Speaker 1: Hello, and welcome to the Boats and Verdicts podcast, hosted
Speaker 1: by the policy and Litigation team at Bloomberg Intelligence, investment
Speaker 1: research platform at Bloomberg LP. This podcast series examines the
Speaker 1: intersection of business policy and law. I'm Doing Right, an
Speaker 1: analyst with Bloomberg Intelligence covering government healthcare policy.
Speaker 2: And I'm Tish Walker, an analyst with Bloomberg Intelligence covering
Speaker 2: pharma patent litigation.
Speaker 1: So our topic for today is the Biden Administration's proposal
Speaker 1: to update marching rights under the Buy Dole Act to
Speaker 1: include a specification that price can be a factor in
Speaker 1: determining that a drug is not accessible to the public.
Speaker 1: While BIDOLE applies to any taxpayer funded invention, our focus
Speaker 1: will be on drugs and drug prices. This action is
Speaker 1: in stark contrast with the Trump administration's efforts to frankly
Speaker 1: do the opposite, which is to prohibit the exercise of
Speaker 1: marching rights on the basis of price alone. Stepping back.
Speaker 1: This is part of a broader effort by the Buying
Speaker 1: administration to keep the focus on its policies to lower
Speaker 1: healthcare costs, specifically drug prices, after passage of the Inflation
Speaker 1: Reduction Act. So, what is the Bidual Act. What are
Speaker 1: marching rights? How have marching rights been used in the past,
Speaker 1: How could expansion as proposed under the framework impact manufacturers
Speaker 1: and research institutes, institutions that accept federal funding, and if applied,
Speaker 1: will it ly to lower prices? Today we have doctor
Speaker 1: Aaron Kesselheim, a professor of medicine at the Harvard Medical
Speaker 1: School and faculty member in the Department of Medicine at
Speaker 1: Brigham and Williams and Women's Hospital. He's also the director
Speaker 1: of Portal the Program on Regulation Therapeutics and Law, based
Speaker 1: out of the Brigham and Women's Hospital. Doctor Kesselheim, Welcome
Speaker 1: to the Boats and Verdicts podcast.
Speaker 3: Thank you very much. It's a pleasure to be here.
Speaker 1: Now, just to kick things off, can you tell us
Speaker 1: a bit about your work at Harvard Medical School.
Speaker 3: Sure. I'm a primary care doctor and a professor of
Speaker 3: medicine at Harvard Medical School, and I run a research
Speaker 3: center called the Program on Regulation Therapeutics in Law, which
Speaker 3: is an interdisciplinary research center that accepts no funding from
Speaker 3: the pharmaceutical industry and studies issues related to prescription drug
Speaker 3: development and regulation and use and pricing.
Speaker 1: Now, setting the stage a bit, what is the Bidole Act.
Speaker 3: Sure The by Dole Act was a piece of legislation
Speaker 3: passed in nineteen eighty that allowed it basically set a
Speaker 3: ground rule that institutions that received government funding and created
Speaker 3: patentable inventions from that government funding would retain title to
Speaker 3: that invention and be able to exclusively license it to
Speaker 3: organizations or companies that could then commercialize the innovation.
Speaker 1: Now, it seems like there's four key pillars that open
Speaker 1: the door for the government to exercise marchin rights. Can
Speaker 1: you go over those briefly?
Speaker 3: Right? So, in setting up this default that would allow
Speaker 3: the institutions to exclusively license inventions or discoveries made with
Speaker 3: government funding, the Congress also created what's called marching rights
Speaker 3: to allow the government, in extreme cases where those exclusive
Speaker 3: rights were not being used in the way that the
Speaker 3: government might want them to be used to then be
Speaker 3: able to step back in and say, you know, no way.
Speaker 3: You know, we're going to try to find other folks
Speaker 3: to be able to license those rights to as well,
Speaker 3: because ultimately the goal here is to turn government in
Speaker 3: funded inventions into commercialized items that could benefit the public.
Speaker 3: And so there was this this part of the statute
Speaker 3: called marching rights that said that, you know, if the
Speaker 3: if there if one of four different circumstances were met,
Speaker 3: the government could relicense that exclusively licensed product to another
Speaker 3: another entity. And those four circumstances were if the licensee
Speaker 3: hadn't taken effective steps to achieve practical application of the invention,
Speaker 3: if health or safety needs exist that are not reasonably
Speaker 3: satisfied by the licensee, If the government funded invention was
Speaker 3: is required for public use and that use is not
Speaker 3: satisfied by the licensee, Or if the licensee violated its
Speaker 3: agreement to manufacture the product the United States. Those are
Speaker 3: the four circumstances that you're talking about now.
Speaker 1: Tish and I have a number of podcasts focus on
Speaker 1: drug pricing, specifically around the Equation Reduction Act, but we're
Speaker 1: now seeing this conversation about trick prices applied to marching.
Speaker 1: So how does marching fit in with the current effort
Speaker 1: on reducing drug prices and increasing access.
