Democrats are suddenly eyeing a valuable pharma asset: its patents
WASHINGTON — Forget the push to bring more generics to market or to tweak Medicare’s arcane payment system.
Democrats, newly empowered in D.C. and on the hunt for bigger and bolder ways to lower drug prices, are suddenly taking aim at a far more central part of pharma’s monopoly power: the patents the industry holds on its drugs.
For years, lawmakers from both parties have shied away to address the industry’s intellectual property. Muck with a drug company’s government-granted monopoly, the thinking goes, and investments in research and development will disappear. Pharma even helped to scuttle a broad, bipartisan patent reform effort in 2015, in part because the industry worried that even small changes focused on bad actors would open the door to bigger ones.
Now, however, after a midterm election season that saw voters more focused on drug prices than ever before, progressives are decrying the intellectual property monopolies that give pharma the ability to charge exorbitant prices — and threatening legislative action.
They are doing so with a three-pronged attack, one element of which is a new proposal: language that has appeared in two major drug-pricing bills introduced in recent months that would enable “compulsory licensing” — allowing the health secretary to break a monopoly by issuing a license to a competitor if negotiations stall. A second came when presumptive House speaker Nancy Pelosi made a high-profile nod this summer to a law that enables the government to seize patents in extreme circumstances. A third would pressure the National Institutes of Health to reinterpret laws governing how it transfers federally funded inventions to the private sector — a role the agency itself does not want.
The new bills, to numerous Capitol Hill aides and outside drug policy experts, typify an emboldened Democratic presence in Washington, following a campaign-trail focus on health care costs — and drug prices in particular — that paid dividends in November.
“When you look at the new bills, they’re designed to deal specifically with the problem of high drug prices,” said Rachel Sachs, a law professor at Washington University who focuses on patent law and the health industry. “It’s more interesting and detailed proposals than we’ve seen before.”
While legislation that could end drug company monopolies is unlikely to become law, drug industry opponents see the fact that such conversations are being had publicly as a victory within itself. The renewed enthusiasm, Democrats say, could serve as penance for what they view as years of bad-faith negotiation.
Read more: New ads push lawmakers to keep the drug pricing promises they made on the campaign trail
It’s not just Democrats. In August, the National Governors Association — a group representing governors from both major political parties — endorsed a “compulsory licensing” proposal akin to language in the two pieces of federal legislation, one from Sen. Bernie Sanders (I-Vt.) and Rep. Ro Khanna (D-Calif.), and the other from Rep. Lloyd Doggett (D-Texas).
Those bills either use international reference prices to cap U.S. payments for drugs or allow Medicare to negotiate drug prices. Each would allow the health secretary to issue a second license to a competitor company if those negotiations end in a stalemate.
Pelosi’s threat to PhRMA, meanwhile, centered on an existing law once used to threaten the drug company Cipro at the height of the anthrax scare in the early 2000s. It allows the health secretary to seize a patent for government use when necessary.
A third, long-touted concept would pressure the NIH to re-interpret the Bayh-Dole Act, which governs intellectual property developed using federal research, and “march in” on licenses for drugs that were excessively priced by their manufacturer.
Republicans — and brand-name drug manufacturers with them — say it’s easy to understand the patent-focused proposals’ political appeal, especially compared to more technical proposals regarding rebates or insurance issues. But while Democrats have found it easy to explain some drug companies’ monopolistic behavior in layman’s terms, Republicans and industry figures alike fear bills like Doggett’s would prove a death knell for new cures.
“That’s a great way to kill venture-capital investment in a new Alzheimer’s drug,” said Sen. Bill Cassidy (R-La.), at a STAT event last week. “If you start marching in, saying we don’t care what your [intellectual property] is, we’re going to now take it over, VC is going to evaporate.”
Joe Grogan, a top drug pricing adviser to the Trump administration, said the federal government exercising its march-in rights would be a “disaster,” likening such proposals to theft.
“By overriding the intellectual property protections for a product, compulsory licensing breaks the government’s word to the inventor that their product is protected for a set period of time,” said PhRMA spokeswoman Holly Campbell, “creating significant uncertainty and discouraging future innovation.”
Democrats’ response is twofold. For one, aides who have worked on drug-pricing legislation told STAT they are tired of drug companies responding to every policy proposal by claiming it will mark the end of new drug development. Even health secretary Alex Azar, a former Eli Lilly executive and Trump appointee, has refuted that talking point in his agency’s policy rollouts.
