Biden takes aim at big pharma in controversial plan

US government takes on price gouging in latest raft of proposals | IP attorney says the “unfortunate decision” will deter future public-private collaboration | Move prompts concern over government's future use of march-in rights.

The Biden administration has announced a set of proposals aimed at curbing big pharma and price gouging, in a move that has been criticised by IP life sciences attorneys.

The Biden administration, on December 7, revealed a series of actions to promote competition in the healthcare sector and tackle what it described as “the soaring costs of prescription drugs”.

A proposed framework released by the US Department of Commerce (DOC) and the Department of Health and Human Services (HHS) outlined guidelines for agencies on the exercise of march-in rights for taxpayer-funded drugs and other inventions.

These rights allow the government to grant patent licences to other parties, or to acquire if government agencies have contributed to the funding of the research and development.

Commenting on the development, Chad Landmon, partner at Axinn, Veltrop & Harkrider, said: “We are likely to see some very hotly contested litigation in the event that this proposal is finalised and march-in rights are exercised.”

These actions build on previous government initiatives, including capping the cost of insulin at $35 per product per month for seniors, allowing Medicare to negotiate lower prescription drug prices, as well as requiring drug companies to pay rebates if they raise prices faster than inflation.

Research released by the HHS found that a dearth of competition in drug markets is strongly associated with higher prices

Specifically, when it came to the most expensive drugs (the top 10% by price per prescription), 89% of small molecule drugs and all biological products had only one manufacturer.

Additionally, the research demonstrated that nearly three out of ten people face difficulties affording the medications they require.

Addressing market consolidation

Highlighting concerns about the limited competition in the healthcare industry, the administration pointed out that the 25 largest pharmaceutical companies currently control around 70% of industry revenues.

In addition, government research showed that the majority of individual health insurance markets are controlled by just three or fewer issuers in 44 states.

The Biden administration holds that taxpayer-funded drugs and inventions should be more accessible to the public, and the proposed framework for agencies emphasises the role of march-in rights in ensuring affordability.

As Landmon points out, there has been a lot of debate about the federal government's potential use of march-in rights in recent years, with Senator Bernie Sanders strongly advocating for this.

“March-in rights under the Bayh-Dole Act have never been used to reduce drug prices, and we can certainly expect to see a wave of litigation if the government takes the step to exercise these rights,” he added.

According to Landmon, these lawsuits are expected to include challenges related to legal and constitutional issues.

However, he also said that “they may involve detailed factual disputes as to what aspects of a product were funded through government research”.

Landemon adds that this is due to a lot of the research funded by the government involving early-stage technological development that is then expanded on by pharmaceutical companies in the development of their products.

Others are openly dismissive of the government’s action, with Nick Matich, principal at McKool Smith, describing it as “an unfortunate decision”.

“The Bayh-Dole Act got private industry to build on basic government research, by letting them licence patented inventions created with government funds.

“Now the administration is coming in once the invention has proven valuable to demand concessions that it never could have gotten ex ante. This will deter future public-private collaboration," Matich added.

Additional government initiatives

The administration is also launching a cross-government public inquiry into corporate practices in healthcare, aimed at tackling “corporate greed” and protecting patients' interests.

The Department of Justice (DOJ), the Federal Trade Commission (FTC), and the HHS will collaborate to identify areas for regulation and enforcement.

To address market consolidation caused by multiple acquisitions, the HHS, DOJ, and FTC will engage in data sharing to identify potentially anticompetitive transactions that may evade an antitrust review.

The administration will be the first to make ownership data relating to hospitals, nursing homes, hospice providers, and home health agencies publicly available

Additionally, the Centers for Medicare & Medicaid Services will solicit information from the public to strengthen data capabilities and transparency efforts.

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