prompt it to apply march-in rights, saying in a statement that it relies on
the facts presented by each petition.

A tight community

It doesn't help the patient advocates' case that the bill's two sponsors,
former senators Birch Bayh and Robert Dole, explicitly stated in a
Washington Post 2002 letter to the editor, "Bayh-Dole did not intend that
government set prices on resulting products."

That claim, Sachs said, is undermined by the fact that Bayh-Dole predates
the Hatch-Waxman act that set data exclusivity and patent term extensions
for drugs. The law's sponsors, therefore, could not have foreseen the
pricing power that branded drug manufacturers have today.

Past failures at getting the NIH involved isn't discouraging the activist
group Knowledge Economy International, though. The organization, which has
received funding from such foundations as the Open Society Foundation and
Kaiser Foundation Health Plan and Hospitals, is now preparing a Bayh-Dole
petition on Novartis' $2.1 million gene therapy Zolgensma, executive
director James Love said in an interview.

In preparation, KEI wants lead investigator Jerry Mendell to disclose
clinical trial costs accrued at Nationwide Children's Hospital. The
organization also asked how much of the funding came from public sources
like NIH and charities, as well as which patents Nationwide licensed to
Avexis, the company that Novartis bought to access Zolgensma.

Nationwide said in a statement the NIH was one of multiple sources of
funding for preclinical study of Zolgensma, and the federal agency did not
fund human clinical trials.

Love claims one reason the NIH doesn't enforce Bayh-Dole march-in rights is
because of relationships between NIH, academics and industry that enable
discovering researchers and their intellectual property to move into
startup biotechs.

"The tech transfer community is a pretty tight community. These are their
colleagues. Their colleagues are doing well," he said.

In spite of the NIH's reluctance to act in the past, Love said he is
optimistic more pressure can soon be brought to bear on the pharma sector.
That is because so many of the new cell and gene therapies — such as the
cell therapies Kymriah and Yescarta as well as the gene therapies Zolgensma
and Luxturna — benefited from NIH grants in their early-stage research.

As it happens, such therapies are among the most expensive brought to
market, with Zolgensma's price setting a per-treatment record.

"We would love to change the statute but I wouldn't sit around saying we
can't do anything," he said. "You can do things now without changing the

Changes coming?

Lawmakers have, however, introduced bills that would expand the federal
government's authority over NIH-supported patents.

Maryland Democratic Senator Chris Van Hollen's We Protect American
Investment in Drugs (WE PAID) Act would appoint a commission to evaluate
reasonable prices for drugs that have received federal funding in

Rep. Lloyd Doggett, D-Texas, has proposed that Bayh-Dole march-in rights be
exercised against any company that refuses to negotiate with Medicare on
the price of drugs.

March-in rights, meanwhile, have been proposed as a drug price-control tool
by Democratic presidential candidates like Pete Buttigieg, Bernie Sanders
and Elizabeth Warren.

"If I am elected president, I'm going to cut prescription drug costs in
this country by 50% so that we are not paying any more than other major
countries are paying," said Sanders in an interview on Face the Nation in
March. "If [pharmaceutical companies] don't like that then we'll take a
look at their patents."

More recently, President Donald Trump's Health and Human Services
department last month sued Gilead for infringing on patents granted to the
Centers for Disease Control and Prevention for research on pre-exposure
prophylaxis HIV treatment.

While the suit does not refer to Bayh-Dole authorities, the fact a
Republican administration is going after a pharmaceutical company's
intellectual property is suggestive of the changing political winds around
drug patents.

Eminent domain

Bayh-Dole march-in rights apply only to drugs developed with help from
federal programs.

A second law, referred to as section 1498 of the U.S. code and pre-dating
Bayh-Dole by 70 years, is a type of "eminent domain" statute for
intellectual property. It has previously been used by the Defense
Department to secure lead-free bullets and night-vision goggles that
violated U.S. patents. When the federal government invokes 1498 authority,
it must compensate the patent owner.

In the pharmaceutical world, the authority has been threatened twice, but
ultimately was not invoked because drug manufacturers agreed to cut prices.

The first case was during the anthrax terror scare of 2001, when Health and
Human Services Secretary Tommy Thompson threatened to use section 1498
rights to allow for importation of generic ciprofloxacin. Cipro maker Bayer
agreed to a lower price for the federal government so Thompson didn't have
to make good on his threat.

More recently, its use was discussed on behalf of Louisiana when its health
secretary, Rebekah Gee, was searching for a way to reduce Medicaid outlays
for hepatitis C drugs. (States can invoke section 1498 because Medicaid is
jointly funded by the federal and state governments.)

Her effort ultimately resulted in the establishment of a "Netflix model"
that traded an unlimited supply of medication for a fixed fee.

"The effect of raising 1498 was that it really showed that she was serious
about trying to solve a public health problem, and I think it caught
people's attention for that reason," said Sharfstein, who was involved in
the Louisiana hepatitis C program.

However, he sees 1498 as a limited tool to achieving drug price control. "I
think that the stars have to align for that to work."

Still, adding section 1498 authority and march-in power to direct drug
price negotiation could become part of a broader drug-price strategy, said

"Industry has been so unwilling to accept even the most limited pricing
reform strategies that advocates are now thinking that one of the most
effective tools will be to use the same governmental authorities or to use
stronger negotiating tactics."

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