Astellas Pharma, a drug company headquartered in Japan, is charging U.S. patients $156,000 a year for the prostate cancer drug Xtandi (enzalutamide) — more than three to five times what it charges residents of other wealthy countries, and five times more than it charges in Japan. Adding insult to injury, Xtandi was discovered by scientists at the University of California, Los Angeles, with grants from the National Institutes of Health (NIH) and the U.S. Army.
A petition that has languished before the Army since 2019 was recently forwarded to the Department of Health and Human Services (HHS). It asks the government to protect taxpayers from Xtandi’s excessive price by exercising “march-in rights” for the drug. This would require HHS to make a modest determination: that it is unreasonable to force Americans to pay three to five times more than people in other high-income countries for a drug developed with U.S. taxpayers’ dollars.
It’s hard to dispute that the U.S. price of Xtandi is unreasonable. But with federal agencies heavily lobbied by the pharmaceutical industry, what appears straightforward is not. The Xtandi case is thus a litmus test of whether the Biden administration will exercise its existing legal authority to restrain unreasonable drug prices. While by no means mutually exclusive with President Biden’s “Build Back Better” drug pricing provisions, march-in authority offers an opportunity to take action now on drug prices, without enacting any new federal legislation.
An earlier petition to march-in on Xtandi’s patents was filed in 2016 with HHS, the Department of Defense (DoD), and the NIH. The NIH rejected it without a hearing on the grounds that making the drug publicly available at any price was acceptable.
In 2019, Vietnam War veteran Clare Love and former MIT scientist David Reed submitted an updated march-in petition on Xtandi to the Army. In April 2021, one of us (R.S.), a former chair of the National Coalition for Cancer Survivorship who is also battling prostate cancer, joined the 2019 petition. Seven months later, having received no response from the U.S. Army or the Department of Defense, Sachs and Love redirected their petition to HHS. A few weeks later, HIV activist Eric Sawyer, who also is contending with prostate cancer, joined the Sachs and Love petition. All of the petitioners simply seek the opportunity to present their case at an evidentiary hearing. On Dec. 23, 2021, the petitioners were advised that their request has been referred to the NIH for review.
The petition has strong legal underpinnings. Under the Bayh-Dole Act, also known as the Patent and Trademark Law Amendments Act of 1980, the federal government can exercise march-in rights to remedy unreasonable drug pricing. The term “march-in rights” refers to the government’s authority, under Section 203 of the Bayh-Dole Act, to authorize third-party licenses to federally funded patents if the original patent holder fails to make the invention “available to the public on reasonable terms.” If the government were to exercise march-in rights for Xtandi, other manufacturers would be able to produce a generic version of the drug, reducing its price substantially.
Prostate cancer is the most common cancer among American men. This year, nearly 250,000 men will be diagnosed with it. The racial/ethnic disparities are dramatic: African American men experience among the highest prostate cancer rates in the world. Prostate cancer is also the most common cancer diagnosis in Hispanic or Latino men in the U.S., amounting to more than 20% of new diagnoses.
Because prostate cancer tends to affect older men regardless of ethnicity, the price of Xtandi drains the Medicare budget, harming all U.S. taxpayers. From 2015 to 2019, the last year for which data are available, Medicare spent $5.2 billion on Xtandi. This is extraordinary given that the tablet is easy to manufacture, and a Canadian company has offered to supply enzalutamide to Medicare for $4,380 a year, a savings of more than 97%.
March-in would be an effective remedy for Astella’s price gouging, which is enabled by a monopoly on the drug’s patents.
As background, UCLA, where Xtandi was invented, exclusively licensed the rights to Xtandi’s patents to a company called Medivation in 2005. Four years later, Medivation partnered with Astellas to commercialize Xtandi, which the FDA approved in 2012. Four years after that, Pfizer acquired Medivation and, through the acquisition, the company’s partnership with Astellas on Xtandi. Astellas holds exclusive rights in Xtandi’s patents through at least 2027.
So far, the march-in petition on Xtandi has not generated any government action. The real obstacle to the petition’s success is not the strength of the case it presents — it is the government’s failure to have exercised its statutory authority when it comes to abusive pricing of taxpayer-funded drugs.
No agency has held a hearing on a march-in petition since 2004 hearings on the HIV drug Norvir (ritonavir), which drew public scrutiny when Abbott Laboratories increased its price by 400%. Facing an outcry over the price hike in the U.S., Abbott agreed to roll back the entire price increase for patients on federal programs and, during the hearing on the march-in petition, promised to “permanently freeze the price” to federal programs and made commitments on its patient-assistance program.
In the past, the NIH has justified its failure to exercise march-in authority by asserting that march-in rights are not an appropriate method for dealing with excessive prices. Not only is that contrary to the specific mandate of the Bayh-Dole Act, it’s also out of sync with American consumers who, after the Trump administration issued a last-minute proposal to eliminate pricing as a basis for march in, filed more than 80,000 public comments in opposition to the proposal.
The Biden administration has issued statements seeming to support march-in rights, including the president’s Executive Order on Promoting Competition in the American Economy and HHS’s Comprehensive Plan for Addressing High Drug Prices, but it has yet to act.
How the Biden administration responds to the Xtandi petitions will have consequences for all Americans. Xtandi is certainly not the only pharmaceutical product invented with federal funds.
Many drugs, vaccines, and gene or cell therapies for the treatment of cancer, rare diseases, HIV, Covid-19, and more were developed using patented inventions that benefited from federal funding. Some of these products have more complicated patent landscapes or present other challenges to the introduction of generic competition, but the Xtandi case is particularly straightforward and one that provides a clear test of the willingness of the government to enforce Bayh-Dole Act safeguards.
Exercising march-in rights for Xtandi would send a strong message to the public and the pharmaceutical industry: If a drug company gouges Americans on a taxpayer-funded drug, there will be repercussions. Failing to grant a hearing on the Xtandi petitions would signal that the federal government will continue to be a paper tiger when it comes to demonstrably unreasonable drug pricing, letting pharmaceutical companies be even more confident that there’s one tried-and-true patient group they can always price gouge: American consumers.
Peter Arno is an economist and director of health policy research at the Political Economy Research Institute at the University of Massachusetts, Amherst. Robert Sachs is an attorney in Boston. Kathryn Ardizzone is counsel for Knowledge Ecology International, a nonprofit organization that promotes access to medicine.
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