Oliver Contreras/SIPA USA via AP Images
President Joe Biden visiting the National Institutes of Health in February
A mostly overlooked provision in President Biden’s executive order on economic competition breathes new life into a powerful tool to lower the cost of individual prescription drugs. If it follows through, the Biden administration would be the first to commandeer patents of excessively priced drugs, ensuring they are offered to patients at an affordable price.
The overall executive order could tip the scales on a roiling debate within the Democratic Party over drug prices. The threat of executive action could finally spur legislative initiatives on an issue that perennially sits at the top of voter concerns.
In the waning days of the Trump administration, the National Institute of Standards and Technology (NIST) proposed a rule to weaken so-called “march-in rights,” whereby the government can seize patents from drugmakers if the product was developed with government funding, and if it isn’t made “available to the public under reasonable terms.” Those patents could then be distributed to third parties.
The language was passed under the Bayh-Dole Act of 1980, but it’s never been used since then. There’s been over four decades of controversy over whether unaffordably high prices violate the “reasonable terms” clause, meaning that the government could seize patents on high-cost drugs and give them to companies who would offer them to the public at cheaper rates. Even the namesakes, former Sens. Birch Bayh (D-IN) and Bob Dole (R-KS), weighed in, arguing in 2002 that their own legislation does not cover unreasonable prices, a contention critics say is at odds with the statutory language and colored by Bayh and Dole’s service at the time as lobbyists for the pharmaceutical industry.
The idea would be that just using march-in rights once would give pharmaceutical companies pause over setting prices unreasonably high.
Bayh and Dole notwithstanding, several 2020 Democratic presidential candidates, including now-Vice President Kamala Harris, highlighted march-in rights in their platforms as an executive action they would take on drug prices. But the NIST rule, conceived just two weeks before Trump left office, would have removed price as a consideration for march-in rights, a long-held wish of the pharmaceutical lobby.
Despite it being a Trump rule, the Biden administration failed to stop its progress during the public comment period, which yielded an extraordinarily large 81,000 comments for such an obscure rulemaking, most of them in opposition. The rule then appeared in the “unified agenda,” a handbook for upcoming regulatory action, in June. “We were a little shaken when we saw it in the unified agenda,” said Steve Knievel, an advocate at Public Citizen’s Access to Medicines program. “After that we have conversations [with the White House] and received indications that it shouldn’t be read too deeply read into.”
Indeed, deep in the executive order released on July 9, Biden directed NIST to “consider not finalizing any provisions on march-in rights and product pricing” in its proposed rule. (Stat News was the first to report the development.) While NIST could theoretically go ahead and finalize the rule, a directive from the president almost certainly alters that scenario.
With march-in rights still operative and the Biden administration seemingly tipping in their favor, advocates see some daylight for a ruling on an outstanding march-in request dating back to 2018 over the advanced prostate cancer drug Xtandi, which sells in the United States at over $150,000 for an annual course of treatment, the highest in the world. The price is more than double what it sells for in a survey of 15 high-income countries, four times the price in Canada, and more than five times the price in Japan. The drug is co-marketed in the U.S. by Japanese company Astellas in partnership with Pfizer. Even with insurance, the co-payment on Xtandi is around $10,000 per year.
“U.S. taxpayers who funded the early development of Xtandi are now being charged multiple times what citizens of other developed countries must pay,” reads the petition of Robert Sachs, who went on Xtandi last October when his prostate cancer fell out of remission and metastasized.
Xtandi was developed through grants from the National Institutes of Health (NIH) and the U.S. Army, and the latter is of particular importance. The 2017 National Defense Authorization Act included language from Sen. Angus King (I-ME) that directed the Department of Defense to exercise march-in rights on any prescription drugs or medical devices the Pentagon helped fund to develop, if the U.S. price is higher than that the median price in seven large, high-income countries.
So far, the Defense Department has ignored the march-in petition on Xtandi since its release in 2018. But Biden’s action to stop the NIST rule’s progress could break the silence. “It would seem that if you go to the trouble to put in the executive order, you’re putting the right to use march-in forward,” said James Love of Knowledge Ecology International, a non-profit that advocates for greater prescription-drug access.
Sachs, a trustee of the esteemed Dana-Farber Cancer Institute, went off the drug in March but joined the petition in April, asking DoD for a hearing on Xtandi and the opportunity to participate. In an interview with the Prospect, Sachs said that the issue was broader than his cancer or even this one drug. “As someone with prostate cancer and a 35-year non-Hodgkins cancer survivor, I learned that patients have to advocate for themselves,” Sachs said. “I think it sends a strong message that with government-funded research, the government retains certain rights. If drug companies are going to gouge patients, in this instance cancer patients, they do so at the risk of the government granting additional rights to other manufacturers.”
