Citing the limited supplies and the pricing of the COVID-19 therapy, nearly three dozen U.S. states and territories are clamoring for the federal government to march in on Gilead Sciences Inc.’s patents for remdesivir. And if the feds won’t, then states should be given that authority, according to a letter sent Tuesday to the Department of Health and Human Services, the NIH and the FDA.
Signed by Republican and Democratic attorneys general (AGs) from 31 states, two territories and the District of Columbia, the letter shows little understanding of the challenges of manufacturing a new drug, the costs involved and even the march-in process itself. That lack of understanding and the crescendoing demand for government action could impact future responses to pandemics and other emergencies.
Under the 1980 Bayh-Dole Act, which allows universities to exclusively license patents stemming from federally funded research, federal agencies may use march-in rights to require a patent holder to license a patent to a third party when the patent holder fails to reasonably “alleviate health or safety needs” of the American public, the AGs said.
What the AGs ignored is that a march-in is not an instant, automatic procedure in the U.S. Under Bayh-Dole, the federal government can only intervene after it demonstrates, in what can be a lengthy court process, that the invention is not “reasonably available to the public.”
That process can involve protracted litigation with appeals all the way up to the Supreme Court, Joseph Allen, former president of the National Technology Transfer Center, said at an Information Technology & Innovation Foundation webinar a few months ago. In other words, using the Bayh-Dole march-in can take years, so it is not the most viable solution in an emergency.
Nevertheless, the AGs tried to make a case for a government march-in on Gilead’s remdesivir patent by saying the Foster City, Calif., company “is unable to guarantee a supply of remdesivir sufficient to alleviate the health and safety needs of the country amid the pandemic.”
Despite taxpayer funding and the company’s efforts to scale up its production capacity for remdesivir, “Gilead’s production projection remains dangerously low and insufficient to handle the current domestic demands, let alone future demands for the antiviral drug,” the AGs said.
Claiming that the low supply and the unmet demand for remdesivir is a market failure, the AGs added, “We believe march-in rights are a necessary step towards addressing this supply chain problem to adequately fulfill market demand.”
Besides the lack of immediacy of a march-in, the AGs’ argument ignored that having march-in rights to a drug patent doesn’t mean the government would necessarily have the same rights to manufacturing patents needed to produce the drug. According to Cortellis, at least 14 patents protect remdesivir, several of which are method patents.
The AGs’ letter also is oblivious to the expertise and the lengthy process entailed in scaling up production for any new innovative drug. Because of potential manufacturing patents and the complexity of the manufacturing process, even if the federal government were to march in on a remdesivir patent, it likely would not be able to procure the necessary raw ingredients and contract and scale up manufacturing of the sterile intravenous drug in time to address the urgent need of the pandemic.
Producing a drug like remdesivir is not as simple as assembling off-the-shelf parts on a factory line. The “production is a long, linear chemical synthesis process that must be completed sequentially and includes several specialized chemistry steps and novel substances with limited global availability,” according to Gilead.
Some of the manufacturing steps for remdesivir take weeks to complete, which impacts the ability to rapidly produce large quantities of the drug to meet an emergency situation. Subsequently, the company also has invested in improving processes to shorten the manufacturing time for the drug.
“The typical timeline for manufacturing a drug like remdesivir at scale is nine to 12 months; we have reduced that period to six to eight months,” Gilead said earlier this year, adding that it would continue working to optimize “the chemical synthesis processes to further accelerate product deliveries and volumes.”
At what price?
Dismissing Gilead’s donation of its initial stock of 1.5 million individual doses of remdesivir and its pricing of the drug below the traditional cost-effectiveness benchmark, the AGs suggested Gilead was taking advantage of the pandemic.
“This is not the time for any company to extract large corporate profits from uninsured and underinsured Americans – nor can we allow the individual market priorities and weaknesses of one company to determine the fates of hundreds of thousands of people,” the AGs said in the letter. “Gilead should not profit from the pandemic, and it should be pushed to do more to help more people.”
The AGs took issue with Gilead’s pricing of remdesivir – $390 per vial, or about $2,340 per five-day treatment course, for governments of developed countries, and $520 per vial, or $3,120 per five-day course, for commercial payers in the U.S. They suggested that a reasonable price should only reflect the actual manufacturing cost of the drug, which they claim should be less than $1 per day.
However, even the Institute for Clinical and Economic Review (ICER) determined that a basic cost-recovery pricing model in the U.S. would be more like $160 a day for remdesivir. That price doesn’t include Gilead’s R&D costs to develop the drug in the first place, nor its opportunity cost. If a cost-effectiveness pricing model were used, ICER said a fair price would be $4,580 to $5,080 for a five-day treatment.
Even generic companies marketing remdesivir in emerging markets have higher prices than what the state AGs said would be a “reasonable price” in the U.S. Beximco, a Bangladeshi company, had announced a pricing range of its generic remdesivir from about $59 to $71 a day, with discounted prices offered to the government. Two India-based companies planned to launch their generics for use in India at prices between $39 to $78 a day.
In arguing for a march-in, the AGs erroneously claimed that Bayh-Dole allows the federal government to march in “if the patent holder fails to achieve a reasonable price.” While a reasonable pricing provision was added to the law in 1989, it was revoked in 1995, because it had resulted in a considerable decline in the private-public collaborations that lead to innovation.
After the reasonable price provision was removed, collaboration picked up. Since then, Bayh-Dole has resulted in more than 100,000 academic patents, 420,000 invention disclosures and the launch of 13,000 companies across various industry sectors.
As it is today, Bayh-Dole doesn’t give the federal government the authority to set prices, Allen said. Instead, the march-in provision is to ensure a company doesn’t license a patent and then shelve it for years, he added.