Secretary Alex Azar’s comment on 28 USC 1498 submitted for the record of the 2018 confirmation hearings

The following is a question for the record from Senator Sherrod Brown, and a response from Alex Azar, in connection with Azar’s confirmation hearing.

    Questions for the Record
    January 9, 2018 Hearing to Consider the Nomination of Alex Azar to be Secretary of Health and Human Services
    Senate Finance Committee

    Page 90

    Senator Brown

    Mr. Azar, in your opening statement, you mention your experience at HHS during the post 9/11 anthrax attacks and their threat on our nation’s public health. Your boss at the time – then-HHS Secretary Tommy Thompson – publicly considered using his authority under a section of the United States Code, Title 28 Section 1498, that would have allowed the government to buy generic versions of an otherwise patented anti-anthrax drug at a steep discount. Mr. Thompson’s threat of invoking Title 28 Section 1498 allowed the government to leverage a deal with the brand name manufacturer and cut the price of the anti-anthrax medication Cipro in half, saving taxpayer dollars and protecting public health.

    Did you play a role in advising then-Secretary Thompson in threatening to invoke the authority behind section 1498, which led directly to cheaper medicines?

    Azar Response: I was involved in the negotiations with Bayer to acquire ciprofloxacin in the aftermath of 9/11 and during the anthrax attacks. As I noted in a letter to the editor of the American Lawyer, Alex M. Azar II, Letter to the Editor, The Cipro Dilemma, American Lawyer, Jan. 31, 2002, Bayer was never threatened with the use of section 1498, and it was my view and the view of the Department’s attorneys that section 1498 would not authorize FDA to approve a product in violation of the market exclusivity provisions of the Hatch Waxman Act. Section 1498 is not a regulatory provision that would allow the FDA to approve a product under the Food, Drug, and Cosmetics Act when that Act does not so permit. Section 1498 does not authorize the government or its contractors to engage in patent infringement, but rather provides a remedy in the event that that were to occur. If, for example, a suit were filed against a government contractor for infringement and various conditions were met, the government would step in, defend the suit, and ultimately pay. Section 1498 has never been used in a situation like this, does not automatically result in a lower drug price, and it is not a cost free option.

Azar’s answer can be contrasted with the Bayer account of the negotiations, in this 2002 SEC filing.

    FILED AS OF DATE: 20020114

    The extent of patent protection varies from country to country. In some of the countries in which we operate, patent protection may be significantly weaker than in the United States or the European Union. Piracy of patent-protected intellectual property has often occurred in recent years, particularly in some Asian countries. In addition, in an effort to control public health crises, some developing countries, such as South Africa and Brazil, have recently announced plans for substantial reductions in scope of patent protection for pharmaceutical products. In particular, these countries could facilitate competition within their markets from generic manufacturers who would otherwise be unable to introduce competing products for a number of years. Furthermore, in response to the recent bioterror attacks in the United States, the U.S. and Canadian governments contemplated compulsory licensing of our ciprofloxacin antibiotic — in effect, permission to generic manufacturers to market ciprofloxacin before the expiry of our patent rights. Although we reached agreements with the two governments intended to ensure adequate supplies of ciprofloxacin while preserving our existing patent rights, we cannot assure you that these or other governments would not impose compulsory licensing in future in response to renewed or increased bioterror attacks. We do not currently expect any proposed patent law modifications to affect us materially. Nevertheless, if a country in which we sell a substantial volume of an important product were to effectively void our patent rights in that product, our revenue could suffer.