By: Jonathan Grygiel
The Senate has recently began discussing a bill, dubbed the We PAID Act, that would require any corporation that receives research funding from federal agencies, including the National Institute of Health, to follow certain pricing restrictions for pharmaceutical drugs that they sell.[1] If corporations refuse to follow these pricing restrictions, they would incur strict penalties.[2] This bill has gained steady bipartisan support, which shows that both parties are prioritizing the reduction of drug prices.[3] The Act would commission the National Academies of Science, Engineering, and Medicine to study which drugs received funding and determine reasonable prices for those drugs based on how much funding was used from federal agencies.[4] Then, a newly appointed Drug Affordability and Access Committee would use this study’s results to determine final drug prices.[5]
If a corporation does not follow the committee’s final drug price requirements, it would lose exclusivity to those drugs, thus allowing generics to enter the market.[6] Additionally, the corporation would lose future licensing agreements on patented technology developed through federal research funding.[7] These strikingly strict penalties may be necessary to prevent pharmaceutical corporations from setting excessive drug prices and penalizing the taxpayers who are partially supporting many of these drug developments.[8]
InOil States Energy Services, LLC v. Greene’s Energy Group, LLC, the Supreme Court reaffirmed that Congress has the ability to take away a corporation’s patent rights.[9] Overall, the Court equated patents to “public franchises” that the government can grant and later revoke.[10] In other words, the government can qualify a patent grant to a corporation by reserving the authority to revoke this franchise in the future.[11] Therefore, it is likely that the government would legally be able to revoke patent rights through the We PAID Act.
Furthermore, with the power to revoke patent rights, would these penalties be a possible solution for fixing high drug prices? Altogether, the answer is yes, but it is only just the start. Many corporations state that they increase drug prices so that the profits can go towards further research and development.[12] However, when pharmaceutical companies substantially increase drug prices and research and development funding is not proportionately increased, this assertion cannot be true.[13] Since 20-25% of prescription drugs are developed with assistance from federal funding, this Act would open the door to allow the government to start combatting high drug prices while certain generics continue to meet regulation requirements to enter the market.[14] Therefore, corporations could not benefit from taxpayers’ contribution to drug development and then turn around and further benefit from taxpayers by setting unnecessarily high drug prices.
As demonstrated above, this Act would allow Congress to use its legal authority to revoke certain patent rights in order to regulate a meaningful portion of excessive drug prices.[15] Additionally, with this Act’s bipartisan support, it is likely that future bills will follow this trend and defeat more of these high drug prices by using patent law concepts.[16] As of now, this strategy seems sound and the American people must wait until an eventual approval of this Act to see if it actually leads to any significant reduction of drug prices.
[1]Li Zhou, The New Bipartisan Senate Bill Aimed at Making Big Pharma Lower Drug Prices, Explained, Vox (July 31, 2019), https://www.vox.com/policy-and-politics/2019/7/31/20746601/senate-prescription-drug-prices-chris-van-hollen-rick-scott-we-paid-act.
[2]Id.
[3]Lauren Aronson, An Unprecedented Opportunity for Washington to Lower Drug Prices, The Hill (Sept. 25, 2019), https://thehill.com/blogs/congress-blog/healthcare/462927-an-unprecedented-opportunity-for-washington-to-lower-drug (“[T]here is overwhelming consensus among Americans, from all backgrounds and political ideologies, that Big Pharma needs to be held accountable and policymakers must act to tackle the crisis of rising drug prices.”).
[4]Zhou, supra note 1.
[5]Id.
[6]We Protect American Investment in Drugs Act (We PAID Act), S. 2387, 116th Cong. § 6(b) (2019).
[7]Id.
[8]Zhou, supra note 1.
[9]See Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 138 S. Ct. 1365 (2018).
[10]Id. at 1373 (explaining that patents are public franchises that the Government grants to the inventors of new and useful improvements).
[11]Id. at 1375 (comparing how the government can revoke patent rights to how the government can revoke the right of a company to build a toll bridge,since the company is a franchise).
[12]Ezekiel J. Emanuel, Big Pharma’s Go-To Defense of Soaring Drug Prices Doesn’t Add Up, The Atlantic (Mar. 23, 2019), https://www.theatlantic.com/health/archive/2019/03/drug-prices-high-cost-research-and-development/585253/ (stating how a Johnson & Johnson representative explained a recent drug price increase with a need for more research and development funding).
[13]Id.(“To be more precise, after accounting for the costs of all research—about $80 billion a year—drug companies had $40 billion more from the top 20 drugs alone, all of which went straight to profits, not research.”).
[14]Zhou,supranote 1.
[15]Id.
[16]See generallyEileen McDermott, Bipartisan Agreement That Drug Prices Are a Problem (and Patents are Complicated) Could Mean Changes for Pharma, IPWatchdog.com (May 8, 2019), https://www.ipwatchdog.com/2019/05/08/bipartisan-agreement-drug-prices-problem-patents-complicated-mean-changes-pharma/id=109068/.
