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Stat: Lawmakers ask Defense Department about using a controversial maneuver to lower drug prices

Three years ago, Congress directed the Department of Defense to take steps to lower the cost of medicines discovered with the help of federal funding, but eventually cost Americans substantially more than what is paid in other countries.

Now, a pair of lawmakers wants to know what, if anything, the department has done to comply with the directive, the latest move to convince federal agencies to use a controversial provision of federal law to lower the cost of certain prescription medicines.

In a letter to Defense Secretary Lloyd Austin II, the lawmakers wrote that it is unclear if the department acted on a 2018 report by the Senate Armed Services Committee. The report authorized the department to act when prices are higher in the U.S. than the median price in the seven largest economies with per capita incomes at least half of the per capita income of the U.S. (See page 173).

The lawmakers argued the department could use so-called march-in rights to lower the cost of drugs, because the federal government retains intellectual property to medicines – and other inventions – that were developed, at least in part, through federally funded research. This is a wonky, but fiercely debated notion that has gotten more attention as the cost of prescription medicines became a pocketbook issue.

Under a federal law known as the Bayh-Dole Act, a government agency that funds private research can require a company to license its patent to another party in order to “alleviate health and safety needs which are not being reasonably satisfied.” An agency can also do so when the benefits of a product, such as a medicine, are not available on “reasonable terms.”

Over the past two decades, the Defense Department has contributed more than $15 billion to support medical research. The almost 20,000 projects, drugs, and other medical products that benefited from that funding could be subject to march-in rights, Sen. Elizabeth Warren (D-Mass.) and Rep. Lloyd Doggett (D-Tx.) wrote in their letter.

In response to questions, a Defense Department spokesperson wrote that a reply will be sent directly to the lawmakers.

The missive arrives shortly after the Biden administration halted a rule that would prevent the federal government from using the provision.

Over the last several years, a growing number of consumer advocates, academics, and lawmakers have argued that medicines invented with taxpayer dollars should be affordable to Americans. But the pharmaceutical industry and universities argue that exercising march-in rights would chill the willingness among drug makers to work with federal agencies and, subsequently, harm innovation.

Besides complaining about price controls, drug makers have often been reluctant to commit to pricing terms while projects are in the early stages of development, which prompted the National Institutes of Health in 1995 to remove “reasonable pricing” clauses from cooperative R&D agreements. At the time, former NIH director Dr. Harold Varmus described the clauses as a “restraint” on new product development.

The Bayh-Dole Coalition, a collection of drug makers and university technology transfer offices, argues that law was not intended to address prescription drug costs. “The provision is often subject to misinterpretation,” the coalition wrote in a summary of a recent webinar on march-in rights. “Misusing march-in rights as a price-setting mechanism would eliminate research, development, and investment incentives across the technology transfer, venture capital, and life sciences industries.”

Added Joe Allen, who heads the coalition: “March-in rights don’t allow the government to control prices of commercially marketed prices. They don’t have legal authority to use march-in rights for price controls.”

To what extent, if any, the Biden administration will pursue march-in rights in response to rising prescription drug costs remains to be seen. Successive administrations have previously declined to do so.

As previously noted, the NIH rejected several requests to pursue march-in rights for various medicines. In one notable example, AIDS activists three years ago asked the agency to use this mechanism as a way to lower the cost of the Truvada, or PrEP, HIV prevention pill, although nothing came of their effort. And Knowledge Ecology International, an advocacy group, tried to convince the NIH to use march-in rights for the Xtandi prostate cancer treatment, which was invented with grants from the NIH and U.S. Army.

The Trump administration had issued a rule that would have forbidden any government agency from pursuing march-in rights to address pricing of “commercial goods and services” stemming from an invention. The National Institute of Standards and Technology, which issued the rule, noted the proposal would have provided “additional certainty to licensees” and alleviated concerns about price controls.

But in an executive order issued last month, the Biden administration instructed the NIST, which is part of the Department of Commerce, to consider not finalizing any provisions on march-in rights and product pricing in the proposed rule. The executive order, which was touted as a bid to promote business competition, also contained various proposals to address the cost of prescription medicines.

Nonetheless, any move to exercise march-in rights is likely to trigger court battles. Even so, the executive order suggests the Biden administration is taking a broader look at patents as a potential tool for addressing affordable access to medicines.

A notable example occurred recently when the administration unexpectedly supported a proposal at the World Trade Organization to temporarily waive rights to patents, industrial designs, copyrights, and trade secret protections for Covid-19 vaccines. In theory, this could make it easier for countries that permit compulsory licensing to allow a domestic manufacturer to export lower-cost vaccines to poor countries. The proposal was made last fall after wealthy nations reached deals for billions of doses of Covid-19 vaccines.

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