Exercising March-In Rights Would Make Biomedical Public-Private Partnerships Stronger
The federal government invests heavily in biomedical research, much of it conducted at research universities such as the University of California, Los Angeles where federally funded researchers first discovered (and obtained patents covering) the lifesaving prostate cancer drug enzalutamide that later became known as Xtandi. The Bayh-Dole Act of 1980 applies to patents on inventions such as Xtandi developed with federal funds; it was designed to strike a balance between incentivizing the private-sector development and commercialization of federally funded research and development (R&D) on the one hand and ensuring public access to and benefit from this R&D on the other. When the public rights of reasonable access to patented inventions developed through the use of federal funding—such and Xtandi—are undermined, the federal funding agencies have the ability to exercise their march-in rights and require the patent owner to license the applicable patents to a generics manufacturer or another drug corporation.
Yet, despite repeated requests by public stakeholders impacted by the unreasonable pricing of prescription drugs developed through the use of public funds, no federal agency has ever exercised its power to “march-in” under the terms of the Bayh-Dole Act. Indeed, only once has a federal agency even granted a request for a hearing to consider the merits of a march-in petition. As a result, this mechanism for protecting the public rights in federally funded R&D has remained dormant even as the divergence of private rights from public health needs within the pharmaceutical industry has increased.
The repeated failure to use the Bayh-Dole Act to protect the public interest in federally funded discoveries is symptomatic of a much broader government failure: the failure to protect the public interest in the public-private partnerships that the US increasingly relies upon to combat public health challenges. While partnerships between the public and private sectors may be essential to tackle the most intractable public health problems, their success will depend on the ability to establish a healthier balance between public and private interests. Biomedical public-private partnerships need to be designed and governed in ways that better align private incentives with the public interest, and exercising “march-in” rights in the case of Xtandi could be a good first step toward reaching that goal.
Biomedical Public-Private Partnerships As Sources Of Transformational Biomedical Breakthroughs
While public-private partnerships have long existed outside of the biomedical arena, they have become increasingly popular in the biomedical space since the early 2000s. Public-private partnerships designed to accelerate the creation of novel health technologies, or what I refer to as biomedical public-private partnerships, now form the backbone of the most ambitious US biomedical innovation strategies. These biomedical public-private partnerships (BPPPs) can be broadly defined as collaborative R&D arrangements between one or more governments and one or more private actors to engage in the discovery and development of novel biomedical technologies such as new therapies and vaccines. Both public- and private-sector participants contribute money, technical expertise, intellectual property, information, and know-how in joint pursuit of biomedical innovation according to agreed-upon contractual terms and applicable statutory requirements. The public-sector contributions often take the form of public financing and early-stage biomedical discoveries and knowledge, although in some cases the public sector also conducts later-stage research, development, and clinical testing. The private-sector contributions are typically (but not always) concentrated in later-stage drug development, testing, and commercialization.
Great hopes have been pinned on the ability of BPPPs to solve some of our most intractable health problems. BPPPs are attractive to both the government and the private sector as they confront complex, risky, and expensive public health problems. In an earlier article, I described the reliance on BPPPs as a vehicle for finding a cure for Alzheimer’s disease. At the start of the COVID-19 pandemic, Operation Warp Speed, a partnership between an array of government agencies and private corporations designed to accelerate the search for vaccines and cures to COVID-19, attracted more than $18 billion in public funds. Most recently, the Biden administration has proposed the formation of a new agency called ARPA-H to support public-private collaboration in the development of platforms for supporting transformative biomedical breakthroughs—advances too expensive, too risky, and too complex to be addressed by either the private or public sector acting alone.
The Need To Better Align Private Incentives With Public Interests
Yet, while BPPPs such as ARPA-H have the potential to generate significant health breakthroughs, I argue that their ability to achieve valuable public health breakthroughs depends on whether they are structured in a way that aligns private incentives, largely profit driven, with public health goals. Private-sector rewards must be tied to meaningful public health benefits, something that does not always occur in our current pharmaceutical marketplace, and public-private benefit sharing must accompany the cost and risk sharing that take place.
While advancing the interests of all participants would seem like a critical part of any sustainable partnership, we seem to be moving in the wrong direction. In recent US BPPPs the public interests often seem to take a back seat to concerns about enhancing private incentives to innovate. Although the neglect of the public interest is particularly evident in the failure of public negotiators to retain decision-making power over how the new drugs and vaccines that emerge are priced and distributed, the misalignment of private incentives and public needs also impacts early stages of project selection and design.
Operation Warp Speed, for example, allowed significant flexibility in how public funds were allocated and used by private-sector collaborators in the race to develop COVID-19 vaccines and therapies, ceding significant control to the corporations involved. Among other things, the government agencies in charge, dominated largely by the Department of Defense (DoD), were able to rely on the authority to engage in flexible federal contracting practices, or Other Transactions Authority (OTA), to avoid many of the traditional protections included in public funding mechanisms, such as Bayh-Dole Act protections. This emphasis on the expanded use of OTA has persisted, including by the National Institutes of Health (NIH), based on arguments of efficiency and concerns about the chilling effect of preserving the government’s right to assert public interests in the decision-making process. Indeed, some policy makers have suggested the use of the Defense Advanced Research Projects Agency (DARPA) framework, including its use of OTA, as a model for ARPA-H-funded projects.
