[Ip-health] Washington Post on NIST Bayh-Dole proposals: A rare deterrent to limitless drug price increases may die under Trump

James Love james.love at keionline.org
Thu Apr 18 12:44:12 PDT 2019


A rare deterrent to limitless drug price increases may die under Trump

Sen. Birch Bayh (D-Ind.), left, and Sen. Bob Dole (R-Kan.) meet in February
1978 at the Capitol during a break in a closed session of the Senate. (John
Duricka/Associated Press)
By Christopher Rowland April 18

As drug prices have soared, lawmakers and patient advocates have pushed the
federal government to deploy for the first time a powerful deterrent: a
legal provision that allows it to suspend a drugmaker’s patent and license
someone else to produce the drug.

Now, responding to industry alarm over those demands, the Trump
administration is proposing to strictly limit the little-known power.

The move by the Department of Commerce is supported by drug manufacturers
and research universities but could undermine Trump’s populist message of
attacking drug prices. He declared in his first news conference after his
inauguration that drug companies are “getting away with murder” and has
called lowering prices one of his “greatest priorities.’’

[An HIV treatment cost taxpayers millions. The government patented it. But
a pharma giant is making billions.]

Critics say the Commerce Department move is a triumph for industry.

“If tough talk and tweets could stop price gouging, consumers could
celebrate,’’ said Rep. Lloyd Doggett (D-Tex.), who said the administration
is being swayed by drug company influence.

The Commerce draft plan would prohibit the government from suspending a
drugmaker’s exclusive patent over excessive pricing. It targets an obscure
provision of a 40-year-old law called Bayh-Dole that is supposed to protect
taxpayer interests in government-funded inventions, such as drugs
discovered using federal grant money.

The law gives the government “march-in rights’’ to circumvent a patent (and
license someone else to market a drug) if the original therapy is not made
available to the public “on reasonable terms.’’ But the phrase “reasonable
terms’’ is not defined in the law and for years has been the subject of
competing interpretations.

The Trump administration plan, which was published as a “summary of
intended actions’’ in December but received little attention, would come
down clearly in favor of drug companies and major research universities.

March-in rights have never been used by the government, which historically
has encouraged the flow of discoveries to private business for development.
The National Institutes of Health, the leading drug research agency, has
declined multiple times to use march-in rights to control prices —
including under Democratic President Barack Obama.

But in today’s hyper-charged debates over the costs of U.S. prescription
drugs, especially with the advent of biotechnology and gene therapies that
cost hundreds of thousands of dollars a year, the government’s powers are
getting a closer look.

Consumer advocates argue that the threat of government action is one of the
few checks on drug prices and could give drug companies second thoughts
about gouging consumers on drugs that were invented with public funding.

“The pharmaceutical manufacturer takes taxpayers’ money that was invested,
and takes the government monopoly that is granted, and charges monopoly
prices without any countervailing force,’’ Doggett, the chairman of the
House Ways and Means subcommittee on health, said in an interview.

Constituents in his Texas district, he said, “think they are getting ripped
off by the same company that used their tax money.’’

Doggett led 50 Democrats who wrote to Trump in 2017 urging the president to
order NIH to create guidelines on when excessive pricing would trigger
government action. The letter cited Trump’s own declaration after his 2017
inauguration that drug companies were on the White House target list.

Research universities, where federally sponsored research is conducted,
have pushed the Trump administration to head off these initiatives.
Universities reap millions of dollars a year from royalties on inventions
they license to private companies.

The industry and academic institutions argue that march-in rights, or even
the threat of march-in rights, raise the specter of price controls and will
discourage private investors from backing new discoveries.

“If there is a trap door that makes that intellectual property useless, and
there is a fear that might occur, then you can imagine a company is not
going to invest the funds necessary to bring the invention to market,’’
said Stephen J. Susalka, chief executive of the AUTM, which advocates for
research institutions over patents and licensing.

They have found a friendly audience in Trump’s Department of Commerce,
where the president’s populist political rhetoric is colliding with his
equally strong desire for industry-friendly deregulation.