Speaker 3: Well, there's been apart from the Inflation Reduction Act, which
Speaker 3: is you know, relatively novel, there's been a forty year
Speaker 3: debate over whether or not the phrase practical application in
Speaker 3: the first of those four categories, practical application is defined
Speaker 3: in the Statute as making the product available such that
Speaker 3: its benefits are available to the public on reasonable terms.
Speaker 3: That's the phrase used in the statute, and there's been
Speaker 3: a discussion over whether reasonable terms includes the price that
Speaker 3: the drug is made available at. And so if there's
Speaker 3: some you know, piece of a discovery, you know, either
Speaker 3: a drug or a you know, a medical device or
Speaker 3: something like that, that is discovered with government funding and
Speaker 3: then licensed to a commercial entity, and that commercial entity
Speaker 3: makes the product available at such a high price that
Speaker 3: people can't access it, that, you know, is that grounds
Speaker 3: for the government to exercise marching rights under the under
Speaker 3: the bi Dole Act. That's been the sort of ongoing
Speaker 3: discussion over the last over the last forty years. Now,
Speaker 3: you know, obviously the link with the Inflation Reduction Act
Speaker 3: is that the Inflation Reduction Act also is intended to
Speaker 3: try to ensure that the government, in this case Medicare,
Speaker 3: pays a fair price for certain very expensive drugs. But
Speaker 3: there's sort of you know, they're different. They're intended to
Speaker 3: you know, focus on different as different products and address
Speaker 3: different address different problems, but they're you know, they're both
Speaker 3: kind of under this sort of broader umbrella of issues
Speaker 3: that may or may not affect high drug prices.
Speaker 1: And so has this administration or even prior administrations been
Speaker 1: asked to apply march in with certain drugs based on price.
Speaker 1: What's the history here?
Speaker 3: So the history is that there have been about a
Speaker 3: half a dozen times over the last forty years, in
Speaker 3: the case of the of the healthcare, prescription drug and
Speaker 3: device market, where marching rights have been invoked as a
Speaker 3: potential solution to try to address high prices. There was
Speaker 3: a or or lack of availability of a product. There
Speaker 3: was a case of an HIV medication, and a there
Speaker 3: was another case of an eye drop medication, you know,
Speaker 3: in in the early two thousands, where marching rights was invoked.
Speaker 3: And as they said, there have been about half a
Speaker 3: dozen times where marching rights have been invoked. And of
Speaker 3: those half a dozen times, really two of them or
Speaker 3: three of them were related to the drug being priced
Speaker 3: at a very high level and whether that was enough
Speaker 3: to sustain marching rights. And in none of those cases,
Speaker 3: including cases where the drug was priced at a really
Speaker 3: high level, did did the ni H ever even begin
Speaker 3: to take up marching rights as a as a potential consideration.
Speaker 3: So no times has it ever been invoked. And it
Speaker 3: in particular, you know, of those six or so times,
Speaker 3: the three of them that in that's that explicitly involved
Speaker 3: high prices, where whereas not it was not, you know,
Speaker 3: the the ni H declined to invoke marching rights and
Speaker 3: and and imply that that pricing alone is not enough
Speaker 3: of a consideration too to make a claim for marching rights.
Speaker 1: Now, this seems to be their reading of the statute. Uh.
Speaker 1: What's your take on what the legislative intent was of
Speaker 1: the by Dole Acts, specifically the marching requirements, because we
Speaker 1: are seeing some pushback by former staff who worked on
Speaker 1: this law that price was never meant to be a
Speaker 1: factor when applying or exercising march in what's your take
Speaker 1: on the intent going into developing this law.
Speaker 3: Well, I mean, I think it's pretty clear if you
Speaker 3: look back in the late nineteen seventies, because the Bidole
Speaker 3: Act wasn't just introduced and passed in a single legislative session.
Speaker 3: It evolved over the course of the you know, the
Speaker 3: end of the nineteen seventies, and I think it's I
Speaker 3: think it's very clear that if you look at the
Speaker 3: legislative history of the Act that that that price was
Speaker 3: considered as part of this reasonable terms catch all phrase,
Speaker 3: and that what the people in Congress were very concerned
Speaker 3: about was this idea that there would be this public
Speaker 3: investment in developing a product and then a company would
Speaker 3: make it available at a you know, at an unreasonably
Speaker 3: high price and uh and people wouldn't be able to
Speaker 3: access it. And so I think it is I think
Speaker 3: it is clear that if you look at the detailed
Speaker 3: legislative history of the bill, that that most of the
Speaker 3: people when they were talking about this this safety net
Speaker 3: in the bill, that they were thinking about price as
Speaker 3: part of it. And indeed, when Congress around that same
Speaker 3: time and in the later years, uses the phrase reasonable
Speaker 3: terms in other statutes, they very explicitly mean price as well.