At the same time as public rights in federally funded innovations are being minimized, the regulatory barriers put in place to ensure the safety and efficacy of resulting drugs and other health technologies are being weakened. The proposed Cures 2.0 Act, for example, includes provisions that would limit the ability of government agencies such as the Centers for Medicare and Medicaid Services to deny coverage of drugs even where the health benefits remain unproven. The Food and Drug Administration is allowing pharmaceutical corporations to exercise more flexibility in how they meet drug approval standards. Regulatory shifts include a greater use of accelerated approvals and a willingness to allow corporations to use an increasing range of metrics not directly tied to health impact to establish drug efficacy. Trends such as these have the combined effect of diminishing the ability of the government to ensure that the outcomes of BPPPs are reasonably accessible and affordable, or even a net health benefit to the public.
Improving The Balance Of Public And Private In BPPPs
BPPPs work well when the interests of the parties are aligned and the collaboration is structured in a way that prioritizes public health needs while generating a reasonable return for the private-sector collaborators. Although it is hard to anticipate and therefore contract for the outcomes of R&D projects in advance, this balance of interests can be achieved by allowing the public actors to meaningfully participate in choices made along the R&D project lifecycle and providing them with reasonable opportunities to protect public rights of affordable access to the results. This might include a larger public role in project selection and development choices, more robust and creative negotiations about how to handle the ownership and use of co-developed or co-funded intellectual property and proprietary information, and/or a reasonable opportunity to negotiate the terms of price and access for resulting drugs and other health technologies.
Marching-In Is A Good Place To Start
There are a variety of ways to achieve these rights without compromising the ability of the private-sector actors to profit from their efforts. We could start to reinvigorate these rights by giving life to existing legislative mechanisms designed to do just that—mechanisms such as the march-in rights that, despite repeated efforts to invoke them, have sat dormant since the 1980s. And we have a proposal for doing just that, in the form of the currently pending petition on Xtandi.
On November 18, 2021, two patients suffering from prostate cancer refiled a petition that they had previously filed with the DoD, requesting that the Department of Health and Human Services (HHS) exercise its march-in rights under the Bayh-Dole Act to address the unreasonable pricing of the prostate cancer drug Xtandi. An earlier request to the DoD, HHS, and NIH to exercise their march-in rights on Xtandi patents and authorize cheaper generic manufacture of the drug was rejected by the NIH without a hearing on the grounds that the price of a drug, regardless of how high, should not be considered a factor in determining whether it is “available to the public on reasonable terms.” As petitioners for march-in rights on patents covering Xtandi and other lifesaving drugs have repeatedly argued, a drug that is excessively priced is not reasonably available to the public.
As the many recent congressional hearings on and studies of the high cost of prescription drugs demonstrate, high prices are a significant barrier to meeting the critical health needs of US patients, while the profits earned by pharmaceutical corporations from selling these drugs place them among the most profitable of industries. Perhaps in recognition of this need to restore the balance between public and private interests in the fruits of publicly funded biomedical R&D, the Biden administration dismissed the idea of adopting rules that would preclude consideration of product price in march-in determinations, a position reaffirmed by HHS in its Comprehensive Plan for Addressing High Drug Prices.
Senator Elizabeth Warren (D-MA), Senator Angus King (I-ME), and Congressman Lloyd Doggett (D-TX) are among the most recent lawmakers to express support for a public hearing on this petition, arguing in a letter to the secretary of HHS that HHS should hold a public hearing on the Xtandi petition “to allow petitioners and patent-holders to present arguments and accompanying evidence on this case, and then move forward to exercise the government’s march-in rights without delay.”
Although pharmaceutical corporations have been quick to point to the chilling effect that this might have on innovation, there is no evidence that a measured and reasonable use of the provision would actually harm innovation. Indeed, a hearing on march-in rights could be used to remove uncertainty by providing clear and predictable guidelines that suggest what might constitute grounds for a march-in and what the ultimate result might look like. The best way to turn march-in rights into a workable mechanism with more predictable reach would be to actually grant a march-in where—as is true in the case of Xtandi—the merits of the case support a reasonable government intervention.
Conclusion
Biomedical public-private partnerships will only achieve their potential as vehicles for transformative change in public health if they are structured in a way that allows for the robust balancing of public interests with private incentives. The Xtandi case provides the Biden administration with an opportunity to take a measured first step in a long overdue implementation of the safeguards that were included in the Bayh-Dole Act to protect the public from unreasonable use of federally funded inventions. More generally, it offers a good test case of how safeguards such as these can be used to address the need for reasonable public access to drugs developed with public funds without harming the ability of corporations to earn a reasonable profit from their R&D investments.