[Ip-health] Biden Executive Order Could Finally Lower Drug Prices

Claire Cassedy claire.cassedy at keionline.org
Mon Jul 19 06:28:36 PDT 2021


Biden Executive Order Could Finally Lower Drug Prices

Several tools could lower prices directly—and serve as an indirect
incentive to get Congress to act.


A mostly overlooked provision in President Biden’s executive order on
economic competition breathes new life into a powerful tool to lower the
cost of individual prescription drugs. If it follows through, the Biden
administration would be the first to commandeer patents of excessively
priced drugs, ensuring they are offered to patients at an affordable price.

The overall executive order could tip the scales on a roiling debate within
the Democratic Party over drug prices. The threat of executive action could
finally spur legislative initiatives on an issue that perennially sits at
the top of voter concerns.

In the waning days of the Trump administration, the National Institute of
Standards and Technology (NIST) proposed a rule to weaken so-called
“march-in rights,” whereby the government can seize patents from drugmakers
if the product was developed with government funding, and if it isn’t made
“available to the public under reasonable terms.” Those patents could then
be distributed to third parties.

The language was passed under the Bayh-Dole Act of 1980, but it’s never
been used since then. There’s been over four decades of controversy over
whether unaffordably high prices violate the “reasonable terms” clause,
meaning that the government could seize patents on high-cost drugs and give
them to companies who would offer them to the public at cheaper rates. Even
the namesakes, former Sens. Birch Bayh (D-IN) and Bob Dole (R-KS), weighed
in, arguing in 2002 that their own legislation does not cover unreasonable
prices, a contention critics say is at odds with the statutory language and
colored by Bayh and Dole’s service at the time as lobbyists for the
pharmaceutical industry.

Bayh and Dole notwithstanding, several 2020 Democratic presidential
candidates, including now-Vice President Kamala Harris, highlighted
march-in rights in their platforms as an executive action they would take
on drug prices. But the NIST rule, conceived just two weeks before Trump
left office, would have removed price as a consideration for march-in
rights, a long-held wish of the pharmaceutical lobby.

Despite it being a Trump rule, the Biden administration failed to stop its
progress during the public comment period, which yielded an extraordinarily
large 81,000 comments for such an obscure rulemaking, most of them in
opposition. The rule then appeared in the “unified agenda,” a handbook for
upcoming regulatory action, in June. “We were a little shaken when we saw
it in the unified agenda,” said Steve Knievel, an advocate at Public
Citizen’s Access to Medicines program. “After that we have conversations
[with the White House] and received indications that it shouldn’t be read
too deeply read into.”

Indeed, deep in the executive order released on July 9, Biden directed NIST
to “consider not finalizing any provisions on march-in rights and product
pricing” in its proposed rule. (Stat News was the first to report the
development.) While NIST could theoretically go ahead and finalize the
rule, a directive from the president almost certainly alters that scenario.

With march-in rights still operative and the Biden administration seemingly
tipping in their favor, advocates see some daylight for a ruling on an
outstanding march-in request dating back to 2018 over the advanced prostate
cancer drug Xtandi, which sells in the United States at over $150,000 for
an annual course of treatment, the highest in the world. The price is more
than double what it sells for in a survey of 15 high-income countries, four
times the price in Canada, and more than five times the price in Japan. The
drug is co-marketed in the U.S. by Japanese company Astellas in partnership
with Pfizer. Even with insurance, the co-payment on Xtandi is around
$10,000 per year.

“U.S. taxpayers who funded the early development of Xtandi are now being
charged multiple times what citizens of other developed countries must
pay,” reads the petition of Robert Sachs, who went on Xtandi last October
when his prostate cancer fell out of remission and metastasized.

Xtandi was developed through grants from the National Institutes of Health
(NIH) and the U.S. Army, and the latter is of particular importance. The
2017 National Defense Authorization Act included language from Sen. Angus
King (I-ME) that directed the Department of Defense to exercise march-in
rights on any prescription drugs or medical devices the Pentagon helped
fund to develop, if the U.S. price is higher than that the median price in
seven large, high-income countries.

So far, the Defense Department has ignored the march-in petition on Xtandi
since its release in 2018. But Biden’s action to stop the NIST rule’s
progress could break the silence. “It would seem that if you go to the
trouble to put in the executive order, you’re putting the right to use
march-in forward,” said James Love of Knowledge Ecology International, a
non-profit that advocates for greater prescription-drug access.