The idea would be that just using march-in rights once would give pharmaceutical companies pause over setting prices unreasonably high. The threat on government-funded drugs would hang over that decision-making process. And the government helps fund a wide array of prescription drug development. Most important, it’s in the law now and doesn’t require any further action by Congress.
THE EXECUTIVE ORDER ON COMPETITION included a couple other ideas to lower drug prices, though advocates said their effects would be modest. Biden directed the Federal Trade Commission to end “pay-for-delay” deals, a form of bribery where drug companies with a monopoly patent pay off generic would-be competitors to stay out of the market. But FTC estimates have shown that pay-for-delay affects no more than $3.5 billion worth of drugs in a $500 billion industry. (Some researchers see that number as vastly understated.)
The order also advances Trump-era moves toward allowing patients to obtain prescription drugs at lower prices from Canada, though that country features the second-highest drug prices in the world, and as a nation of one-tenth the size of America, would not have nearly the supply available to make a sustained impact on drug prices for U.S. patients. And that’s all if the drug industry doesn’t intervene. “You don’t want to let pharma raise prices somewhere else to raise prices here,” said Alex Lawson of Social Security Works, who has been active in drug price reform policy.
But perhaps most powerfully, the order directs the Department of Health and Human Services (HHS) to make recommendations within 45 days for executive action on drug prices, which continue to soar, with 66 drugs raising prices just this month. Advocates are hopeful that march-in and other forms of compulsory licensing will be part of the recommendation list. They note that just last year, HHS Secretary Xavier Becerra led a bipartisan letter while Attorney General of California, asking HHS, NIH, and the Food and Drug Administration to use march-in rights for Remdesivir, then seen as an effective coronavirus treatment.
March-in rights are just one of a suite of potentially effective executive actions that could be included in HHS’s recommendations, which are due August 23. For example, a separate compulsory licensing regime using Section 1498 of the U.S. Code, sometimes known as “eminent domain for patents,” could be used to distribute patents on high-priced drugs. “It is necessary for us to include compulsory licensing in this plan,” said Steve Knievel. “It would be disappointing to not include the most important authorities they have.”
Civil society groups sent a letter before the inauguration to President-elect Biden with a number of other options, including re-establishing a reasonable pricing requirement in NIH contracts prior to any government-funded drug development, an idea that fell out of favor in the Clinton administration.
The letter also suggested instituting a demonstration project for “most favored nation” status for Medicare drugs, tying prices to an international benchmark. The Trump administration worked on this in 2020 and put out a modest version, but a pending regulation entered earlier this month entitled “Most Favored Nation Model” suggests that the Biden administration is looking to update it. Depending on how many drugs were included, such a project could be quite impactful.
All of these possibilities could affect what Democrats in Congress decide to do about drug prices, a debate that has been faltering amid widespread differences of opinion within the Democratic caucus. The Senate budget deal for its sweeping $3.5 trillion in public investment changed that conversation by including drug price reform as a way to raise revenue offsetting the spending. As much as $600 billion in savings could be derived from using Medicare to negotiate drug prices.
Sen. Ron Wyden (D-OR) is reportedly driving this process in the Senate. You would expect the ultimate outcome to get chipped away at in the sausage-making, with big-money pharmaceutical interests and their congressional allies objecting to the fiercest provisions. But the lingering executive order and a potentially far-reaching recommendation for action could provide a version of gunboat diplomacy. “If there’s a swing and a miss on the legislative side we can go to executive action,” Lawson explained. “It creates an incentive for the Senate to act. When they don’t do something, they don’t want somebody else to do something. Giving the pen to somebody else is not what they’re interested in.”
In this context, negotiating better prices through Medicare could be seen by lawmakers as a softer intervention than letting the executive branch literally seize the patents of drug companies and sell them off to competitors.
The winds on drug prices in the Democratic Party do appear to be shifting. In May, ten House Democrats raised objections to Medicare drug price negotiation, which passed the House last year. Three of the ten who signed that letter, however, have already reversed their position, including co-lead author Rep. Jake Auchincloss, a freshman from Massachusetts. And a letter from 15 swing-state Democrats last week urged passage of drug price reform, framing it as central to their re-election efforts.
“The truth is that there’s only one path to Democrats holding the House, and it’s through delivering lower drug prices to everybody,” Lawson said. “They’ve literally run on it for nine years.”
