Dayen on TAP: A Big Miss on Drug Prices

The Biden administration has seen firsthand in the past few weeks the benefits of using statutory power to bring down prescription drug costs. With Novo Nordisk and Sanofi following the lead of Eli Lilly and announcing their intent to slash the list price of their insulin medications by 65 percent or more, practically all diabetes patients will see relief, mostly thanks to a change in Medicaid rebates stuck into the American Rescue Plan. It upended the usual laissez-faire attitude about prescription price-gouging, and showed that the government, as a major medication buyer, can intervene to lower costs.

Which is why it’s so disappointing that a separate effort to take action on an even wider array of pharmaceuticals has fizzled. The Department of Health and Human Services (HHS) and the National Institutes of Health (NIH) have rejected a petition from prostate cancer patients to use a provision of the Bayh-Dole Act of 1980 to seize the patents of a high-cost drug because of its high price.

The tactic, known as “march-in rights,” was a core pillar of the Day One Agenda. The Bayh-Dole Act specifies how the government awards patents to drugs developed with publicly funded research (a significant number). But if the feds find that the drug is not being made accessible on “reasonable terms,” they can march in and extinguish the patent, allowing generic competitors to market their own versions.

But march-in rights have never been used since Bayh-Dole’s inception, and NIH has repeatedly rejected the idea that affordability is a reasonable term. Advocates thought they found the perfect test case for a new administration that paid lip service to lowering prescription drug costs: a cancer drug called Xtandi (enzalutamide), which lists at an average wholesale price in the U.S. of $188,900 per year. Even with insurance, co-pays range as high as $10,000 or more.

This is three to six times the list price of Xtandi in every other industrialized country in the world. Grants from the NIH and the U.S. Army helped create Xtandi, which is owned by a Japanese pharmaceutical conglomerate named Astellas (Pfizer co-owns the U.S. market for the drug). An FDA-approved generic is ready and waiting whenever the monopoly patent expires. Patent holders have already made back $20 billion in revenue on the drug, far beyond their costs.

But NIH, in a letter sent late Tuesday, rejected march-in for Xtandi for the second time, the other coming in 2016. Xtandi is “widely available to the public on the market,” acting NIH director Lawrence Tabak wrote, and march-in would not be “an effective means of lowering the price of the drug.” This effectively rejects the idea that price is an important component of access; in fact, the letter edits out “reasonable terms” as the condition of drug availability under Bayh-Dole.

The outcry was immediate. “What the Biden Administration is saying is that charging US residents 3 to 6 times more than any other high-income country is reasonable,” wrote Knowledge Ecology International, which has taken the lead on march-in challenges. The decision “protects monopolists over taxpayers and patients, despite clear statutory authority and reasonableness to intervene,” said Rep. Lloyd Doggett (D-TX), who had urged the NIH to act. “How many prostate cancer patients will die because they cannot afford this unacceptable price?” asked Sen. Bernie Sanders (I-VT).

The leadership of the NIH has been historically unwilling to disrupt a lucrative gravy train for themselves and their research partners. Some senior NIH officials receive personal royalties of up to $150,000 per year for prescription drugs and other treatments. The old Upton Sinclair line about it being difficult to get a man to understand something when their salary depends on not understanding it applies here.

That pharma lobbyists get this big win right at the time when the administration has demonstrated the ability to force insulin prices lower is perhaps the biggest disappointment. Separately, the government is today breaking up a monopoly nonprofit that controls the organ transplant system, a glimmer of hope to reduce the extreme backlog for transplants. NIH and HHS could have stopped a similar racket that protects monopoly patents for drugs that U.S. taxpayers paid to develop. But they’re clearly too implicated in the system to overhaul it.