Many industry stakeholders have been wrestling with difficult questions: How should the fair value of a drug be determined?
Following the launch of sofosbuvir (Sovaldi) in 2013, the pharmaceutical industry has been in the crosshairs of the government because of the drug's cost. Many industry stakeholders have been wrestling with difficult questions: How should the fair value of a drug be determined? What should the cost be for better outcomes? How much should a drug cost if it extends life? We have seen some political solutions advanced, such as the International Pricing Index, the Rebate Rule, and others, but no silver bullet to controlling costs has manifested to date.
The political costs of seeing an initiative through have often been harsh. The solution called march-in rights has been discussed frequently, but it has been clouded in confusion. Let’s examine what this policy is and whether it is a feasible solution to controlling prescription drug costs.
March-in rights arose from the Bayh-Dole Act, otherwise known as the Patent and Trademark Law Amendments Act, which was enacted in 1980. The law, found at US Code, Title 35, Part II, Chapter 18, Section 203, addresses intellectual property arising from federal government—funded research.
The law states that if an invention was created with the assistance of federal funds, the agency that provided the funding can require the granting of licenses to responsible applicants. These licenses can be exclusive, nonexclusive, or partially exclusive. If any licensee refuses to abide by reasonable terms for the granted licenses, then the federal agency can empower itself with a license based on specific conditions outlined in the law.
Right now, stakeholder groups are lobbying the National Institutes of Health by arguing that high prescription drug costs are not meeting patient needs, thus satisfying the burdens outlined in the law. Although it sounds as though the federal government can impose price controls on prescriptions, the government has never invoked this type of authority since it legally does not exist within the statute. If this were the case, the industry could possibly witness less innovation, which could inadvertently lead to the devaluation of patents in general.
The Commerce Department’s latest actions may have put the nail in the coffin on exploring the idea of government intervention via price controls. In April 2019, the National Institute of Standards and Technology finalized its green paper that recommends against the government exercising its march-in rights to lower prescription drug costs.1
“The green paper notes that in the intervening decades, interpretation of the Bayh-Dole Act has created confusion over the ‘march-in rights’ and ‘government-use license’ provisions, and that some stakeholders want clarification,” the authors wrote. “March-in rights described under Bayh-Dole allow the government, in certain limited circumstances, to force the party with title to a government-funded intellectual property to grant a license to another entity. To date, the government has never exercised these rights.”
If march-in rights are not the answer to lowering drug prices, then what is? The answer lies with Congress, which alone has the power to amend the Bayh-Dole Act to clarify when government intervention can occur, either by legislation or a regulatory directive. If not through Bayh-Dole, then Congress is the best place to legislation prescription price controls. There are several legislative bills pending on this issue, including the Prescription Drug Pricing Reduction Act, which has gained public momentum in the last few weeks. It will be interesting to see whether there is an emerging policy on price transparency from the states, as several legislatures are exploring solutions to this issue.
I am neutral when it comes to finding the appropriate answer to this issue. I believe that patients should have access to affordable medications. But how do we define affordable and what market-sufficient protocols could convince manufacturers that they should continue to innovate, knowing that they may not recoup their research and development costs?
My neutrality comes from not having an answer. I am for specialty stakeholders being able to operate on a level playing field while servicing their patients. I would advise that whenever there is a gray area, such as march-in rights, we should seek to obtain a long-lasting solution by changing the statute.
Yes, it may take significant time, but going through the courts is not always a guaranteed outcome. Although the short-term work of getting a solution memorialized through legislation is sometimes painstaking, the resulting certainty can last for many years.
1. NIST releases findings on increasing the innovation impacts of federally funded R&D [news release]. Gaithersburg, MD: National Institute of Standards and Technology; April 24, 2019. www.nist.gov/news-events/news/2019/04/nist-releases-findings-increasing-innovation-impacts-federally-funded-rd.