The report released March 4 from the Information Technology and Innovation Foundation (ITIF) is a win for the drug industry, which continues to face criticism on Capitol Hill for the rising costs of prescription drugs. Lawmakers and the White House are considering a number of policy options to bring down drug prices, and using NIH funds in drug development has come up in recent drug pricing hearings.
Under the Bayh-Dole Act, a federal agency that funded research leading to an invention can “march in” and issue patent licenses on its own—thereby ignoring exclusivity rights—if “reasonable terms are not being met” on drug pricing and if the agency has the intellectual property on the drug’s molecule.
A study published last year found NIH funding contributed to the development of every new drug approved by the Food and Drug Administration from 2010 to 2016, meaning NIH could in theory exercise its march-in rights all 210 of those drugs.
Rights Never Used
But NIH has never exercised its march-in rights. The agency rejected requests for AbbVie’s AIDS drug Norvir and for Xtandi, a cancer drug from Astella Pharma and Pfizer Inc.
NIH Director Francis Collins has not ruled out the possibility of using march-in rights for drug pricing but called it an unlikely move for the agency. NIH is more likely to intervene if a company failed to commercialize a product.
Bayh-Dole is a 1980 patent and trademark law (Pub. L. 96-517) that aimed to spur innovation by allowing the government to license technologies to the private sector, particularly for university scientists who invented products with federally funded research grants.
The fact that march-in rights have never been used has contributed to higher drug costs because there’s no pressure on drug companies to lower drug prices when a company has exclusive rights to the drug’s active ingredient, Peter Maybarduk, director of Public Citizen’s Global Access to Medicines Program, told Bloomberg Law.
“If you implement one half of this [Bayh-Dole] regime without the other, of course you’re likely to see extreme price abuse,” Maybarduk said. “There has to be some sort of discipline on price and some sort of disincentive to charging whatever society will pay.”
The ITIF report said using Bayh-Dole for drug pricing would significantly reduce the pace of biopharmaceutical innovation, which could lead to fewer new drugs being developed. The report includes four Bayh-Dole case studies, including Bristol-Myers Squibb’s cancer drug Yervoy, which costs $30,000 per injection.
Stephen Ezell, lead author of the report and vice president of ITIF, said calls to use march-in rights to control drug prices could allow a government entity to retroactively commandeer innovations that private-sector enterprises invested hundreds of millions, if not billions, of dollars to create.
“That threat would significantly reduce the pace of biopharmaceutical innovation,” Ezell said in a March 4 statement.
Propaganda Claims
James Love, director of a nonprofit that has petitioned for march-in rights, told Bloomberg Law the report contains “a lot of myth and propaganda.” The threat of march-in rights was used as leverage in 2004 to roll back a 400 percent price increase for Norvir for federal programs, he said.
Love is the director Knowledge Ecology International, which worked with the Union for Affordable Cancer Treatment to ask NIH and the Department of Defense to use its march-in rights for Xtandi. Both agencies ultimately denied the requests. Another march-in rights request for Xtandi is pending at the Army.
“Bayh-Dole did not eliminate march-in rights. March-in rights were included, and extended to any case where a patented invention was not ‘available to the public on reasonable terms,’” Love wrote in a March 4 email.
The drug industry did not fund ITIF’s report, a foundation spokesperson told Bloomberg Law. The ITIF released its report in advance of a March 7 briefing on the Bayh-Dole Act’s role in catalyzing life sciences development in the U.S.
It’s unclear whether Congress would use march-in as one of the tools in controlling drug pricing, but several lawmakers have expressed interest in the idea. Rep. Lloyd Doggett (D-Texas) has called for the use of march-in rights for drug pricing in the past.
Reps. Alexandria Ocasio-Cortez (D-N.Y.) and Ro Khanna (D-Calif.) raised concerns at a recent House Oversight Committee hearing about how NIH-funded research contributes to new medicines that the private sector develops. Khanna brought up the 2018 study showing NIH contributed to all 210 new drugs approved by FDA. Ocasio-Cortez noted NIH acts as an “early investor” in the development of new medicines and “then they receive no return on the investment they have made.”
A spokesman for the Pharmaceutical Research and Manufacturers of America (PhRMA) told Bloomberg Law the march-in authority under Bayh-Dole was never intended to serve as a mechanism for regulating the pricing of any particular product, including prescription medicines.
“Doing so could effectively defeat the purpose of Bayh-Dole,” PhRMA spokesman Tom Wilbur said. “As this report shows, circumventing patent rights on medical innovation threatens our country’s ability to remain competitive.”
Read more in the ITIF report and the study on NIH funding. Learn more about the briefing on preserving the Bayh-Dole Act and the House Oversight Committee hearing.
Selected information in the "Pharmaceutical Science Update" is compiled from summaries and articles from Bloomberg BNA.