Is the NIST's New Proposal on March-in a Price-Control Vehicle?

[Music] hello everyone and welcome to this Federal Society virtual event my name is Emily Manning and I'm deputy director of strategic Partnerships with the Federalist society today we're excited to host a discussion titled is the National Institute of Standards and Technology new proposal on Marchin a price control vehicle we have an excellent panel today moderated by Jeffrey deff who I will introduce to you briefly Jeff is a policy consultant at the center for strategic and international studies and a PhD candidate at the University of Pittsburgh Graduate School of Public and international Affairs Jeff is a registered patent attorney and an intellectual property and Innovation policy professional with a unique combination of training and Real World Experience he has done policy work for trade organizations professional societies and other organizations he has also worked in University technology transfer the pharmaceutical industry the law and the federal courts after our speakers give their opening remarks will turn to you the audience for questions if you have a question please enter it into the Q&A function at the bottom of your Zoom window and we will do our best to answer as many as we can finally I'll note that as always all expressions of opinion today are those of our guest speakers not the Federalist Society with that thank you for joining us today and Jeff the floor is yours thank you Emily uh welcome everyone uh I will Echo Emily sentiments we have a tremendous panel for you today a truly August panel uh people that I am privileged to work with and and call friends and we're eager to share their insights with you on this important topic uh so without further Ado I'm just going to give a brief introduction to everyone uh first we have Professor shubao he's the kle Melvin professor of law at the Syracuse University College of Law uh he earned his JD from Stanford and prior to that he earned a PhD in economics from the University of Michigan uh and we are excited for him to share his e his insights here as we're talking about prices and price controls that insights will be invaluable in this discussion um Brian O shanesy is a partner with dinsmor and scha here in Washington DC he is the firmwide chair of their intellectual property transactions and Licensing group he is a a practicing uh registered patent attorney he's been practicing for over 30 years he's a true expert in the field and in addition to serving his clients he has spent uh many years working with the licensing executive society which is the leading professional Society devoted to commcial transactions and intellectual property licensing uh he has been the president and today he serves as the senior vice president for Public Policy so Brian's again combination of real world work on the ground with clients and his work in the policy space is going to be a tremendous asset in in our discussion today Walt Copan uh is the vice president of research and Technology transfer at the Colorado School of Minds uh Walt is a legend in the tech transfer Community he has been in this field for many for decades he doesn't look anywhere old enough to be in it for as long as he has but he is truly a a wealth of knowledge and experience on Tech transfer matters uh prior to joining the University of the Colorado School of Mines he was the under secretary for standards and Technology during the Trump Administration which made him the director of nist and as you know nist is the sort of agency that implements the the B do act and its regulations so Waltz again experience in Tech transfer and having worked at a key agency here is going to be a phenomenal addition to our discussion today and we thank him for joining us uh and uh and he also is I should mention in in Washington DC he works with the center for strategic and International Studies he's one of the co-founders of the renewing American innovation project which is a very important uh working group uh on policy matters related to American innovation and uh finally last but not least uh Andre yonu is a partner with the law firm of Sullivan and Cromwell he's based in Los Angeles but he also does work in DC uh prior to joining Sullivan and Cromwell uh we all know him as also an under Secretary of Commerce this time for intellectual property as he was the director of the patent office in the Trump Administration a phenomenal tenure and we're all always grateful for all the great things that he had did there to strengthen the patent system uh and uh in addition to his work with his clients he is also heavily involved in policy and advocacy here in DC he works with uh as Walt as as withth Walt the center for strategic and international studies on their renewing American innovation project he's also involved in the uh Council for Innovation promotion another group in town that does excellent work in this space and he also again helps well in in his with his Alma moer at UCLA and their technology Development Group so again uh Andre with his experience in the private sector and in government is we're just thrilled to have him as part of this discussion so that is our panel uh and we have a lot of wood to chop so we're going to just sort of jump right into it here uh I'm going to just set up uh sort of the level set here for everybody um in case you're not all in the weeds and as familiar as this issue as as some as the panel lists are uh but we're talking about the Bol act here enacted in 1980 late in 1980 it gave birth to academic technology transfer it was enacted to solve the massive problem that existed at the time of most if if not all of the many many early stage technologies that were funded in part with Federal monies that were just sitting on the shelves wasting away because the government asserted ownership of them and we're not in a position we're not capable we're not willing to sort of form the Partnerships necessary to further develop and commercialize these exciting potentially disruptive early stage Technologies and in my view this this assertion of ownership was completely ultrav virus The Genius of the US Patent system at least is originally found founded was that the ownership follows inventorship this concept traces back to John Lock probably the most influential political philosophers of the founders and the framers and his labor theory of property again