Biden administration threatens seizure of US-funded drug patents if prices too high

The Biden administration is rolling out a framework to enforce the government’s march-in authorities on drugs developed with taxpayer dollars, saying if drugmakers refuse to make their products “reasonably” available, then the government is prepared to give other companies license to produce those drugs at a lower cost.

Under the Bayh–Dole Act of 1980, the government retains certain rights on any products produced through a public-private partnership using federal funding. This legislation allows federal agencies that provided the funding to compel companies that make such products to provide a “nonexclusive, partially exclusive, or exclusive” license to a “responsible applicant.”

If the company refuses to grant a license for its product, the government has the authority to grant the license itself.

These are referred to as march-in rights, as they allow the federal government to “march in” and issue a license for a product on its own.

While the government has had this authority for decades, it has never exercised this right. Shortly before leaving office, the Trump administration proposed a rule that would have narrowed the terms in which march-in rights could be used, preventing them from being exercised on the basis of “business decisions” related to the “pricing of commercial goods and services.”

Though the public comment period on this rule was allowed to continue in its entirety, the Biden administration ultimately did not finalize it. The Biden White House said it is now prepared to make use of this power for the first time.

“American taxpayers pay more for research than any country in the world: hundreds of billions of dollars on research relevant to developing new drugs through the [National Institutes of Health] and other agencies. But at the same time, pharmaceutical companies charge Americans two to three times — and sometimes even more than that — for the same drugs than what they can charge in other countries,” White House domestic policy adviser Neera Tanden said in a briefing.

The issue of high-priced, taxpayer-funded drugs has frequently been brought up, most recently when it came to the cost of COVID-19 vaccines. Throughout this year, lawmakers such as Sen. Bernie Sanders (I-Vt.) grumbled over the price hikes of coronavirus vaccines from Moderna and Pfizer, arguing the investment of taxpayer funds into these medicines was meant to promote public health and not corporate profits.

The departments of Commerce and Health and Human Services (HHS) will release a proposed framework stipulating that the high costs of drugs developed with taxpayer funds will contribute to whether a medication is considered to be available on a “reasonable” basis.

The two agencies said in March they would review the federal government’s march-in authorities.

“Too often, patent and other laws have been misused to inhibit or delay for years and sometimes even decades competition for generic drugs and biosimilars, which overall denies Americans access to lower-cost drugs,” Tanden said.

White House national economic adviser Lael Brainard said, “We’ll make clear that when drug companies won’t sell taxpayer funded drugs at reasonable prices, we will be prepared to allow other companies to provide those drugs for less.”

The provisions in the Bayh–Dole Act act specify that a federal agency can issue its own license of a taxpayer-funded product if it’s determined that:

• The current exclusive licensee has not or is not expected to make “practical application” of the invention
• It’s necessary in order to “alleviate health or safety needs”
• This action is needed to meet “requirements for public use” under federal regulations
• And action is needed because the product is not being “manufactured substantially” in the U.S., a requirement of the Bayh–Dole Act that can be waived if a company shows that manufacturing in the U.S. is not “commercially feasible.”

Brainard said the administration is also taking up this authority in response not only to high drug prices, but also to promote competition in the industry.

“In the pharmaceutical industry, the four largest companies control almost half of all revenues, leading to less competition and higher prices for American consumers,” Brainard said.

When asked which drugs may be subject to march-in rights, senior administration officials declined to elaborate, saying this action is not about any specific medicine. Officials said the framework reflects the interagency thinking of several agencies, including HHS and the National Institutes of Health.

Ahead of the announcement, Pharmaceutical Research and Manufacturers of America (PhRMA) spokesperson Megan Van Etten issued a statement responding to the proposed framework, saying, “This would be yet another loss for American patients who rely on public-private sector collaboration to advance new treatments and cures. The Administration is sending us back to a time when government research sat on a shelf, not benefitting anyone.”

PhRMA is one of several plaintiffs currently suing to stop Medicare price negotiation established through the Inflation Reduction Act, a measure that administration officials said this framework is building on.

The framework will be open to public comment for 60 days.

Along with this action, the administration also announced it will launch a public inquiry into “corporate greed in health care” to stop anticompetitive mergers and practices. As such, the Justice Department, HHS and the Federal Trade Commission will be requesting information on how the control that private equity and corporations have on health care is impacting Americans.

—Updated at 10:43 a.m. EST