[Ip-health] House Appropriations Committee rejects Kaptur amendment (directing march-in when prices higher than 7 reference countries)

Kim Treanor kim.treanor at keionline.org
Fri Jul 21 08:23:18 PDT 2017


House Appropriations Committee rejects Kaptur amendment (directing march-in
when prices higher than 7 reference countries)
Kim Treanor on 21 July 2017

On 19 July 2017, Rep. Marcy Kaptur (D-OH) introduced an amendment at the
markup in the U.S. House Appropriations Committee of the FY2018 State and
Foreign Operations, Labor, Health and Human Services Appropriations bill
that would direct the Department of Health and Human Services to use its
authority to break patent monopolies for government-funded inventions
priced higher in the U.S. than seven other high-income countries.

Kaptur explained to the Committee that the amendment would direct HHS to
exercise its rights identified under 35 USC § 202(c)(4), § 209(d(1)) or §
203 to authorize third parties to use inventions developed with government
funding whenever the price of the invention is higher in the United States
than in similar economies around the world.

35 U.S.C. § 202(c)(4) provides that the Government retains a “nonexclusive,
nontransferrable, irrevocable, paid-up license to practice or have
practiced for or on behalf of the United States any subject invention
throughout the world…” Section 209(d)(1) echoes the language of 202(c)(4),
specifying that the royalty-free right must be drafted into the language of
licenses granted for federally-owned inventions. 35 U.S.C. § 203 separately
establishes the Bayh-Dole “march-in” rights provision. The march-in rights
allow the funding agency to grant third parties (like generic drug
companies) the right to use the patented inventions, subject to a royalty
payment, if products are not “available to the public on reasonable terms.”

The march-in rights apply only to inventions that benefited directly from
federal funding, which a patent holder is required to disclose, and is
reported in the published patent. A failure to disclose federal funding can
result in the U.S. government claiming title to the patent, under 35 U.S.C.
§ 202(c)(1).

Rep. Kaptur referenced the prostate cancer drug Xtandi and the epilepsy
drug Vimpat as examples when explaining the amendment. Both drugs were
developed using funds made available through HHS, and disclose federal
funding in their patents.

Xtandi (enzalutamide) lists three patents, all of which disclose government
funding and declare government rights.

Patent 9126941 declares government rights: “This invention was made with
Government support under Grant No. W81XWH-04-1-0129 awarded by the United
States Army, Medical Research and Materiel Command; Grant No. CA092131
awarded by the National Institutes of Health. The Government has certain
rights in this invention.”

Patent 8183274 also declares government rights: “This invention was made
with United States Government support under National Institutes of Health
SPORE grant number 5 P50 CA092131and Department of Defense (Army) grant
number W81XWH-04-1-0129. The Government has certain rights in the

Patent 7709517, the final patent, also states: “This invention was made
with United States Government support under National Institutes of Health
SPORE grant number 5 P50 CA092131 and Department of Defense (Army) grant
number W81XWH-04-1-0129. The Government has certain rights in the

Vimpat (lacosamide) lists one patent, which discloses government funding
and declares government rights.

Patent RE38551 states: “This invention was made with Government support
under Grant/Contract No. NIH MS 15604 awarded by the National Institute of
Health. The Government has certain rights in the invention.”

Both drugs are priced higher in the United States than in other high income
countries. Xtandi is priced at 2 to 4 times higher than in seven other
large economies which have a GNI per capita of at least 50% of the United
States: Japan, Germany, the UK, France, Italy, Canada and Australia. Based
on 2015 figures, the amendment could save Medicare alone $500 million
annually. For more on Xtandi, see: https://www.keionline.org/xtandi

Even before the amendment was introduced by Rep. Kaptur, the trade
association Biotechnology Innovation Organization (BIO) was lobbying
members of the Appropriations Committee to vote against it. Opposition
during the Committee’s debate came from Rep. Tom Cole (R-OK), who urged a
no vote on the amendment. Rep. Cole stated that while he appreciated the
concern of Rep. Kaptur, he thought the amendment would run the risk of
upsetting the relationship between the National Institutes of Health and
private industry. Rep. Cole also stated that the amendment would be
“extremely difficult to implement, as there’s no way to measure to what
extent a particularly federally funded study played in the discovery of a
new drug.”

A similar directive to the proposed amendment was included in the Senate
Armed Services Committee’s Report on the National Defense Authorization
Act, which applied exclusively to drugs developed with funding from the
Department of Defense. For more on this report, see:

Rep. Rosa L. DeLauro (D-CT) spoke in support of the amendment,
“[Pharmaceutical] companies grow their businesses with the benefit of
taxpayer sponsored research. They then turn around and they gouge those
same taxpayers, and they put life-saving medicine out of the reach of many.”

Had DoD or HHS enforced this mandate earlier, Medicare would have saved
considerable money. In 2015, the average price in the US to medicare was
$73.94 per pill (4 per day are required). In 2016, the median price for the
seven reference prices* was the Japan price of $26.37 per pill, a discount
of 64.3 percent of the 2015 Medicare price. Based upon this calculation,
the 2015 savings to Medicare would have been $791m x .643 = $508m.

For the private sector, the savings would be larger, on a percentage basis.
For example, the GoodRx.Com price for Xtandi is 95.53 per pill, or $382 per
day, for a treatment you need every day, for as long as it works. The
reference price would be lower by more than 72 percent. Instead of $382 per
day, the cost would be $105.48 per day, which is still a lot of money, but
better than $382. If Astellas did not lower the price and the government
issued the compulsory license, the price would be far lower. One firm has
offered to supply Medicare for $3 per pill, and even that is much higher
than the costs of manufacturing.

The US and reference prices compared
United States: GoodRx price: 95.53 USD
United States, Medicare (2015): 73.94 USD
Germany: 34.19 EUR (36.93 USD)
United Kingdom 24.42 GBP (35.65 USD)
France 24.75 EUR (26.73 USD)
Japan 3,138.80 Yen (26.37 USD)
Italy 24.08 EUR (26.01 USD)
Australia 33.04 AUD (23.46 USD)
Canada, Quebec 28.35 CAD (20.12 USD)

While Rep. Kaptur made an impassioned plea to use the existing legislation
under Bayh-Dole to lower drug prices for Americans and to allow taxpayers
to benefit from what they have invested in drug development, the committee
voted the amendment down. There was no roll call vote, and the
determination to strike the amendment was made by voice vote for the noes
determined by the committee chair Rodney Frelinghuysen (R-NJ).

KEI Director James Love commented on the debate in the Appropriations
“The Kaptur amendment would have only applied to drugs where the invention
was funded by the U.S. taxpayers, something the patent holders are required
to disclose in the patent applications. The rule Kaptur proposed was very
modest, only that government funded inventions should not be more expensive
here than anywhere else. People voting against the Kaptur amendment are
endorsing the freedom of drug companies to charge US residents more, and in
many cases, much more than the prices anywhere else, for an invention
funded by US taxpayers. Rejecting the Kaptur amendment is endorsing a
policy of treating the US worst than any other country. We hope this issue
continues to be debated in the Congress, and the Trump Administration
changes its policy, in order to save taxpayers billions of dollars and to
ensure that taxpayer-funded drugs are more affordable.”

Video of the hearing is available below:


Kim Treanor
Knowledge Ecology International
kim.treanor at keionline.org
tel.: +1.202.332.2670

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