which you know simply put the property right is a natural right wherein of ownership interest vests upon the application of one's physical and or intellectual labor funding has nothing to do with it it's the labor that generates the ownership interest and that's why ownership simply put ownership follows inventorship this is why Clause 8 in the Constitution talks about securing not granting these rights anyway the problem arose from what governments doing what they always do overreach for some reason they asserted ownership and the grant recipients allowed them to get away with this and as over time this Pro this sort of approach failed miserably as we talked about the Technologies were wasting away on the shelf and it needed to be corrected and thankfully in the late 70s Senators by and Dole bur by and Bob Dole recognized this problem set about to corrected via statute they wanted to stop this wasting away of technology so the bll ACT allowed Grant recipients contractors in the name of the statute in the language of the statute to elect title to the inventions created on their campuses or sort of reverting back to the system we designed so that ownership now it was invested in in the university and allowed them to develop the asset to not let it waste away uh and to allow technology transfer technology commercialization to proceed and that's where the industry was born now as part of that statute the the drafters were smart enough to include what I like to call pressure relief valve or a break glass in case of emergency Provisions where if in fact these Technologies still remained on the Shelf despite the incentives that were created they would have the ability the funding agency would have the ability to what we call March in and sort of relicense the technology to another partner to make sure that it wasn't being wasting wasn't being held up wasn't being you know sort of again allowed to waste away on the shelf that but but there were very specific Provisions under which this could occur and you know given the incentives that were in place and these very specific Provisions despite having multiple requests for this March in over the years it's never was never enacted it was never it was never triggered and uh these these with these requests uh were were typically involved drugs uh because and the argument was that the prices were too high and that's why we needed to march in and make these available to somebody else um and uh you know again all of those uh you know um requests were were rejected and after the latest rejection in 2023 the Biden Administration said about to revise the procedure uh and the triggers and the criteria for March in and that really led us here today what led to the creation of this draft inter agency guidance framework for considering the exercise of Marchin r we're going to call it the framework throughout the discussion today and uh and again that sort of is the the setup and and why what sort of brings us here to this discussion so uh without further Ado Brian O shanesy Let's jump right into it here is this framework a backdoor price control mechanism why or why not and if so how does it go about doing that thanks Jeff uh yeah I think without question it is an attempt at a price control me ISM it is not a price setting mechanism uh but it's clearly an effort uh by the federal government to give itself the authority to march in as you've described it uh when the government feels that the price of a resulting product is not reasonable uh now of course as you identified there is a certain Provisions that are in the statute that provide for the government to exercise its March in Authority uh price is not among them and in fact in 2003 Senators uh by and Dole uh wrote an oped in the Washington Post specifically saying that it was never their intention that the ACT should have a Marchin provision based upon price now I would say to my esteemed colleague and good friend Walt Copan uh Walt Copan tried to uh uh establish that and memorialized that fact in uh regulation at the end of his term which unfortunately did not get uh through the the review and comment period properly and sufficiently in time and so it was withdrawn by the new Administration uh as a result and partly as a result of I think the denial or rejection of the most recent request on xandy to march in um the Biden Administration as you say came forth with this proposal this framework for exercising Marchin based upon price um that uh I think is beyond the wording of the statute um it's not within the authority of the administration to do this without an act of Congress uh so I think it is um a poorly reasoned approach but more importantly it's going to be an entirely ineffective approach uh it will not succeed need in controlling prices simply because between the time of the federally funded basic research identifying perhaps a mechanism of action and a later development of an actually efficacious molecule for example uh there is a great deal of research a great deal of invention and a great deal of intellectual property resulting the feds cannot reach that followon intellectual property simply because it's not generally federally funded uh so this will have a tremendous negative impact on the Innovation economy and it won't do what the government hopes to do which is give themselves the authority to control the prices of drugs thank you Brian well Brian mentioned you're you know heavily involved in this so so please share share your thoughts on on this question and uh thanks so much and Brian really appreciate your um uh comments and and and insights um indeed the um uh the work uh during the time that I was n director uh was focused on regulatory Clarity uh for the implementation of the Bol act and uh it was clear that there are certain Dimensions that needed to be modernized to uh uh to link with the uh with the uh changes uh in the law uh following on to the America invents act and and other uh uh legislative as well as policy decisions U and and so those actually did go forward but the um clarification that uh that we sought on this matter um uh resulted in a firestorm of uh of inputs from the uh from the community from citizen groups groups um who had been misled to believe that the B act actually authorized March in for the purpose of price control um the way in which the framework uh uh for um the guidance to how to uh implement the um