Could this federal guideline drive down drug costs?

The Biden administration’s quest for lower drug costs may lead to a 1980 law.
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Amelia Kinsinger

· 6 min read

One federal agency has found a mechanism for the Biden administration to lower drug costs: a little-known provision from a 44-year-old law called march-in rights. And by adding some tweaks to the law, the National Institute of Standards and Technology (NIST) believes it can help the US government go up against drug companies.

NIST has begun the process of making high costs a reason for the government to invoke march-in rights, which would (in theory) compel pharmaceutical companies to lower their prices or risk losing out on exclusive patents—formulas that are billion-dollar moneymakers for the likes of Pfizer, Astellas, and other drug companies.

“We’re taking a very important step toward ending price gouging,” President Joe Biden said in a statement as part of the December 2023 announcement that listed march-in rights as a central strategy to tackling drug costs.

How march-in rights work

Though a private enterprise may own a patent and have the sole right to manufacture that product, the government can “march in” and force the patent holder to license out, under a specific set of conditions, any invention created using taxpayer dollars. These conditions include increasing production to meet a safety need or making an inaccessible product more available to consumers, according to the Federal Trade Commission (FTC).

The rule comes from the 1980 Bayh–Dole Act, which hands the intellectual property of products the government helped develop over to private inventors.

In the case of pharmaceutical products, an agency like the National Institutes of Health (NIH) could invoke march-in rights and force a patent holder to license production rights to other companies. Those companies, in turn, could make generic equivalents of that drug, creating competition to bring down prices.

Though the public comment period ended last month and guidelines won’t arrive until later this year, the move has already sent shockwaves through the pharmaceutical industry.

“We strongly oppose this approach and urge NIST to remove price as a consideration from the framework,” Stacy Harris, a spokesperson for pharmaceutical company Astellas, said in a statement shared with Healthcare Brew. “This misguided proposal would have a chilling effect not only in the life sciences but across all fields of technology that involve early-stage government-funded research.”

Companies have a lot to lose

After Pfizer’s patent on Lipitor, which treats high cholesterol, expired in 2011, generic versions flooded the market and cut into the company’s revenue. The next year, Lipitor made Pfizer $4 billion, down from $12 billion in 2010, according to Biopharma Dive. AbbVie, the manufacturer that makes Humira, has made about $200 billion since the inflammation treatment drug first came to market, Healthcare Brew previously reported. Its patent expired at the beginning of 2023.

If there is more liberal guidance for using march-in rights, drug companies fear that the government could, in effect, expedite patent expiration for other money-making therapies, according to Pfizer’s letter in opposition to NIST’s new framework.

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Still, experts believe that level of intervention is unlikely.

March-in rights haven’t been invoked since they became law in 1980 because of the narrow scope and time it takes to arbitrate, according to the FTC.

In March 2023, for example, the NIH declined to march in on prostate cancer drug Xtandi ahead of its 2027 patent expiration after the Union for Affordable Cancer Treatment (UACT), a patient advocacy group, petitioned the Department of Health and Human Services (HHS) to do so in 2021. The petition argued that at $427.50 per day, Xtandi was inaccessible to patients.

Writing to UACT, then Acting NIH Director Lawrence Tabak explained that “the remaining patent life and the lengthy administrative process involved” led the agency to decide against marching in. Because more than 200,000 patients had received the drug since 2012, Tabak concluded that Xtandi was “widely available to the public on the market.”

On February 5, during the public comment period for NIST’s new framework, HHS Secretary Xavier Becerra upheld NIH’s denial.

Even if agencies had great enthusiasm for march-in rights, the list of qualifying drugs doesn’t run long. Of the 884 FDA product patent renewals between 1997 and 2023, the government only helped develop about 60 of them, according to data that James Love, director of Knowledge Ecology International, a not-for-profit public advocacy group that has petitioned for march-in rights (including on Xtandi), and Reshma Ramachandran, an associate professor of medicine at Yale School of Medicine, compiled and shared with Healthcare Brew.

“Knowledgeable critics and supporters of march-in rights agree they are relevant to relatively few products,” Love wrote earlier this year in Scientific American.

Drugmakers, such as Gilead, Pfizer, and Novartis, expressed concerns about adding price points to the list of triggers that could invoke march-in rights, according to the nearly 52,000 comments NIST received during the public comment period, which ended on February 6.

They argued that expanded march-in rights would create less of an incentive to collaborate with the government, since an agency could later wrest control of the resulting patent away.

March-in rights “could have negative consequences such as discouraging collaboration, introducing uncertainty, and jeopardizing the further development and successful commercialization of research funded by the government,” Jennifer Walton, senior VP of US policy and government relations at Pfizer, wrote in a comment on the proposed framework.

With the addition of price as a trigger to invoke march-in rights, drug companies’ concerns about government involvement could get one step closer to reality.

“This guidance would sort of allow you to get there,” Matt Rizzolo, a partner at Ropes & Gray, a law firm that focuses on intellectual property with pharmaceutical clients like Pfizer, told Healthcare Brew.

Navigate the healthcare industry

Healthcare Brew covers pharmaceutical developments, health startups, the latest tech, and how it impacts hospitals and providers to keep administrators and providers informed.