As Pandemic Preparedness bill clears House committee, effort to include antibiotics transferable exclusivity extension fails

On July 18, 2018, the U.S. House Energy and Commerce committee gave its approval to HR 6378, the Pandemic and All-Hazards Preparedness Act, known as PAHPA. During the mark up, Reps. John Shimkus (R-IL) and Tony Cárdenas (D-CA) proposed attaching as an amendment language from a different bill, HR 6294, titled Re-Valuing Anti-Microbial Products Act of 2018, or the REVAMP Act. The REVAMP Act would grant up to ten 12-month transferable exclusivity vouchers for drugs designated as priority antimicrobial products. The REVAMP voucher could then be used to extend the monopoly on another drug, including drugs with very large sales revenue, like Biogen’s Tecfidera, a very expensive (more than $90,000 per year with a Goodrx coupon) drug for multiple sclerosis that has recorded U.S. sales of $3.3 billion in 2017. Given the dramatic decreases in prices for blockbuster drugs following the expiration of the patents, the cost to consumers of the ten vouchers could exceed the annual budget of the NIH.

During the markup, co-sponsor Rep. Shimkus explained that although they “continue to move towards consensus” for the REVAMP Act, it was still “not enough.” He nevertheless suggested that they will try to get the amendment included when the PAHPA bill gets to the House floor.

An embedded video of the remarks by Rep. Shimkus are here:

KEI transcript of the remarks by Rep. Shimkus during the PAHPA markup on July 18, 2018.

    “One thing lacking in the legislation is what Congressman Cárdenas and I have been working on is the antimicrobial resistance issue, i.e., the ‘superbug’ concern, which is predominant in healthcare. I’m being told we continue to move towards consensus but, obviously, not enough to include it in this piece of legislation. So we hope that we can do that. The very basic simple premise is that if we want to have antimicrobial resistant drugs on the counter when we need it, we have to find a way to pay for it hoping that we never use them. That’s the basic premise. Or, we use it in such a small batch that you can’t – there is not a return on investment of the research. So that – and I’m proud to have Congressman Cárdenas join me in this cause.

    I also like to submit for the record some letters in support. I have a letter to me and Congressman Cárdenas from the Infectious Diseases Society of America, dated June 29; I have another one dated June 28 from the Antimicrobial Innovation Alliance; and the last one addressed to you and the Ranking Member Congressman Pallone from the Biotechnology Innovation Organization. And I hope we can encourage our staff to keep working, so when this get to the floor this can be included.”

Rep. Shimkus also cited three letters in support of the REVAMP Act sent by the Antimicrobial Innovation Alliance, which includes companies like Merck, Novartis, Sanofi, and Pfizer; the Biotechnology Innovation Organization (BIO), and the Infectious Diseases Society of America. A number of consumer and health groups, including KEI, oppose the use of the transferable exclusivity exceptions.

One feature of the REVAMP bill that deserves attention is the proposal to give the Congressionally-created Foundation for the NIH 5 percent of the cash value of the vouchers, a provision that could end up giving the Foundation more than $1.5 billion if all ten vouchers are issued.

    “(h) Contribution Upon Conveyance.—As a condition on the award of an exclusivity extension period to the holder of a drug pursuant to subsection (a), the Secretary shall require the holder, upon any conveyance of the period pursuant to such subsection, in whole or in portions, to make a monetary contribution to the Foundation for the National Institutes of Health that—
    “(1) is in an amount that is equal to 5 percent of the total value of the consideration received by the holder as a result of the conveyance; and
    “(2) is designated to be used by the Foundation to conduct or support early-stage research on the development of products to treat or prevent a disease attributable to a multi-drug resistant bacterial or fungal pathogen.

The mandate to use some of the cash from the sale of the voucher to fund early-stage research is contained in a bad bill, but it reminds us that one possible way to enhance research expenditures, particularly in areas of priority, can be to mandate that companies pay for the research from sales or targeted windfalls, a topic that requires more thought and attention. The notion of research mandates has a long history, from the early obligations on Bristol-Myers Squibb in connection with an extension of exclusivity for cisplatin, to Senator Sander’s Open Source Dividend proposal, and in a variety of other contexts, as noted recently by Marcus Low in comments to the UN High-Level Panel on Access to Medicine.

KEI does not see the Foundation for the NIH (FNIH) as the appropriate entity to receive and manage research funds. The board of directors of the FNIH includes a number of persons from big pharmaceutical companies and investors in the biomedical industry, and the policies adopted by the FNIH will no doubt be more favorable to large pharmaceutical companies than the public. Indeed, during the negotiations at the UN Secretary-General’s High-Level Panel on Access to Medicine, Dr. Maria Freire, the President and Executive Director of the FNIH, often took the side of large pharmaceutical companies.

Having some fraction of the reward to a drug developer be reallocated into early stage research is a good idea. Senator Sanders proposed that “at least” 5 percent of the innovation inducement prizes be allowed to reward researchers that open source knowledge, technology, materials and data, that were useful in drug development.

In the cisplatin case, the NIH mandated that Bristol-Myers Squibb fund a certain dollar amount of cancer research.

In the case of priority antimicrobial products, providing large market entry rewards is a good idea, but the rewards should not be financed through transferable patent extensions, which would arbitrarily impose huge costs on patients of a small number of best selling drugs. A better approach would be to finance the market entry rewards through alternative methods, including, for example:

  1. A broad based contribution from health insurers,
  2. A “pigouvian” broad based fee on the sale of all antibiotic drugs, including for use in agriculture, as the use of existing antibiotic drugs are creating resistance, or
  3. A contribution from drugs that have earned excessive returns, as measured either by sales exceeding a certain threshold in a given year, cumulative sales, or both.

The first option would be attractive to insurers if the price of the new antibiotic drug were low, since the market entry reward would be the new incentive to reward drug developers. Indeed, given the massive value of the voucher proposed in the REVAMP bill, it is startling that the bill gives the drug developers the freedom to set any price, despite the massive subsidy and reward borne only by U.S. residents.

Going forward, the United States should also consider the global and cross border aspects of the development subsidy. Countries that contribute and share the costs of the market entry reward should also have the opportunity to obtain access to the drug at concessionary prices, subject to the appropriate use set out in the REVAMP bill.

Creating new incentives for the development of priority antimicrobial products is important, but the REVAMP bill is deeply flawed and should not be approved in its current form by the Congress.