Speaker 3: So it's a phrase that oftentimes that Congress intends to
Speaker 3: encompass price. Now, part of the controversy that you point
Speaker 3: out and comes from the fact that many years later,
Speaker 3: Buy and Dole wrote a an op ed in The
Speaker 3: Washington Post in which they explicitly said that, oh, we
Speaker 3: never meant for marchin rights to encompass price. But you know,
Speaker 3: by that time both Buy and Dole were working for
Speaker 3: consulting firms that had a financial vested interest in in
Speaker 3: them making that claim. And and you know, legislative history
Speaker 3: isn't is really should be based on a read of
Speaker 3: the of the record leading up to a bill rather
Speaker 3: than you know, these sort of post hawk statements made
Speaker 3: decades later.
Speaker 2: And you know, just you know, bringing it back to
Speaker 2: you know, we're talking about, you know, the focus on
Speaker 2: drugs here and one of the sort of the threshold
Speaker 2: issues being you know, it needs to be a subject invention.
Speaker 2: So we're looking at something that's going to have some
Speaker 2: level right of federal funding for us to even be here,
Speaker 2: you know, seeing if marchin rights, you know, would even
Speaker 2: be a possibility related to a certain drug. So, so
Speaker 2: what percent of FDA approvals include some level of federal funding?
Speaker 2: And are there certain therapeutic areas that maybe are more
Speaker 2: likely to have government investment or government funding as compared
Speaker 2: to other therapeutic areas well.
Speaker 3: I think it's important to recognize that every single drug
Speaker 3: approved by the FDA has is based on federal funding.
Speaker 3: One hundred percent. There are all drugs are based on
Speaker 3: federal funding. To NIH that leads to incredibly important discoveries
Speaker 3: in basic and translational science. And in some cases sometimes
Speaker 3: that federal funding even occurs later in later stages, you know,
Speaker 3: leading to you know, proof of proof of design and
Speaker 3: stuff like that. But the Bidole Act and Marchin Rights
Speaker 3: only applies when there is a patent that has government
Speaker 3: rights as part of the patent. And there is a
Speaker 3: very small number of FDA approved drugs that have patents
Speaker 3: that can be explicitly linked to government sponsored funding. To
Speaker 3: government funding, We're talking on the order of, you know,
Speaker 3: a few dozen drugs over the last forty years, whereas
Speaker 3: you know, the FDA approves forty or fifty new drugs
Speaker 3: every year, you know, so we're talking that, you know,
Speaker 3: of all the drugs that have federal funding. The Bidole
Speaker 3: Act and Marching Rights only applies when there's a patent,
Speaker 3: and you know, the number of drugs that have that
Speaker 3: is actually very, you know, really quite small.
Speaker 1: Okay. So with that background, we have a sense of
Speaker 1: what the administration wants to do and expanding the ability
Speaker 1: to exercise march In with the focus on direct prices
Speaker 1: and whether that invention is available on reasonable terms. I
Speaker 1: think I look at the document that's for comment, I
Speaker 1: see words like reasonable, extreme, and unjustified which is a
Speaker 1: caveat to actually exercising marchin rights. What's your sense of
Speaker 1: where that bar should be set in terms of what
Speaker 1: is reasonable? But then also when you think about some
Speaker 1: of the other language, as I mentioned earlier, extreme and unjustified,
Speaker 1: is that kind of a way for the administration to
Speaker 1: back out of exercising marchin rights. Help me kind of
Speaker 1: wrap my head around how these terms can be defined
Speaker 1: so that this would be something that is a bit
Speaker 1: more predictable.
Speaker 3: Yeah, I think that's a really important issue because you
Speaker 3: know predictability and you know ex anti understanding what the
Speaker 3: response onsibilities are for you know, government uh inventions that
Speaker 3: have government sponsored patents associated with them is a really
Speaker 3: important issue. And so you know, I think that it
Speaker 3: would be more useful to have a clear definition of
Speaker 3: what reasonable terms are. So, for example, one definition could
Speaker 3: be that you know a product is made available on
Speaker 3: reasonable terms when that product's price is you know, on
Speaker 3: par with the price that the product is made available
Speaker 3: to other industrialized countries in Europe or Canada or Australia
Speaker 3: or Japan. And so you know, if other countries are
Speaker 3: getting a drug at a certain price, you know there's
Speaker 3: no reason that the that the US should be spending
Speaker 3: two to four times higher than you know, for its
Speaker 3: for the product in the in for American patients. But
Speaker 3: in fact, that is what often happens for brand name drugs,
Speaker 3: is that in the US we spend two to four
Speaker 3: times more than is spent in other countries. So that
Speaker 3: might be a uh, you know, a clear ex anti
Speaker 3: rule for how to define what reasonable terms are in
Speaker 3: terms of price. And the Biden administration proposed guidance. As
Speaker 3: you said, you know, you see phrases like extreme and unjustified,
Speaker 3: you know, at which you know, are a lot more
Speaker 3: vague in terms of how they would be applied. And
Speaker 3: so you know, ultimately the application of marching rights is
Speaker 3: going to be up to you know, the the executive
Speaker 3: agencies n I H and the other agencies that are
Speaker 3: tasked with implementing this, and so you know, it's gonna
Speaker 3: it's gonna be you know it. You know, those kinds
Speaker 3: of of phrases that that aren't clearly defined, you know,
Speaker 3: may may be subject to some you know, variable interpretations
Speaker 3: over the years depending on who's in charge. So and
Speaker 3: I think it's also important to recognize that that it
Speaker 3: is very challenging administratively, you know, and judicially to implement
Speaker 3: marchin rights in the first place. So you know, it's
Speaker 3: a it's really a safety net for circumstances where you know,
Speaker 3: products are really you know, manufacturers or or entities that
Speaker 3: are commercializing a government funded project product, you know, really
Speaker 3: are taking advantage in ways that that are unfair to
Speaker 3: US patients, you know.
