Biden Administration Outlines Plan to Effectively Remove Patent Rights from Certain Prescription Medications

The Biden Administration recently published a draft proposal to exercise “march-in” rights regarding generic options for patented drugs. Under the proposed plan the federal government would be able to grant licenses to third parties for products that were developed using federal funds, if the original patent holder does not make the product available to the public on “reasonable terms.”

On X, President Biden posted that his Administration “is proposing that if a drug is made using taxpayer funds is not reasonably available to Americans, the government reserves the right to ‘march in’ and license that drug to another manufacturer who could sell it for less.”

Under the framework, government agencies (including the Department of Health and Human Services (HHS) and the Department of Commerce (DOC)) would consider certain factors in evaluating whether to use march-in rights. One of those factors is pricing, and specifically instances where the price is not deemed “reasonable.” However, “reasonable” is not defined in the draft proposal.

A key factor in whether march-in-rights can be used is whether the invention was funded by the government. However, the proposal further notes that “whether an invention is a subject invention can be a complex and fact-intensive inquiry. For example, some patents that acknowledge government funding will not meet the statutory definition of a ‘subject invention’ (e.g., those under a funding agreement made primarily for educational purposes).” The proposal then outlines several questions the assessing agency may consider in whether an invention is a “subject invention” that would fall under the Bayh-Dole Act or not.

The proposal also outlines the four statutorily defined circumstances in which action is authorized under the Bayh-Dole Act, along with questions to consider in determining whether the criterion is met:

1. Action is necessary because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use.
2. Action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees.
3. Action is necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably satisfied by the contractor, assignee, or licensee.
4. Action is necessary because the agreement required by section 204 [which requires that exclusive licenses to use or sell in the U.S. include an agreement that products embodying subject inventions must be manufactured substantially in the U.S.] has not been obtained or waived or because a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement obtained pursuant to the section.

The draft framework concludes with a handful of scenarios that help to paint a picture as to how the proposal may work, if implemented as proposed.

As Forbes notes in an article about the proposal, march-in-rights stem from the Bayh-Dole Act and typically relate to the ability of universities and businesses to “capitalize on federally funded research to bring novel inventions to the market.” However, the same article also states that the Bayh-Dole Act not only “makes no reference to reasonable prices being enforced by the federal government,” but also Senators Bayh and Dole even later claimed that their “reasonable terms” did not include “price controls,” but that they emphasized competition.

Representative Pramila Jayapal, Chair of the Congressional Progressive Caucus, issued a statement following the draft guidance, noting that, “While we appreciate the administration’s work to address this issue from our Executive Action Agenda, we are concerned that this rule needs to be strengthened and given teeth or it will not fulfill the full promise of march-in rights. The guidance acknowledges that the high cost of drugs should be a factor in the government’s determination of whether to employ its march-in authorities, but it does not provide sufficient grounds to actually take on Big Pharma’s corporate profiteering or the egregious drug pricing schemes that force people to ration prescriptions, travel to Canada for lower prices, or go without life saving medication.”

PhRMA created a brief fact sheet on the Bayh-Dole Act and march-in-rights, which can be found here and which notes that “[r]egardless of the facts, some policymakers want to rewrite the march-in provision to give the government broad new authority to set prices on products, such as medicines or green technologies, that resulted, in part, from  federal funding.” Megan Van Etten, spokesperson for PhRMA, stated that “This would be yet another loss for American patients who rely on public-private sector collaboration to advance new treatments and cures. The Administration is sending us back to a time when government research sat on a shelf, not benefitting anyone.”

Comments on the Proposal Are Accepted

The proposed framework is open to comment for sixty days – until February 6, 2024 – before a final memorandum will be issued. An informational webinar on the framework that includes information on how to submit comments can be found here. Of note, the Federal Register notice states that comments “accompanied by a request that part or all of the material be treated confidentially because of its business proprietary nature or for any other reason” will not be accepted, and therefore, “do not submit confidential business information or otherwise sensitive, protected, or personal information.”