Susan Walsh/AP Photo
President Biden arrives to speak from the East Room of the White House, December 6, 2021, about his administration’s plans to lower the costs of prescription drugs.
The selection of the next director of the National Institutes of Health has taken on added significance with the Department of Health and Human Services’ determination, wrongly in the view of critics, that some of the more powerful executive actions available to lower prescription drug prices must flow through NIH.
This, along with a reluctance to disrupt a perpetually pending reconciliation deal that would allow Medicare to bargain over the bulk price of some medications, has led to practically no action taken on drug prices throughout the Biden presidency, despite Democrats vowing for nearly two decades that reducing high drug costs is a top priority.
Any congressional prescription drug deal remains tied to a broader reconciliation package that will live or die at the whim of Sen. Joe Manchin (D-WV). Sens. Susan Collins (R-ME) and Jeanne Shaheen (D-NH) released a separate bipartisan bill last week that would cap co-pays of insulin, but it would do nothing to increase access or lower prices for the uninsured, who bear the brunt of the insulin crisis. Nor do ten Republican votes exist to pass the co-pay cap through the Senate, according to advocates working on drug pricing.
This combination of executive branch paralysis and the legislative waiting game means that, by default, the only active effort to deal with drug prices is coming out of the Federal Trade Commission, which is investigating the practices of pharmacy benefit managers, the middlemen who determine access to prescription drugs for hundreds of millions of patients, and who have been accused of using their power to keep prices high to fatten their own profits. The FTC’s investigation could find that PBM business methods constitute commercial bribery under the Robinson-Patman Act.
But that FTC investigation is a rare bright light into the operations of the pharmaceutical supply chain, and it doesn’t touch the actual manufacturers of the therapeutics. For drug companies, the world since January 2021 has scarcely changed.
THE ADMINISTRATION HAS BEEN ADVISED of its power in this arena. A broad coalition of eight research and activist groups under the name Make Meds Affordable has delivered a road map to HHS Secretary Xavier Becerra on how to use executive authority to lower drug costs, focusing on six drugs—the prostate cancer drug Xtandi, coronavirus treatment Paxlovid, Epclusa for hepatitis C, PrEP treatments for HIV/AIDS, asthma inhaler Symbicort, and insulins.
As the Prospect has reported, a combination of Section 1498 of the U.S. Code and a provision of the Bayh-Dole Act of 1980 known as “march-in rights” can be used to effectively seize patents of drugs that are unaffordable and distribute them to generic manufacturers who will sell the medications at lower cost.
With Xtandi, advocates have been waiting on a decision from the NIH on whether to use march-in rights for a drug sold in the U.S. at a price three to five times higher than that in the rest of the industrialized world. Two Xtandi patients petitioned the government last November to use march-in, and in January, the acting principal deputy director of the NIH, Dr. Tara Schwetz, responded that the petitions were under review and “will likely require approximately a month” to determine the next course of action. Yet months later, no action has been taken. The petition was not made to NIH, but to HHS. Yet Becerra, according to Schwetz, assigned the petition to her agency, because they were one of the grantees of Xtandi’s research funding.
HHS’s punt puts the decisions on these drugs in the hands of an agency that has never used march-in rights in the 42 years they have been available.
The other drugs in the road map are all subject to Section 1498, under which “any federal official has right under law to make use of an invention for the purposes of the U.S. government at any time,” said Steve Knievel with Public Citizen’s Access to Medicines program. Section 1498 was threatened during the anthrax scare in 2001 for Cipro, which Bayer eventually decided to deliver cheaply.
But advocates told the Prospect that HHS also assigned these 1498 cases to NIH. They disagree with the approach. “We think these are political decisions for people’s health, we want to see HHS being very active,” said Peter Maybarduk, also with Public Citizen’s Access to Medicines program.
HHS’s punt puts the decisions on these drugs in the hands of an agency that has never used march-in rights in the 42 years they have been available, and denied several requests to do so. NIH has had a cozy relationship with research universities that benefit from the breakthroughs, and some of the Institute’s senior officials are also patent holders who receive personal royalties of up to $150,000 per year for prescription drugs and other treatments, on top of their salary.
Additionally, NIH has no confirmed leader. The former director, Francis Collins, who has long been hostile to aggressive uses of executive authority to lower prescription drug prices, stepped down last December. The acting director, Lawrence Tabak, cannot under the Federal Vacancies Reform Act serve in the position for more than 210 days from the beginning of the vacancy, unless a nominee is named. That time period ends July 18.
