Biden's Competition Order Is Much Worse Than the Decreed Illness
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President Biden made a big deal in the rollout of his executive order on market consolidation about the price of prescription drugs.

The order weaponizes antitrust and damages the patent system.  That’s not strong medicine.  It’s deadly poison.

This combo will weaken our vibrant, innovative biopharma sector that developed the most effective, safest COVID-19 vaccines in amazingly short time.  Ironically, IQVIA reports that “net per capita [drug] spending declined by 2.7% in 2020” and “has increased only $56 since 2010.”

The only competition the order fosters is among government agencies for regulatory heavy-handedness.  The E.O.’s directives aimed at biopharma companies risk harming patients who rely on their medicines. 

The orders include importing drugs, disrupting patent settlements between brand and generic drug firms, treating innovation like it’s anticompetitive and tasking Health and Human Services to compile a wish list of price controls.  There’s also blocking part of a rule relating to the Bayh-Dole Act.

First, the White House wants states to set up drug importation schemes.  Florida is setting up a scheme under Trump administration rules.  It’s likely to fall short of the hype.

Medicines would ostensibly come from Canada.  But many times, “Canadian” drugs are counterfeits or adulterated versions.  And the Canadian government isn’t sitting idly by and letting its legitimate pharmaceuticals go.

Also, the Federal Trade Commission is directed to apply its powers to patent settlements.  Labeled by critics as “pay for delay,” these are merely out-of-court settlements of patent infringement cases. 

Not only zealots in the administration, but lawmakers such as Sen. Amy Klobuchar apparently don’t understand this, judging by the misguided S. 1428 and the bias at a recent antitrust hearing.

The Hatch-Waxman Act employs the constructive mechanism of patent-related legal action to facilitate negotiations between innovator and generic maker.  It’s a win-win.  Parties settle faster, allow generic drugs to enter the market much sooner and respect for the innovator’s patent exclusivity is preserved.

FTC disruption will likely cause negotiations to stretch on longer, force parties to spend more money on litigation and reduce earnings that presently support both generic firms and innovators’ drug discovery and development.

Another sweeping directive calls for “ensur[ing] that the patent system, while incentivizing innovation, does not also unjustifiably delay generic drug and biosimilar competition beyond that reasonably contemplated by applicable law.”

This apparently implies the adoption of concepts Sens. John Cornyn and Richard Blumenthal would outlaw:  so-called “product hopping” and “patent thicketing.”  Their S. 1435 would apply an antitrust hammer to an extraordinarily common thing:  iterative and follow-on invention and improvements.  But it would only applied to biopharmaceutical invention and innovation.

The E.O. seems to encourage unilateral executive action aimed at biopharma innovators.  Its end-running of Congress strikes an antitrust hammer on inventing a new and improved version of a brand medicine.  For instance, it could be an easier-to-swallow pill, a convenient time-released dosage or a formulation that reduces side effects.

And there’s the HHS grab bag order.  Put every anti-IP government price-fixing idea in the bag in 45 days.  Expect to see direct “negotiation” (read:  bureaucrats set a drug’s price on a take-it-or-leave-it basis; “leave it” really means antitrust persecution, product expropriation or something similarly punitive).

Other possibilities?  Reference pricing based on the drug prices foreign governments’ health bureaucrats price-fix.  A punitive tax penalty and civil monetary penalties if a medicine’s price increase exceeds the rate of inflation.  Twisting Bayh-Dole march-in rights to snatch drug patents based on product price.

That leads us to the Bayh-Dole Act order.  The National Institute on Standards and Technology is told to “consider” dropping “any provisions on march-in rights and product pricing” from its final rule on technology transfer of federally sponsored research discoveries.

Bayh-Dole allows the government very narrow grounds to “march in” on patents on inventions made under a federal research grant.  For example, if a company licensed a university’s patent and sat on it because the invention may disrupt the firm’s existing product’s market.  But price of a product doesn’t qualify for march-in. 

The administration wants wiggle room to distort and abuse the law’s narrow confines through creative regulatory writing.

Does any of this promote competition?  No.  The president’s policy prescription is much worse than the presumed illness.

James Edwards is executive director of Conservatives for Property Rights (@4PropertyRights) and patent policy advisor to Eagle Forum Education and Legal Defense Fund.  The views expressed are his own.

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