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States Demanding Gilead Drug Seizure Misread Law, Attorneys Say

Aug. 6, 2020, 8:56 AM

The attorneys general pushing the federal government to flex its might on the only approved Covid-19 treatment misunderstood the 40-year-old law they rely on, according to intellectual property lawyers.

The high cost of Gilead’s remdesivir isn’t enough for the government to step in and seize the patent, licensing it to other companies for production, they said.

The bipartisan coalition of 34 AGs called for the government to seize Gilead’s intellectual property rights for remdesivir, in a recent letter to the heads of the Department of Health and Human Services, the Food and Drug Administration, and the National Institutes of Health.

Arguing that Gilead priced the drug too high and isn’t producing a sufficient supply to meet demand, the attorneys general, led by Xavier Becerra of California and Jeff Landry of Louisiana, said the company “should not profit from the pandemic and it should be pushed to do more to help more people.”

They also argued that the Bayh-Dole patent law applies because the federal government helped fund remdesivir, citing a $30 million NIH-funded clinical trial.

However, the HHS, intellectual property lawyers, and one of the authors of the Bayh-Dole Act argue the attorneys general fail to grasp the basic provisions of the law: March-in rights are not triggered by high drug prices, and federal funds never actually went toward the development of remdesivir, which will cost most U.S. patients $3,120 per five-day course.

“The statute is not intended to be a price regulation or a mechanism for the government to confiscate patents, said Adam Mossoff, a professor of intellectual property law at George Mason University.

“This would actually undermine and eviscerate all types of incentives for companies to make the massive multibillion dollar investments necessary to create these types of life enhancing medical treatments,” he added.

Bayh-Dole

Bayh-Dole allows the government to seize patents for inventions created with government funding and license them to other entities, but only in certain circumstances.

“The statute expressly limits the march-in power only to when a drug is clearly not available on the market at all or is not being licensed in any way by the patent owner. But neither of those situations exist right now with respect to remdesivir,” Mossoff said.

No administration has ever used march-in rights, though the process has been initiated a handful of times, with the George W. Bush and Obama administrations declining to pursue the rights.

The Trump administration is unlikely to do anything differently, as HHS officials don’t believe Bayh-Dole applies to remdesivir either.

“We can only exercise march-in rights where the IP to make the product, as a whole, was funded by the federal government,” an HHS spokesperson said in a comment. “In short, ALL of the patents underlying the product have to have been conceived or reduced to practice with federal funds for Bayh-Dole’s march-in provision to be of any practical significance. We do not believe this to be the case here.”

A spokeswoman for Gilead said the company was “deeply disappointed” that the AGs chose to “misrepresent facts on access” to remdesivir.

The Drug

Gilead received FDA authorization May 1 for emergency use of remdesivir to treat the coronavirus.

The company, which started developing remdesivir in 2010 as a potential Ebola treatment, has at least three patents to protect the drug, extending its monopoly until at least until Oct. 29, 2035—assuming the patents are valid. It also has an unknown number of pending patent applications for remdesivir.

“Gilead is making all efforts necessary to continue to engage in the necessary R&D to prove that this drug is effective and it has already entered into numerous agreements including with the federal government to distribute and make this drug available to patients,” Mossoff said.

Demand for Access

In fact, Gilead has already voluntarily licensed the drug to generic drugmakers in Egypt, India, and Pakistan to boost global supply and is spending $1 billion on the remdesivir effort this year alone.

“If there is a legitimate concern that the company can’t make a sufficient supply, there are other remedies available to the government such as the Defense Production Act,” said Stephen Ezell of the Information Technology and Innovation Foundation.

The AGs believe in this instance march-in rights should be used because “Gilead is unable to guarantee a supply of remdesivir sufficient to alleviate the health and safety needs of the country amid the pandemic,” they said in the letter to federal officials.

“The Bayh-Dole Act more broadly protects the public where public taxpayer funds are used to create a medical product—a protection under federal law that is especially important where there is a shortage for the only known therapeutic to mitigate and shorten COVID-19, during a pandemic,” Becerra’s office said in an emailed statement.

Gilead plans to make 2 million treatment courses by the end of the year, which will be largely designated for distribution in the U.S. However, the AGs wrote that such a projection is “dangerously low and insufficient to handle the current domestic demands.”

But that argument forgets that the population of Covid patients who actually will need and be eligible to receive remdesivir is limited to those who are hospitalized with serious complications. That’s “a small fraction” of the 3.5 million who have been diagnosed, said Joseph Allen, a former staffer to Sen. Birch Bayh (D-Ind.) who helped craft the act.

Allen cautioned that other drugmakers may see how Gilead is being targeted over remdesivir and may be discouraged from pursuing new Covid treatments.

“If they’re going to be attacked like this, what other company is going to want to get involved?” Allen asked.

To contact the reporter on this story: Valerie Bauman in Washington at vbauman@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Andrew Childers at achilders@bloomberglaw.com

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