White House Says It Can Seize Certain Drug Patents to Lower Prices

The Biden administration announced on Thursday a proposed framework to rein in prescription drug “price gouging” by activating a never-before-used patent authority over unreasonably expensive drugs funded by taxpayer dollars.

To do this, the administration plans to leverage “march-in rights,” a controversial provision of the Bayh-Dole Act of 1980 that gives the government the authority, under certain circumstances, to assert control of a drug patent and license it to another company if the drug was developed with government support.

What the administration’s framework does is to make clear that a drug’s high price, on its own, is enough of a reason to trigger march-in rights.

White House National Economic Advisor Lael Brainard, PhD, suggested to reporters in a press briefing that the logic is simple: “If American taxpayers paid to help invent a prescription drug, the drug company should sell it to the American public for a reasonable price.”

White House Domestic Policy Advisor Neera Tanden, JD, added that under the provision, if an “invention” was developed using federal funds but is not made available “on reasonable terms,” the agency responsible for funding that research can license that invention to a competitor.

“Fundamentally, we are establishing that price can now be a factor in determining when the federal government can ‘march-in’ to ensure that we have lower prices,” Tanden told reporters.

Rules of Engagement

According to the draft guidance, “march-in” actions must meet one of four criteria, such as being necessary to meet regulatory “requirements for public use” that were “not reasonably satisfied by the contractor, assignee, or licensees.”

Regarding another of the criteria focused on the invention’s capacity to “achieve practical application,” the draft guidance noted that “[w]hether action may be needed to meet the needs of the government or protect the public against nonuse or unreasonable use of the subject invention may include consideration of factors that unreasonably limit availability of the invention to the public, including the reasonableness of the price and other terms at which the product is made available to end-user.” (Italics added for emphasis.)

Among the top 10% of drugs for price per prescription in the U.S., nine out of 10 small molecule drugs and every biologic on the list had only one manufacturer. Yet, three in 10 people struggle to afford their medications, according to a White House fact sheet.

The Trump administration had proposed a rule that would have prevented the federal government from exercising march-in rights based on high-price alone, Brainard said, but the Biden administration chose not to finalize that proposal.

Tackling Healthcare Competition

Along with the new march-in proposal, the Biden administration on Thursday also announced interagency efforts “to scrutinize anti-competitive practices that keep healthcare prices high for families, including collecting information from the public on how some corporations are putting profits ahead of patients,” Brainard said.

Increased consolidation in the healthcare market has contributed to higher costs, poorer quality, and diminished access to care, especially in rural areas, according to a White House fact sheet. Consolidation is also believed to be responsible for the shrinking number of independent physician practices.

The administration’s plans to address anti-competitive acquisitions and behaviors include beginning a cross-government “public inquiry into corporate greed in healthcare.” The Department of Justice (DOJ), Federal Trade Commission (FTC), and HHS will jointly gather data on private equity’s increasing control of the healthcare market and its impact on patients in order to inform future regulation and help to prioritize enforcement activities.

The plan also includes targeting “anticompetitive ‘roll ups.'” These smaller acquisitions — often by health insurers, health systems, or private equity — are too small to meet the reporting threshold of antitrust enforcement agencies and sometimes escape notice. However, they violate antitrust laws and are a concern because they often consolidate the market and lead to worse patient outcomes.

As of Thursday, HHS, DOJ, and FTC will begin to share data to help antitrust enforcers identify potentially anticompetitive transactions.

The Biden administration already announced it will make ownership data publicly available for nursing homes, hospice providers, and home health agencies. On Thursday, CMS released ownership data on Federally Qualified Health Centers and Rural Health Clinics to better assess the relationship between ownership, healthcare costs, and outcomes and to track trends in consolidation.

CMS also plans to improve transparency around Medicare Advantage programs. It is slated to start soliciting information from the public beginning in early 2024 as part of an effort to ensure timely access to care and to see how market competition impacts consumers and care outcomes.

Notably, as part of the interagency efforts to track “corporate greed” in healthcare, HHS will appoint a Chief Competition Officer and both the DOJ’s Antitrust Division and the FTC will appoint Counsels for Health Care.

Sen. Bernie Sanders (I-Vt.), chair of the Senate Health, Education, Labor and Pensions Committee, lauded the new framework as a “step forward in the right direction” but stressed that the administration has more work to do.

“In my view, the administration should reinstate and expand the reasonable pricing clause to require the pharmaceutical industry to charge affordable prices for new prescription drugs developed with taxpayer support,” said Sanders in a press release.

He singled out prostate cancer drug enzalutamide (Xtandi) as a drug that the White House should “march-in” on to allow companies to manufacture generics. Wholesale cost of enzalutamide is $160,000 to $180,000 per year, according to Reuters. Sanders claimed the drug can be bought in Canada for one-fifth the U.S. price.

In March, the federal government denied a request to use march-in authority to compel Pfizer and Astellas to lower the price of enzalutamide.

Sarah Ryan, a spokesperson for the Pharmaceutical Research and Manufacturers of America (PhRMA), a lobbying group for the pharmaceutical industry, expressed disappointment in the administration’s actions.

“If government bureaucrats are allowed to take away patent protections at any time, there is no incentive for biopharmaceutical manufacturers to collaborate with the government or universities, returning us to the pre-Bayh-Dole era where promising new technologies sat on the shelf benefitting no one,” she said in statement to the press.