Lower Drug Costs Are Just a Federal License Away. But They Require Biden Administration Leadership

In December the White House announced a new draft guidance that allows federal agencies to grant nonvoluntary licenses to patents on inventions funded with taxpayer dollars. These are called “march-in” rights, and they allow the government to force licensing, when necessary, to remedy an abuse or nonuse of such patented inventions.

The draft guidance fundamentally changes policy on federally funded inventions, including drugs and other products that rely on inventions that are sold at high prices by pharma and biotech companies. In doing so, it flexes a muscle that past administrations feared to brandish.

At issue is the ability and inclination of the federal government to grant compulsory licenses to patents on federally funded inventions, allowed under a 1980 law, the Bayh-Dole Act. The march-in right is a key safeguard to protect the public from an abuse of patent-granted monopolies on inventions. In the 43 years following the passage of the act, however, the federal government has never formally used the right, despite plenty of cases where it was warranted, including cases of excessive drug pricing.

It’s a long-standing federal failure to have never exercised this safeguard to lower drug prices, and the new draft document signals a significant change in policy. But the draft makes mistakes that could limit the march-in right to too few cases and gives pharmaceutical firms an unearned pass on pillaging the taxpayers who paid for the inventions behind their expensive new drugs.

President Joe Biden, his allies and members of his staff have described the newly announced policy as a significant tool to lower drug prices. But the actual published document is less ambitious. Among other things, it avoids the core issue related to every past attempt to use march-in rights to address prices—the argument that U.S. taxpayers should not have to pay more than people in other high-income countries when the federal government funded the invention.

Knowledgeable critics and supporters of march-in rights agree they are relevant to relatively few products. They only apply when the federal government funding is related to an invention but do not apply to other research subsidies. A review of patents for new small-molecule drugs shows only a handful with any government rights and even fewer cases where all the listed patents disclose federal funding. Furthermore, even when the federal government has rights in some patent on a product, companies may claim others. Additional barriers may also exist, particularly those relating to the regulatory pathway or access to know-how or proprietary cell lines.

For example, the proposed guidance states that “timing factors, like the remaining patent life compared to the time required to complete march-in proceedings, exhaust appeals, and further develop the technology … could weigh against march-in.” Notably, the march-in right is subject to an automatic stay while patent holders pursue appeals, presenting the risk that drug firms will game the system and run the clock before a march-in remedy can be put in place.

Making matters worse, there is considerable underreporting of government rights in patented inventions. Some corrected disclosures may not appear in patent searching tools. And the corrections can be late. Norvatis waited 18 years to disclose government patent rights in Gleevec, a cancer drug that made $4.65 billion in 2015 alone. Federal science agencies are lax in enforcing disclosure requirements. We have been waiting four years for the National Institutes of Health to respond to a petition about the failure of patent holders to disclose federal rights in six key cancer treatment patents involving drugs such as Keytruda, Opdivo, Tecentriq, Bavencio and Imfinzi.

Still, march-in rights matter. Products where feder