Speaker 2: So you know, I think we just talked about how
Speaker 2: the terms you know, reasonable and extreme and unjustified, they
Speaker 2: can be a little bit subjective and maybe you know,
Speaker 2: subject to variation depending on different administrations. But you did
Speaker 2: give at least, you know, one example of maybe of
Speaker 2: a potential way to you know, consistently apply you know,
Speaker 2: marchin rights, which is perhaps looking at pricing in other
Speaker 2: jurisdictions compared to the US. So if you were at NIS,
Speaker 2: or if you were advising the White House here, what
Speaker 2: are some factors you think that could be applied in
Speaker 2: this sort of in a consistent manner that could trigger
Speaker 2: marchin rights to maybe get away from some of that
Speaker 2: you know, subjective language.
Speaker 3: So I agree, I think that I think that that
Speaker 3: would be one way of trying to implement you know
Speaker 3: that in a in a more predictable fashion. And in fact,
Speaker 3: you saw recently that there there was some news about
Speaker 3: a government license for a COVID nineteen monoclonal antibody development
Speaker 3: with a private company, where you know that that kind
Speaker 3: of language of you know, the US price should be
Speaker 3: on par with other industrialized countries prices was part of
Speaker 3: that was part of that U the license for that
Speaker 3: particular product. So that's one example. I mean, you could
Speaker 3: imagine other formulations as well. You can imagine that you know,
Speaker 3: maybe maybe it's defined as a value based price according
Speaker 3: to some you know, independent valuation organization, or you could
Speaker 3: imagine that a reasonable price is defined as the cost
Speaker 3: of production plus a certain percentage that would allow for
Speaker 3: a reasonable royalty to the manufacturer, you know, cost of
Speaker 3: production plus one hundred percent or two hundred percent or
Speaker 3: whatever people decide is a fair royalty for for the
Speaker 3: entity that's taking on the the responsibility of commercializing the product.
Speaker 2: Yeah, and you know, it'll be interesting to see if
Speaker 2: we see more of that in some of these you
Speaker 2: know contracts that are are being you know developed between
Speaker 2: the government and you know third parties. But you know,
Speaker 2: going back to when we were setting the considerations and
Speaker 2: sort of setting the stage for a vidol. You know,
Speaker 2: you mentioned that a subject invention and a patent that
Speaker 2: is a subject invention is a threshold right for exercising
Speaker 2: Marchin rights. And you know, there's multiple patents that can
Speaker 2: cover let's say a drug product. You can have patents
Speaker 2: that cover the compound itself, could cover salt forms, formulations,
Speaker 2: method of using, and usually you see some sort of
Speaker 2: combination of all of these different types of patents that
Speaker 2: might be protecting a certain product. So, in your view,
Speaker 2: is it going to be a rare case where all
Speaker 2: the patents that cover a drug would be subject to
Speaker 2: Marchin rights? And you know, how would compulsory licensing of
Speaker 2: some but not all of those patents affect access. So
Speaker 2: for example, maybe one of those six patents or three
Speaker 2: of those six patents might be subject inventions, but there
Speaker 2: could be other patents that protect the drug that aren't
Speaker 2: necessarily subject inventions.
Speaker 3: I do think it is going to be the rare
Speaker 3: case that all of the patents on a drug are
Speaker 3: connected to government funding. And one of those rare cases
Speaker 3: actually exists. There's a drug called ensoludamide or extandy where
Speaker 3: all the FDA listed patents are. It's a cancer drug
Speaker 3: used in prostate cancer, very effective drug developed entirely at
Speaker 3: UCLA before being licensed out for manufacturing and commercialization, and
Speaker 3: all of the patents are linked to government funding. And
Speaker 3: so that's a pretty clear case where marching rights could
Speaker 3: be available. In other cases, as you point out, it
Speaker 3: might only be one out of you know, six or
Speaker 3: twelve or you know, even more patents that relate to
Speaker 3: marchin rights. What we've found actually in our research is
Speaker 3: that of the drugs that are linked to government funded patents,
Speaker 3: a lot of those government funded patents are the are
Speaker 3: on the active ingredient and are like the central most
Speaker 3: important patents. And so I think that you know, the
Speaker 3: process of exercising marching rights on some of these very
Speaker 3: important patents, even if there are other patents available, you know,
Speaker 3: that might lead a company that's commercializing the product to
Speaker 3: consider what whether or not its price is fair and
Speaker 3: consider adjusting it if it seems like there's a possibility
Speaker 3: that another company could get access to its you know,
Speaker 3: sort of most important intellectual property. It's also the case,
Speaker 3: by the way, that the government has the authority under
Speaker 3: a different section of the of the Federal Statute of
Speaker 3: the Federal Code called section fourteen ninety eight, in which
Speaker 3: the government is allowed to use patented innss for its
Speaker 3: own use. So you could imagine marching rights applying to
Speaker 3: the one patent that is the central, you know, active
Speaker 3: ingredient patent, and then the government relying on section fourteen
Speaker 3: ninety eight to allow the use of the other five
Speaker 3: or nine or fifteen patents on the drug, you know,
Speaker 3: to allow the other manufacturer to supply the product to
Speaker 3: Medicare and Medicaid or other other government payers. So there
Speaker 3: are there are ways around this, this pro this issue
Speaker 3: that you're talking about, where marching rights might only apply
Speaker 3: to one out of the huge thicket of patents that
Speaker 3: a manufacturer builds around its brand name drug.
