House Appropriations rejects Kaptur amendment (allow competition for gov funded drugs if prices higher than reference countries)

On 19 July 2017, Rep. Marcy Kaptur (D-OH) introduced an amendment at the markup in the U.S. House Appropriations Committee of the FY2018 State and Foreign Operations, Labor, Health and Human Services Appropriations bill that would direct the Department of Health and Human Services to use its authority to break patent monopolies for government-funded inventions priced higher in the U.S. than seven other high-income countries.

Kaptur explained to the Committee that the amendment would direct HHS to exercise its rights identified under 35 USC § 202(c)(4), § 209(d(1)) or § 203 to authorize third parties to use inventions developed with government funding whenever the price of the invention is higher in the United States than in similar economies around the world.

35 U.S.C. § 202(c)(4) provides that the Government retains a “nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world…” Section 209(d)(1) echoes the language of 202(c)(4), specifying that the royalty-free right must be drafted into the language of licenses granted for federally-owned inventions. 35 U.S.C. § 203 separately establishes the Bayh-Dole “march-in” rights provision. The march-in rights allow the funding agency to grant third parties (like generic drug companies) the right to use the patented inventions, subject to a royalty payment, if products are not “available to the public on reasonable terms.”

The march-in rights apply only to inventions that benefited directly from federal funding, which a patent holder is required to disclose, and is reported in the published patent. A failure to disclose federal funding can result in the U.S. government claiming title to the patent, under 35 U.S.C. § 202(c)(1).

Rep. Kaptur referenced the prostate cancer drug Xtandi and the epilepsy drug Vimpat as examples when explaining the amendment. Both drugs were developed using funds made available through HHS, and disclose federal funding in their patents.

Xtandi (enzalutamide) lists three patents, all of which disclose government funding and declare government rights.

Patent 9126941 declares government rights: “This invention was made with Government support under Grant No. W81XWH-04-1-0129 awarded by the United States Army, Medical Research and Materiel Command; Grant No. CA092131 awarded by the National Institutes of Health. The Government has certain rights in this invention.”
Patent 8183274 also declares government rights: “This invention was made with United States Government support under National Institutes of Health SPORE grant number 5 P50 CA092131and Department of Defense (Army) grant number W81XWH-04-1-0129. The Government has certain rights in the invention.”
Patent 7709517, the final patent, also states: “This invention was made with United States Government support under National Institutes of Health SPORE grant number 5 P50 CA092131 and Department of Defense (Army) grant number W81XWH-04-1-0129. The Government has certain rights in the invention.”

Vimpat (lacosamide) lists one patent, which discloses government funding and declares government rights.

Patent RE38551 states: “This invention was made with Government support under Grant/Contract No. NIH MS 15604 awarded by the National Institute of Health. The Government has certain rights in the invention.”

Both drugs are priced higher in the United States than in other high income countries. Xtandi is priced at 2 to 4 times higher than in seven other large economies which have a GNI per capita of at least 50% of the United States: Japan, Germany, the UK, France, Italy, Canada and Australia. Based on 2015 figures, the amendment could save Medicare alone $500 million annually. For more on Xtandi, see: /xtandi

Even before the amendment was introduced by Rep. Kaptur, the trade association Biotechnology Innovation Organization (BIO) was lobbying members of the Appropriations Committee to vote against it. Opposition during the Committee’s debate came from Rep. Tom Cole (R-OK), who urged a no vote on the amendment. Rep. Cole stated that while he appreciated the concern of Rep. Kaptur, he thought the amendment would run the risk of upsetting the relationship between the National Institutes of Health and private industry. Rep. Cole also stated that the amendment would be “extremely difficult to implement, as there’s no way to measure to what extent a particularly federally funded study played in the discovery of a new drug.”

A similar directive to the proposed amendment was included in the Senate Armed Services Committee’s Report on the National Defense Authorization Act, which applied exclusively to drugs developed with funding from the Department of Defense. For more on this report, see: /node/2832

Rep. Rosa L. DeLauro (D-CT) spoke in support of the amendment, “[Pharmaceutical] companies grow their businesses with the benefit of taxpayer sponsored research. They then turn around and they gouge those same taxpayers, and they put life-saving medicine out of the reach of many.”

Had DoD or HHS enforced this mandate earlier, Medicare would have saved considerable money. In 2015, the average price in the US to medicare was $73.94 per pill (4 per day are required). In 2016, the median price for the seven reference prices* was the Japan price of $26.37 per pill, a discount of 64.3 percent of the 2015 Medicare price. Based upon this calculation, the 2015 savings to Medicare would have been $791m x .643 = $508m.

For the private sector, the savings would be larger, on a percentage basis. For example, the GoodRx.Com price for Xtandi is 95.53 per pill, or $382 per day, for a treatment you need every day, for as long as it works. The reference price would be lower by more than 72 percent. Instead of $382 per day, the cost would be $105.48 per day, which is still a lot of money, but better than $382. If Astellas did not lower the price and the government issued the compulsory license, the price would be far lower. One firm has offered to supply Medicare for $3 per pill, and even that is much higher than the costs of manufacturing.

The US and prices from reference countries for a single pill of Xtandi compared

  • United States: GoodRx price: 95.53 USD
  • United States, Medicare (2015): 73.94 USD
  • 2016 Reference prices
    • Germany: 34.19 EUR (36.93 USD)
    • United Kingdom 24.42 GBP (35.65 USD)
    • France 24.75 EUR (26.73 USD)
    • Japan 3,138.80 Yen (26.37 USD)
    • Italy 24.08 EUR (26.01 USD)
    • Australia 33.04 AUD (23.46 USD)
    • Canada, Quebec 28.35 CAD (20.12 USD)

While Rep. Kaptur made an impassioned plea to use the existing legislation under Bayh-Dole to lower drug prices for Americans and to allow taxpayers to benefit from what they have invested in drug development, the committee voted the amendment down. There was no roll call vote, and the determination to strike the amendment was made by voice vote for the noes determined by the committee chair Rodney Frelinghuysen (R-NJ).

KEI Director James Love commented on the debate in the Appropriations Committee.

“The Kaptur amendment would have only applied to drugs where the invention was funded by the U.S. taxpayers, something the patent holders are required to disclose in the patent applications. The rule Kaptur proposed was very modest, only that government funded inventions should not be more expensive here than anywhere else. People voting against the Kaptur amendment are endorsing the freedom of drug companies to charge US residents more, and in many cases, much more than the prices anywhere else, for an invention funded by US taxpayers. Rejecting the Kaptur amendment is endorsing a policy of treating the US worst than any other country. We hope this issue continues to be debated in the Congress, and the Trump Administration changes its policy, in order to save taxpayers billions of dollars and to ensure that taxpayer-funded drugs are more affordable.”

Video from the hearing is available below: