December 7, 2023, President Biden announced new actions to promote competition in health care and to lower prescription drug costs. Of particular note is a newly unveiled framework for deciding whether the Government may exercise “march-in” rights and take a pharmaceutical company’s drug patents developed with federal funds and share them with other companies. See Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights, available here (“Draft Guidance”).

When an invention is made with federal assistance, the federal government may exercise its “march-in” rights to license the patented invention to another party, even when the patent owner disagrees. The controversial “march-in” rights have rarely, if ever, been exercised since its initial creation by the Bayh-Dole Act of 1980.

The newly announced Draft Guidance lists numerous factors and considerations for evaluating whether the Government should exercise the “march in” rights. Many of them appear to direct government agencies to consider specifically the price of prescription drugs:

• “Has the contractor or licensee made the product available only to a narrow set of consumers or customers because of high pricing or other extenuating factors?”
• “Is the contractor or the licensee exploiting a health or safety need in order to set a product price that is extreme and unjustified given the totality of circumstances?”
• “[H]as the contractor or licensee implemented a sudden, steep price increase in response to a disaster that is putting people’s health at risk?”
• “At what price would another licensee(s) be able to make the product available to the public?”

It is also interesting to note that the Draft Guidance appears to recognize that the FDA’s regulatory exclusivity is not subject to the “march-in” rights. The Draft Guidance asks agencies to consider if “the product or service [is] subject to regulatory exclusivity, such as those provided by the FDA,” and “how much time remains in the period of exclusivity.”

Pharmaceutical Research and Manufacturers of America (PhRMA) warns that misuse of “march-in” rights would chill innovation and undermine collaboration between the public and private sectors, and that promising new technologies would sit on the shelf benefitting no one. See here.

The Draft Guidance is currently open to public comment for 60 days. At Sheppard Mullin we are closely monitoring the rulemaking process, and will provide our clients with the most up-to-date analysis and advice.