White House proposes use of march-in rights to help lower prescription drug prices

The Biden-Harris administration recently announced new actions to lower health care and prescription drug costs by promoting competition. These actions include a proposed framework that encourages agencies to use march-in rights to lower the price of prescription medicines. The proposed framework encourages agencies to consider price as a factor in determining whether a drug is genuinely accessible to the public.

Prescription drugs cost more in the U.S. than elsewhere, even though taxpayers' dollars support federal research. Each year, U.S. taxpayers contribute more than $40 billion to the National Institutes of Health, according to the NIH budget webpage, while, as the White House fact sheet announcing the new actions points out, nearly three in ten individuals struggle to pay for the drugs they need. The fact sheet notes, “(w)hen an invention is made using taxpayer funds, under certain circumstances march-in authority under the Bayh-Dole Act enables the federal government to license the invention to another party.”

The directive refutes a proposed rule change by the previous administration, which the Biden administration decided not to finalize earlier this year. That directive stated that march-in rights "shall not be exercised exclusively based on the business decisions of the contractor regarding the pricing of commercial goods and services arising from the practical application of the invention." In discussing statutory requirements for walk-in rights, the new framework, for the first time, advises agencies to consider at what price and on what terms the invention has been sold or offered for sale. Agencies would consider whether a high price hinders the availability of the drug and whether the drug company can explain why they are charging this amount for the drug.

Taxpayer money is crucial for the development of prescription drugs. Rena M. Conti, technology and policy research initiative faculty director, Boston University School of Business, and Frank S. David, a member of the Harvard-MIT Center for Regulatory Science, note in an opinion article that “detailed case studies reveal that public support has played at least some role in virtually all of the 26 most clinically and commercially significant drugs and drug classes approved over the past several decades.”[1]

However, Conti and David point out that although the role of taxpayer money is critical to the early stages of research, it is not what takes these drugs over the finish line into commercialization. They note that “(t)he public sector supported key basic research for 19 of the 26 ‘transformative’ drugs and drug classes cited above, contributed to the actual discovery of a new therapy in just 11, and could claim sole discovery credit in only four cases.”

Those who oppose the proposed framework cite the potentially negative impact on the broader innovation ecosystem as a concern.

AUTM has expressed disappointment in the new framework, noting on its website that "(u)nfortunately, this document specifies that the reasonableness of a product's price may be a factor that an agency can consider when deciding to exercise march-in rights. This policy will create significant uncertainty in licensing federally funded inventions.” AUTM also encouraged its members to voice their perspectives during the comment period, which ends on February 6, 2024.

The public can submit comments about the proposed framework here.