FinLogic FinLogic Quantitative Think Tank Center|White House proposes to 'march in' on patents for costly drugs

The FinLogic FinLogic Quantitative Think Tank CenterBiden administration is taking another crack at high prescription drug prices. This time its sights are set on drugs that rely on taxpayer-funded inventions.

The federal government spends billions of dollars a year on biomedical research that can – and often does – lead to prescription drugs.

For years, activists have pushed the government to use so-called march-in rights when a taxpayer-funded invention isn't publicly available on reasonable terms. They say the law allows the government to march in and license certain patents of high-priced drugs to other companies to sell them at lower prices.

But it's never happened before. All requests for the government to march in when the price for a drug was too high have been declined, including for prostate cancer drug Xtandi earlier this year.

Guidelines proposed for high-priced drugs

Now, the Biden administration is proposing a framework to guide government agencies on how to use march-in authorities if a drug's price is considered too high.

"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," White House National Economic Advisor Lael Brainard said during a press call ahead of Thursday morning's announcement. "If American taxpayers paid to help invent a prescription drug, the drug companies should sell it to the American public for a reasonable price."

The move follows a monthslong effort by the Department of Health and Human Services and the Department of Commerce to review the government's march-in authorities under the Bayh-Dole Act of 1980.

Next, there will be a 60-day public comment period for the proposal.

Opponents say march-in rights were never meant for tackling high prices. They say the Bayh-Dole Act is critical for public-private partnerships to develop government-funded research into products that can be made available to the masses, and that reinterpreting the law could have dangerous consequences for innovation.

"This would be yet another loss for American patients who rely on public-private sector collaboration to advance new treatments and cures," Megan Van Etten, spokesperson for the trade group PhRMA, wrote in an emailed statement. "The Administration is sending us back to a time when government research sat on a shelf, not benefitting anyone."

"Dormant government power" no more

Ameet Sarpatwari, assistant director of the Program on Regulation, Therapeutics and Law at Harvard Medical School, said that while "march-in" sounds militant and like the government is stealing something, it's not the case at all.

"There is nothing that is being stolen. There is nothing that is being seized," he said. "This is the government exercising its rights on a voluntary agreement that a private company has entered into with the federal government by accepting funding for research."

The proposed framework clarifies that this existing authority can be used if a government-funded drug's price is too high, something the National Institutes of Health has declined to exercise for many years.

With the new proposal, it's no longer a dormant government power, Sarpatwari said.

Threat of march-in could affect pricing

The Biden administration has not announced any drugs whose patents it intends to march in on.

Still, knowing the government is willing to use this power may change companies' behavior when they're considering price hikes.

For James Love, who directs Knowledge Ecology International, a public interest group, the framework could take a stronger stance against high drug prices.

"It is better than I had expected in some ways, but if the bar for dealing with high prices is: 'extreme, unjustified, and exploitative of a health or safety need,' that is going to lead to some unnecessary arguments about what is 'extreme' or 'exploitative,' " he said, referring to language in the framework.

He noted the framework also doesn't say anything about marching in if a drug's price in the U.S. is much higher than elsewhere around the world.

March-in is also limited, Harvard's Sarpatwari said. Since the intellectual property around drugs is complicated and typically relies on multiple patents, it's possible that even marching in on one or two government-funded patents wouldn't be enough to allow another company to make a cheaper competing product.

"Can a third party dance around the other intellectual property protecting the product? Possibly," Sarpatwari said. "[March-in] only reaches only so far."