The Biden administration is officially moving forward with a Trump rulemaking that would eliminate a key government power for driving down the costs of drugs and other inventions built from federal research.
The rulemaking was included in the administration’s “unified agenda of regulatory and deregulatory actions” for spring 2021 that was published on June 11. The agenda, compiled by the Office of Information and Regulatory Affairs, outlines the actions that the administration intends to pursue in the near and long term. It is in “final rule stage,” which means its promulgating agency, in this case the National Institute of Standards and Technology (NIST), “plan[s] to publish a final rule or an interim final rule or to take other final action as the next step,” according to an accompanying document. The rule has been assigned a final action date of October 2021.
Under the Bayh-Dole Act of 1980, which governs the transfer of federally-funded research to the private sector, the government retains “march-in rights” that allow it to seize the patents for taxpayer-funded drugs and other inventions when “action is necessary to alleviate health and safety needs which are not being reasonably satisfied” or when they are not being “made available to the public under reasonable terms” and license them to responsible third parties to provide competition. It’s one of the main ways the executive branch could address excessive drug prices without needing action from Congress, which has been deadlocked on drug pricing reform measures for years.
Once finalized, the new rule would say that the government cannot use march-in rights solely because a government-funded drug or other product is being sold at an excessive price. The change has been a major lobbying aim of the Pharmaceutical Research and Manufacturers of America and other industry groups that have seen more and more voters tell pollsters that the high cost of prescription drugs is among their top concerns.
“This rule takes away the government’s power to act to curb that price abuse by authorizing generic competition, and we think that’s 180 degrees the wrong move at this time,” said Peter Maybarduk, director of the access to medicines program at the nonprofit Public Citizen. “We expect Biden to use this power during his tenure rather than repeal it, given the scale of the problem.”
The rulemaking was initiated by NIST on January 4, just days before Biden took office. The public comment period for the regulatory change ended on April 5, after more than 81,000 comments were submitted.
The rule “almost slipped through unnoticed because this is not an office that’s frequently in the public light and it’s sort of a technical rule,” said Maybarduk. “We almost had a situation where pharma allies stripped this government power without anyone noticing, but because it was noticed now there is an outcry.”
Although the rule change would apply to all kinds of inventions, it would primarily impact the pharmaceutical industry, which makes heavy use of research from universities that receive federal research funding. Every petition that the government has received asking it to use march-in rights since Bayh-Dole was enacted has pertained to a pharmaceutical, most often around concerns of price gouging, though they have all faced strong industry opposition and been rejected.
Joe Biden has stood against many Democrats for decades when it comes to the government using its power to influence drug pricing. In 1995, he was one of eight Democrats who voted to table a Sen. Paul Wellstone amendment to restore a clause in contracts requiring that publicly funded drugs be reasonably priced, which had been stripped by the Clinton administration at the behest of the pharmaceutical lobby. During the 2020 presidential primary campaign, Biden declined to endorse the use of march-in rights for driving down drug costs, unlike Buttigieg, Harris, Sanders, and Warren, who all included march-in in their drug pricing reform platforms.
In March, 35 congressional Democrats, led by Rep. Lloyd Doggett (Texas), submitted a comment urging the rule change to be rejected.
“The NIST proposal is a grave misjudgment and would likely exacerbate the already exorbitant cost of prescription medicines,” the Democrats wrote. “It is a one-side proposal that prioritizes the desires of industry over the rights and needs of Americans.”
The pharmaceutical industry has been a major backer of Biden. It kicked in more than $5 million to groups that made independent expenditures to boost his presidential campaign, according to OpenSecrets, and Pfizer made a $1 million donation to Biden’s inaugural committee. Pfizer’s COVID vaccine uses a spike protein patent licensed from the National Institutes of Health to BioNTech, its partner in the drug. OpenSecrets, which assigns industry groupings to donors, says that PACs and individuals affiliated with “pharmaceuticals/health products” have donated more than $8.6 million to Biden’s campaigns since 1989.
Biden counselor Steve Ricchetti is a former lobbyist who in the early 2000s worked for Pfizer, Eli Lilly, Novartis, and Sanofi to influence the federal government on issues related to drug pricing, patents, and advertising, according to filings reviewed by Sludge. Steve’s brother Jeff Ricchetti still runs the family business, Ricchetti Incorporated, and has signed on several drug companies this year including Eagle Pharmaceuticals, GlaxoSmithKline, and Horizon Therapeutics. Jeff’s lobbying disclosures do not contain enough specificity to determine whether he has lobbied his brother or Biden on the Bayh-Dole rulemaking, but his Q1 GlaxoSmithKline filing indicates he discussed “Issues related to drug pricing” with the Executive Office of the President.
Biden has yet to pick a director for NIST, and his nominee will likely play a key role in determining if this rulemaking is pulled or if it is completed in October as described in the regulatory agenda.
Trump’s NIST director Walter Copan, who oversaw the creation of the rule, is now the co-founder of the Renewing American Innovation Project at the Center for Strategic and International Studies, a new project that will focus on intellectual property issues to boost private sector incentives to innovate. Copan recently moderated a CSIS panel on the Bayh-Dole Act and the march-in rule with guests including New Democrat Coalition Vice Chair Rep. Ami Bera (D-Calif.) without mentioning that he was at the head of NIST when the rulemaking was initiated.
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