Marchin framework um U actually creates less Clarity um and and certainly with regard to Legal interpretation um uh creates ambiguities that uh that would make it a very very challenging set of uh of Provisions to uh to deploy but the fact that several of the scenarios actually specifically invoke product pricing um is a very worrisome development um after many many decades of clear recognition by all who are engaged um in the ual practice of the B act uh that that would actually stifle us Innovation that would create uh lack of certainty for investors especially um in uh new technologies or in early stage companies who were uh built around at least in part technologies that came from federal funding uh and and so we should also realize that not only are universities affected by this uh but small companies uh who are working on projects that are funded by the federal government and and lead to intellectual properties um as well as federally funded research and development centers so uh the majority of the Department of energy Federal Labs by way of example um operate under the B Dole act and so the uh other piece of clarity that comes from the uh proposed framework is that this is not just about drug pricing that the Bol act affects all Technologies in all markets that are connected in some way with Federal funding of research and development that leads to the creation of intellectual properties uh and that is the other very worrying aspect of this is that by uh focusing on the drug pricing issue within the current Administration and trying to misuse the law uh for purposes of uh of price control U it actually opens uh the door for government overreach in every Marketplace uh for any uh technology platform that had some connection with Federal funding and intellectual property Rising thank you well Andre you've been you've written about this you've spoken uh many times on this topic share share your thoughts is this a price control mechanism yeah this is absolutely a price control mechanism um you know a government uh functionary in an agency that is not named it will depend um as to what the technology at issue is in the future and where the application is being made so some government agency and some functionary within that government agency will review a petition uh at some undefined period of time in the future and will'll decide uh whether the price that uh the patent owner um uh has established is uh reasonable whatever that might mean in their minds and if it is not so reasonable according to that unknown government functionaries uh decision uh then the government will March in uh pursuant to this uh proposed framework so absolutely it's a price control because uh companies in the private sector will uh try to achieve whatever they believe uh government uh reasonableness might dictate so uh so that's that's uh that's very problematic um I do want to make a very important uh observation here at the start and that is that nist's proposal is uh meant to cover every single area of Technology there is some public discourse that this is a measure to control drug pricing um and uh there's a lot of rhetoric surrounding that but whatever the public rhetoric is the proposal itself is crystal clear that it's meant to address every single area of technology so for example towards the very beginning um of uh of The Proposal if you look at the Federal Register um uh it says that um uh nist is interested in receiving input and has a number of questions and the premise to question five is and I'll quote the framework is not meant to apply to just one type or of technology or product close quote it's really meant to apply to everything and the examples of the lack of the of the proposal uh go into many areas of Technology such as water filtration traffic Technologies um uh telecommunications and so on that have nothing to do with drugs the second point I want to make um Jeff is that while the focus of the public commentary has been on price controls and certainly this n proposal does talk about price controls and introduces them for the first time in the last 40 years since the statute was passed um the uh framework adds many additional levers on which the government can March in in addition to price controls the proposal gives the government functionary of the day uh whoever is in charge of the petition for marching marching wide latitude to use all sorts of criteria okay including whatever the flavor of the day social policy might be when the application is made uh to exercise marching rights Beyond price control and we can go through some of examples of that at the back at the appropriate time but if you look at the examples at the back there's eight of them you will see that the analysis deals with significantly more than just price controls fantastic thank you I want to get everybody a chance to weigh in on this important sort of foundational question so Professor what are your thoughts is this a price control mechanism uh no uh in the sense that when you think about traditional price control it is as Brian said price setting you think about price controls during the Nix Administration you think about price controls during uh World War II price stabilization boards and things like that what it it is trying to do and this is the intention well-intentioned and I'm using the phrase int well intentioned in the way we think about it is to try to inject some competition in the system one reason why I wouldn't call it price control is the mechanism is very different than traditional price control mechanisms it's about licensing it's compulsory licensing uh in other words we're trying to have individuals who want to get access to the to the patented technology to work through the agency to get a license and so as a price control mechanism it's it's fairly uh fairly up to uh in terms of using a licensing scheme to do that so I I think price control is good rhetoric uh government overreach is good rhetoric but I I want to get into the reality of what this proposal is and that is is about trying to inject competition but it is trying to do it in a way that's probably not very effective um I think I should point out that the FTC did comment on it I mean this FTC which is very much a pro enforcement FTC did comment on it with with a mixed it I mean they said okay there might be some reason to think about competition in the in the patent sphere but this