March-In Rights Alone Won’t Solve Our Drug Pricing Problems

By Rachel Sachs

On Monday, a group of over 50 members of Congress sent a letter urging the Department of Health and Human Services (HHS) and the National Institutes of Health (NIH) to use a little-known statutory provision to take action against high drug prices.  Their goal is laudable, and HHS and the NIH should certainly offer guidance in this area – but the existing law offers only a partial solution to the problem as the legislators describe it.

The members of Congress wrote to remind HHS and the NIH of a provision in the 1980 Bayh-Dole Act giving the government “march-in rights” to patents resulting from government-funded research.  More specifically, the statute spells out a range of conditions under which the government may require a patentholder to grant licenses on reasonable terms to others to practice the patent.  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).  The legislators argue that many drugs today violate these conditions, as even many insured Americans cannot access prescription drugs without incurring significant financial harm.

Although the “march-in rights” provision has existed in the statute since 1980, it has never been exercised by the federal government, even when it has been specifically asked.  And some of these cases have been paradigmatic examples where “health or safety needs” are not being satisfied.  A December 2015 study notes that in Bayh-Dole’s history, there have only been five petitions requesting that the NIH exercise its march-in rights.  Three of those requests were based on high prices for drugs for HIV/AIDS and glaucoma, and one was based on a persistent drug shortage which may have caused the deaths of people with Fabry disease, a rare condition.  (The fifth petition involved a medical device under patent litigation at the time.)  The NIH denied each request.  Some scholars argued that if the NIH denied the Fabry disease petition, where Genzyme’s drug shortages lasted for multiple years and caused great suffering, possibly including death, there may be no circumstances under which the NIH would grant such a petition.

The legislators here urge HHS and the NIH to issue “official guidance regarding the situations in which march-in rights would apply,” suggesting that “reasonable guidelines can discourage drug price gouging.”  Such official guidance should absolutely be issued – but I’m skeptical that it will materially address the drug price issue.  Although there are many reasons why, in the interest of space I will explain only three here briefly.

1. Multiple Patents. Unfortunately, there is not usually a one-to-one correspondence between a drug and a patent. As scholars have noted, most small-molecule drugs are protected by several patents, with an average of 3.5 patents per drug as of 2005.  Some drugs are protected by 10 or more patents.  Where some but not all of a drug’s patents were developed under a funding agreement with the federal government, a license to practice a subset of a drug’s patents is likely not be the same as a license to the drug itself.  This may be a legal question that would need to be answered during the lengthy appeals process the law provides the entities affected by a march-in determination, during which the march-in would be on hold, under 35 U.S.C. § 203(b).

2. The FDA. The legislators’ letter focuses on the NIH, as the primary funding agency for the basic research that leads to the discovery of many new drugs. And the march-in rights provision does give the NIH the ability to grant another company the right to make and use the particular technology without fear of infringement liability.  But here’s the problem: where the technology at issue is a drug, licensing the technology to another company isn’t sufficient to create improved access to that drug.  The competitor has to get its drug approved by the FDA.  And if the drug in question has only recently entered the market, there may be an FDA exclusivity period (typically lasting either five, seven, or twelve years, depending on the drug) preventing the FDA from granting approval or preventing the new licensee from relying on the originator drug’s clinical trials to get on the market.  A licensee who has to conduct their own clinical trials won’t make it to market for many years, and the expenses incurred in that process would raise the price of the competitor’s drug.

3. The Denominator Problem. Many (perhaps most) drugs are developed on the basis of basic research funded by the federal government. But fewer drugs are directly covered by patents developed on the basis of federal funding.  (Note: where a drug isn’t covered by such a patent but nonetheless is derived from one, we may have a separate legal problem defining the “subject invention.”)  March-in rights thus won’t reach all patented drugs.  March-in rights will also not reach high-priced off-patent drugs, as Martin Shkreli most notably brought to the public’s attention.  The subset of drugs these legislators are concerned about is not the same as the subset of drugs reachable through the Bayh-Dole Act.

I don’t present these concerns to suggest that march-in rights are irrelevant, or to suggest that high drug prices (particularly high out-of-pocket costs for patients) aren’t having a harmful effect on our health care system.  But I do want to suggest that the very people writing this letter – members of Congress – have the power to pass laws fixing at least some, if not all, of the other problems I identify above.  This is not a problem solely for the executive branch.  I do hope the NIH and HHS release guidance on march-in rights, but they need Congress’ help to make real change.