The department’s National Institute of Standards and Technology (NIST) is
scheduled to issue a final draft this month of its proposal, which it is
calling a “discussion document.’’ The draft plan would block any government
agency from exercising march-in rights based on the price of a product.
Exclusivity rights could still be suspended in times of national emergency
— such as an epidemic.

NIST’s director, Undersecretary of Commerce Walter G. Copan, is a Trump
appointee and a longtime expert in the transfer of technology from
government-sponsored labs to the private sector. He was unavailable for
comment for this article, pending the release of a final document, expected
later this month. The final framework will serve as a starting point for
drafting new regulations, a process that would take months.

March-in rights “are unfortunately not well defined in current legislation,
[which] has led to ambiguities and the attempts to use march-in rights as
price control mechanisms,’’ Copan said at a public hearing last year.
Holding back prices, he said, “was not the intent at all of the authors’’
of the law.

The White House Office of Science and Technology Policy echoed that view.
“Clear, uniform standards for applying patent march-in rights across the
government would benefit the entire innovation ecosystem,’’ a spokesman
said Thursday.

Industry and university officials who support NIST’s approach say march-in
rights were never intended to be used for pricing. The proposal has also
galvanized fervent property rights activists such as Andrew Schlafly, son
of the late conservative activist Phyllis Schlafly.

“March-in must never be twisted into a means of enacting price controls,’’
Schlafly wrote in public comments to the government.

But plenty of patent experts disagree that the law’s “reasonable terms’’
should be narrowly applied.

“We have march-in rights for a reason, as a safety valve, and pricing is
one of just many issues that could make something not reasonably
available,’’ said John R. Thomas, a professor at Georgetown Law who
specializes in intellectual property and, as a visiting scholar, wrote a
Congressional Research Service report on the subject. “The idea that the
price is too high fits pretty comfortably in the wording of the statute.’’

Consumer and social justice organizations, including the nonprofit
Knowledge Ecology International, which advocates on patent issues,
circulated an open letter to Congress this month warning against the NIST

A year ago, Trump unveiled a “blueprint’’ for lowering prescription prices,
which included accelerating approvals for generic prescription drugs to
provide greater competition. His administration has proposed a rule to
eliminate from Medicare Part D all drug company rebates made to pharmacy
insurance benefit managers, which are blamed for driving up list prices.

The administration has said it wants to use international comparisons to
hold back prices on Medicare drugs delivered in hospitals and doctor’s
offices. It also wants to require drug companies to include list prices in

The 1980 Bayh-Dole law is named for its Senate sponsors, Democrat Birch
Bayh of Indiana and Republican Bob Dole of Kansas. It set up a framework
for the modern system that allows federally funded research institutions to
license discoveries.

Dole and Bayh wrote an op-ed in The Washington Post in 2002 that said
controlling prices was never their intent. Advocates, however, have been
quick to note that Dole and Bayh were no longer senators when they wrote
that article. Dole, who left the Senate in 1996 during his campaign for
president, became a Pfizer TV pitch man for Viagra in 1998; Bayh, who died
this year, represented the Washington interests of numerous corporate
clients after he left the Senate in 1981. In 2002, he was a registered
lobbyist for multiple companies.

Democratic senators in 2016 asked the Obama administration to exercise
march-in rights in response to drug prices and were rebuffed. Obama’s
Health and Human Services secretary, Sylvia Mathews Burwell, rejected that
request, saying that “The statutory criteria are sufficiently clear and
additional guidance is not needed.’’

“It was never the intent of Congress to use the Bayh-Dole Act to exercise
government price controls,’’ asserted the Pharmaceutical Research and
Manufacturers of America, the drug industry lobbying group, in written
comments as NIST was drawing up its proposed rules.

But Thomas, the Georgetown Law professor, said that analysis is not correct.

“Post-enactment legislative history,’’ he said, “isn’t really the way the
game is played.’’

James Love.  Knowledge Ecology International
U.S. Mobile +1.202.361.3040
U.S. office phone +1.202.332.2670
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