is may not be the most effective or meaningful way of of of of getting to that goal so I think the intention is to try to have competition the system uh price control is good rhetoric but the way in which they're trying to have competition in this system is not very effective I mean we just had hearings earlier this week from the Senate Judiciary Committee about uh access to drugs uh and it focused specifically on drugs and Professor mof is very critical about this uh this proposal and other uh commentators such as Professor Ry or Dr Ock uh talking from a public health perspective talked about other ways in which we could inject competition in the patent system such as uh dealing with regulation in the FDA space dealing with orange book issues and you know those are things maybe outside the scope of this panel maybe we can have a a sequel to this panel it can be a a Marvel Universe type thing where we can have uh subsequent panels that talk about those issues but that's the way I would I would phrase it and that's probably the best way to think about it in my in my opinion that isn't just boiled out in rhetoric okay so so so that's great so the regardless then of of what we call it is whether it's price control price setting uh trying to inject competition you know it it sounds like the the panel here thinks that it's probably not going to work Brian talked about sort of at a granular level that you know all very few of the patents that cover uh medications actually excuse me are are sort of by do patents they're ones that were funded in in the early stages with with federal funds so you know even if this were to theoretically work is it's not going to work as a practical matter and you know and and we we we've heard that you know it may impact investors ability and willing to invest to develop so so so how you and you you talked about Professor about you know it's trying to inject competition but you didn't think that it would do that very well so how do we then bring about the competition that it sounds like is the way to go about lowering drug prices or any prices as Andre said this is this is agnostic to you know how do we go about yeah this is a big question as I said it's worthy of a panel of itself but very very quickly I think a lot of the a lot of the proposals are tried to about L lowering barriers to entry to the marketplace I mean you think about you know the covid vaccine whatever you think about the vaccine we had what several vaccines that came out of the market once and they all were subject to patents there there there's obviously litigation going on there's always going to be those types of issues but the the reason why that occurred is that there was you know science that had been developed there had been low barriers of access to that basic fundamental science and the companies were able to take that particular crisis as an opportunity to get funding and move forward so there uh and I guess I'm not saying a crisis is the answer to competition but the point is there are competitive system competitive forces that can exist within the patent system that uh that can lower these types of barriers entry and I think within the area of drugs the FDA and and coordinating activities between the USPTO and the FDA has been a fruitful source and there's just more work to be done in that particular area so is it safe to say Brian I'll I'll put this to you then is it safe to to say that that based on what professor said about you know the multiple products with each that are were patented is it safe to say then that more patents can lead to more Innovation and more competition well certainly I think I I agree with that statement but let me go back for a moment to chuba's remarks and I I want to agree with him in the sense that yeah maybe this isn't a pure Tri price control mechanism if it is it's a remarkably poor and naive one uh because as Andre said you know the problem with this system and this notion that price should be a factor is it puts decisions in the hands of ill-informed bureaucrats who don't know the market they don't know the science uh they're they're just apparently charged or would be charged uh with the oversight and the review of what constitutes a reasonable price the problem I foresee with that is is particular if we confine ourselves for the moment to Pharmaceuticals um it takes about 10 years to get a pharmaceutical product from the lab to the marketplace uh what with clinical trials further development finding the efficacious drug etc etc so you're talking about something that the rights have been contracted in year one and then in year 10 11 or 12 it might actually get to the market well nobody knows really what constitutes a reasonable able price certainly at the time of Licensing uh much I mean it's certainly going to be much more complicated 10 years down the pike uh when somebody has to decide what constitutes a reasonable price and by the way it should be noted that the framework nowhere defines reasonable price uh the market sets the reasonable price and the beauty of the patent system as you say Jeff more patents probably leads to more Innovation because patents reveal information as opposed to covering it up so if we want more competition we want more patents because patents promote the disclosure of information they set the meats and Bounds of what constitutes the rights of a particular inventor uh and then it encourages others to design around those rights and to come up with alternative medicines and as Shuba properly noted there were lots of different kinds of vaccines that were invented all in a very short period of time now nothing of course was patented by that time when those vaccines were coming out because none of them had worked their way through the patent system but nonetheless the technology that led to the MRNA vaccines had been developed 10 or 15 years earlier and in fact uh it was it had been very very difficult to license that technology but it had been picked up by a small biofarma startup and had been developed and ultimately the biofarma startup got acquired by bigger companies and fortunately for all us all uh it was acquired by companies that had the wewi all and the wisdom to develop that technology into a drug a vaccine that could go into the arms of patients and probably saved multitudes and millions and millions of lives but that was all made possible because of the B do