The Biden administration made a significant announcement today, December 7, 2023, marking a potential turning point in the way the U.S. government handles pharmaceutical patents. The administration asserted its authority, using so-called “march-in” rights, to license patents to third parties—in this case, patents of certain costly medications in a push to reduce high drug prices and promote competition.

What are March-In Rights?

March-in rights are a provision under the Bayh-Dole Act of 1980, allowing the federal government to license patents (a “nonexclusive, partially exclusive, or exclusive” license to a “responsible applicant”) to third parties under specific conditions related to products produced through a public-private partnership using federal funding. These conditions have historically included unmet public health needs, failure to make the invention reasonably accessible to the public, non-compliance with federal manufacturing requirements, and not fulfilling regulatory demands. The government has never used march-in rights to license a patent to a third party.

Key Change in the Announcement

The administration’s latest framework introduces an important change: the cost of a medication may now be considered when deciding to exercise march-in rights. This approach could significantly impact drugmakers, potentially leading to more competition and lower drug prices. White House National Economic Advisor Lael Brainard stated, “When drug companies won’t sell taxpayer-funded drugs at reasonable prices, we will be prepared to allow other companies to provide those drugs for less.”

In conjunction with the announcement, the U.S. Department of Commerce’s National Institute of Standards and Technology (NIST) released for public comment its “Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights,” meant to help agencies evaluate when it might be appropriate to require licensing of a patent developed with federal funding. It is now available in the Federal Register. There is a 60-day comment period that will close on February 6, 2024, after which NIST will review and make publicly available all comments received, before finalizing the guidance.

The administration’s actions follow a comprehensive review of the government’s march-in rights and is part of a broader effort to reduce U.S. drug prices. Given the substantial taxpayer investment in drug development, the Biden administration argues there is a justification for more government action to reduce prices.

Potential Impact and Industry Response

The pharmaceutical industry has long contended that march-in rights discourage drug development, arguing that patent seizures open treatments to competition, reducing revenue and R&D investment. This perspective has historically made the government hesitant to use march-in rights, as seen in both the Obama and Trump administrations—and even the Biden administration—which rejected such requests in the past.

The Trump administration proposed a rule to narrow the use of march-in rights, preventing them from being exercised on the basis of “business decisions” related to the “pricing of commercial goods and services.” In March, 2023, the Biden administration, itself, rejected a request to use march-in rights to break the patent of the prostate cancer drug Xtandi as a way to lower the price. However, the Biden administration’s latest move signals a shift away from this stance.

Conclusion

While it remains to be seen how federal agencies will implement this new framework, the Biden administration’s announcement represents a significant escalation in government intervention in pharmaceutical pricing and patent rights.