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UPDATE (February 5, 2024): AFP submitted a letter to the federal register urging the administration to withdraw its proposal. Click here to read the full letter.
Last week, the Biden administration announced a plan to give itself a new power to confiscate pharmaceutical drug patents whenever federal officials deem a prescription drug “too expensive.”
Under the still-developing plan, federal officials could “march in” to confiscate the patent on a high-priced drug and give it to someone else.
The administration claims the government needs this power to combat drug-company “price-gouging” and to promote pharmaceutical innovation and competition. The opposite would happen.
The plan is also illegal. While under the Bayh-Dole Act of 1980, the president has limited march-in rights, he may only invoke them when a promising product that was developed with the help of taxpayer-funded research is not “accessible to the public,” meaning the patent-holder is preventing the product from being produced or marketed. The law says nothing about the product’s price.
The Act’s purpose is to ensure federally subsidized innovations are turned into actual products. It was never intended as a tool to impose backdoor government price controls.
Indeed, Senators Evan Bayh and Bob Dole explicitly noted in the congressional debate that “the law makes no reference to a reasonable price that should be dictated by the government.” The Act’s march-in rights authority, they explained, is “not contingent on the pricing of a resultant product or tied to the profitability of a company that has commercialized a product that results in part from government-funded research.” Instead, they argued, government should march in “only when the private industry collaborator has not successfully commercialized the invention as a product.”
In unilaterally proposing to redefine the term “accessible to the public” to mean “available to the public at a price we deem fair,” the Biden administration is clearly acting beyond its authority.
And in promising to reduce drug prices, it is clearly exaggerating, because less than 15 percent of new drugs are based on a patent derived from public funding. (Most drug products involve numerous patents.)
Several previous administrations have been publicly exhorted by politicians and formally petitioned by pressure groups to use march-in rights to control prices. But in every case, they wisely said no.
Indeed, no president has ever invoked march-in rights. And for good reason. Doing so would have profound negative consequences for innovation and patient health.
Understanding march-in rights
Congress enacted the Bayh-Dole Act of 1980 to stimulate innovation by encouraging the transfer of federally funded research from universities to the private sector.
As we have seen, one of the Act’s provisions, the march-in rights authority, grants the federal government the power to intervene and license an invention, but only when certain conditions are met.
Those conditions are:
The phrase, “on reasonable terms” here does not refer to a producer’s terms of sale, but rather to an inventor’s terms of license, that is, to the agreement by which the inventor licenses the product to be produced and marketed. It has nothing to do with the product’s sale price.
Negative effects on pharmaceutical innovation
Invoking march-in rights to control drug prices would suppress life-saving medical innovation for at least three reasons. It would:
Negative impact on patient health
Patients, too, would suffer under Biden’s proposed illegal expansion of march-in rights, in two big ways.
Negative economic impact
The president’s proposed use of march-in rights would also put the U.S. at a competitive disadvantage.
Conclusion: Using march-in rights to impose government price controls will only harm human health
While the Bayh-Dole Act’s march-in rights are meant to, and do, balance public interests, and accelerate the dissemination of publicly funded inventions, using them to impose backdoor government price controls will lead to significant harms with devastating effects on human health and well-being.
Government confiscation of drug patents is the wrong way to increase competition and reduce prices. The right way is to give every American a Personal Option — a doctor- supported plan that makes health care more affordable, dependable, transparent, and hassle-free without any government mandates or meddling.
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