act and if it had been for price control mechanisms uh whether it's in the of price control framework uh or otherwise that technology probably would never have been licensed because it would have been owned by the feds and no you know there was a saying that was commonly used prior to buy Dole which is Tainted by federal funding and if anything that came out of a university lab had an ounce of federal funding in it nobody would license it because they knew that the feds would be complicating those agreements ments and probably imposing all kinds of conditions that it would make it impossible for them to effectively develop Market that product thank you no that's great so so we've talked a lot about patents here so Andre as the former director of the patent office I'll turn it to you do do you think that you know more patents are what can drive Innovation and and competition and and and lowering prices is that the way to go well if done appropriately and in a balance balanced fashion uh yes I do think that strengthening the patent system in order to incentivize inventors and investors to devote more resources towards Innovation um and be uh protected by additional patents that are uh good patents uh then that would provide uh the additional facilities to create uh to spur on more innovation in the United States a misconception about patents uh driven by loose rhetoric is that patents are quote monopolies and therefore if they're monopolies uh the natural reaction is well gez then they must be monopolistic and have anti-competitive Tendencies the reality is uh the patents are not monopolies all that patents do is pre vent others from um from uh implementing your specific solution to a particular problem it does not preclude entry into the market space at all and because of that patents are actually Pro competitive because what you do with patents is you are publicly telling the rest of the world what your particular solution is what the boundaries are surrounding Your solution and if it's a good Market others will be incentivized to come in and do something else provide a different solution to uh to compete in the same Market space and now the public benefits from multiple solutions to the same problem you see in almost every other area of Industry you usually have multiple solutions to the same problem everything right automobiles for a there's so many different brands and types of automobiles helping to drive prices towards a reasonable place um even headache medicines right so for headache medicines you have Tylenol and moin and uh Excedrin um and these are all different formulations to attack the same physical condition however because it is so expensive to in and the risks are so high to bring a drug to Market like Brian said it costs on average about2 billion to do that successfully then in in the drug space for any particular medical condition to be treated there is at best one single Solution by the way most physical conditions have no drugs to address them at all and for the ones that we do have you have one solution usually if drug if patents in uh in general and also in the drug space were stronger and people felt more comfortable um in the rule of law that their investment would be protected on average or on the margins you would have more investment and therefore more particular drug solutions to a particular Sol uh particular condition creating competition as in every other space of the economy and driving price down that is the real answer here not artificially limiting um intellectual property protections so what fantastic so Professor Andre has been very eloquent talking about the role of competition and and the multiple substitute products and he mentioned Monopoly uh in the beginning and and you had mentioned the hearing uh earlier this week on drug pricing and I just want to point point out another example from that hearing that I think makes Andre's point but I want your thoughts on this if they talked about the hepc medications that were new about 10 years ago and how when they first were introduced was astronomically expensive but within a matter of months because multiple companies had come out with similar substitute products all of a sudden that price came down dramatically um you know so so talk about that that the way to go about solving this problem to get where we want to go well I I don't know if there's I don't know if there's one solution and I I'm not you know I'm not in favor of the term patent Monopoly that's a old blackstonian language right so uh and in fact I just give a shout out there's an interesting conference I think at GW the next week about the statute of monopolies I think it's having some some Centennial anniversary now and I have some colleagues including colleague from my law school presenting there so I recommend people think about that uh yeah it's it's not a monopoly in the in an economic sense either uh it's you know if you're trying to fit it into some sort of Market structure look at it from that perspective it's more like an oligopoly but yeah I mean there are lots of forces of competition and certainly the the the the the race to get a patent or to to the race to be the first to have Innovation uh is part of the compet competitive process which is not just simply a price matter but just simply also a uh you know a matter of uh of uh of uh qualitative competition not just simply price competition so uh yes uh but I'm not sure how that responds to the point of this uh of this panel uh Jeff uh I I agree there are lots of forces of competition out there patents do play a role I guess part of this and this may get to Brian's point a little bit about the um I think he made some comment about the vaccines that the the patents had not been obtained yet when the when some many of the covid vaccines were being developed and out there but they they have been up they're in process so I guess at some level we go back and forth in our discussion between having a specific patent and having a patent system system that works and so we go back and forth in that discussion uh yeah I think having a patent system that's robust and healthy uh supports competition uh can there be bad patents that are granted that can can adversely affect competition yes and that's why the antitrust laws are there that's why we have something called The Walker process uh uh Doctrine uh that's why we have actually within