The White House’s Latest Move to Rein in Drug Prices

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Each year, the U.S. government spends over $100 billion investing in the research and development of new technologies, with pharmaceutical companies being among the chief beneficiaries of this research. These public-private partnerships have led to some of the most important pharmaceutical developments of our time, including the COVID-19 vaccine.

But with that partnership, however, there comes a catch. According to the Bayh-Dole Act, if a business organization takes funding from the federal government in order to develop a new product, the U.S. government has the right to “march in” and control who licenses the product. In the case of pharmaceutical companies, this means that the government can give the license to manufacture a patent-protected drug to a generic company, significantly bringing down the price of the drug.

To date, the government has never used its “march-in” rights. But on Thursday, Dec. 7, the Biden administration announced that it would introduce a new framework for evaluating when governments can execute “march-in,” rights.

“President Biden believes that health care should be a right, not a privilege,” the White House wrote in their announcement. “Today, the Biden-Harris Administration is announcing new actions to promote competition in health care and support lowering prescription drug costs for American families, including the release of a proposed framework for agencies on the exercise of march-in rights on taxpayer-funded drugs and other inventions, which specifies that price can be a factor in considering whether a drug is accessible to the public.”

Experts tell TIME that while this announcement does not mean that the government will actually implement the law, the threat of “marching-in” has been successful at getting drug companies to reduce their prices in the past.

“March-in rights have always been most effective as a threat. That’s why they’ve never been fully exercised,” says Robin Feldman, a professor of law at UCSF who specializes in intellectual property law and drug markets.

In 2001 during the anthrax scare, the government threatened to use its march-in rights to secure a cheaper supply of the antibiotic ciprofloxacin, which is a treatment for anthrax disease. The pharmaceutical company, Bayer, agreed to reduce the price of ciprofloxacin by 50%.

Pharmaceutical companies have long argued that their right to sell new drugs exclusively at exorbitant prices are essential to funding the billions of dollars in research and development that it takes to bring new drugs to market.

“This would be yet another loss for American patients who rely on public-private sector collaboration to advance new treatments and cures,” Megan Van Etten, spokesperson for the trade group PhRMA, referring to the new announcement in an email to NPR. “The Administration is sending us back to a time when government research sat on a shelf, not benefitting anyone.”

But experts told TIME it’s not clear whether or not the high prices enabled by the patent system are contributing to innovation. One study showed that 78% of drugs associated with new patents between 2005 and 2015 were not completely new drugs. Instead, they were altered versions of drugs that already existed, designed to help extend a drug’s patent through a process called evergreening.

Evergreening occurs when a pharmaceutical company releases a slightly altered version of a drug which has a patent that is about to expire. The drug company is then able to file a second patent on the altered drug, and gain an additional 20 years of protection from competition using the second patent. This means that the company can prevent competitors from entering the market for an additional 20 years, and continue to charge very high prices.

The American public has grown increasingly frustrated with the high cost of drug prices, which are among the highest in the world. The Inflation Reduction Act, passed in August 2022, requires that drug companies that raise their prices at a rate that is higher than inflation be required to pay Medicare a rebate.

In response, pharmaceutical companies filed multiple lawsuits alleging that the Inflation Reduction Act breached their constitutional rights. Feldman says it’s likely that the threat of “march-in” rights is also being used as leverage to get the pharmaceutical industry to back away from the fight against the Inflation Reduction Act. “It sends a message to the pharmaceutical companies: play nice or we will do something you really don’t like,” says Feldman.