On December 6, the Trump Administration released a new Return on Investment Initiative Draft Green Paper full of giveaways to Big Pharma and other private companies that piggyback on U.S. funded research and reap monopoly rights to sell resulting innovations at bloated prices. These IP-maximalist proposals, including curtailing of government-use rights and march-in rights with respect to technology transfer of federally funded research, (if implemented) would inevitably lead to higher prices contrary to President Trump’s rhetoric about lowering drug prices. These proposals will not merely eviscerate some of the benefits that might theoretically accrue to the government and American taxpayers from federally funded research, but they also portend to establish new intellectual property understandings that the U.S. is likely to pursue in trade agreements and in other forms of pressure on governments elsewhere around the globe.
For example, limiting government-use rights to products “used or consumed” only by the federal government or its government contractors, including for ongoing R&D, would greatly restrict the existing practice of government use (or “public non-commercial use” under the TRIPS Agreement), which otherwise allows governments to provide access to patented technologies for public purposes through government programs. Thus, for example, the government might not be permitted to allow generic production and access in federally supported health programs like Medicare and Medicaid. Although not directly referenced in the paper, the proposed restriction on the right of government use might have interpretive consequences on future efforts to restrict the right of government use under 28 USC sec. 1498. In the international context, the US could push for a highly restricted interpretation of government use licenses, undermining the rights of other governments to use such licenses to gain access to much more affordable pharmaceutical products.
As a second example, the Green Paper proposes eliminating the use of so-called “march-in rights” where a federally-funded and licensed product is not made reasonably available to the public at a reasonable price. Instead of guaranteeing that the public get some benefit from its federal tax dollar investments, the proposed change would guarantee that the public not only pays for the R&D but that it also pays through the nose for the licensed technology, most typically medicines. What a great deal for Big Pharma: taxpayers pay for innovative research, the researchers are required to grant licenses to private companies, and private companies can set whatever price they want. The inevitable result of this Trump drug price policy will be higher prices. The U.S. Trade Representative will use this anti-price control precedent and continue to seek restrictions on foreign countries sovereign right to control monopoly pricing through price control or formulary decisions.
This Draft Green Paper is really green—as in big bucks—for the biopharmaceutical industry. The two changes above would be accomplished administratively by regulation without any involvement of Congress, which has been busy writing bills that might actually control outrageous drug pricing. Pharma will take these bankrupt-the-payer Green Paper proposals directly to its foreign policy emissaries, the US Trade Representative and State Department. The U.S. Chamber of Commerce, BIO, and PhRMA will applaud. Patients here in the United States, and abroad, will suffer.