the antitrust system some remedies of compulsory licensing they're not used uh you know that readily but they were used in the AT&T case they're used in the IBM case they used a certain extent in the Microsoft case so uh I think we're sort of going back and forth between actually having a patent and a reward which you know obviously that's part of the issue of the system but also thinking about the system as a whole so I think I'm not disagreeing with with uh with Dr yanu here uh that yes there are competitive forces there we just need to identify them and channel them the right way yeah so I think I think we're in a and I think we're in agreement that this particular n proposal and the use of Marchin rights which is a compulsory licensing Regine let's you know I love this panel I love the title I probably would have called it is compulsory licensing the to drug pricing and I think the answer to that would be no from all of us and I would you know more readily say no to that than trying to characterize it as price control sorry I had to put that in so wal as a as someone who's worked in Tech transfer for as long as you have you know what are your what are your thoughts on you know compulsory licensing is that is that is that a better way to go are you asking me no Walter yeah I think Jeff U the U kind of the redefinition here that uh Dr go is uh is uh advocating for is uh is is is the the right one I mean we are looking at the use of Marchin rights a as the wrong Tool uh to accomplish uh a stated goal namely uh more affordable health care for the people in the United States and ALS also for other parts of the world that are are affected by these systems um compulsory licensing uh regimes in general um have been problematic uh as we look around the world other examples um that U uh they're attempting to achieve a certain result in The Market Place uh by forcing an owner of uh of intellectual properties of a particular invention uh uh into a a market position a market access position uh that they did not intend to uh uh to address uh and and in in some ways I think that um as we look at the role of government here and and the role of policy in the public interest uh that uh we need to be looking at the proper tools to accomplish uh the desired outcomes um and and I think here that uh to the point of having a robust and trustworthy intellectual property system um is is absolutely essential for uh for marketing economies uh to work um and and and ultimately to avoid the um uh the uh action of of taking in to try to uh uh to force a licensing relationship um and and uh and as we look at the the need for greater certainty in the investment Marketplace whether it's for an early stage technology uh or even one that has matured and has intellectual property protections behind it uh the uncertainty that's created in the marketplace by a a Marchin action or by a compulsory license um it has been shown time and again uh that uh investor confidence then is eroded um and the investments will not follow thank you no that that's that's fantastic so I mean I think just to summarize I think what we what we're saying here here is that you know sort of government involvement overreach or you know whether again it's it's sort of going beyond the statute and Marching In where March in is not permitted or you know compulsive forcing licenses where you know the the individual parties are not ready to go is not the solution it's not going to get us where we want to go uh you know and we need to let the market do that we've heard that patents more patents stronger patents can can actually drive Market competition and that can actually again will be the the way to get to where we want to go and whether it's drug pricing or anything else again we don't want to lose sight of what Andre pointed out in the beginning that this is you know beyond just drugs this will affect every product that's out there and we all want to pay less for things but we we need to make sure that we have them and with if these sort of government overreach and government it was going to likely end up in in less things being available to us so back to the he on Tuesday we heard a lot about patent abuses you know too many patents so we've been talking here that patents are a good thing and more of them are better uh yet we often hear in the rhetoric uh in the in right now in the debate about you know over over patenting too many patents on on agents and things like that so let let's talk a little bit about that uh you know is is is there patent abuse or we do we have too many patents are the pharmaceutical companies for example gaining too many patents on their on their their agents and delaying generic competition and is is that really a problem um you know in in the current debate um Brian I'll start with you may have froze there Andre I'll turn to you while we try to recover Brian as as former director of the patent office you speak to this uh you know quite well with you know patent abuses evergreening and patent thickets as as the terms of art are often uh put out there in the debate well let me start with let me start with the premise that uh somehow um patents or some some type of misuse of the patent system by the pharmaceutical companies is delaying entry of generics into the market Place let's look at the actual numbers and the actual statistics as it so happens 90% of prescriptions in the United States are filled by generics okay so nine out of 10 are filled with generic prescriptions not with the patented brand okay this is significantly higher than in than the oec Oe ecd average um and it's significantly higher than every single other uh developed country in the world generic penetration in the United States as a result of um our balanced legislation hatch Waxman by do and the like is remarkable let's look at the second point which is how much more can we squeeze out of this okay let's assume the maximum okay 100% generic penetration which is not possible because if it's 100% generic penetration then you have no Innovative drugs and therefore nothing for the generics to emulate but best case scenario in some fantasy world is 100% penetration so therefore only 10% more filled by generics how much do we think the additional extra percentage point is going to help here with drug pricing the reality here is that the drug prices are high in the United States and but they're driven by