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The Biden administration is taking steps to rein in the price of prescription drugs that were developed with taxpayer money, examine private equity’s role in the healthcare industry and spotlight serial acquirers in the industry who have thus far ducked antitrust scrutiny.
Under a new proposal released Thursday, the federal government could potentially break the patents for high-cost drugs whose discovery and development were fueled by public funds — licensing the inventions to third parties to spur competition and lower prices.
The proposal, issued by the Department of Commerce and the Department of Health and Human Services, specifies for the first time that price can be a factor when federal agencies weigh whether to exercise such “march-in rights,” which are authorized under a federal law that has been on the books for more than 40 years but have so far not been used to drive down drug prices.
“American taxpayers pay more for research than any other country in the world–hundreds of billions of dollars on research relevant to developing new drugs,” through the National Institutes of Health and other federal agencies, White House domestic policy advisor Neera Tanden said on a call with reporters Wednesday. “But at the same time, pharmaceutical companies charge Americans two to three times–and sometimes even more than that–for those same drugs than what they can charge in other countries,” Tanden said.
“Today, we’re taking a very important step toward ending price-gouging, so you don’t have to pay more for medicines than you need,” President Joe Biden said in a video released Thursday.
The administration also said Thursday that the Department of Justice, Federal Trade Commission and HHS would jointly seek input on private equity and other corporations’ influence on U.S. healthcare, calling the effort an examination of “corporate greed” in the industry that will spotlight areas for future regulation and enforcement. The three agencies said they will also share data to help antitrust enforcers zero in on transactions that might otherwise evade review — including “roll-up” strategies that consolidate a market through a series of small deals.
The idea of using march-in rights to rein in drug prices has been hotly debated among policy experts and industry players. The Bayh-Dole Act, passed in 1980, was designed to boost the commercialization of inventions developed with taxpayer money, but it also gives the federal government the power to license the inventions to third parties in certain situations if the benefits of those innovations are not made available to the public.
Multiple petitions asking federal agencies to exercise those march-in rights on certain prescription drugs have so far been rejected. In March, the National Institutes of Health rejected a petition to use march-in rights on Xtandi, the prostate cancer drug jointly developed and commercialized by Astellas Pharma Inc.
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The authority has never been used, a senior administration official said on the call Wednesday, because the criteria haven’t been clearly stated and “agencies have been uncertain about how to approach this.”
Depending on how it is ultimately used, the authority could have a broad reach. Funding from the National Institutes of Health, for example, contributed to research associated with every one of the 210 new drugs approved by the U.S. Food and Drug Administration between 2010 and 2016, according to a study published in the Proceedings of the National Academy of Sciences.
The Commerce Department and the Health and Human Services Department announced in March that they would review the federal government’s authority under the Bayh-Dole Act and clarify when different factors, including price, could factor into march-in decisions. That authority is “a powerful tool designed to ensure that the benefits of the American taxpayer’s investment in research and development are reasonably accessible to the public,” HHS Secretary Xavier Becerra said in a statement when the review was announced. The Trump administration previously proposed a rule that would have blocked the government’s authority to exercise march-in rights based on a drug’s price, but the Biden administration put that proposal on hold.
“We’ll make clear that when drug companies won’t sell taxpayer-funded drugs at reasonable prices, we will be prepared to allow other companies to provide those drugs for less,” National Economic Council director Lael Brainard said on the call Wednesday. “These authorities are in existing laws. The last administration just didn’t want to allow them to be used in this way.”
Drug-industry trade group Pharmaceutical Research and Manufacturers of America said in a May report that “misusing the march-in provision would create a precedent that any product made with any level of government funding would be subject to march-in if someone made an arbitrary determination the price was not ‘reasonable,’” stifling the public-private innovation that the Bayh-Dole Act was designed to promote.
Even before it was officially announced Thursday, the administration’s new proposal drew criticism from Sen. Bill Cassidy, Republican of Louisiana and ranking member of the Senate Health, Education, Labor and Pensions Committee, who said in a statement, “the Biden administration does not have the legal authority for this use of march-in rights,” adding that such a move “would kill American health care innovation and deny millions of Americans future lifesaving cures and treatments.”
