Senators Chris van Hollen and Rick Scott introduce bill on reasonable pricing of federally-funded drugs

This is a copy of the “We PAID Act” by Senators Chris van Hollen (D-MD) and Rick Scott (R-FL).

The 31 page bill creates a new non-profit organization to determine reasonable prices for drugs that use “qualifying patents” that benefited from federal funding, and would impose harsh sanctions, including the loss of access to federally-funded inventions and a loss of exclusivity, when prices exceed a reasonable price, or have annual increases in prices that exceed a medical care category of the consumer price index. The National Academies provides inputs to the methodology.

If a product had even a single federally funded patent, the reasonable pricing obligation would apply.

The bill has a number of features that are interesting. It would require patent holders to disclose “any Federal grant received in the 10-year period prior to submitting the application, in which the applicant is listed as the principal investigator or co-investigator with respect to the grant,” a provision that would address the many failures to disclose abuses described here:

The bill also creates a private right of action to enforce failures to disclose under 35 USC 202(c)(6), the part of the Bayh-Dole Act that requires disclosures of federal funding, something that patent holders frequently fail to do. The existing legal obligation to disclose is as follows:

    35 USC 202 (c) Each funding agreement with a small business firm or nonprofit organization shall contain appropriate provisions to effectuate the following:
    . ..

    (6) An obligation on the part of the contractor, in the event a United States patent application is filed by or on its behalf or by any assignee of the contractor, to include within the specification of such application and any patent issuing thereon, a statement specifying that the invention was made with Government support and that the Government has certain rights in the invention.

The bill provides for new private actions to remedy for non disclosure, which is important, given the NIH’s persistent unwillingness to sanction such failures.

The failure to disclose federal funding issue can also be raised in the context of an Inter Parties Review of the patent, and result in the patent being cancelled when funding is not disclosed.



    (A) IN GENERAL.—A person (including a government entity) may bring a civil action in an appropriate district court of the United States against a covered patentee—

    (i) on the ground that the application for the patent with respect to which the covered patentee holds title failed to comply with the requirement under section 202(c)(6); and

    (ii) if the person is injured by the failure to comply described in clause (i)

    (B) SCOPE.—In an action brought under subparagraph (A), if the court finds by a preponderance of the evidence that the application described in that subparagraph failed to comply with the requirement under section 202(c)(6), the court shall cancel as unpatentable any claim of the patent issuing from that application.

    (2) INTER PARTES REVIEW.—Section 311 of title 35, United States Code, is amended by striking subsection (b) and inserting the following:

    ‘‘(b) SCOPE.—A petitioner in an inter partes review may request to cancel as unpatentable 1 or more claims of a patent—

    ‘‘(1)(A) on a ground that could be raised under section 102 or 103; and

    ‘‘(B) on the basis of prior art consisting of patents or printed publications; or

    ‘‘(2) on the ground that the application with re16 spect to the patent was subject to the requirement in section 202(c)(6) and failed to comply with that requirement.’’.

The bill would not be retroactive.