Lowering prescription drug prices is a US presidential classic. It was on Bill Clinton’s agenda, on George Bush’s, on Barack Obama’s, and on Donald Trump’s. And yet drug prices have continued to rise far above inflation, and Americans continue to pay exorbitant prices for drugs—including the ones that their taxpayer dollars helped develop.
Arguably, Joe Biden made lowering drug prices an even bigger campaign promise than his predecessors. Measures that would help cap outlandish prescription drug prices are in the Build Back Better act, and on Feb. 10 at a speech in Virginia, the president called for congressional support for his plan, detailing the ways in which he hopes make medicine more affordable for Americans.
Even before the package is approved, and without congressional involvement, the administration has a chance to send a strong signal about its commitment to more fairly priced medications. The National Institute of Health (NIH) is currently evaluating a petition about a common prostate cancer drug that offers the Biden administration a chance to intervene in a case of price gouging, and set an important precedent against unjustified drug pricing. All by applying a law that was put in place in 1980 to do just that.
It’s not the first time the NIH has considered this very petition. A first request was rejected during the Obama administration, and the current one ignored under the Trump administration—though things may be different this time.
Who pays for government-funded drugs
The drug in question is Xtandi, which is made by Japanese pharmaceutical company Astellas. Prescribed for advanced prostate cancer, it can extend the life of patients by many years, and is sold in many other rich countries at a wholesale price ranging between $80 and $160 per day. In the US, it’s more than $500 a day.
Most men who receive the drug are older and covered by Medicare, but the co-pay can be high—up to more than $10,000 a year. This makes the drug inaccessible for many patients who need it, and often ends up eating up retirement savings. “My husband worked so hard and invested his money so that we could have a nice retirement,” Rita Dickens, the wife of a Medicare prostate cancer patient who has been taking Xtandi for a few years, wrote in an email. The yearly out-of-pocket costs of $11,000 has challenged their financial stability, she wrote.
The copay, while significant, still covers just a fraction of the price of the drug. Taxpayers, who fund Medicare, pick up the rest of the tab. Except US taxpayers already paid for Xtandi: They funded its development at the University of California, Los Angeles (UCLA), with money from the NIH and the Department of Defense.
“What is the point of investing public money in medicine if the people who need it can’t benefit from it?” asks Merith Basey, who leads the North American chapter of Universities Allied for Essential Medicines (UAEM), an international organization of medical students working to improve access to drugs.
While the situation with Xtandi might sound outrageous, it’s not uncommon. The US government invests more than any other in drug development, and has paid in part or completely for most of the new drugs that have become available over the last decade. Americans, however, consistently pay far more than their counterparts for the drugs they paid to develop. Why? Because the privatized health system allows pharmaceutical companies to charge the prices they want.
Yet for more than four decades, the US government has had a tool designed to avoid this very situation, in some cases at least: the Bayh–Dole Act. The law gives the federal government the right to patent-free use of inventions that were developed with federal money—including drugs. Further, it gives the government what are known as “march-in” rights, allowing it to revoke an exclusive license for a product developed with federal funds if that product isn’t made available by the maker to the entire US market in a reasonable fashion. It has never been enforced.
The Xtandi petition presented to the NIH asks that the government exercise its rights by revoking the exclusive license and allowing the two manufacturers of enzalutamide, the generic version of Xtandi, that have already received US Food and Drug Administration (FDA) approval to sell it. The drug could cost as little as $3 per pill, or slightly more than 3% of the current price of $98 per pill. The core argument presents the price of the drug in comparable high-income countries as evidence that Xtandi isn’t available in the US under the “reasonable terms” required by the act, which represents discrimination against Americans.
To justify its price, which has gone up 90% since the drug was introduced to the US market in 2012, Astellas points to its $1.4 billion research and development investment in Xtandi, following the $500,000 the US government invested to develop the core molecule. Rather than comparing its price to the international market, it uses other drugs sold in the US as the benchmark. “Xtandi is priced in line with other oral therapies for advanced prostate cancer available in the U.S. today and is widely available for patients across the health insurance marketplace,” the company wrote in a statement.
