In the battle to control drug costs, old patent laws get new life

In the drug-pricing battle, progressive lawmakers such as Sen. Bernie Sanders (I-Vt.) and patients’ rights activists rarely find themselves in step with the health industry’s big players.

But in a twist, these usually at-odds actors are championing similar tactics to tame prescription drug prices.

The strategies involve repurposing two obscure and rarely deployed workarounds in patent law that, in different ways, empower the federal government to take back patents and license them to other companies. The first is known as “march-in rights.” The second is generally referred to as Section 1498 because of its location in the U.S. Code.

Sanders has in recent years pointed to these steps as useful tools in the drug-pricing debate.

As an indicator of how high the stakes have become, these ideas also are finding traction among some major health industry players – most notably, two large trade groups that represent health plans and the “middlemen” companies that negotiate drug coverage.

“It used to be the case that everyone played nicely with one another, and now as prices have gone up, the knives have come out,” said Jacob S. Sherkow, a law professor at New York University who focuses on intellectual property and the pharmaceutical industry.

The push for march-in rights gained momentum this past summer, when activists launched a campaign challenging the patent for Truvada (emtricitabine/tenofovir), the HIV treatment by Gilead Sciences that has been shown to reduce the risks of contracting HIV when taken daily as a preventive.

Initially, patient advocates focused mainly on shaming insurance companies into providing better coverage of that pill, also known as pre-exposure prophylaxis, or PrEP, because it is taken before someone is exposed to the virus. But they soon found themselves targeting a frustration that insurance companies happened to share: the drug’s list price.

James Krellenstein, cofounder of the PrEP4All Collaboration, an advocacy group, was part of that campaign. Health plans had put barriers in place to limit access to the drug, he said. But they, too, were worried about Truvada’s escalating price.

“You can’t scale up to a level you need to unless we deal with the pricing problem,” he said.

Now, as insurers signal they might adopt an approach similar to that of the campaign, he voiced skepticism. On the one hand, the support could benefit their cause. At the same time, “they have their interests, and that’s not the interests of public health,” Mr. Krellenstein said.

Still, in Washington, the influence of groups like America’s Health Insurance Plans (AHIP), which is the largest trade association for health insurers, and the Pharmaceutical Care Management Association (PCMA), which represents those middlemen companies known as pharmacy benefit managers (PBMs), could add political credibility to these long-shot ideas.

President Trump has said curbing prescription drug costs is a high priority. But, as congressional action seems increasingly unlikely, these two approaches offer another possible path forward.

They are “already part of a law that is intact. ... An option the administration can take now,” said Walid Gellad, MD, MPH, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh.

AHIP says the Department of Health & Human Services should lean on a federal statute that lets the government take over drug patents and grant them to other manufacturers, as long as it adequately compensates the original patent holder.

Meanwhile, PCMA is pressing the administration to use the march-in rights championed by HIV activists. Provided under the 1980 Bayh-Dole Act, they empower the government to rescind a drug’s patent and let other companies develop versions of it. This applies only if government funding helped develop the drug, and it can be invoked only in specific circumstances, including a threat to public health or safety.

“Everybody is feeling the heat, and I think that is the reason you’re seeing this interest in using the tools that exist,” said Amy Kapczynski, a professor at Yale Law School who has written extensively about drug patents.

But opposition is strong among drugmakers.

“Policies should spur competition and new innovations to meet patient needs not disincentivize them such as the use of 1498 and march-in could do,” said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Researchers and Manufacturers of America, or PhRMA, a trade and lobbying group.

Gilead, which manufactures Truvada, has a similar stance.

“We believe that there is no rationale or precedent for the government to exercise march-in or other [intellectual property] rights related to Truvada for PrEP,” said Ryan McKeel, a spokesman for Gilead. The company’s other efforts to make the drug “available for health and safety needs,” he added, “clearly satisfy” the company’s legal requirements.

And the potential for march-in authority is still theoretical. It has never been used, despite at least five petitions to the National Institutes of Health, three of which cited high drug prices.

