The March-in Rights section of Xavier Becerra’s report on high drug prices

On September 9, 2021, the Secretary of HHS, Xavier Becerra, pushed a 29 page report on proposals to address high drug prices.

“Report To The White House Competition Council, on Comprehensive Plan for Addressing High Drug Prices. A Report in Response to the Executive Order on Competition in the American Economy. Secretary Xavier Becerra, U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, September 9, 2021. link

The whole report is impressive and covers a number of different topics. There are 36 mentions of the word “patent”, and two paragraphs on March-in and government use rights.

The immediate impact of the HHS report will be to put more pressure on the Biden Administration to act on this April 12, 2021 petition by Robert Sachs.

Beyond the Sachs/Xtandi petition, which relies on a straightforward international reference price standard for reasonableness, is the larger issue of the standards for determining more generally what constitutes reasonable terms for a drug or other medical technology that relies upon a federally funded invention.

The HHS report also cites the use of government use provisions in the Bayh-Dole Act and separately in 28 USC 1498, which is significant, and reiterates the decision to block the section of the NIST rules on march-in rights and pricing.

The HHS report may signal the end of more than 40 years of non-enforcement of the reasonable terms provision in the Bayh-Dole Act, but of course, there has to be follow-though as well, and to overcome the hardline positions taken by Francis Collins and Mark Rohrbaugh at the NIH, who have aggressively opposed any measures to address pricing of federally funded inventions. KEI welcomes the Xavier Becerra report, and encourages HHS to implement its recommendations on march-in rights as well as the other excellent proposals.

March-In Rights and Government Use

The Bayh-Dole Act was designed to address the absence of incentives to commercialize government funded inventions by allowing small businesses or nonprofit organizations, such as universities, to claim title to inventions generated during performance of a federal grant or contract. Before the Bayh-Dole Act became law in 1980, the federal government owned any inventions it funded and none of them were used to develop therapeutics or vaccines; since then, 245 therapeutics and vaccines have been brought to market using university and federal laboratory patents./85/ The federal government may grant a license to use the intellectual property arising from government funding without the permission of the rights-holder under certain circumstances, including when “action is necessary to alleviate health and safety needs which are not reasonably satisfied” or when the benefits of the patented product are not “available to the public on reasonable terms.”/86/

HHS, NIH, and other agencies have been petitioned to take action under these provisions, and HHS will continue to give such petitions due consideration.* HHS will also engage other government agencies to address barriers to accessing government-funded inventions as emphasized in the Competition Executive Order, which directs the Director of the National Institute for Standards and Technology to consider not finalizing any provisions on march-in rights and product pricing in the proposed rule, “Rights to Federally Funded Inventions and Licensing of Government Owned Inventions.”

* Another provision, 28 U.S.C. § 1498, allows the federal government to “use or manufacture” technologies protected under current U.S. patents, while giving the patent owner “recovery of his reasonable and entire compensation for such use and manufacture”;

/85/ Unpublished NIH research.
/86/ 35 U.S.C. §203(a)(2), §201(f), see also 37 C.F.R. Part 401