Speaker 1: Yeah.
Speaker 2: No, it's interesting that you mentioned section fourteen ninety eight,
Speaker 2: and maybe this could be a whole other podcast, but
Speaker 2: I know certainly that that's something that I don't know
Speaker 2: if you followed the COVID vaccine litigation, but I've done
Speaker 2: and some research on these, and that's certainly a defense
Speaker 2: that Maderna has put forth in terms of some of
Speaker 2: the patent infringement actions that have been filed against them
Speaker 2: for their COVID vaccine, basically saying that the government authorized
Speaker 2: via Section fourteen ninety eight for them to you know,
Speaker 2: basically use a third party's IP. So I think it'll
Speaker 2: be interesting to see how that. I think the case
Speaker 2: where you're seeing it right now is the arbutus being Madernist.
Speaker 2: So it'll be interesting to see how that sort of
Speaker 2: plays out. But I think what's also interesting there is
Speaker 2: while it might alleviate that third party from infringement, I
Speaker 2: do think it also provides the patent owner could always
Speaker 2: go after the government I think through the Court of
Speaker 2: Claims for patent infringement, but then could be limited potentially
Speaker 2: on damages that they could get back there. But you know,
Speaker 2: it's interesting, you know, we're talking about needing the patent
Speaker 2: and maybe not having all the patents, but you know,
Speaker 2: can you discuss a little as well about how compulsory
Speaker 2: licensing isn't necessarily the same as tech transfer. So you know,
Speaker 2: for example, it would be one thing to potentially license
Speaker 2: a patent to a third party for them to develop it,
Speaker 2: but you're not necessarily transferring the know how, right, Like,
Speaker 2: how do you make that drug? How do you manufacture
Speaker 2: that drug. So you know, with that in mind, what
Speaker 2: do you think the process would look like for the
Speaker 2: government to use the license and to contract with a
Speaker 2: generic manufacturer to make you know, a particular drug at
Speaker 2: a lower price, you know, And do you think, you know,
Speaker 2: would that impact how long it would take for the
Speaker 2: drugs to be produced.
Speaker 3: I think it's a very important point, and I absolutely
Speaker 3: agree that it is not as simple as just transferring
Speaker 3: a patent to another manufacturer and then you know you're
Speaker 3: going to be able to have a product. You know,
Speaker 3: not only do you have to, you know, deal with
Speaker 3: the issue is that you're talking about about know how
Speaker 3: and manufacturing capacity, you know, you also have to deal
Speaker 3: with FDA approval of the manufacture of the product from
Speaker 3: that manufacturer. So you know, this is again all of
Speaker 3: this points to the fact that marching rights is not
Speaker 3: a large scale solution to issues related to prescription drug prices.
Speaker 3: Marching rights is a very very focused, very very small
Speaker 3: scale solution for a very small number of products, you know,
Speaker 3: But it's important that it exists, and it's important that
Speaker 3: it applied to cases where the drug prices are too high,
Speaker 3: because when public funding develops, an essential medication like the
Speaker 3: cancer drug or the HIV medication, or the or the
Speaker 3: eye drop that I was talking about earlier. It is
Speaker 3: really important that that patients have fair access to those products.
Speaker 3: And but but I agree with you that all of
Speaker 3: those are important issues. Now, you know, in the case
Speaker 3: of ns alutamide, there actually is another manufacturer that you know,
Speaker 3: that a generic manufacturer that that could make the product
Speaker 3: available and has received tentative approval from the FDA to
Speaker 3: do so. But for the existing intellectual property rights that exist,
Speaker 3: you know, that protect the brand name product. So there
Speaker 3: are some drugs that are going where the where the
Speaker 3: you know, transfer of know how isn't very challenging, as
Speaker 3: in the case of a drug like ends alutamide. And
Speaker 3: then there are other products like another one of the
Speaker 3: petitions for marching rights over the years related to a
Speaker 3: drug called a galasidase for Fabria's disease, which is a
Speaker 3: biologic product that really wasn't a pricing issue, is more
Speaker 3: of a supply issue, you know. But that's a much
Speaker 3: more complicated biologic drug, and having finding other manufacturers to
Speaker 3: make that is is a is a bit of a
Speaker 3: of a of a bigger task. So but I agree
Speaker 3: with you that that's an important issue.
