President Donald Trump recently tweeted that he's "working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!"
But that 140-character-limit promise contains few specifics. Now lawmakers are trying to fill in the details.
They say we could slash drug costs by allowing the government to use "march-in" rights. These rights would allow the federal government to strip drug patents from private companies at a whim whenever it thinks prices are too high. It could then relicense the patents to generic manufacturers, who have undertaken no risk or investment in research and innovation.
Using march-in rights as a price control mechanism is a misuse of these rights. It would discourage research and development of new life-saving drugs. President Trump would be wise to ignore legislators' suggestion.
Congress had initially created march-in rights to allow federal agencies to revoke exclusive licensing rights from drug manufacturers in the event of extraordinary public safety concerns or when a company is unwilling to develop the drug for patient use.
A dangerous infectious disease outbreak, for example, would qualify as grounds for march-in rights. If a drug manufacturer were unable or unwilling to mass-produce enough vaccines to keep the public safe, the government would be authorized to "march in" and relicense the vaccine patent to other manufacturers.
March-in rights are part of the Bayh-Dole Act of 1980.
At that time, private life science companies had the capabilities to develop drugs but lacked interest in turning university breakthroughs into marketable drugs because the government retained the patents on any discoveries. That meant the company didn't have a guarantee it could sell the product it developed and rely on the sale to sustain business and fuel future research and development.
As a result, 95 percent of the accumulated 28,000 patents stemming from federal funding were never licensed to private companies and commercialized for public use.
The Bayh-Dole Act fixed this problem. The law allowed universities and non-profits to own the patents on their discoveries and license those patents to private sectors such as pharmaceutical and biotech companies for product commercialization in exchange for royalties.
The authors of the Bayh-Dole Act explicitly argued against using march-in rights as price controls. They clarified that the law "did not intend that government set prices on resulting products. The law makes no reference to a reasonable price that should be dictated by the government. This omission was intentional."
Here's why. When drug manufacturers license a university discovery, they spend years and hundreds of millions, or even billions, of dollars developing it into a marketable drug.
If the government can take away their licenses on a whim, drug manufacturers would reconsider or altogether drop investments in innovative drugs. We'd regress to a pre-Bayh-Dole era in which 95 percent of public research funding -- even if it's for the cure to cancer -- never actually benefits patients.
It's noble that our leaders want to lower drug prices. But to ensure companies continue to develop medicines that save lives and drive down costs through competition, the government must reward innovation and risk. Without innovations how will we tackle debilitating diseases like Alzheimer?s, Parkinson?s and mortality due to Cancer?
Sandip Shah is the founder and president of Market Access Solutions, a global market access consultancy, where he develops strategies to optimize patient access to life-changing therapies. Helen Shao is an Analyst in the same company.