Why Are Federally-Financed Drugs So Expensive?

After WWII, the Federal government and science in general rode a wave of public approbation resulting from the stupendous success of the war-ending Bomb.  Government money poured into basic scientific research, leading to many discoveries, many inventions, and many patents.  Back in the day (President Truman’s day, that is), the Government collectively decided that the best way to turn these new inventions into the public good was for the Government to own all the patents and to license the patents to interested businesses.

The only problem was, it didn’t happen.

By 1980, the Federal government owned some 28, 000 patents, fewer than 5% of which had been commercially licensed.  The rest were sitting idle.  Government ownership clearly was not leading to development of the Federally-financed inventions.

Enter Senators Birch Bayh (D-IN) and Robert Dole (R-KS). The Bayh-Dole Act of 1980 allows inventors whose work is financed by the Federal government to retain ownership of the inventions and resulting patents, provided that they report the inventions to the Federal government and proceed to patent and commercialize the inventions.  The Baye-Dole Act has been a huge success.  Many products are now available to the public because of private commercial development of Government-funded inventions protected by patents.

The Bayh-Dole Act provides a safety valve to the Government.  The Federal government has “march in” rights – the Government can take the patents from the inventor or can license the invention to others if the inventor fails to protect and commercialize the invention or if “…action is necessary to alleviate health or safety needs which are not reasonably satisfied…” by the inventor.

But what about expensive drugs?

Those ‘march in’ rights should be a great way to control predatory drug pricing.  If you can’t afford the drug, then it can’t satisfy your health needs, right?   Up to now, no.  The NIH has refused several petitions to ‘march in’ and take back a patent based drug on excess price, saying that pricing is a question for Congress.

Which brings us to Nusinersen.

What is Nusinersen, you might ask.  It’s a drug, but not just any drug.   It treats spinal muscular atrophy (SMA).  The first year of treatment with Nusinersen costs $750,000.  Each subsequent year costs $375,000.00.  KEI (Knowledge Ecology International), an advocacy group, has petitioned the Federal Government, alleging that Nusinersen is the result of government-funded research and the owner (ISIS Pharmaceuticals – got to love the name) failed to notify the Government of the invention.  KEI asks the Government to determine that the Government owns the Nusinersen patents under the Bayh-Dole Act.  KEI promises future petitions asking the Department of Health and Human Services (Medicare) and other agencies to use the Government’s march-in rights to to offer generic versions of the Federally-funded drug.  KEI hopes that the new administration will be more sympathetic to Federal march-in rights based on excessive drug prices.

The petition is brand new and KEI gets points for a creative approach.  We’ll keep you apprised of developments.

— Robert Yarbrough, Esq.