Speaker 2: Yeah, and I think that's a good note that you
Speaker 2: make on the ends alutamide, right, is that, well, if
Speaker 2: there's somebody that's waiting in the wings that has the approval,
Speaker 2: they just need the license to the patents, right, that's
Speaker 2: sort of a different scenario. And certainly, you know, I
Speaker 2: think one thing that maybe could be thought about is like,
Speaker 2: at what point would a generic manufacturer potentially go to
Speaker 2: the government and request a license through march in whether
Speaker 2: it would be you know, when they file their new
Speaker 2: drug application or they're abbreviated new drug application, or at
Speaker 2: some point during the litigation. I think it probably would
Speaker 2: need them to do an assessment, right on what are
Speaker 2: the patents that cover the drugs, what are the key
Speaker 2: ones that are you know, the barrier to access for them,
Speaker 2: and are any of those you know, subject to government funding.
Speaker 1: Yeah, and I guess as I'm thinking about this, you know,
Speaker 1: I we just passed or Congress just passed the President
Speaker 1: signed the law, the Inflation Action Act, And you mentioned
Speaker 1: this earlier, and we've had some questions today about providing
Speaker 1: a bit more predictability based on the way some of
Speaker 1: these words are used in the draft framework. Now, is
Speaker 1: it reasonable for somebody to say, and I know you've
Speaker 1: said that the way we're looking at Marching now, it
Speaker 1: would only apply to a very small number of drugs.
Speaker 1: Is it reasonable or unreasonable? I need to use those
Speaker 1: words since we talked about it earlier. But is it
Speaker 1: reasonable to assume that because we have the IRA, we
Speaker 1: don't necessarily need these to expand the Marching authority because
Speaker 1: at least with IRA, you know, we'll know what the
Speaker 1: prices are coming up this year potentially. Is it reasonable
Speaker 1: to assume that there's a more predictable process and maybe
Speaker 1: a more efficient tool more lewing prices than this, uh,
Speaker 1: expanding this story through Marching? What do you what's your
Speaker 1: response to that?
Speaker 3: Well, I think that the Inflation Reduction Act and Marching
Speaker 3: Rights are separate, complementary tools. And and again, as I said,
Speaker 3: you know, the Inflation Reduction Act is you know, applies
Speaker 3: to a small number of drugs that meet certain minimum
Speaker 3: criteria for for medicare spending in terms of you know,
Speaker 3: minimum of two hundred million dollars a year in medicare
Speaker 3: spending and have to be on the market for nine
Speaker 3: to eleven nine to thirteen years after after approval and
Speaker 3: have to you know, subject to other exemptions. So you know,
Speaker 3: the Inflation Reduction Act has is you know, an an
Speaker 3: incredibly important and transformational piece of legislation, but it also
Speaker 3: is limited in certain ways. And that you know, it
Speaker 3: applies to a certain small number of drugs at at
Speaker 3: the very end of their exclusivity and only in the
Speaker 3: and only applies to to medicare, uh to the prices
Speaker 3: paid in medicare. Whereas you know, marching rights applies to
Speaker 3: cases where a drug is developed with substantial public funding
Speaker 3: that will that that that leads to the development of
Speaker 3: one of the key patents for the drug, or sometimes
Speaker 3: all of the key patents for the drug. As I said,
Speaker 3: you know that those those two don't necessarily overlap. In
Speaker 3: the case of Extandy, ex standy didn't qualify for the
Speaker 3: first round of Medicare negotiation because it, you know, it
Speaker 3: was it was not one of the top ten top
Speaker 3: selling drugs in medicare this year. Whether it qualifies in
Speaker 3: future years, you know, we'll we'll see.
Speaker 1: But probably will yeah, I mean, we'll see.
Speaker 3: You know, who knows. But there, you know, there, I
Speaker 3: think they are complementary and I think they both feel
Speaker 3: different policy needs. And again I don't I don't. I
Speaker 3: don't feel like either the IRA makes the makes the
Speaker 3: need for marching rights to be you know, a real
Speaker 3: uh a real uh you know, important safety net uh unnecessary,
Speaker 3: or that marching rights in any way makes the Inflation
Speaker 3: Reduction ACTU necessary. I think they just apply in different circumstances,
Speaker 3: you know.