Sachs, a trustee of the esteemed Dana-Farber Cancer Institute, went off the
drug in March but joined the petition in April, asking DoD for a hearing on
Xtandi and the opportunity to participate. In an interview with the
Prospect, Sachs said that the issue was broader than his cancer or even
this one drug. “As someone with prostate cancer and a 35-year non-Hodgkins
cancer survivor, I learned that patients have to advocate for themselves,”
Sachs said. “I think it sends a strong message that with government-funded
research, the government retains certain rights. If drug companies are
going to gouge patients, in this instance cancer patients, they do so at
the risk of the government granting additional rights to other

The idea would be that just using march-in rights once would give
pharmaceutical companies pause over setting prices unreasonably high. The
threat on government-funded drugs would hang over that decision-making
process. And the government helps fund a wide array of prescription drug
development. Most important, it’s in the law now and doesn’t require any
further action by Congress.

THE EXECUTIVE ORDER ON COMPETITION included a couple other ideas to lower
drug prices, though advocates said their effects would be modest. Biden
directed the Federal Trade Commission to end “pay-for-delay” deals, a form
of bribery where drug companies with a monopoly patent pay off generic
would-be competitors to stay out of the market. But FTC estimates have
shown that pay-for-delay affects no more than $3.5 billion worth of drugs
in a $500 billion industry. (Some researchers see that number as vastly

The order also advances Trump-era moves toward allowing patients to obtain
prescription drugs at lower prices from Canada, though that country
features the second-highest drug prices in the world, and as a nation of
one-tenth the size of America, would not have nearly the supply available
to make a sustained impact on drug prices for U.S. patients. And that’s all
if the drug industry doesn’t intervene. “You don’t want to let pharma raise
prices somewhere else to raise prices here,” said Alex Lawson of Social
Security Works, who has been active in drug price reform policy.

But perhaps most powerfully, the order directs the Department of Health and
Human Services (HHS) to make recommendations within 45 days for executive
action on drug prices, which continue to soar, with 66 drugs raising prices
just this month. Advocates are hopeful that march-in and other forms of
compulsory licensing will be part of the recommendation list. They note
that just last year, HHS Secretary Xavier Becerra led a bipartisan letter
while Attorney General of California, asking HHS, NIH, and the Food and
Drug Administration to use march-in rights for Remdesivir, then seen as an
effective coronavirus treatment.

March-in rights are just one of a suite of potentially effective executive
actions that could be included in HHS’s recommendations, which are due
August 23. For example, a separate compulsory licensing regime using
Section 1498 of the U.S. Code, sometimes known as “eminent domain for
patents,” could be used to distribute patents on high-priced drugs. “It is
necessary for us to include compulsory licensing in this plan,” said Steve
Knievel. “It would be disappointing to not include the most important
authorities they have.”

Civil society groups sent a letter before the inauguration to
President-elect Biden with a number of other options, including
re-establishing a reasonable pricing requirement in NIH contracts prior to
any government-funded drug development, an idea that fell out of favor in
the Clinton administration.

The letter also suggested instituting a demonstration project for “most
favored nation” status for Medicare drugs, tying prices to an international
benchmark. The Trump administration worked on this in 2020 and put out a
modest version, but a pending regulation entered earlier this month
entitled “Most Favored Nation Model” suggests that the Biden administration
is looking to update it. Depending on how many drugs were included, such a
project could be quite impactful.

All of these possibilities could affect what Democrats in Congress decide
to do about drug prices, a debate that has been faltering amid widespread
differences of opinion within the Democratic caucus. The Senate budget deal
for its sweeping $3.5 trillion in public investment changed that
conversation by including drug price reform as a way to raise revenue
offsetting the spending. As much as $600 billion in savings could be
derived from using Medicare to negotiate drug prices.

Sen. Ron Wyden (D-OR) is reportedly driving this process in the Senate. You
would expect the ultimate outcome to get chipped away at in the
sausage-making, with big-money pharmaceutical interests and their
congressional allies objecting to the fiercest provisions. But the
lingering executive order and a potentially far-reaching recommendation for
action could provide a version of gunboat diplomacy. “If there’s a swing
and a miss on the legislative side we can go to executive action,” Lawson
explained. “It creates an incentive for the Senate to act. When they don’t
do something, they don’t want somebody else to do something. Giving the pen
to somebody else is not what they’re interested in.”

In this context, negotiating better prices through Medicare could be seen
by lawmakers as a softer intervention than letting the executive branch
literally seize the patents of drug companies and sell them off to

The winds on drug prices in the Democratic Party do appear to be shifting.
In May, ten House Democrats raised objections to Medicare drug price
negotiation, which passed the House last year. Three of the ten who signed
that letter, however, have already reversed their position, including
co-lead author Rep. Jake Auchincloss, a freshman from Massachusetts. And a
letter from 15 swing-state Democrats last week urged passage of drug price
reform, framing it as central to their re-election efforts.

“The truth is that there’s only one path to Democrats holding the House,
and it’s through delivering lower drug prices to everybody,” Lawson said.
“They’ve literally run on it for nine years.”

More information about the Ip-health mailing list