The pharmaceutical sector is facing the intensified gaze of governmental bodies seeking ways to decrease prescription drug costs and enhance competition. A recent highlight of this situation was the Federal Trade Commission’s decision to scrutinize a multitude of pharmaceutical patents for instances of potential anti-competitive behavior [1].
In response to this FTC challenge, the National Institute of Standards and Technology and the Department of Health and Human Services have made public a new draft set of guidelines [2]. These guidelines promote a structure enabling federal agencies to temporarily suspend patents owned by pharmaceutical firms, allowing competitor entities to manufacture and market the drugs covered by these patents. If this proposed rule comes into effect, companies in the pharmaceutical sector can expect their patent strategies, licensing and commercialization endeavors, and product pricing to be inspected more stringently.
Interestingly, the proposed framework utilizes a relatively obscure mechanism from the Bayh-Dole Act of 1980, the “march-in” protocol [3]. This provision grants the federal agency funding the research the prerogative to intervene and obliges the patent holder to grant licenses to competitors under certain circumstances. Essentially, the clause can be put into action if:
- The patent-owner hasn’t been effectively working towards practical application of the invention
- Dire health or safety needs aren’t being addressed adequately
- Requirements for public use, as guided by federal regulations, aren’t being satisfactorily met
- A domestic manufacturing agreement isn’t in place or has been breached or breached by an exclusive licensee
However, it’s worth noting that this rule has never been put to use before. Moreover, the Bayh-Dole specifications only apply to drugs backed by federal research funds. As per estimates, close to 15 to 25% of new medication that received approval over the preceding decade are shielded by a patent directly awarded to a public entity, or containing a government interest statement reflecting public funding as mandated in Bayh-Dole [4].
In conclusion, if this proposed framework does get established, any agency bringing forward a march-in motion – and the companies on the defensive – would be diving into uncharted waters of legal concern. This is a factor expected to inflate legal expenses, particularly for proprietors holding patents under Bayh-Dole. Therefore, it would be a wise move for companies to meticulously review the proposed framework and share their comments with NIST to clear any ambiguities and fine-tune the procedures in the finalized rule.