Speaker 2: And anytime we see some sort of new policy, and
Speaker 2: not that bi dole is new, right, but the thought
Speaker 2: of using price right as a as a consideration, you know,
Speaker 2: is there's always a discussion about the implications and the
Speaker 2: consequences or maybe unintended consequences. So it's probably important if
Speaker 2: we maybe talk through some of those, so, you know,
Speaker 2: if this framework is implemented, you know, we you talked
Speaker 2: a little bit about how often you know, agency inventions
Speaker 2: or even university inventions, right are often very very early
Speaker 2: on and can be very foundational and drug development. How
Speaker 2: do you think this framework could impact licensing and collaboration
Speaker 2: agreements that we see between for example, academic medical research
Speaker 2: centers and biotech companies. You know, oftentimes universities have a
Speaker 2: tech transfer office where they're generating a lot of revenue
Speaker 2: for their university by out licensing some of these key,
Speaker 2: you know, fundamental inventions that help support you know, further
Speaker 2: development or even you know, maybe in the case of
Speaker 2: extandy right that are actually to a drug itself. Do
Speaker 2: you think manufacturers are going to start pricing in this
Speaker 2: new what they might consider a new march and risk
Speaker 2: and could that lead to lower prices for government funded
Speaker 2: research or create maybe a direct hit to tech transfer
Speaker 2: offices such that they're not getting as much revenue as
Speaker 2: maybe they could beforehand.
Speaker 3: Well, you know, I do think that, uh, I do
Speaker 3: think that that the ability for academic centers to uh
Speaker 3: coordinate with commercial entities that ultimately manufacture and bring a
Speaker 3: drug through the regulatory approval process. I mean, I think
Speaker 3: that that process is a very important one, and it's
Speaker 3: it's very important to make sure that it remains vital
Speaker 3: and and and that you know, it remains a conduit
Speaker 3: because you know, that really is the process through which,
Speaker 3: uh most of the transformational drugs and and and most
Speaker 3: important new uh new ways of treating medical conditions end
Speaker 3: up getting to patients. So it's important that we have
Speaker 3: this conversation and make sure that that any changes that
Speaker 3: make that are made in policy, you know, don't don't
Speaker 3: affect that that vital pathway. And I personally don't think that,
Speaker 3: you know, the the extension of marchin rights to include
Speaker 3: prices would affect that for a number of reasons. I mean,
Speaker 3: I think, first of all, as I said, it really
Speaker 3: only affects an extremely small number of drugs overall, like
Speaker 3: we're talking as you know, we're talking you know, six
Speaker 3: cases of proposed marching rights over the last you know,
Speaker 3: forty years. And in addition, you know, a lot of
Speaker 3: large drug companies have don't invest in basic science and
Speaker 3: don't invest in the in the kind of work and
Speaker 3: when they count on on on new and important ideas
Speaker 3: emerging from government funded research at academic centers. And so
Speaker 3: the idea that as a result of this change in policy,
Speaker 3: that that large manu that manufacturers would turn away from
Speaker 3: the ideas coming out of academic centers is you know,
Speaker 3: is completely absurd to me. That you know, they they
Speaker 3: don't have any other place to find that information because
Speaker 3: a lot of the large companies have divested out of there,
Speaker 3: out of their own research centers, uh in in into
Speaker 3: to a large extent. So you know, would it be
Speaker 3: the case that that that manufacturers would price this in
Speaker 3: to the royalties that that academic centers would receive. I mean, maybe,
Speaker 3: you know, I think that if you look at it,
Speaker 3: there are a couple very successful academic in terms of
Speaker 3: financially successful, a couple very financially successful academic transfer offices,
Speaker 3: but a lot of take transfer offices aren't, you know,
Speaker 3: sort of major financial successes. And so you know, I
Speaker 3: don't know that that's going to be that disruptive to
Speaker 3: the to the process. And you know, ultimately, and as
Speaker 3: I said, the equity here is is important to keep
Speaker 3: in mind that these are these are inventions and discoveries
Speaker 3: that that really have a substantial amount of public contribution
Speaker 3: to them. And the fact that a company can then
Speaker 3: charge high prices that make them inaccessible to some members
Speaker 3: of the public or to make them make them be
Speaker 3: a drain on the on the the healthcare system, you
Speaker 3: know that that really doesn't seem very fair.
Speaker 2: You know, And I think maybe you sort of answered
Speaker 2: my next question as well. As you know, often when
Speaker 2: we see changes like this, some of the criticism we
Speaker 2: see sometimes from you know, uh, the pharmaceutical industry itself,
Speaker 2: is like, oh, this is gonna you know, you're confiscating
Speaker 2: our property. This is going to stifle innovation, This is
Speaker 2: going to reduce R and D investment. This ultimately is
Speaker 2: going to be harmful to to people and not beneficial.
Speaker 2: What's your response to you know that sort of criticism.
Speaker 3: Well, you know, any time you change pharmaceutical policy, the
Speaker 3: pharmaceutical industry will say that you will no longer see
Speaker 3: any more new drugs. Like that's their constant refrain. Ever
Speaker 3: since the you know, the you know in time for
Speaker 3: Time Immemorium Tracksman Act meant would mean that there is
Speaker 3: no more innovation that you know, the the the Inflation
Speaker 3: Reduction Act means that there's not gonna be any more innovation.
