Why Chinese Universities Suck WINTERSPRING BOOKS ISSUE NOVEMBER/DECEMBER 2016 $5.95 U.S./$6.95 CAN PLUS: How to make conservatism great again America’s best police chief Just the Medicine How the next president can lower drug prices with the stroke of a pen. By Alicia Mundy t’s hard to watch television or read a newspaper These are not isolated incidents. List prices for drugs in these days without seeing stories about outrageous general rose 12 percent last year, on top of similar increases I prescription drug price increases. This past summer, over the previous five years. Drug prices are now on track the company Mylan was in the spotlight for hiking the to account for more than 15 percent of health care costs in price of its EpiPen, an injector containing cheap but life- America, up from less than 10 percent in 2014. That increase saving allergy medicine, from $94 for a two-pack in 2007 is helping to drive up health insurance premiums and pa- to over $600 today. Last fall, Martin Shkreli, CEO of Tur- tient deductibles. According to an August 2015 report by Kai- ing Pharmaceuticals, became the face of greed when his ser Health News, 24 percent of Americans taking prescrip- company purchased the AIDS drug Daraprim and prompt- tion drugs reported being unable to afford a prescription ly raised its price from $13.50 to $750 per pill—an increase from their doctors in 2015 over the previous year. of some 5,000 percent. Prior to that, Valeant Pharma- The only thing more depressing than these out-of-con- ceuticals drew widespread scorn for jacking up the prices trol drug prices is the seeming inability of politicians to do of two heart medications, Nitropress and Isuprel, by 212 anything about the problem. President Barack Obama has percent and 525 percent respectively. Meanwhile, Medi- called for, among other things, faster approvals of gener- care, Medicaid, and private insurers were buckling un- ic copies of expensive biologic drugs and new authority to der the $84,000 per-dosage-cycle price of Sovaldi, Gilead drive down prices for Medicare Part B. His proposals have Sciences’ treatment for Hepatitis C, and of Medivation’s gone nowhere in the GOP-controlled Congress. This sum- prostate cancer drug Xtandi, which costs $129,000 for an mer, Hillary Clinton released a more aggressive plan for stat- pixhook annual treatment. utory changes that would make drugs cheaper and cut some Washington Monthly 29 advertising tax breaks for the drug industry. Even Donald and commercialization system that gives rise to those insane Trump said he would break with his own party and support prices in the first place. changing the law to allow Medicare to bargain with the phar- maceutical industry over drug prices. ast September, as public outrage over price hikes by Va- Yet none of these proposals has even the slightest chance leant and Martin Shkreli was spiking, Doggett invited a of being taken up by Congress during the lame-duck session, L few fellow Democratic representatives, including Rosa and the chances will be hardly better in the new Congress, giv- DeLauro of Connecticut, Jan Schakowsky of Illinois, and Peter en Big Pharma’s power over lawmakers in both parties. Indeed, Welch of Vermont, along with staffers, for a series of meetings legislation introduced in September by a bipartisan group of in his Rayburn Building office. Doggett is a former Texas state lawmakers that would merely require drug companies to give supreme court judge with a bit of a laconic western drawl who warning about upcoming price increases—an effort just to represents a safe liberal district that includes Austin. He enjoys give incumbents up for reelection something they could tell a reputation among his colleagues as a non-flashy legislative voters they were doing—was widely seen as DOA. workhorse who fights hard behind the scenes for his causes. But what if the next president doesn’t need Congress’s One of those causes is lowering drug costs; he has been push- approval in order to act? What if previous statutes have al- ing legislation to that end since he entered Congress in 1995. ready given the executive branch the authority it needs to At one of these meetings in Doggett’s office, researchers beat back extreme drug price increases? And what if the from the Center for American Progress (CAP), a liberal think Obama administration, which otherwise has not been shy tank, gave the group an eye-opening presentation on the ex- tent to which federal—meaning taxpayer—dollars support critical drug research. Government funding played a role in Government funding played nearly half of the 478 drugs approved by the FDA between 1998 and 2005, according to one study, and almost two-thirds a role in nearly half of the of the most important and cutting-edge