The Bayh-Dole Act provides that the federal government retains certain rights in inventions it funds. Many have sought to use those rights as a way to lower the cost of prescription drugs for consumers and for the federal government. With the increasing market share of more expensive biologic prescriptions, those calls have only become greater. As illustrated by the reference to “generous public subsidies for research and development primarily through the National Institutes of Health” in the Executive Order on Most-Favored-Nation Prescription Drug Pricing, the sentiment is that the federal government should get more for its funding of biopharmaceutical innovation.
When the National Institutes of Health (“NIH”) funds biopharmaceutical research, it retains the right to “march-in” and grant a license to a third-party if it determines that the company selling a drug licensed under that research has not satisfied one of four conditions. Specifically, the NIH must determine that:
- “effective steps to achieve practical application of the . . . invention” in its field of use have not been taken;
- “health or safety needs . . . are not reasonably satisfied”;
- “requirements for public use specified by Federal regulations . . . are not reasonably satisfied”; or
- the requirement that “any products embodying the . . . invention or produced through the use of the . . . invention will be manufactured substantially in the United States” has not been waived or met.
35 U.S.C. § 203(a).
Proponents of using march-in rights to lower the cost of prescription drugs argue that the first two provisions (practical application of the invention and satisfying health or safety needs) justify a consideration of the price of the drug. See Request for Information Regarding the Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights, 88 Fed. Reg. 85593, 855598–99 (Dec. 8, 2023). Any use of price to justify marching-in is sure to be highly controversial, and vigorously litigated, and not simply due to the economic stakes.
Although march-in rights have existed for 45 years, they have never been exercised, and requests from the public have been repeatedly denied. For instance, in 2024, the Department of Health and Human Services (“HHS”) denied a request appealing the NIH’s decision on a petition regarding the use of march-in authority for Xtandi® (enzalutamide). The HHS reasoned that Xtandi® was widely available to the public on the market, and “given the remaining patent life and the lengthy administrative process involved for a march-in proceeding,” the “initiation of a march-in proceeding is not warranted in this case.” See Letter from Department of Health and Human Services to Robert J. Sachs, Clare M. Love, and Eric Sawyer (Feb. 5, 2024) at 2. Moreover, the statute itself says nothing about price considerations. And its authors have expressly stated that omitting consideration of price was an intentional decision by Congress.
But practically speaking, would it even matter? Does the federal government actually fund research resulting in patents that cover the most expensive prescription drugs?
To date, 15 biologic products have been involved in litigation with biosimilar manufacturers under the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”):
- Epogen;
- Neupogen;
- Rituxan;
- Enbrel;
- Remicade;
- Herceptin;
- Neulasta;
- Humira;
- Avastin;
- Tysabri;
- Soliris;
- Stelara;
- Actemra;
- Prolia/Xgeva; and
- Eylea.
These include some of the best-selling drugs in the United States by dollars spent. They also include some of the more expensive drugs sold in the United States. And biologics as a whole are projected to take an ever-increasing share of overall prescription drug spending.
We have previously identified the original compound patents for each of the products involved in BPCIA litigation and discussed where their first patent applications were filed. Patents supported by NIH finding are required to have a specific statement of government support in a specific location. See 35 U.S.C. § 202(c)(6); 37 C.F.R. § 401.14(f)(4). We have reviewed those 15 original compound patents for that statement and discovered that not a single one had the required statement of government support.
While it is possible that the required statement may have been present elsewhere, compliance with any required Bayh-Dole Act obligations is a basic element of any diligence and audit process. Our search included the transaction history for the original compound patents to identify any Certificates of Correction that might have added a statement of government support post-issuance if an accidentally omitted statement were identified during a diligence or audit. We did not find any.
Thus, contrary to popular belief, considering price in march-in decisions likely would not affect the cost for prescription drugs because, historically, the federal government has not funded some of the most expensive prescription drugs. We are aware of studies on small molecule drugs that reach a similar conclusion.
That is not to say, of course, that federal government funding of biopharmaceutical research is not vitally important. It is certainly possible that drugs available today would not have been discovered without upstream research that was, in fact, funded by the federal government. For example, both Avastin and Eylea are inhibitors of vascular endothelial growth factor (“VEGF”). Recognition of the clinical significance of VEGF can be traced back to work by Judah Folkman in 1970 in identifying a factor secreted by tumor cells that promoted angiogenesis. See Judah Folkman et al., “Isolation of a Tumor Factor Responsible for Angiogenesis,” J. Exp. Med. 133(2):275–88 (1971). Subsequently, Ferrara and Henzel purified and sequenced the factor Folkman had described, naming it VEGF. See N. Ferrara & W. J. Henzel, “Pituitary Follicular Cells Secrete a Novel Heparin-binding Growth Factor Specific for Vascular Endothelial Cells,” Biochem. Biophys. Res. Commun. 161(2):851–58 (1989). Both of these projects were supported by NIH funding, and the subsequent compound patents covering Avastin and Eylea stemmed from this basic research funded by the NIH.