Additionally, to signal their belief that exclusive licenses cannot exist in eternity, both parties are highlighting drug manufacturers’ aggressive “evergreening” and “pay-for-delay” tactics. Even the FDA Commissioner Scott Gottlieb, a Trump appointee, has made such practices a focus of his own agency’s work to tackle drug costs.
The new Democratic legislation is noteworthy, in large part, because it moves beyond bellyaching about the current and broad patent law landscape and instead proposes new mechanisms for the federal government.
Progressive lawmakers say that, in their view, drug industry patent abuse has reached a crisis level — and that political momentum to tackle drug prices has set the stage for a particularly aggressive push on intellectual property issues.
“Market exclusivity is a privilege,” said Khanna, who joined Sanders on his legislation on the issue. “When you abuse that by price-gouging the sick and aging, then you lose that privilege.”
In the past, Democrats had focused more on existing law, including a push for the NIH to re-interpret laws governing intellectual property to factor in high drug costs. James Love, the director of the intellectual-property-focused nonprofit Knowledge Ecology International, suggested lawmakers had been “pretending” they didn’t need new legislation to address abuses of the patent system — and that the NIH might be able to take care of the problem itself.
That interpretation, however, could put the NIH in the difficult position of regulating drug costs when it issues licenses to commercialize federal research and in the years that follow.
Bayh-Dole, the current framework governing patents derived from federal research, allows for new licenses to be granted to address a health or safety need. The NIH has never used law has never been used to “march in” — to grant a competitor the right to manufacture a drug initially developed and patented by another company — despite six petitions requesting the NIH do so, many on the basis of a drug’s high cost.
Advocates argue there’s already a clear health or safety need, given that millions of Americans struggle to afford medicines. Democrats’ increasing interest in “march-in” rights, however, has at times pulled the NIH into an unwanted spotlight.
“Our role at NIH is not to control drug prices,” said Mark Rohrbaugh, the special adviser for technology transfer at NIH. “If we tried to, as was our experience in a limited way in the early- and mid-1990s, the products don’t get developed. Nobody’s interested in them because they don’t want to be subject to some kind of government price control.”
Other figures familiar with federal research expressed concern that the NIH being forced to police high drug costs could turn a beloved research agency into a politicized regulatory body. Kathy Hudson, the agency’s former deputy director of science, outreach, and policy, said that NIH figures agree on the need to lower drug costs, but see the issue as both beyond their scope.
“The bottom line is that NIH is poorly equipped to be in the business of figuring out prices,” she said. “It’s ironic that Congress is saying, ‘You should go figure this out,’ because maybe it’s Congress that needs to.”
As Rohrbaugh described, the agency in the mid-1990s attempted to implement a “reasonable pricing” clause that bound drug companies to set accessible prices for drugs developed in collaboration with NIH.
“An extensive review of this matter over the past year indicated that the pricing clause has driven industry away from potentially beneficial scientific collaborations,” Harold Varmus, then the NIH director, wrote in 1995. With the policy lifted, new collaborations tripled.
Even then, Democratic lawmakers — including then-Rep. Ron Wyden (Ore.), now the top Democrat on the Senate Finance Committee — warned that government could step back in if prices were to balloon.
Even in a best-case scenario for advocates of reclaiming intellectual property, such march-ins will likely never happen: Most analysis shows that even if government was empowered to break monopolies if bulk-pricing deals couldn’t be struck, companies would be driven to the negotiating table to avoid losing their market exclusivity.
In Democrats’ view, that scenario is a win-win — either drug companies would negotiate a reasonable cost with government, or their monopolies would be broken. Conservative concerns that a bargaining stalemate would effectively deny patients access, one aide said, are nullified by the new competitor’s ability to step in and manufacture the drug in question.
While Rohrbaugh declined to speculate as to the circumstances that would lead the NIH to break a monopoly, he did not rule out a scenario in which cost proved such an immense obstacle to access that the agency would feel compelled to act. From the NIH’s perspective, however, regularly breaking monopolies for the sake of lowering drug costs would soon backfire.
“It would not become a regular practice,” Rohrbaugh said, “because the drugs just wouldn’t get developed.”
