Patents in Healthcare: Who Benefits?

We have recently seen the release of a stunning allegation of patent infringement by a big pharma company. See further background courtesy of Yale law prof Amy Kapczynski here. (Even more here.) Unusually in this case, the patent holder is the US Department of Health and Human Services.

The government often licenses patents to industry (and holds quite a few of them), but no deal is in place with Gilead Sciences, maker of Truvada, an HIV drug. The medication is priced at up to $2,000 for a one-month supply, though the cost is reportedly much less than that, and the company notes that only approximately 20% of the patients who could benefit from it are receiving it now (up from 10% a couple years back). State Medicaid programs note that if they had access to the medication at lower prices, they could provide it to many more patients who need it.

The president called for eradicating HIV in the US by 2030 in his State of the Union address, but the current administration “has a mixed record” on this front (“including proposing changes to Medicare that would hit HIV-positive seniors especially hard, and firing all members of the Presidential Advisory Council on HIV/AIDS in 2018”).

Gilead and the federales are reportedly in discussions on a licensing deal but no details are public. (The government, unlike other patent holders, generally avoids enforcement litigation.)

Update 5/9/2019: HHS Secretary Azar tweeted news of a settlement. Here’s the first tweet in his thread:

Let’s explore what that means. About 100,000 US patients receive Truvada now, out of the over 1 million for whom it is an appropriate therapy. The cost in the U.S. is $24,000 a year; overseas it can be below $100. So the Secretary is accepting a $20 million per year commitment to protect $2.4 billion per year in current revenue, and much more if the drug is covered for the 90% of patients in the U.S. who aren’t getting it yet. (I’m using round numbers; figures are easily found on line.)

Update 12/4/2019: The details of the deal and its implementation are announced together with a caveat that the patent infringement case continues.

Widening the frame, it is worth noting that many innovations developed or discovered using federal funds (even if not at federal agencies) have been commercialized over the years by research universities, their health systems, and by companies they have spun out. Under our current system, the institution receives a licensing fee, but the federales do not — yet the government (and, indirectly, each and every one of us) ultimately foots the bill through federal and state health care programs.

One such innovation (and patent, and patent dispute) that has received much attention in recent years is CRISPR, but the issue with the patent system goes back further, even beyond the BRCA patent litigation (focused on the issue of whether something occurring in nature may be patented — it can’t), to the foundation of the now decades-long stream of patents issued to university-based researchers whose work is sponsored by federal grants.

Here’s a précis of the issue, and some possible solutions, drawn from a law review article:

By transferring ownership rights of federally funded inventions to non-government contractors and their subsequent licensees, the University and Small Business Patent Procedures Act of 1980 (Bayh-Dole Act) gives private actors unprecedented rights to intellectual property that was cultivated with public money….

Proponents argue that the Bayh-Dole Act has led to economic growth, particularly in the biotechnology industry. Critics counter that Bayh-Dole has negatively affected the practice and norms of science, created “anticommons” problems, contributed to patent hold-ups, and led to unnecessary increases in consumer prices….

Three suggestions, espoused in some form by a number of tech-transfer academics, are proffered here. First, a percentage of Bayh-Dole tech-transfer income should be sent back to federal funding agencies [to offset the “double taxation” problem of having one federal agency fund research and another federal agency pay for the end product of that research, and to otherwise allow the funder of the research to share in the economic value of the results]. Second, any researcher receiving federal funds should be allowed to use, for research purposes, all inventions developed with federal money. Finally, underutilized patents should be placed in the public domain to be monitored and exchanged through a national tech-transfer office. Implementing these three changes could go a long way to giving the taxpayer direct returns on some of the many billions of dollars spent every year on research in the United States.

(More on Bayh-Dole here and here.)

Academic medicine technology transfer offices are doing a land-office business, reaping enormous benefits under the Bayh-Dole Act. While few would argue that there should be no rewards granted to those who take on risk in commercializing inventions as well as those who actually do the inventing, the balance of risk and reward may be ripe for review.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting