Anyone who follows U.S. public health issues – or who reads my blog posts – knows that the cost of the drugs needed to treat Hepatitis C infections is very high. The cost of these drugs is of particular concern to state health authorities who are charged with providing health care for Medicaid recipients and the incarcerated. The result is many states limiting access to treatment only to Medicaid recipients with advanced liver damage, and not making treatment available at all to those incarcerated, despite a high prevalence in this population. Louisiana estimates that it would cost the state $764 million to treat all of 35,000 residents who depend on state-funded healthcare, which would account for a quarter of the state’s $3.6 billion health care budget. This cost is prohibitive to the state, so the health officials thought through possible options. After consultation with public health and legal authorities, Louisiana has proposed that the federal government use a 1910 patent law that allows regulators to appropriate inventions, such as pharmaceutical drugs, for the use of the greater public good. This would mean that the federal government would take exception to the general patent exclusivity given to pharmaceutical manufacturers, which allows them to control the pricing and manufacture of a drug formulation for 20 years from the initial patent application date.
28 U.S.C § 1498 and the Federal Government’s authority to ignore patent rights
(DISCLAIMER: To my lawyer friends and colleagues reading this, this is a simplified explanation of the laws and policies at issue. Do not take me to task for a lack of complex statutory interpretation.)
The law at issue is 28 U.S.C.§ 1498. It is a federal judicial procedure law that outlines the legal remedies available to a patent holder whose patent was breached by the U.S. Government. The law states, in summary, that the holder can sue the government for “reasonable and entire compensation for such use and manufacture.” So, if the U.S. were to utilize the patent information to manufacture an expensive drug – such as one of the patent-protected Hepatitis C treatments – the government would only need to pay the pharmaceutical company compensation for the manufacturing costs for the quantity the government diverted to a generic manufacturer under the breach, rather than the company-set market price for the quantity of the drug the government had manufactured.
The Takings Clause
The 5th Amendment of the U.S. Constitution provides, in relevant part, that the government cannot take private property for public use without providing just compensation. This Takings Clause describes the government’s right to claim eminent domain over all property within the United States if extenuating circumstances require such action. 28 U.S.C. § 1498 outlines the Takings Clause as applied to patents and copyrights. The law codifies the means (lawsuit) by which a patent holder can take against the government to address the breach, and the compensation to which he would be entitled.
The principle of Sovereign Immunity is that a government, or sovereign, cannot be sued in its own courts unless it expressly consents to do so. While this rule does not appear in the U.S. Constitution, it is inferred based on the principle that the government is what creates the courts to begin with, so the courts cannot compel the entity under whose authority it falls under. Think of it as workplace insubordination: as much as some employees would like to be the ones imposing rules over their bosses, that is not how the system is set up. In 1910, Congress passed 28 U.S.C. § 1498 to expressly state that the U.S. agrees to be sued in this type of patent breach matter, thus allowing a party to sue the federal government for compensation.
Prior Uses of 28 U.S.C. § 1498
The idea of invoking this statute to address high drug prices is not a novel one. This statute has been used in many times in the U.S., usually in a National Security context. The Department of Defense used the law to procure drugs in the 1960s and 1970s for millions of dollars cheaper than the patent holder’s price. Most recently, the U.S. Dept. of Health and Human Services (HHS) threatened to invoke Section 1498 to procure the antibiotic Cipro, the main drug used to treat Anthrax, which had become a public health and bioterrorism concern immediately following the attacks on 9/11.
Negotiation v. Litigation
Pharmaceutical companies have addressed the threat to their bottom line posed by Section 1498 by lobbying for the limited use of the law to only when national security requires it. Most companies have opted to enter into negotiations with government health authorities to bring down prices. It is unclear to what extent Louisiana has negotiated with manufacturers to get the drug costs down to a manageable amount.
It is clear that the state of Louisiana sees its Hepatitis C crisis as a public health priority, and in my Hep C policy world, that is great news. However, that is overshadowed by the apparent helplessness it feels to properly address the issue. Invoking Section 1498 should be seen as a last resort, and the proposal of such will hopefully motivate all relevant parties to come back to the negotiating table to allow the state to gain access to these life-saving treatments at a more manageable price.
(For further reading on the use of Section 1498 to acquire HCV drugs, see http://yjolt.org/sites/default/files/Kapczynski_18YJoLT275_gk_0.pdf)