ones. These more innovative drugs, such as the critical oncology medication 478 drugs approved by the Gleevec, not only originated through federal support but FDA between 1998 and continue to receive it thanks to Medicare, Medicaid, and oth- er government programs that subsidize their purchase. Tax- 2005 and almost two-thirds payers, in other words, are paying for these drugs on both the front and back ends, even as the prices drug companies of the most important charge escalate seemingly without end. The CAP researchers and cutting-edge ones. also explained how the Bayh-Dole Act—officially the Patent and Trademark Law Amendments Act of 1980—could be uti- lized to lower those prices. about using executive power aggressively—to battle climate A complex piece of legislation that took four years to change, to reform immigration, and to defend transgender write and pass, Bayh-Dole was designed by its sponsors, In- rights, for example—simply hasn’t used that power to curb diana Democratic Senator Birch Bayh and Republican Robert drug prices, even though it could? Dole of Kansas, to encourage the commercialization of feder- That’s exactly what a group of progressive Democratic ally sponsored research. At the time, much of that research was lawmakers, including Massachusetts Senator Elizabeth War- sitting on shelves in university and federal labs because com- ren and Vermont Senator Bernie Sanders, have been saying panies could not get secure enough title to the discoveries to for months. The source of that authority, they say, comes be willing to invest the extra dollars necessary to turn them from provisions in a thirty-six-year-old law, the Bayh-Dole into salable products. Bayh-Dole mandated that the labs and Act, that empower the executive branch to get pharmaceu- universities could patent their discoveries and sell the royalty tical companies to reduce prices on drugs invented with the rights to private-sector firms. help of federal research funds. “We already have leverage in The law was, by most accounts, a big success. Over the the law to force down prices—why isn’t President Obama next two decades, U.S. universities increased their patent out- using it?” asks the group’s leader, Texas Representative put tenfold and founded more than 2,200 companies to exploit Lloyd Doggett. those patents, thus creating 260,00 new jobs and contribut- According to a months-long investigation by the Wash- ing $40 billion to the economy (though some of this increase is ington Monthly—including interviews with a dozen current probably due to the biomedical revolution, which gave univer- and former Obama administration officials as well as scores of sity researchers tools such as gene splicing to more easily cre- outside experts—these progressive Democrats have a case. If ate patentable medical applications). they’re right, the next president could have leverage not only Bayh-Dole also mandated, however, that the federal gov- to bring down excessive drug prices, but also to reform the in- ernment retain its own rights to the patents, which it could creasingly dysfunctional federally funded biomedical research exercise under certain conditions. If, for instance, a company 30 November/December 2016 failed to use a federally funded discovery to get a product to terms.” Another is if the agency that originally disbursed the the market, the federal agency could “march in” and offer the research funds determines that exercising its retained rights rights to another company to commercialize and sell the drug “is necessary to alleviate health or safety needs” of the public. to the public. Or it could offer “royalty-free rights” on any pat- The fundamental legal dispute is whether, under Bayh-Dole, ent to companies that would manufacture products strictly for exorbitant drug prices constitute a violation of “reasonable government use—say, a drug sold only to the military. terms” and/or a threat to “public health and safety.” Yet in the thirty-six-year history of Bayh-Dole, there It is fair to say that the vast majority of attorneys who had only been five attempts (petitions from patients, advo- know anything about Bayh-Dole have concluded that the an- cacy groups, or corporations) to get the government to in- swer is no: high drug prices are not one of the conditions voke march-in or royalty-free rights—together referred to as that would trigger the government’s ability to exercise its re- “retained rights”—against a pharmaceutical company. All tained rights. five petitions had been rejected by the National Institutes of It is also fair to say that most of the attorneys who make Health (NIH), an agency of the Department of Health and this argument represent drug companies. This is the case even Human Services (HHS). of the law’s cosponsors.