You may have heard. Around the middle of December last year, the Biden administration decided to float a framework for lowering prescription drug prices by announcing that they may exercise their ‘march-in’ rights under the Bayh-Doyle Act.
Huh?
In short, the Bayh-Dole Act of 1980 was designed to: ‘facilitate the commercialization of inventions developed with public funds, by granting the recipient of those funds the option to retain ownership and seek patents on those inventions. At the same time, the law provides the federal government with residual rights for inventions developed using federal dollars, including the authority to grant licenses to such inventions to third parties when the benefits of the invention are not available to the public on reasonable terms.’
Basically, if a company commercialises a product whose provenance includes federal funding, the government has the right to ‘march in’ and re-licence those products to another manufacturer on more reasonable terms.
Now, on the surface, it seems like a plausible back door to controlling drug prices and using a never-before-used mechanism to keep manufacturers in check. Proponents of using march-in rights under the Bayh-Doyle Act say that this exercising of the government’s rights is long overdue and that drug companies have ridden the coat-tails of federally funded biomedical research to achieve massive profits. And not only that, but the medicines that have been derived from these federally funded dollars have also been priced out of reach for most Americans, while being made available in other jurisdictions for a fraction of the cost.
Opponents of using march-in rights, namely pharmaceutical companies and their lobby groups, point out that public-private partnerships are a critical engine of the US economy, having contributed trillions of dollars and millions of jobs since the Bayh- Doyle Act was enacted in 1980. They also point out that any perception that chokes this public-private partnership will have a catastrophic effect on the biomedical innovation economy. And, finally, opponents state that prior to the Bayh-Doyle Act, more than 28,000 government patents were dormant and had not been used to advance commercialisation of products – a testament to the inertia of the federal government and its inability to take research from the lab to the consumer.
And perhaps the most important argument against invoking march-in rights is this: ‘Bayh- Dole did not intend that government set prices on resulting products. The law makes no reference to a reasonable price that should be dictated by the government. This omission was intentional; the primary purpose of the act was to entice the private sector to seek public-private research collaboration rather than focusing on its own proprietary research’, as the namesakes of the act wrote in the Washington Post two decades ago. The senators went on to write that ‘the ability of the government to revoke a license granted under the act is not contingent on the pricing of a resulting product or tied to the profitability of a company that has commercialized a product that results in part from government-funded research. The law instructs the government to revoke such licenses only when the private industry collaborator has not successfully commercialised the invention as a product.’
On the basis of the Washington Post op-ed alone, the government might be overreaching.
But perhaps the intent of the Biden administration’s strategy is to distract. Distract from what? The Inflation Reduction Act, which empowers the federal government to negotiate the prices of certain medications. Divide and conquer. Start a few fires on multiple fronts, content in the knowledge that industry will have to pick and choose which fires to fight.
Or maybe the strategy is to hang the threat of march-in rights out there in public view to whip up support and amplify public angst about how their tax dollars are being used to develop products that they can’t afford. Name and shame. Or maybe this is a 2024 election ploy – showing the American voters that the Biden administration has ‘got their back’ and is ‘looking out for John Q Taxpayer’. Or maybe the Biden administration really intends to go through with trying to exercise its march-in rights on a product or two. A trial balloon of sorts. Legal battles will ensue. Industry will be frozen. Do we raise our prices by 9.9% every single year? Or do we, perhaps, revisit that price increase in the hopes of not being drawn into a ‘march-in battle’.
No matter the strategy, Biden continues to sabre-rattle with all sorts of actors in the healthcare space with a singular focus on fighting high healthcare costs. His intent is admirable but, with this one, he is marching to the beat of a different drummer.