Section 1498 was used to negotiate lower drug prices in the 1960s and 1970s, but has since faded. In 2001, during the nation’s anthrax scare, HHS threatened to invoke it to procure more of the antibiotic used to treat the deadly bacterial disease, according to contemporaneous reports. Last year, Louisiana’s health secretary unsuccessfully tried to use it to ease the toll pricey hepatitis C medications exerted on the state’s Medicaid program.

NIH Director Francis Collins, MD, PhD, remains skeptical, repeatedly saying that a drug’s price doesn’t constitute a health or safety concern within the agency’s jurisdiction.

HHS Secretary Alex M. Azar II, speaking at a June Senate hearing, described march-in, also known as “compulsory licensing,” as a “socialist” approach.

But health plans and other payers, increasingly squeezed by fast-climbing prices, are undeterred – touting this kind of intervention as a “market-based solution.”

“The trends of drug prices in this country suggest that we all collectively need to find new approaches – including new approaches that are available under existing law – to try to change this trend,” said Mark Hamelburg, AHIP’s senior vice president of federal programs.

Kaiser Permanente, the health system and insurance provider, called for leveraging Section 1498 in a public comment submitted to HHS about its strategy to bring down drug prices. In a similar filing, Humana, a major insurer, pointed to “existing law [that] allows for actions around patents,” singling out march-in rights.

Humana did not respond to requests for comment. Both PCMA and Kaiser Permanente declined to comment beyond their statements. (Kaiser Health News is not affiliated with Kaiser Permanente.)

Nonetheless, experts say there are serious sticking points.

Neither of these legal provisions would be a sweeping solution. And both require administration buy-in.

“They’re only as effective as the government’s willingness to pursue them,” said Robin Feldman, a law professor at the University of California-Hastings.

Simply taking a patent doesn’t bring down prices, either. There are other ways manufacturers gain favorable market positioning for specific drugs, said Rachel Sachs, an associate law professor at Washington University in St. Louis who tracks drug-pricing laws.

And creating an opening for generics is only one step. Another drugmaker would still need to create a competing product, gain approval, and make it available. Then, theoretically, market competition can kick in.

Finally, there’s no guarantee such savings would benefit consumers, argued Nicholson Price, an assistant professor at the University of Michigan Law School. Insurance plans or PBMs could simply bargain greater discounts on drugs and pocket the money. (AHIP says any savings should be passed on.)

That’s the fundamental question, Mr. Krellenstein said.

“Is this going to be more armor in the fighting [between payers and drug companies]?” he said. “Or is it actually going to be a dramatic reform that actually results in real changes, that actually makes it easier for Americans to access the medications they need?”
 

KHN’s coverage of prescription drug development, costs, and pricing is supported in part by the Laura and John Arnold Foundation. Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.

In the drug-pricing battle, progressive lawmakers such as Sen. Bernie Sanders (I-Vt.) and patients’ rights activists rarely find themselves in step with the health industry’s big players.

But in a twist, these usually at-odds actors are championing similar tactics to tame prescription drug prices.

The strategies involve repurposing two obscure and rarely deployed workarounds in patent law that, in different ways, empower the federal government to take back patents and license them to other companies. The first is known as “march-in rights.” The second is generally referred to as Section 1498 because of its location in the U.S. Code.

Sanders has in recent years pointed to these steps as useful tools in the drug-pricing debate.

As an indicator of how high the stakes have become, these ideas also are finding traction among some major health industry players – most notably, two large trade groups that represent health plans and the “middlemen” companies that negotiate drug coverage.

“It used to be the case that everyone played nicely with one another, and now as prices have gone up, the knives have come out,” said Jacob S. Sherkow, a law professor at New York University who focuses on intellectual property and the pharmaceutical industry.

The push for march-in rights gained momentum this past summer, when activists launched a campaign challenging the patent for Truvada (emtricitabine/tenofovir), the HIV treatment by Gilead Sciences that has been shown to reduce the risks of contracting HIV when taken daily as a preventive.

