The Catch-22 of Bayh-Dole March-In Rights

By Rachel Sachs

Earlier today, the NIH rejected a request filed by consumer groups including Knowledge Ecology International (KEI) to exercise the government’s march-in rights on an expensive prostate cancer drug, Xtandi.  Xtandi costs upwards of $129,000 per year, and KEI had asked the government to exercise its rights under the Bayh-Dole Act, which specifies a range of conditions under which the government may require a patentholder to grant licenses on reasonable terms to others to practice the patent.  Specifically, the government may require such a license where “action is necessary to alleviate health or safety needs which are not reasonably satisfied,” 35 U.S.C. § 203(a)(2), or where the benefits of the invention are not being made “available to the public on reasonable terms,” 35 U.S.C. § 201(f).

For some time now, there has been debate over the question of whether high prices for pharmaceuticals are a sufficient trigger to invoke the use of march-in rights under these clauses of the statute.  I don’t take a position on that question here.  Instead, I want to ask whose responsibility it is to decide that question.  Congress has the legal right to do so, but it seems unwilling or unable to.  The agencies in question have recently declined to, even assuming they have the power to interpret the statute in that way.  And so we might look to the courts.  But there’s a puzzle here: it’s not clear that anyone can ask a court to decide whether high prices meet the statutory requirements unless an agency actually decides that high prices meet the statutory requirements.

Read More

Implied Certification and Materiality Under the Civil False Claims Act

By Joan H. Krause

[Cross-posted from Hamilton and Griffin On Rights]

On June 17, the Supreme Court unanimously decided Universal Health Services v. United States ex rel. Escobar (UHS), holding that FCA cases may be predicated on “implied certifications” of compliance as long as the defendant knowingly violates a requirement it knows is material to the government’s payment determination. Because the First Circuit applied an incorrectly broad interpretation of materiality, however, the Justices nonetheless vacated the appellate judgment and remanded. While both parties quickly claimed victory, in reality the decision is likely to satisfy no one and to raise as many questions as it answers.

The case was filed by the parents of a young woman who died after receiving Medicaid-covered mental health treatment from a Massachusetts clinic that failed to satisfy state licensing and supervision regulations. Her parents alleged that the clinic’s MassHealth claims were fraudulent because, by filing for payment, the clinic had implicitly represented that it was in compliance with all relevant state requirements. A district court dismissed the suit but the First Circuit reversed, taking a very broad view of the scope of implied certification. On appeal, UHS asked the Court to reject the implied certification theory, arguing that a failure to disclose noncompliance should not be considered fraudulent in the absence of an affirmative duty to disclose. Respondents, supported by the United States as amicus curiae, countered that a defendant who knowingly bills the government for services without disclosing a failure to meet material conditions has submitted a false claim. While few observers expected the Court to entirely abolish implied certification, at oral argument the Justices appeared deeply divided as to the scope of the theory and the source of any limiting principle.

Read More