[Ip-health] A lucrative Regeneron contract with the federal government lacks the usual taxpayer protections

Claire Cassedy claire.cassedy at keionline.org
Mon Nov 9 11:39:33 PST 2020


https://www.statnews.com/pharmalot/2020/11/06/regeneron-covid19-pandemic-coronavirus-antibody-patents-taxpayers/

A lucrative Regeneron contract with the federal government lacks the usual
taxpayer protections

By ED SILVERMAN @Pharmalot
NOVEMBER 6, 2020

A $450 million federal contract that calls for Regeneron Pharmaceuticals
(REGN) to supply its Covid-19 treatment contains weaker than usual
protections for taxpayers. And consumer advocates complain the agreement
could make it harder for the U.S. government to constrain pricing should
the drug maker attempt to engage in price gouging.

However, a spokesperson for the Department of Defense and Department of
Health and Human Services, which awarded the contrast last July as part of
the Operation Warp Speed project to help fund development or manufacturing
of Covid-19 therapies and vaccine, disagreed with the contention. As part
of the deal, Regeneron is receiving funding in order to supply up to
300,000 doses of its antibody treatment.

The advocacy group, Knowledge Ecology International, contended the contract
does not contain the usual provisions for preserving taxpayer rights when
federal funding is involved. A provision of the Bayh-Dole Act, known as
march-in rights, allows the U.S. government to reclaim patents as a way to
address prescription drugs that are out of reach for different reasons,
such as shortages or pricing.

In this instance, the agreement explicitly stated that “the parties agree
that the Bayh-Dole statute does not apply to this project agreement.” As a
result, the U.S. government would not be able to pursue march-in rights in
the event that the Regeneron treatment is priced out of reach for most
Americans, according to Kathryn Ardizzone, an attorney at KEI.

“We think the obligation under the Bayh-Dole Act is for contractors — in
this case, Regeneron — to make their federally funded inventions accessible
to the public on reasonable terms. This is an important remedy that allows
the federal government to address price gouging, should it occur, but that
provision has been eliminated from this contract,” she told us.

Ardizzone also noted that the contract also limits taxpayer rights by
specifying that any royalty-free license the government might obtain could
not be used for commercial purposes.  Normally, she explained, such
contracts do not contain such restrictions.

“This is an unnecessary narrowing of the Bayh-Dole Act, which is very broad
and doesn’t have limits that say usage can’t be for commercial purposes. We
think it’s very important for the government to have every tool at its
disposal,” she continued. “The Bayh-Dole Act should be a floor for a
minimum set of negotiated rights, but this contract is worse for the
government.”

Although the funding was awarded by DoD and HHS, the contract is actually
between Regeneron and a third party, Advanced Technology International, a
nonprofit that is working on behalf of the Medical CBRN Defense Consortium.
The MCDC typically arranges third-party agreements with companies to help
provide the military with so-called medical countermeasures. The agreement
was disclosed by Regeneron in a regulatory filing. The third party
arrangement is referred to as an Other Transaction Authority.

A Regeneron spokesperson wrote us that, “the government approached us to
negotiate the…agreement, … which is why we did this structure. The parties
carefully negotiated provisions that protect the government’s interest in
any intellectual property developed under the agreement, and we’ll of
course respect those rights.”

Later, an HHS spokesperson sent us this: “The agreements awarded under the
Other Transaction Authority… do include language that protects the federal
government and taxpayers. In the case of Regeneron, the agreement includes
protections for the U.S. government that resemble those under the Bayh-Dole
statute and regulations. We used the Other Transaction Authority statutory
flexibility to negotiate both a ‘march-in right’ provision and a
non-exclusive license for the government to use any invention arising out
of the agreement. The authority has allowed us to obtain protections for
the federal government that would not be typical under standard acquisition
approaches for production of this product.”

Ardizzone, however, argued that “no one is criticizing the agreement for
having no protections for taxpayers. We pointed out how the contract has
weakened or eliminated standard protections for taxpayers, and how that is
particularly unacceptable in a public health emergency with massive
subsidies on the table…

She also maintained that it is “a stretch to say that the protections for
taxpayer resemble the Bayh-Dole Act. They weaken or eliminate some of the
most important of those protections. For example, they eliminate
Regeneron’s obligation to make the treatment available to the public on
reasonable terms, including at a reasonable price. That is pretty stark and
to date, I haven’t heard a valid explanation for this departure from the
Bayh-Dole Act.

“Also, why restrict the government license to non-commercial uses?” she
continued. “If the contract tracked the Bayh-Dole act for the government’s
license to use the inventions, it would have included no such restriction.
What I am not hearing is HHS address in a meaningful, concrete way is how
the departures from Bayh-Dole Act are justified, so we remain unconvinced
that they are… (And) how does the OTA obtain protections for the federal
government that would not be typical under standard acquisition approaches
for this type of product?”

Later, the HHS spokesperson added that “Congress provided flexibility
within that Other Transaction Authority to negotiate more favorable
intellectual property (IP) and data rights terms than the government would
have under Bayh-Dole… When an agreement under OTA is selected, the
agreements for Covid-19 vaccines and therapeutics do contain language
similar to the march-in rights and non-exclusive license provisions for
intellectual property created with federal funding, similar to rights
available under Bayh-Dole. In the case of Regeneron, the parties used the
OTA statutory authority to negotiate both a march-in right provision and a
non-exclusive license for the U.S. government to use any invention arising
out of the agreement.”

Ardizzone countered that “an OTA is more favorable to  contractors in terms
of intellectual property and data because it allows them to retain greater
control than would otherwise be available under the Bayh-Dole Act… Maybe,
in some convoluted way, the government thinks an OTA is favorable because
by allowing weaker rights for the government, the government is more likely
to find a commercial partner. Again, with the massive subsidies, potential
reputational benefit of ending Covid-19, and public health interests at
stake, that rationale is particularly suspect.”

A Regeneron spokesperson wrote us that, “the government approached us to
negotiate the…agreement, … which is why we did this structure. The parties
carefully negotiated provisions that protect the government’s interest in
any intellectual property developed under the agreement, and we’ll of
course respect those rights.”

Although highly controversial among drug makers and their supporters, the
idea of march-in rights has gained traction in recent years in response to
the national debate about the high cost of medicines. Reclaiming a patent
would allow the federal government to work with other companies to make
generic versions of a drug. The federal government, though, has regularly
rejected calls to exercise march-in rights.

But a growing number of lawmakers, academics, and consumer advocates
contend a government agency that funds private research can require a drug
maker to license its patent to another party in order to “alleviate health
and safety needs which are not being reasonably satisfied.” An agency can
also do so when the benefits of a drug or other medical product are not
available on “reasonable terms.”

The issue threatens to become more cantankerous, though, thanks to
Covid-19. The pandemic has triggered an intense global race for
diagnostics, medicines, and vaccines, although there is corresponding
concern about the extent to which these medical products will be
sufficiently accessible globally, especially in lesser-developed economies.

In the U.S., Covid-19 products developed by some companies, such as
Regeneron and Moderna (MRNA), which is developing a vaccine, will be
available at no charge. The HHS noted this in its press release last July.
But the likelihood that any treatment or vaccine may become a long-term
fixture among medical tools for combating the coronavirus has prompted
concern among consumer advocates that price gouging may occur at a later
date.

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This post was updated to note that Regeneron agreed to provide up to
300,000 doses of its medicine, and also to include comment from HHS and
additional comment from KEI.


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