Initially, patient advocates focused mainly on shaming insurance companies into providing better coverage of that pill, also known as pre-exposure prophylaxis, or PrEP, because it is taken before someone is exposed to the virus. But they soon found themselves targeting a frustration that insurance companies happened to share: the drug’s list price.

James Krellenstein, cofounder of the PrEP4All Collaboration, an advocacy group, was part of that campaign. Health plans had put barriers in place to limit access to the drug, he said. But they, too, were worried about Truvada’s escalating price.

“You can’t scale up to a level you need to unless we deal with the pricing problem,” he said.

Now, as insurers signal they might adopt an approach similar to that of the campaign, he voiced skepticism. On the one hand, the support could benefit their cause. At the same time, “they have their interests, and that’s not the interests of public health,” Mr. Krellenstein said.

Still, in Washington, the influence of groups like America’s Health Insurance Plans (AHIP), which is the largest trade association for health insurers, and the Pharmaceutical Care Management Association (PCMA), which represents those middlemen companies known as pharmacy benefit managers (PBMs), could add political credibility to these long-shot ideas.

President Trump has said curbing prescription drug costs is a high priority. But, as congressional action seems increasingly unlikely, these two approaches offer another possible path forward.

They are “already part of a law that is intact. ... An option the administration can take now,” said Walid Gellad, MD, MPH, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh.

AHIP says the Department of Health & Human Services should lean on a federal statute that lets the government take over drug patents and grant them to other manufacturers, as long as it adequately compensates the original patent holder.

Meanwhile, PCMA is pressing the administration to use the march-in rights championed by HIV activists. Provided under the 1980 Bayh-Dole Act, they empower the government to rescind a drug’s patent and let other companies develop versions of it. This applies only if government funding helped develop the drug, and it can be invoked only in specific circumstances, including a threat to public health or safety.

“Everybody is feeling the heat, and I think that is the reason you’re seeing this interest in using the tools that exist,” said Amy Kapczynski, a professor at Yale Law School who has written extensively about drug patents.

But opposition is strong among drugmakers.

“Policies should spur competition and new innovations to meet patient needs not disincentivize them such as the use of 1498 and march-in could do,” said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Researchers and Manufacturers of America, or PhRMA, a trade and lobbying group.

Gilead, which manufactures Truvada, has a similar stance.

“We believe that there is no rationale or precedent for the government to exercise march-in or other [intellectual property] rights related to Truvada for PrEP,” said Ryan McKeel, a spokesman for Gilead. The company’s other efforts to make the drug “available for health and safety needs,” he added, “clearly satisfy” the company’s legal requirements.

And the potential for march-in authority is still theoretical. It has never been used, despite at least five petitions to the National Institutes of Health, three of which cited high drug prices.

Section 1498 was used to negotiate lower drug prices in the 1960s and 1970s, but has since faded. In 2001, during the nation’s anthrax scare, HHS threatened to invoke it to procure more of the antibiotic used to treat the deadly bacterial disease, according to contemporaneous reports. Last year, Louisiana’s health secretary unsuccessfully tried to use it to ease the toll pricey hepatitis C medications exerted on the state’s Medicaid program.

NIH Director Francis Collins, MD, PhD, remains skeptical, repeatedly saying that a drug’s price doesn’t constitute a health or safety concern within the agency’s jurisdiction.

HHS Secretary Alex M. Azar II, speaking at a June Senate hearing, described march-in, also known as “compulsory licensing,” as a “socialist” approach.

But health plans and other payers, increasingly squeezed by fast-climbing prices, are undeterred – touting this kind of intervention as a “market-based solution.”

“The trends of drug prices in this country suggest that we all collectively need to find new approaches – including new approaches that are available under existing law – to try to change this trend,” said Mark Hamelburg, AHIP’s senior vice president of federal programs.

Kaiser Permanente, the health system and insurance provider, called for leveraging Section 1498 in a public comment submitted to HHS about its strategy to bring down drug prices. In a similar filing, Humana, a major insurer, pointed to “existing law [that] allows for actions around patents,” singling out march-in rights.

