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Divisive Drug Patent Proposal From Trump Era Is on Biden Agenda

June 14, 2021, 9:25 AM

The Biden administration is forging ahead with a divisive, Trump-era regulatory proposal that would limit the government’s ability to control prices on drugs developed from federally funded research.

The National Institute of Standards and Technology set an October deadline to update the Bayh-Dole Act, the 1980 law that enables universities to retain patent rights on inventions discovered from government-funded research. The proposal would clarify the law—which allows the government to step in and license federally funded inventions to third parties in certain circumstances—can’t be exercised by an agency primarily to lower costs.

The government has consistently rebuffed calls to use “march-in rights” to control the price of certain medicines. But pressure to do so has mounted during the pandemic, with lawmakers and activists urging the Biden administration to seize control of Covid-19 treatments to ensure more widespread availability.

“Political rhetoric on this is going up and up,” said Joe Allen, executive director of the Bayh-Dole Coalition, a group of research and scientific organizations.

But the change just enshrines what’s been long-standing policy—that Bayh-Dole doesn’t say the government can use it to control prices, said Allen, who was on the staff of former Sen. Birch Bayh (D-Ind.) when the law was drafted.

NIST received more than 81,000 comments on the changes. Opponents include the Pharmaceutical Care Management Association, which represents pharmacy benefit managers, and three dozen Democratic lawmakers.

Proponents include AUTM, which represents university technology transfer offices, and the Pharmaceutical Research and Manufacturers of America, the drug industry’s trade group.

The Biden administration posted the leftover proposal as part of its latest regulatory agenda, released June 11.

‘Under Any Circumstances’

Drug pricing has been a hot-button topic throughout the Trump and Biden administrations. The Health and Human Services Department under President Donald Trump released regulations that tied Medicare reimbursements to lower drug prices overseas, among other things, but some of those rules have been paused or delayed under President Joe Biden.

Congress is taking its own stab at drug pricing, with House lawmakers supporting legislation that would help the government negotiate directly with drugmakers.

Bayh-Dole as it stands doesn’t give the government the green light to control drug prices, law and policy professionals say.

Supporters of the regulatory proposal argue that the federal government has other powers—it can issue compulsory licenses in national emergencies such as the pandemic, and the Federal Trade Commission can investigate if drugmakers are misusing patents to block low-cost competition.

The proposed Bayh-Dole changes “clarify that pricing would not be used under any circumstances, because there are other mechanisms the government has to deal with those issues,” said Walter Copan, who headed NIST in the Trump administration and oversaw the development of the proposed update.

Past efforts to put “reasonable pricing” clauses in licensing contracts resulted in a “dramatic reduction in industry engagement” with the National Institutes of Health, Copan said. “Industry just didn’t want to touch that—there wasn’t a defined process to determine how reasonable pricing is determined.”

Making Money

The government is giving away important leverage at a time when there is concern about high drug prices, said Tahir Amin, executive director of the Initiative for Medicines, Access & Knowledge, an organization promoting better access to drugs.

He pointed to a government grant in the late 1980s to Northwestern University for research into how to affect chemicals in the brain, which led to the blockbuster Pfizer Inc. drug Lyrica. The drug, for epilepsy and fibromyalgia, generated as much as $5 billion a year in revenue before it lost patent protection in 2018.

“I’m not saying they shouldn’t be making money, but they were making $5 billion a year,” Amin said. “If it started with some public funding, there has to be a way to have accountability.”

U.S. government spending on research and development in fiscal 2020 was $150.9 billion, according to the National Science Foundation.

The Senate on June 9 passed a Biden-backed, bipartisan bill for more than $190 billion in added spending, including increased research dollars for universities and government labs. The bill is part of an effort to meet the economic and technical challenge from China in key industries like semiconductor manufacturing, cybersecurity, and electric vehicles.

Now “the question is how do we improve the commercialization of government-funded research?” said Marc Sedam, vice provost for innovation at the University of New Hampshire.

“The debate on the application of Bayh-Dole comes across all the time, but the debate on the intention of Bayh-Dole doesn’t,” he said.

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com

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