A proposal that will decrease the number of lifesaving drugs
President Donald Trump recently tweeted that he’s “working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!”
But that 140-character-limit promise contains few specifics. Now Texas Rep. Lloyd Doggett, D-San Antonio, is trying to fill in the details.
Doggett says we could slash drug costs by allowing the government to use “march-in” rights. These rights, embedded in a 1980 law, would allow the federal government to strip drug patents from private companies at a whim whenever it thinks prices are too high. It could then relicense the patents to generic manufacturers, who have undertaken no risk or investment in research and innovation.
Using march-in rights as a price-control mechanism is a misuse of these rights. It would discourage research and development of new lifesaving drugs. President Trump would be wise to ignore Rep. Doggett’s suggestion.
Congress initially created march-in rights to allow federal agencies to revoke exclusive licensing rights from drug manufacturers in the event of extraordinary public-safety concerns or when a company is unwilling to develop the drug for patient use — for example, during a dangerous infectious disease outbreak.
March-in rights are part of the Bayh-Dole Act of 1980. Before its enactment, federal grants to universities and nonprofits rarely benefited the public. While universities and nonprofits excelled at making innovative discoveries, these organizations were unequipped to turn a theoretical lab discovery into a commercial product. For instance, it was difficult for those organizations to carry out the time-consuming and costly drug-development process that turns a molecule into a real-world medicine.
At that time, private life-science companies had the capabilities to develop drugs but lacked interest in turning university breakthroughs into marketable drugs because the government retained the patents on any discoveries. That meant the company didn’t have a guarantee it could sell the product it developed, and rely on the sale to sustain business and fuel future research and development.
As a result, 95 percent of the accumulated 28,000 patents stemming from federal funding were never licensed to private companies and commercialized for public use.
The Bayh-Dole Act fixed this problem. The law allowed universities and nonprofits to own the patents on their discoveries and license those patents to private sectors, such as pharmaceutical and biotech companies, for product commercialization in exchange for royalties. The licensing agreements gave pharmaceutical and biotech companies confidence to invest in experimental medicines and bring them to market. The Bayh-Dole Act helped ensure that taxpayer-funded grants actually led to the development of real-world products.
The authors of the act — Democrat Sen. Birch Bayh and Republican Sen. Robert Dole — clarified that the law “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.”
Here’s why. When drug manufacturers license a university discovery, they spend years and hundreds of millions, or even billions, of dollars developing it into a marketable drug. Globally, biopharmaceutical companies spend $150 billion annually on medical research and development. That’s five times what the U.S. government spends.
If the government can take away their licenses, we’d regress to a pre-Bayh-Dole era in which 95 percent of public research funding — even if it’s for the cure to cancer — never actually benefits patients.
It’s noble that our leaders want to lower drug prices. But to ensure companies continue to develop medicines that save lives and drive down costs through competition, the government must reward innovation and risk. Without innovations, how will we tackle debilitating diseases like Alzheimer’s and Parkinson’s, and mortality due to cancer?
Sandip Shah is the founder and president of Market Access Solutions, a global market access consultancy, where he develops strategies to optimize patient access to life-changing therapies. Helen Shao is an analyst in the same company.