Humana did not respond to requests for comment. Both PCMA and Kaiser Permanente declined to comment beyond their statements. (Kaiser Health News is not affiliated with Kaiser Permanente.)

Nonetheless, experts say there are serious sticking points.

Neither of these legal provisions would be a sweeping solution. And both require administration buy-in.

“They’re only as effective as the government’s willingness to pursue them,” said Robin Feldman, a law professor at the University of California-Hastings.

Simply taking a patent doesn’t bring down prices, either. There are other ways manufacturers gain favorable market positioning for specific drugs, said Rachel Sachs, an associate law professor at Washington University in St. Louis who tracks drug-pricing laws.

And creating an opening for generics is only one step. Another drugmaker would still need to create a competing product, gain approval, and make it available. Then, theoretically, market competition can kick in.

Finally, there’s no guarantee such savings would benefit consumers, argued Nicholson Price, an assistant professor at the University of Michigan Law School. Insurance plans or PBMs could simply bargain greater discounts on drugs and pocket the money. (AHIP says any savings should be passed on.)

That’s the fundamental question, Mr. Krellenstein said.

“Is this going to be more armor in the fighting [between payers and drug companies]?” he said. “Or is it actually going to be a dramatic reform that actually results in real changes, that actually makes it easier for Americans to access the medications they need?”
 

KHN’s coverage of prescription drug development, costs, and pricing is supported in part by the Laura and John Arnold Foundation. Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.

In the drug-pricing battle, progressive lawmakers such as Sen. Bernie Sanders (I-Vt.) and patients’ rights activists rarely find themselves in step with the health industry’s big players.

But in a twist, these usually at-odds actors are championing similar tactics to tame prescription drug prices.

The strategies involve repurposing two obscure and rarely deployed workarounds in patent law that, in different ways, empower the federal government to take back patents and license them to other companies. The first is known as “march-in rights.” The second is generally referred to as Section 1498 because of its location in the U.S. Code.

Sanders has in recent years pointed to these steps as useful tools in the drug-pricing debate.

As an indicator of how high the stakes have become, these ideas also are finding traction among some major health industry players – most notably, two large trade groups that represent health plans and the “middlemen” companies that negotiate drug coverage.

“It used to be the case that everyone played nicely with one another, and now as prices have gone up, the knives have come out,” said Jacob S. Sherkow, a law professor at New York University who focuses on intellectual property and the pharmaceutical industry.

The push for march-in rights gained momentum this past summer, when activists launched a campaign challenging the patent for Truvada (emtricitabine/tenofovir), the HIV treatment by Gilead Sciences that has been shown to reduce the risks of contracting HIV when taken daily as a preventive.

Initially, patient advocates focused mainly on shaming insurance companies into providing better coverage of that pill, also known as pre-exposure prophylaxis, or PrEP, because it is taken before someone is exposed to the virus. But they soon found themselves targeting a frustration that insurance companies happened to share: the drug’s list price.

James Krellenstein, cofounder of the PrEP4All Collaboration, an advocacy group, was part of that campaign. Health plans had put barriers in place to limit access to the drug, he said. But they, too, were worried about Truvada’s escalating price.

“You can’t scale up to a level you need to unless we deal with the pricing problem,” he said.

Now, as insurers signal they might adopt an approach similar to that of the campaign, he voiced skepticism. On the one hand, the support could benefit their cause. At the same time, “they have their interests, and that’s not the interests of public health,” Mr. Krellenstein said.

Still, in Washington, the influence of groups like America’s Health Insurance Plans (AHIP), which is the largest trade association for health insurers, and the Pharmaceutical Care Management Association (PCMA), which represents those middlemen companies known as pharmacy benefit managers (PBMs), could add political credibility to these long-shot ideas.

President Trump has said curbing prescription drug costs is a high priority. But, as congressional action seems increasingly unlikely, these two approaches offer another possible path forward.

They are “already part of a law that is intact. ... An option the administration can take now,” said Walid Gellad, MD, MPH, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh.

AHIP says the Department of Health & Human Services should lean on a federal statute that lets the government take over drug patents and grant them to other manufacturers, as long as it adequately compensates the original patent holder.