Speaker 3: In fact, since the Inflation Reduction Act has passed, I
Speaker 3: saw one statistic out of the Congressional Budget off is
Speaker 3: that venture capital funding in the in the pharmaceutical industry
Speaker 3: has only increased. So, you know, I think that you
Speaker 3: hear this when you hear that refrain so many times
Speaker 3: in every circumstance, at some point, you know, you tend
Speaker 3: to you tend to like tune out the crying wolf
Speaker 3: aspect of this, and you know you really need to
Speaker 3: just assess the the policy on its own legs and say,
Speaker 3: you know, what are we really talking about here. We're
Speaker 3: talking about, you know, how how how fair it is
Speaker 3: for for the for the government and for public the
Speaker 3: public funding to pay through taxpayer dollars an invention and
Speaker 3: then to have to pay exorbitant fees for that product
Speaker 3: on the back end as well. Doesn't seem very fair.
Speaker 3: And at the same time, we're talking about such a
Speaker 3: small number of products and and such an essential source
Speaker 3: of innovation that this government funding through through research at
Speaker 3: academic centers as a as a source for new innovation,
Speaker 3: that like, you know, I just think that with all
Speaker 3: of those things together, I don't think that I think
Speaker 3: that this is yet another circumstance where we have to
Speaker 3: not take the the pharmaceutical industry you know, crying wolf, uh,
Speaker 3: you know, seriously.
Speaker 1: And and to that point, we've seen this administration move
Speaker 1: forward on some of these policies where there has been
Speaker 1: significant industry opposition, and as we know, there's significant opposition
Speaker 1: industry opposition to what the administration has proposed. And time
Speaker 1: will tell if this actually does happen, if there's a
Speaker 1: final framework, what it might mean in terms of how
Speaker 1: these companies think about their investment strategies. Just just like
Speaker 1: as you said on the IRA, you know, innovation might
Speaker 1: not be stifled, It just might change and require a
Speaker 1: bit more thinking and thought in terms of kind of
Speaker 1: the what's next for each individual company based on their pipeline.
Speaker 1: So time will tell there. But to your last question
Speaker 1: and answer, like for you to bring out your crystal
Speaker 1: ball for this final question, which is now that it's
Speaker 1: twenty twenty four and it's an election year, how do
Speaker 1: you see this getting resolved? My sense is that, you know,
Speaker 1: this is part of a broader effort by the administration
Speaker 1: to keep the emphasis or the focus on their efforts
Speaker 1: to address high healthcare costs, whether it's insurance costs or
Speaker 1: in this instance, drug pricing. So I tend to think
Speaker 1: that we'll see something this year in terms of a
Speaker 1: final framework. Do you agree with that or can you
Speaker 1: give us a sense of what might be in store
Speaker 1: for the next several months. And do you think it's
Speaker 1: going to change any kind of behavior by pharma in
Speaker 1: terms of how they look at their pipelines.
Speaker 3: Well, I do think that there will be a final
Speaker 3: framework this year. I also think that the Biden administration
Speaker 3: will use this step if it does, in fact, you know,
Speaker 3: survive into the final framework. I think it will use
Speaker 3: this step as evidence that it is taking steps to
Speaker 3: address high drug prices. And I think, you know, I
Speaker 3: think it is really important to recognize that, you know,
Speaker 3: despite the as we've talked about before, the relatively small
Speaker 3: number of products that this will apply to, and the
Speaker 3: challenges of applying it, it really is a transformational step
Speaker 3: after forty years of Republican and Democratic administrations alike denying
Speaker 3: that reasonable terms includes prices, for the Biden administration to
Speaker 3: step forward and include price in the discussion of what
Speaker 3: reasonable terms is. So even though it will only apply
Speaker 3: to a small number of products, and it you know,
Speaker 3: is incredibly administratively and judicially challenging to use. And you know,
Speaker 3: I do think that it is valid for the Biden
Speaker 3: administration to use this as a in its in its
Speaker 3: you know, uh political campaign, as an example of how
Speaker 3: it has really taken, you know, new steps in this
Speaker 3: area that have never taken have never been taken before.
Speaker 3: But I do not think that in the looking into
Speaker 3: my crystal ball for twenty twenty four, I don't think
Speaker 3: that even if this guidance gets finalized, I don't think
Speaker 3: that we'll see it be applied to any drugs. And
Speaker 3: even if we do see it, you know, the initial
Speaker 3: steps be taken around one drug. You know, the lengthy
Speaker 3: process it will take to actually make that happen will
Speaker 3: stretch well into twenty twenty five or even you know,
Speaker 3: twenty twenty six. So we may see a final product,
Speaker 3: we may see it be used in political campaigns, but
Speaker 3: I do not think we will see it actually be
Speaker 3: implemented around a particular product.
Speaker 1: Well, let's definitely revisit this a year from now and
Speaker 1: see what's happened in what the reaction has been. And
Speaker 1: I'm sure we'll see this potentially play out in another venue,
Speaker 1: i e. The courtroom potentially at some point, but time
Speaker 1: will tell. And with that we'll wrap up this episode
Speaker 1: of Boats and Verdicts. We're grateful to doctor kessel him
Speaker 1: for joining us today, and we thank you the listener
Speaker 1: for joining us as well. As a reminder, you can
Speaker 1: read all of our bi research on the Bloomberg terminal
Speaker 1: at Big Thanks for listening, and have a great day.