House Dems Target Exclusivity, Pricing Of COVID-19 Drugs

By Andrew Kragie
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Law360 (April 15, 2020, 8:00 PM EDT) -- A group of senior House Democrats on Wednesday outlined their approach to pricing coronavirus-related pharmaceuticals with a ban on exclusivity, a requirement of reasonable prices and transparent corporate reporting on expenses.

Four committee and subcommittee leaders united behind those three principles during a press call, describing their effort to ensure the affordability of COVID-19 treatments and vaccines. The Democrats said they wanted to see the requirements included in the next comprehensive relief package that Congress takes up in the coming weeks. They also suggested the backing of the House speaker and interest from some Republicans.

"There are those few who see this as an opportunity to benefit themselves and their companies by price-gouging, or one could say, by pandemic profiteering," said Rep. Jan Schakowsky of Illinois, who chairs an Energy and Commerce subcommittee. "We are lifting up the urgent need to protect consumers from price-gouging by Big Pharma [and] make sure that the treatments are and will be affordable for all people."

The lawmakers said coronavirus treatments should not be eligible for exclusivity, the period when drugmakers get a monopoly on selling the medicines they developed without competition from generic offerings. They pointed to Gilead Sciences Inc.'s decision last month to seek seven years of exclusivity for an experimental "orphan" drug that could be used to treat COVID-19. Although the U.S. Food and Drug Administration granted the request, the company abandoned the effort after a public outcry.

"Exclusivity determines who has access, who can manufacture and how we scale up production to meet the needs. We cannot leave these decisions up to a single profit-motivated corporation," Schakowsky said.

The Democrats' second principle was "reasonable" pricing, regardless of whether drugmakers used public funding in research and development. Rep. Rosa DeLauro of Connecticut, who leads the Appropriations subcommittee for health, pointed out that the federal government has already invested $31 billion in research for coronavirus treatments and vaccines.

"An unaffordable drug is 100% ineffective," said Rep. Lloyd Doggett, a Texan who chairs the Ways and Means subcommittee on health.

With the United States at war against a dangerous virus, Doggett said, "The pharmaceutical manufacturers are certainly the leading war profiteers."

A spokeswoman for PhRMA, the trade group also known as the Pharmaceutical Research and Manufacturers of America, told Law360 that drugmakers are working with governments on COVID-19 treatments and vaccines, with over 300 clinical trials happening worldwide.

"Far from impeding innovation," the spokeswoman said, "patents are essential to the discovery of new treatments and cures. While we continue this momentum, our companies' focus is on developing treatments and vaccines that are safe, effective and affordable for patients."

The lawmakers framed expensive coronavirus drugs as price-gouging, a practice that is neither defined nor prohibited by federal law, although it can be targeted under the laws of about three-dozen states, most of which require an emergency declaration, and theoretically could be targeted under the federal Defense Production Act.

The group's third principle was transparency.

"We can't even figure out what a reasonable price might be without knowing exactly what the drug companies are spending," Schakowsky said. She wants disclosure of actual expenses in each phase of clinical trials and the amount of research and development that was supported by federal funding.

Rep. Peter DeFazio of Oregon, who chairs the Transportation Committee, suggested lawmakers could restore rules that, until their expiration in the 1990s, allowed government agencies to intervene on pricing for drugs developed with federal support. He and Sen. Bernie Sanders, I-Vt., have long sought to restore those rules.

Congress made coronavirus testing cost-free regardless of health insurance status, but House Speaker Nancy Pelosi, D-Calif., has called for all COVID-19 treatment to be free for patients.

Schakowsky suggested Pelosi and even Republicans would support the principles outlined Wednesday.

"The speaker certainly has talked about it over and over again," Schakowsky said. "I know that she has not been satisfied with the response of the administration when it comes to fair and reasonable pricing."

"I think things have come along to the point where we would hopefully get some bipartisan support on anti-profiteering language," she said. "I think this is a time when Republicans understand that if we have … a drug that's unaffordable, it is 100% ineffective. I do have confidence that we can move beyond testing into the treatments, the therapeutics, the vaccines."

Any legislation would have to win bipartisan support to make it through the GOP-led Senate and get President Donald Trump's signature. Many Republicans are wary of anything that smacks of government price-setting, although some — including Trump and Senate Finance Committee Chairman Chuck Grassley, R-Iowa — have supported Medicare negotiating prices for some drugs. It's not clear whether temporary, coronavirus-related price regulation would draw more support.

The government theoretically could use emergency powers to seize some patents. For inventions created with the help of federal funding, a 1980 intellectual property law called the Bayh-Dole Act provides what are known as “march-in rights,” allowing the government to require the patent holder to grant others a license to the invention when "health or safety needs" are not being "reasonably satisfied." Another provision known as Section 1498 allows the government to make or use any invention without the patentee’s permission if it gives the owner "reasonable" compensation.

Lawmakers, prosecutors and companies have targeted pandemic price-gouging in recent weeks, but most efforts have focused on supplies rather than pharmaceuticals.

Florida and Missouri prosecutors went after third-party sellers charging steep prices for masks, hand sanitizer and other materials. House Democrats urged Federal Trade Commission intervention. U.S. Attorney General Bill Barr said last month that every U.S. attorney's office had designated a prosecutor to focus on supply hoarding and price-gouging, and bipartisan senators asked for details about the effort. 3M, the nation's top manufacturer of N95 protective masks, is trying to fight price-gouging using trademark law.

Before the pandemic, lawmakers in both parties and both chambers had sought broader changes to drug pricing. The House in December approved a Democratic bill providing for government price negotiation. A less dramatic bipartisan deal failed to gain traction in the Senate.

Movement on those measures now appears unlikely this year as the pandemic pushes other business to the back burner and after lawmakers pushed back a deadline that advocates thought could spur action.

--Additional reporting by Ryan Davis and Bryan Koenig. Editing by Orlando Lorenzo.

Update: This article has been updated with comment from PhRMA.

For a reprint of this article, please contact reprints@law360.com.

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