So far, only one name has emerged as a possible director nominee: Mary Klotman, a scientist and dean of the Duke University School of Medicine. An unnamed second candidate is reportedly under consideration. While at Duke, Klotman was a colleague of Robert Califf, the Food and Drug Administration leader whose ties to industry have been probed.
Access to medicines groups are concerned that Collins, who has been the interim White House science adviser since February, is actively involved in the search for his replacement, according to Stat News. Drug pricing and access to medicines has never been a first-order concern at NIH, though it sits at the forefront of $40 billion per year in biomedical research grants, touching every new drug approved in the 2010s. An aggressive director could make contracts on the front end to ensure affordability as a condition of the grant funding.
This isn’t the only blemish on NIH’s record. Others include its poor response to the coronavirus pandemic in some areas (though it also helped get the mRNA vaccines established) and its generally low-risk, low-productivity approach to clinical trials. But it still moves around a massive amount of funding, and can set standards for access for all of it.
“The administration says they want access to medicine for people,” said Alex Lawson of Social Security Works, who has long worked on prescription drug reform. “They really don’t have anywhere to hide if they say they want to focus on access and then it’s NIH’s purview. Then you clearly need to appoint a public health–minded NIH director.”
James Love of Knowledge Ecology International, a nonprofit that advocates for greater prescription drug access, believes that the decisions are being made, or in this case delayed, at the White House. “Some in the White House are not anxious to show that the Democrats can rein in even the most outrageous rip-offs,” he said.
THE ADMINISTRATION WOULDN’T HAVE TO STOP with these measures. Medicare, which handles hundreds of billions of dollars in prescription drug sales, has the right to dictate how it spends public money. It can implement many of the features of the congressional prescription drug agreement—including international reference pricing, and other conditions that mirror bargaining with pharmaceutical companies, which has been barred statutorily. For example, Medicare could also demand cost data from the firms as a condition of payment, forcing them to have to publicly justify price hikes.
However, instead of vowing to make changes as a way to trigger a legislative agreement, HHS and the White House have preferred to wait. “The administration really believes it will get legislative changes, and has a sequencing thing in mind,” said Alex Lawson. “It’s all about reconciliation and they won’t upset the apple cart before. We’re saying, ‘Listen, Jack, you’re out of time.’”
In addition, the congressional deal, which has been watered down by Democratic centrists with ties to pharma lobbyists, still won’t be enough to provide immediate relief. A good example is the insulin co-pay cap, which was part of last year’s reconciliation talks but has now been made into the stand-alone bill by Sens. Collins and Shaheen. Aside from the fact that the bill can’t pass on a bipartisan basis, “all things being equal, it’s worse than the status quo,” Lawson said, because it locks in prices for insulin at the 2021 level. Moreover, a co-pay cap only benefits those with insurance, and those who have none have typically been the ones rationing and dying for lack of access. Alec Smith, who died from ketoacidosis after not being able to afford insulin, lost his parents’ coverage after he turned 26. “Would it have saved Alec Smith’s life? If the answer is no, you haven’t solved the problem,” Lawson concluded.
WHILE CONGRESS CONTINUES to fail to pass drug price reforms, the recent compromise gun safety agreement actually extends a safe harbor from anti-kickback statutes to pharmacy benefit managers, the very industry under investigation at the FTC. President Trump instituted the “rebate rule” to end the safe harbor in 2019, but it has never been implemented, after it was “scored” by budget-counters as costing money. Now as a “pay-for,” delaying the rule can be used to fund expenditures, like the mental-health and school-hardening provisions in the gun bill.
Lawson pointed out that under that logic, you could write a rule committing the country to building publicly funded oyster beds, get a score that it would cost $12 trillion, and pay for Medicare for All that way. “It sounds ridiculous but that’s what they’re doing here,” he said.
Extending PBM rebates even as PBM rebates have been cited in congressional reports as partly responsible for high drug prices reveals the lack of seriousness with which Congress has taken the drug pricing debate. Politicians in both parties have committed to reducing high drug prices, one of the top issues for the public, but haven’t done much about it.
That’s why, advocates say, the executive branch must step in. “In Congress, Biden has to thread various balances between New Democrats and progressives,” Maybarduk said. “He likely will not have major drug pricing reform to claim. He can claim it through executive power instead, and hire an NIH director who will continue it.”