many factors that go well beyond patents and government should really look at those factors such as insurance regulation such as pbms the middleman that add tremendous pricing for um I don't frankly know what particular reason but let me also address the patenting point um and there issues that are brought up about evergreening or about patent thickets and the like those terms were being baned about um at the hearing earlier this week look the reality is in every system of laws some people will misbehave and abuse those laws and those will need to be addressed and are being addressed in every system of law um and but you don't throw out the baby with a bath water let me talk about those two um abuses uh that the that that the senators were mentioning at the hearing the other day evergreening which means that um you know uh companies have a product out there that has a patent on it um and then potentially when the patent is about to expire they improve on that product and introduce a new version with a new innovation that uh adds another patent and therefore another patent term to it well gez isn't that a good thing don't we want to improve technology and by the way it also happens in every other industry I don't even walk out of the Apple store with a brand new iPhone phone whatever the version is you know and by the time I get to my car they are out with yet another version that I should upgrade to the quote evergreening in the technology world the non-f Pharma World happens at a far higher rate than it happens in the pharmaceutical world and then the second point about quote um uh uh thickets well gez do we want more Innovation or less Innovation if we want more Innovation you're going to have more patents and isn't that a good thing so for example Senator Welch was complaining that a lot of the patents on a particular drug were not for the actual formulation the chemical compound that is in the drug but for other things like the delivery mechanisms do you know how important that is to a patient you know so you know some patients for example cannot tolerate the drug at all in a particular form format whether it's a pill uh for example and then a new formulation a new delivery mechanism such as a liquid form needs to be provided that's not easy to do and sometimes it works sometimes it doesn't it takes a lot of innovation and new investment to create that why would we not want to incentivize that additional followon Innovation so I know that it's popular to use these catchphrases and derogative terms but what is really important for the public and the legislators to do is to look Beyond it and really understand what are these companies actually doing and why and isn't it good for the public or is it good for the public or not and then just focus on the actual facts not politic catchy uh uh phrases thank you that that's fantastic and as someone who has spent many years in the pharmaceutical industry talking to and educating doctors about how to use the new developments the new advancements that come out I can tell you that they are invariably so grateful to have those you know alternate and those innovations that make it easier for patients to administer and take and comply with their medication because there's nothing more expensive than a medication that isn't taken um so so you're absolutely right about that and and I I I I live that for many years um and and again so Brian I I want to come to you uh you know as someone who again has worked with clients on strategies uh you know about this and and I think we we we've Illustrated this point really well and I want to sort of nail it down here about about the two aspects of competition I think what we heard during the hearing was way too focused on generic competition we have Illustrated here Andre has done it beautifully that that there are two components to it there there competition from generics but there's also competition from Innovative products substitute products that you know that that compete and and those require more patents we we've I think we've established that quite clearly here so you know what what what are what are your it seems to me that the abuses and the thickets really are just too narrowly focused on this idea of generic competition so give us your thoughts on you know the patent abuses that we heard about during the the hearing are they real and should we be concerned about them or or what well I'm not sure I could add much to what um Andre said I think Andre said it perfectly well and and very very well um you know the the the fact of the matter is the generic industry lives off the Innovative drug industry and if it isn't for the Innovative drug industry they don't have anything to copy so to speak uh and in fact the generic drug industry trade Association came out publicly with remarks in opposition to the margin framework uh so we've already heard from the generic industry that they don't want to see this they don't see it as helping their industry any um and let's face it the the patent system the beauty of the patent system is that it puts the incentives in the marketplace and it encourages people to invest their time tra treasure and talent uh toward innovating new and wonderful things that will improve the lives of millions of people around the world not just within the United States um and so the balance and the tradeoff if you will the quid proquo of the patent system is we're going to give you the opportunity to charge a little bit more during the term of your patent in exchange for disclosure so that at the end of the term of your patent everybody can practice the patent the generics can come in and of course they can come in early thanks to the hatch Waxman act uh but certainly at the end of the term anybody can come in and use your patented product um and commercialize it and so consequently what we're saying in the healthc care sector anyway is would you rather have an expensive drug today as opposed uh an expensive drug today which will be very inexpensive tomorrow or would you rather have no cure at all uh because without the incentives people just aren't going to make the risk uh take the risk and and make the investment and yeah sure of course some will but it won't be as robust and it won't happen as frequently or as dynamically as it does today so I think you know the great danger of the framework is that it puts a cloud on the title of that basic research that taxpayers have funded which makes it that much less appealing for investors to take the deal license the technology take basic research and turn it into something that can go into the market and into the arms of patients um and so you know the very existence of the framework as it exists today is already having an anti-competitive effect it's having an anti- inovative effect people don't know whether it's going to be implemented but I can tell you from an toal evidence that I've heard from numerous Tech transfer officers from universities around the country that have said well there are a lot of people that are nervous about this framework and they're not willing to move forward on a license negotiation that we've been working on and so the real the harm is very very real it's happening now even before implementation takes place and I think the only thing that can be done that will be beneficial to the innovation economy at this point is for the administration to withdraw the framework immediately um and and look for some other mechanism to do what they want to do that that's terrif that's a great segue so in the last few minutes that we have here you know uh we know let's consider you know we know the drug pricing is is a it's a campaign year it's a presidential campaign year drug pricing is in the news we had a hearing it's important to to Americans This Administration appear appear to believe that this is a way that they can lower drug prices so let's assume that they pull the trigger and implement this this this new framework Professor I'll come to you what happens next does it get litigated what does that litigation look like well I imagine would get litigated I mean U first of all I think the scenario that it's going to get past is pretty remote but that's that's not it's just just I won't fight the hypothetical as they say I think it gets litigated I mean it's a fairly big uh administrative move for many reasons we've said it's it goes beyond drug pricing I think that's an important point to to talk about here that it may potentially even go beyond the B do framework I mean there's talk about having this framework being applied to uh to uh privately sponsored research as well so U so I think those would be bases for challenges uh given sort of the general tenor of litig litigation in administrative law right now I think it it would be very ripe I think that I'm sure there are people who are salivating to not bring this case to challenge of it passes um I think it does raise some interesting questions and uh you I know we've talked privately about sort of the major questions Doctrine and how might that apply here and and without opening up that cat of worms I think I want to kind of endorse the approach that I've talked about uh which is uh uh justice Barrett's approach in in Biden versus Nebraska which cautions the use of the major question Doctrine as sort of a a tool of judicial activism if you will we've talked about government overreach let's also keep in mind judicial overreach and Justice Baris does does caution against that under the major question Doctrine and does adopt an approach that looks more to the reasonableness of I sort of the major question doctr is an interpretive tool of reasonableness I'll just summarize it that like that way quickly I think under that standard uh this this this proposal if passed as is probably would not would not survive it um I think what's interesting to me about this is whoever drafted this n was very careful I think they had the major question doctor in mind because if you read The Proposal they just simply say this is a three-step test we just basically look to see whether This falls under by do we then look to see whether it falls within the statute and then we look to see whether it does affect Innovation so if we just look at on the surface oh okay that just seems to be following the statutory guidelines it's not overreach if you will or it's sort of a reasonable but if you go into the the actual application and that's where the litigation gets a little bit more complicated right does there actually have to be a case where marchan rights are exercised before the court will act but I think it would it would probably fail but I do think it's interesting that um the agency has I think did have the major question mind major question doctorine in mind in the way it drafted this proposal because they they did try to stay very close to the text so that a very quick analysis suggested not going beyond the text even though I think there are areas where we can say that they are interesting thank you Andre as our resident litigator your thoughts on uh potential litigation if the framework is actually implemented yeah I am um quite confident that there will be litigation it will be challenged uh the major questions Doctrine as uh Professor gsh mentions that is one path um but there lots of other uh bases um at a at the highest level there is long-standing U uh premise um that you basically don't fit an elephant into a mouse hole in other words you know uh or you don't hide an elephant in the in a mouse hole in other words if Congress really meant to include a price uh control measure into the by doll act it would have said so um something that important would not stay silent so clearly this proposal is uh non-statutory and it's it's uh it's it's a violation of uh of Law and uh I do suspect uh various either companies that are affected or industry groups or both uh will likely challenge it promptly upon uh implementation fantastic thank you so I have us at essentially the hour um Emily I I don't see any questions from the from the audience so I I guess I'll I'll turn it back over to you I guess to to to give us a wrap absolutely so on behalf of the federal Society thank you all for joining us for this great discussion today thank you also to our audience for joining us we greatly appreciate your participation check out our website fed.org or follow us on all major social media platforms at fedock to stay up to date with announcements and upcoming webinars thank you once more for tuning in and we are adjourned [Music]

Channel: The Federalist Society

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Keywords: #fedsoc, federalist society, conservative, libertarian, fedsoc, federalism, fed soc

Id: saY5WB1_bVw

Length: 59min 13sec (3553 seconds)

Published: Wed Jun 12 2024