Who profits from government-funded drugs
A march-in order on Xtandi would essentially put an end to the huge profits the drug has been generating in the US, with sales estimated for about $20 billion in the US alone, since the drug was approved in 2012. Astellas, along with Pfizer which is the US partner for the drug, have taken the lion’s share of Xtandi profits, abundantly repaying its initial investment. Others made good money, too. UCLA earned $520 million from its share of royalties in 2016, as part of a $1.14 billion transaction that included other patent holders, including the researchers and the Howard Hughes Medical Institute, a nonprofit medical research organization.
The range of patent holders gives a sense for the range of interests that have worked against enforcing the Bayh–Dole Act, or more forcefully taking on pharmaceutical price gouging. Big pharma‘s lobbying power is second to none, with more than $320 billion spent in 2021. But there are other important interests, including those of patent-holders on other drugs who fear setting precedents that might compromise their future earnings.
“I’ll draw a picture for you. One group of people that are opposed to this are researchers who hope to make money off the drugs they have patent rights on. That includes employees of the NIH themselves, who can make up to $150,000 or more per year off royalties,” says James Love, the director of Knowledge Ecology International, an advocacy organization that pursues equitable access to medications.
Is this the time of the Bayh-Dole Act?
Still, activists are hopeful that when NIH addresses the Xtandi petition in the coming days (or, at the latest, weeks), the results will be different than in the past. There are many reasons to believe that, says Robert Sachs, a retired lawyer, and prostate cancer survivor who is in treatment with Xtandi who joined involved in the petition as a patient’s rights advocate.
For one, Xavier Becerra, the Health and Human Services secretary, has pledged to give due consideration to petitions, and as California attorney-general he led a bipartisan group to ask the government for march-in rights for Remdesivir, Gilead’s drug used to treat covid-19. Further, says Sachs, members of the administration including Kamala Harris, Pete Buttigieg, and Biden himself, made lowering drug prices a main campaign promise during the primary.
And then there is the fact that the Biden administration was able to stop a last-minute Trump proposal to exclude prices from being a matter of consideration for the the Bayh–Dole Act.
While the decision formally falls onto the NIH (and HHS secretary Becerra), the issue is so close to Biden’s platform that the president will likely be involved in it, and no doubt held responsible by the petitioners, should their request be denied.
This case, too, presents unique implications when it comes to racial justice, another cornerstone of the Biden administration’s stated priorities: prostate cancer is an extremely disproportionate disease in the way it affects minorities, and Black men are at a higher risk of getting it, and more than twice more likely to die of it.
The covid-19 response has given Americans a taste of what it means to have the government involved in drug pricing and distribution—cheaper, if not free, drugs. It’s unlikely that public opinion will accept a failure to intervene in a drug that could benefit many of the 250,000 men in the US who are diagnosed with prostate cancer every year.
“It’s not simply a policy dispute between pharma and public interest groups, there are real people whose lives are impacted if a life-extending drug like Xtandi isn’t available,” says Sachs.
A symbolic decision
The outcomes of the current petition could be essentially three, says Love. In the worst-case scenario for those hoping to reduce the price of the drug, the NIH rejects it. This would require some White House explanation, as Xtandi is low-hanging fruit when it comes to lowering drug prices.
The opposite would be a strong position by the NIH. In that scenario Medicare and the broader US marker would start buying generic versions of enzalutamide, revoking Astellas and Pfizer’s exclusive licensing. This would make the price of Xtandi dramatically lower, and send a strong signal to drugmakers. “The reason why this is important is that it’s not only going to signal a commitment to take targeted action, but it will send a signal that this price gouging is not acceptable,” says UAEM’s Basey.
However, it’s likely the government will use a softer approach, says Love, and leverage the power of the Bayh–Dole Act, without applying it, to force the Astellas and Pfizer to offer a price in line with the rest of the world’s, in exchange for exclusive licensing. With this compromise, the generic drugs wouldn’t be available in the market, but the price would still go down—likely to between half or a third of the current price.
“We would prefer that the government created a market and let the generics in the market as a remedy to the pricing differential and in some ways as kind of a sanction for what [Astellas] have done,” says Love.
But, he says, even a softer approach sets a credible precedent that would move the needle in the case of the many other drugs, such as HIV drug Truvada, that are similarly more expensive in the US than in comparable countries and that were developed with federal funds. “It changes the leverage quite a bit in the price negotiations,” he says. “If the payer can end the monopoly, then the payer has just a lot more leverage.”