Thematically this post follows the previous one for the day.
Earlier in the day I attended a hearing at the National Institutes of Health. The topic was whether the NIH, having given public grant money as allowed by the Bayh-Dole Act (35 U.S.C. 203) to Abbott Laboratories to develop an important AIDS drug, could use the march-in mechanism of the Act to permit other vendors to make a generic version of the drug.
What started the controversy (and forgive typos and technical gaffes as I'm not an expert in this area; what I relate is the understanding I gleaned from the hearing) is that Abbott recently raised the price of its ritonavir drug by 400%. Ritonavir is a distinctive drug. On its own it appears to be too toxic to effectively fight the disease. But some of its side-effects make it an effective "booster" drug that, used in combination with other drugs, makes them more effectively potent. It seems to be the only drug that does this and is an important part of the drug regimen for many (perhaps most?) patients.
Raising the price so substantially has huge effects on public interests. One is financial, relating both to the patients who now need to come up with the money to pay for it, or the insurance companies who might foot the bill. Of course insurance companies pass along the costs eventually so one way or another the public pays. And if the insurance is part of a public program, the public pays then too.
Also, it squeezes other pharmaceutical companies on whom the public is dependant to make new drugs. The marketability of their other drugs is what will generate the revenue to support their further R&D efforts. But their drugs' profitability, and with it the ability to fund new R&D, is being undermined by the price increase, especially in light of the fact that Abbott did not raise the price of ritonavir as part of its own pre-combined drug (Kaletra). Typically a patient will take ritonavir and another protease inhibitor, often a drug from another company. With Kaletra the required ritonavir is already part of the same pill as the other protease inhibitor. Taking fewer pills means that on its own Kaletra should be financially appealing to the market (meaning fewer pills and fewer copays). But by not raising the ritonavir price by the same amount in its Kaletra formulation, Abbott is essentially subsidizing its protease inhibitor by making it, in Kaletra, now the only cost-effective combination to take.
From what I understand, there are people in Congress already concerned about the anti-competitive nature of such actions. The issue raised at the NIH focused on intellectual property and public policy implications attached to Abbott's patent. A patent gives a company monopoly power. With that power, unless barred by some other legal obstacle, a patent-holding company can do whatever it wants with the product the patent protects. The market is a captive audience that has to accept what's offered.
The implications of the patent monopoly system on pharmaceuticals have already been felt in developing nations where AIDS-ridden populations are too poor to purchase the drugs, and have no access to cheaper alternatives since there generally are none – the patent-owner is the exclusive supplier. In this instance there's an even more egregious problem though, which is that the reason the private company has a patent at all is because THE GOVERNMENT GAVE IT THE MONEY TO DEVELOP IT.
On the one hand, if we give someone a monopoly (e.g., through a patent), we can't be completely surprised when they act monopolistic. But in this case there's a different bargain that was struck: the people already got a piece of the action through the public grant. They've paid. It's not fair to make them pay again and again: through the pocketbook for the drug itself, and in terms of reduced R&D by other companies for new drugs because now their own drugs are less marketable. Especially because the premise of the patent system is to stimulate new discovery. A monopoly is supposed to be the tradeoff for bearing the development risk: the company takes the risk and gets a monopoly, but the public gets the good from the discovery. But in this case the public bore the risk too. Surely it's entitled, if not to the same abject benefit of profit, to at least not being victimized by the monopoly it enabled, in this case through direct public investment.
The question today is what can or should be done about it. The NIH is involved because it was the grantor, and under the Bayh-Dole Act which permitted the grant, it could use the march-in language to demand that the public be better served by relicensing the drug to other manufacturers. Or at least that's the argument. There's some controversy as to whether the march-in language could apply to this situation which has been described as one of pricing control. Many testified, including Bayh himself, that the Act and its march-in clause were not intended to be used in instances to control price. There was, however, at least one person who testified that the legislative record indeed supported the opposite conclusion, that this was indeed an intended application of the march-in mechanism, and Scalia was cited by someone in reference to (paraphrased) "The question is not what was in the legislators' minds but what the language of the law says." Then there was the argument that said that even if the legislative intent didn't generally support this type march-in employment, this was the perfect and appropriate occasion to use it anyway. The point was made that the march-in mechanism was put into the Act so that there would be a safeguard to protect the public's interest. If the public interest was being harmed through egregious pricing then it is the harm itself that justifies the intervention.
The Bayh-Dole Act, it is reasonably agreed upon, is a good law designed to make sure that discoveries wouldn't just sit on a shelf, that if they had public value they would be able to reach the public. This was particularly important for public entities who were good at developing things but not at marketing them. The Act fostered public-private partnerships by bearing some of the R&D costs publicly, with the idea that the public would reap the benefit when the private entity made it available.
But the lanuage of the statute requires it to be "reasonably available," and the argument is that disproportionately high prices, for no good reason other than the monopoly permitted the company to set them as such, means that the drugs are not actually "reasonably available." As such, the government has a duty, and an empowerment under the act, to step in and do what it takes to make sure those inventions, which the public already underwrote, become or remain "reasonably available." In this case the NIH would license vendors to produce cheaper generics.
The private entities say that they should be able to work this out on their own. Market forces and all. And there is the reasonable fear that the precedent set by such an intervention by the NIH could chill future development since the perceived exclusivity of the patents may turn out not to be quite so exclusive after all. But I don't think such abdication of responsibility to them is wise. First of all, they have interests that aren't necessarily aligned with that of patients. Returning shareholder value may result in different corporate behaviors than trying to keep as many people alive as possible. In fact I'm sometimes surprised that any private entity really wants to find a cure to certain diseases when it's much more profitable to keep people sustainably sick.
Secondly, drug companies will still produce drugs. The patent system remains (for now) unchanged, so a drug developed entirely out of private money will remain beyond the reach of the NIH. Yet I'm inclined to think that drug companies may still be willing to take the public money. Money is money and it helps bear the investment risk. Plus it's not like the NIH action here would force the company to lose money on the drug. Abbott has already made a huge profit from ritonavir since it hit the market, expediciously it turns out thanks to action by the government to hasten its release. High profits are permitted, but exploitatively high profits may not be and that should seem fair to all involved.
And thirdly because the public has the right to insist that we get value for our money, or at the very least not be exploited by the company benefiting from the fruits of that investment. We've already paid for this drug in inventing it. And then we pay and pay again to use it. US customers in fact pay more than customers in other nations, for a drug that the US public funded. This funding arrangement was supposed to be a partnership, and as such the public should have the right to ensure it be treated equitably within it.
It's this partnership idea that seems to have been the true goal of the Bayh-Dole Act, but it's incumbent on both parties to maintain it: the private company in not abusing its position, and the public in not letting it. The Bayh-Dole Act provided the mechanism for the public (via the government) to protect itself. For the NIH, as a representative of the Executive Branch's power to enforce laws, to do nothing would amount to an abdication of its duty and ability to protect the public's interest, which currently appears to be gravely harmed.