An obscure federal patent law that has been on the books for more than a century gives the government the power to drag down soaring drug prices, Kaiser Health News reports.
Dr. Rebekah Gee, Louisiana’s health secretary, is trying to rally bipartisan support to use the law—US Code Section 1498 under Title 28—to bring down the staggering prices of patented hepatitis C drugs for the state. The price of these drugs alone could cripple the state’s budget. If she’s successful, the legal maneuver could bring down prices for all 50 states—and be used to help reduce the price of other drugs. But to get there, she’ll not only need state support but a sign-off from the Trump administration.
Birth of a legal remedy
Under the law, written in 1910, the government has the power to intentionally infringe on patents and develop affordable generic drugs for public good. And this was indeed the intention of the law, according to the House Committee on Patents’ Report that accompanied the bill. In that report, the lawmakers noted:
[T]he Government ought to have the right to appropriate any invention necessary or convenient for natural defense or for beneficent public use, and that, too, without previous arrangement or negotiation with the owner.
Since then, the government has used the law many times to get around patents and high prices—on everything from electronic passports and genetically engineered mice to pharmaceuticals. In a notable case in the 1960s, the Defense Department negotiated a deal for an antibiotic with an Italian supplier, stepping over Pfizer, the drug company that held the US patent on the antibiotic. The Defense Department’s reason: the negotiated price of the Italian drug was 72 percent cheaper. The Comptroller General upheld the Defense Department’s move.
The pharmaceutical industry lobbied hard to change the law, but it ultimately failed. It also had little success in courts. When the government uses the law, the patent-holding drug company can try to fight the decision in court and get compensation for the infringement. But drug companies didn’t win big, instead often agreeing to modest royalties. And as Yale Law experts wrote in a 2016 review of the law, “[b]ecause these cases tended to settle rather than go to judgment, no case law regarding compensation in this context was created.”
Federal agencies continued to negotiate deep discounts on drugs through the 1960s but inexplicably backed off using the law in the 1970s, possibly because of political and cultural shifts in thinking about intellectual property. Nevertheless, the law could be revived to fight the current rage-inducing rise of prescription drug prices, the Yale lawyers argued. “Under 28 U.S.C. § 1498, the U.S. government can buy generic versions of these medicines at less than 1 percent of their list price plus a reasonable royalty,” they concluded in their review.
Just the pill for that
The case of hepatitis C drugs may be the perfect opportunity for the law’s comeback. In fact, Louisiana’s Gee got top academic experts in law and public health to review the case, and they decidedly gave the attempt the green light.
“This is the path that would be the most viable to be able to get what you need for people in Louisiana,” concluded Joshua Sharfstein, an associate dean at Johns Hopkins Bloomberg School of Public Health and one of the experts Gee contacted.
In the US, hepatitis C is a pervasive, blood-born infection that affects the liver. An estimated 2.7 to 3.9 million people in the country have a chronic infection. This infection can be dormant, producing no noticeable symptoms, for decades, but it can eventually cause liver damage, liver failure, liver cancer, and even death.
New drugs can cure the infection, but they’re pricy. These include sofosbuvir (brand name Sovaldi) and ledipasvir (brand name Harvoni), which are often used in combination. They’re both patented and sold by Gilead Sciences. A pill of either can cost $1,000 or more, leading to treatment regimens easily in the range of tens of thousands. Based on current prices, it would cost Louisiana a whopping $764 million just to cover hepatitis C treatment for its 35,000 or so residents who have the disease but lack private insurance.
Currently, the state only puts $3.6 billion of its $31.2 billion budget toward healthcare, so money for more hepatitis C drugs would have to be poached from funding for schools, infrastructure, or other public services. This could have significant effects—which can be easily explored using an online budget allocation tool created just for this scenario by Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering. For instance, shifting $30 million from the state’s K-12 education’s $160 million budget would hurt around 4,000 kids but only provide hepatitis C treatment for about 3,600 of the 35,000 patients.
Rachel Sachs, a law professor at Washington University in St Louis, told the KHN that this makes a good argument for summoning 28 U.S.C. § 1498. “The case is strong,” she said.
If the law is used, the government could contract with a generic drug manufacturer to make cheap versions of hepatitis C drugs, such as sofosbuvir and ledipasvir, sidestepping Gilead and its ilk. But for that to happen, Health and Human Services Secretary Tom Price would have to sign off on the move. Though Price has said he is committed to making drugs affordable, he has also advocated for less government involvement in healthcare.
Still, as Sachs notes, “The federal government has a direct financial interest in controlling hepatitis C.”