Meanwhile, PCMA is pressing the administration to use the march-in rights championed by HIV activists. Provided under the 1980 Bayh-Dole Act, they empower the government to rescind a drug’s patent and let other companies develop versions of it. This applies only if government funding helped develop the drug, and it can be invoked only in specific circumstances, including a threat to public health or safety.

“Everybody is feeling the heat, and I think that is the reason you’re seeing this interest in using the tools that exist,” said Amy Kapczynski, a professor at Yale Law School who has written extensively about drug patents.

But opposition is strong among drugmakers.

“Policies should spur competition and new innovations to meet patient needs not disincentivize them such as the use of 1498 and march-in could do,” said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Researchers and Manufacturers of America, or PhRMA, a trade and lobbying group.

Gilead, which manufactures Truvada, has a similar stance.

“We believe that there is no rationale or precedent for the government to exercise march-in or other [intellectual property] rights related to Truvada for PrEP,” said Ryan McKeel, a spokesman for Gilead. The company’s other efforts to make the drug “available for health and safety needs,” he added, “clearly satisfy” the company’s legal requirements.

And the potential for march-in authority is still theoretical. It has never been used, despite at least five petitions to the National Institutes of Health, three of which cited high drug prices.

Section 1498 was used to negotiate lower drug prices in the 1960s and 1970s, but has since faded. In 2001, during the nation’s anthrax scare, HHS threatened to invoke it to procure more of the antibiotic used to treat the deadly bacterial disease, according to contemporaneous reports. Last year, Louisiana’s health secretary unsuccessfully tried to use it to ease the toll pricey hepatitis C medications exerted on the state’s Medicaid program.

NIH Director Francis Collins, MD, PhD, remains skeptical, repeatedly saying that a drug’s price doesn’t constitute a health or safety concern within the agency’s jurisdiction.

HHS Secretary Alex M. Azar II, speaking at a June Senate hearing, described march-in, also known as “compulsory licensing,” as a “socialist” approach.

But health plans and other payers, increasingly squeezed by fast-climbing prices, are undeterred – touting this kind of intervention as a “market-based solution.”

“The trends of drug prices in this country suggest that we all collectively need to find new approaches – including new approaches that are available under existing law – to try to change this trend,” said Mark Hamelburg, AHIP’s senior vice president of federal programs.

Kaiser Permanente, the health system and insurance provider, called for leveraging Section 1498 in a public comment submitted to HHS about its strategy to bring down drug prices. In a similar filing, Humana, a major insurer, pointed to “existing law [that] allows for actions around patents,” singling out march-in rights.

Humana did not respond to requests for comment. Both PCMA and Kaiser Permanente declined to comment beyond their statements. (Kaiser Health News is not affiliated with Kaiser Permanente.)

Nonetheless, experts say there are serious sticking points.

Neither of these legal provisions would be a sweeping solution. And both require administration buy-in.

“They’re only as effective as the government’s willingness to pursue them,” said Robin Feldman, a law professor at the University of California-Hastings.

Simply taking a patent doesn’t bring down prices, either. There are other ways manufacturers gain favorable market positioning for specific drugs, said Rachel Sachs, an associate law professor at Washington University in St. Louis who tracks drug-pricing laws.

And creating an opening for generics is only one step. Another drugmaker would still need to create a competing product, gain approval, and make it available. Then, theoretically, market competition can kick in.

Finally, there’s no guarantee such savings would benefit consumers, argued Nicholson Price, an assistant professor at the University of Michigan Law School. Insurance plans or PBMs could simply bargain greater discounts on drugs and pocket the money. (AHIP says any savings should be passed on.)

That’s the fundamental question, Mr. Krellenstein said.

“Is this going to be more armor in the fighting [between payers and drug companies]?” he said. “Or is it actually going to be a dramatic reform that actually results in real changes, that actually makes it easier for Americans to access the medications they need?”
 

KHN’s coverage of prescription drug development, costs, and pricing is supported in part by the Laura and John Arnold Foundation. Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.