Late last week, House Democrats passed Speaker Nancy Pelosi’s Elijah E. Cummings Lower Drug Costs Now Act. This bill would, among other things, permit the Department of Health and Human Services (“HHS”) to negotiate lower prices for 250 of the costliest drugs on behalf of Medicare beneficiaries and other consumers. Although this particular legislation appears to have little chance of passing the Senate and appears to lack support from President Trump, it comes on the heels of several other efforts aimed at reducing prescription drug prices. For instance, the Trump administration has released its drug pricing blueprint to use similar price control mechanisms to lower Medicare drug prices.  Additionally, just last month, Senator Cory Booker, along with Senators Bernie Sanders and Kamala Harris, introduced the Prescription Drug Affordability and Access Act (“Act” or “Prescription Act”) to regulate the cost of prescription drugs and threaten the abolishment of patent protections for non-compliant drug manufacturers. The current version of the proposal raises significant questions.

The Prescription Act proposes to create two new bodies: (1) the Bureau of Prescription Drug Affordability and Access (“Bureau”) within HHS to determine list prices for new and existing drugs; and (2) a Consumer Advisory Council (“Council”) comprised of patients, patient organizations, and medicine and health care finance experts to oversee the Bureau. Before a new drug can go to market, the Act obligates drug makers to provide the Bureau with sensitive information regarding the cost of research and development, the cost of the drug and comparable medications in other countries, and the federal investments of the drug’s discovery and production, among other things, in order for the Bureau to determine an “appropriate” price. For drugs already on the market, the Bureau would review the drug manufacturer’s cost profile and set an appropriate price based on the lesser of the Bureau-determined price or the median list price of eleven listed drug reference countries including Japan, Germany, the United Kingdom, France, Italy, Canada, Australia, Spain, the Netherlands, Switzerland, and Sweden. If drug makers charge an “inappropriate” price for a drug – i.e., a price above the amount determined by the Bureau, they must remit a rebate based on the surplus revenue earned to patients affected by the higher price. Further, if a drug maker fails to comply with the Bureau’s list price or remit excessive revenue earned within 30 days of receiving a notice that its price is “inappropriate,” HHS may void any patent related to the medication or clinical trial data or end other government-granted exclusivity. In the event HHS invalidates the patent, the Act contemplates that third parties should provide “reasonable compensation” to the patent holders, but the Act does not discuss how reasonable compensation would be determined.

In addition to the uncertainty regarding the calculation of “reasonable compensation,” the Act (like other similar proposals) does not appear to ensure that a drug product’s price reflects its true value. For instance, although the Bureau may take into account the cost of research and development for the particular drug at issue, there is no guarantee that the Bureau will account for (1) the often significant investment made in unsuccessful attempts to bring other drugs to market, or (2) the savings that a drug might bring to the healthcare market by preventing future illness or avoiding more costly treatment options. Also, the Act’s incorporation of reference pricing does not account for the nuances in healthcare systems in the reference countries, including the availability of alternative treatment methods in those countries.

Providing HHS the authority to invalidate patents and government licenses based on drug maker’s failure to abide by a drug price set on what appears to be an incomplete list of relevant factors promises to create further uncertainty for companies investing in drug product development. Companies would be well advised to continue monitoring progress on the Prescription Act, as well as drug pricing reforms more generally, as we head into an election year where government action on drug pricing appears to remain a central issue.

 

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Photo of Jennifer Plitsch Jennifer Plitsch

Jennifer Plitsch leads the firm’s Government Contracts Practice Group, where she works with clients on a broad range of issues arising from both defense and civilian contracts including contract proposal, performance, and compliance questions as well as litigation, transactional, and legislative issues.

She…

Jennifer Plitsch leads the firm’s Government Contracts Practice Group, where she works with clients on a broad range of issues arising from both defense and civilian contracts including contract proposal, performance, and compliance questions as well as litigation, transactional, and legislative issues.

She has particular expertise in advising clients on intellectual property and data rights issues under the Federal Acquisition Regulations (FAR) and obligations imposed by the Bayh-Dole Act, including march-in and substantial domestic manufacturing. Jen also has significant experience in negotiation and compliance under non-traditional government agreements including Other Transaction Authority agreements (OTAs), Cooperative Research and Development Agreements (CRADAs), Cooperative Agreements, Grants, and Small Business Innovation Research agreements.

For over 20 years, Jen’s practice has focused on advising clients in the pharmaceutical, biologics and medical device industry on all aspects of both commercial and non-commercial agreements with various government agencies including:

  • the Department of Veterans Affairs (VA);
  • the Department of Health and Human Services (HHS), including the Biomedical Advanced Research and Development Authority (BARDA), the National Institutes of Health (NIH), and the Centers for Disease Control (CDC);
  • the Department of Defense (DoD), including the Defense Threat Reduction Agency (DTRA), the Defense Advanced Research Projects Agency (DARPA), and the Joint Program Executive Office for Chemical Biological Defense (JPEO-CBRN); and
    the U.S. Agency for International Development (USAID).

She regularly advises on the development, production, and supply to the government of vaccines and other medical countermeasures addressing threats such as COVID-19, Ebola, Zika, MERS-CoV, Smallpox, seasonal and pandemic influenza, tropical diseases, botulinum toxin, nerve agents, and radiation events. In addition, for commercial drugs, biologics, and medical devices, Jen advises on Federal Supply Schedule contracts, including the complex pricing requirements imposed on products under the Veterans Health Care Act, as well as on the obligations imposed by participation in the 340B Drug Pricing program.

Jen also has significant experience in domestic sourcing compliance under the Buy American Act (BAA) and the Trade Agreements Act (TAA), including regulatory analysis and comments, certifications, investigations, and disclosures (including under the Acetris decision and Biden Administration Executive Orders). She also advises on prevailing wage requirements, including those imposed through the Davis-Bacon Act and the Service Contract Labor Standards.

Photo of Alexander Hastings Alexander Hastings

Alex Hastings advises clients across a broad range of government contracting issues, including advising clients in transactional matters involving government contractors and assisting defense contractors and pharmaceutical companies in securing and performing government contracts.

Mr. Hastings also advises clients concerning best practices in…

Alex Hastings advises clients across a broad range of government contracting issues, including advising clients in transactional matters involving government contractors and assisting defense contractors and pharmaceutical companies in securing and performing government contracts.

Mr. Hastings also advises clients concerning best practices in e-discovery. He assists in investigations and litigations that involve complex e-discovery issues and has represented clients in matters involving the U.S. Department of Justice, Securities and Exchange Commission and the United States International Trade Commission.

Mr. Hastings’ government contracts experience includes advising clients regarding new developments in regulatory requirements, including the Federal Acquisition Regulation’s (FAR) anti-human trafficking requirements and the FAR and Bayh-Dole Act’s intellectual property provisions. Mr. Hastings also provides due diligence regulatory advice to clients contemplating the acquisition of government contracting entities or assets.

Mr. Hastings’ e-discovery experience includes advising a wide-array of clients on best practices in information governance and document collection and assisting clients develop effective mobile device and document management policies.

Mr. Hastings also maintains an active pro bono practice and routinely writes on issues related to government contracts and e-discovery.