Sanders offers amendment to create compulsory licenses on medical inventions, for veterans

On Wednesday, July 22, 2015, the Senate Veterans Committee held a mark-up to consider several bills. During the mark-up, Senator Sanders offered an amendment, attached below, that would create a compulsory license mechanism in the Department of Veterans Affairs, for patents on medical inventions. (See amendment text below). The motivation for the amendment was a crisis in the VA involving access to drugs for the hepatitis C virus (HCV).

The high cost of the new HCV drugs from Gilead and AbbVie combined with the large number of Veterans living with HCV depleted the VA budget for drugs, and blocked enrollment of patients for treatment. The VA then proposed transferring $500 million from the VA Choice Program, which was set up to allow veterans to get health care from non-VA doctors. Since May, Senator Sanders has been pushing to VA to consider breaking the patents on sofosbuvir and other HCV drugs, as an alternative to cutting benefits from another VA program for veterans.

On May 12, 2015, Sanders asked the VA to consider using the "Government use" provisions in the U.S. patent law, to authorize the VA to buy generic versions of the HCV drugs. Sanders referred to 28 USC 1498(a), a section of U.S. law that allows any federal agency to authorize the use of a patent "by or for the United States without license of the owner." The statute covers "a contractor, a subcontractor, or any person, firm, or corporation" taking actions for a government entity. Courts have extended this power even to institutions like the Smithsonian or the Federal Reserve.

The VA subsequently rejected Sander's proposal, citing the uncertainty over the compensation required under 28 USC 1498(a). At the July 22, 2015 hearing, Sanders offered an amendment to that would have added language to Title 38 of the U.S. Code, the statutes for Veterans Benefits. The amendment would have created a compulsory licensing mechanism in Title 38, and provide statutory guidance on the "reasonable and affordable royalty" used to compensate the patent holder, "taking into account the budgetary resources of the Department for the fiscal year in which the Secretary seeks to acquire the medical technology." This was defined as follows:

"(c) REASONABLE AND AFFORDABLE ROYALTY.—In determining a reasonable and affordable royalty under subsection (a), the Secretary shall consider the following:

"(1) The impact of paying the royalty on the budget of the Department for providing hospital care and medical services to veterans under chapter 17 of this title.

"(2) The extent to which the owner of the patented invention has recovered or is expected to recover, through sales other than under this section, the research and development costs incurred by such owner.

"(3) Such other factors as the Secretary considers appropriate, including the impact of the patented invention on improving health outcomes for individuals.".

While the amendment gave the Secretary of Veterans Affairs discretion to determine if a price is "excessive or a barrier to care," it required such a determination if:

"(1) the price of the technology is the primary factor prohibiting the Secretary from being able to provide access to the technology to all veterans for whom the technology is considered clinically appropriate; and
"(2) there is no comparable and equally efficacious technology available to the Department at a reasonable and affordable price.

The amendment offered by Sanders made explicit and concrete the policy objective of providing access for "all veterans", and ensured that the agencies limited budget would be considered a constraint on the royalty payments, rather than on access. Instead of putting patients at risk, the amendment put the patent monopoly at risk.

The debate on the amendment took place from 1:04.10 to 1:23.31, and was also referenced later in the mark up.
bernie-Screenshot-2015-07-22.png

As is clear from the video, the Senators on the Committee were sympathetic to Sanders' efforts to ensure that Veterans "did not die" because the prices of medicines were too high. Senator Blumenthal (D-CT), a former state attorney general offered to work with Senator Sanders on the specifics of the amendment, and the Chair agreed to schedule a hearing on the issue. After nearly 20 minutes of discussion, Senator Sanders agreed to withdraw the amendment, and to work with others on the language, and on the promised hearing.

KEI Commentary
The Senator Sanders proposal to have a specialized compulsory licensing statute for patents can be seen as one of many specialized statutes that provide mechanisms that weaken, limit or eliminate patent monopolies. Several of these provisions in U.S. law are limited to specific contexts. For example, there are at least four compulsory licensing statutes in Title 42 of the U.S. Code, including those involving (1) nuclear energy technologies, (2) the Clean Air Act, and more recently, statutes involving the (3) "Next Generation Lighting Initiative" and (4) "Energy Storage Competitiveness." There is a special provision on patents and other intellectual property in Title 30 relating to Black Lung Disease. The Affordable Care Act create a system of compulsory licenses of patents on biologic drugs, when the patents are not disclosed on a timely basis to potential suppliers of biosimiliar drugs. There are general statutes for cases where federal funds are involved (the Bayh-Dole March-In rights), for government use (28 USC 1498(a)), or for when goods are imported into the United States (19 USC 1337). The US statute on injunctions has turned into a general purpose compulsory licensing statute following a Supreme Court Decision in eBay v MercExchange. A half dozen federal antitrust laws are used to mandate compulsory licensing of patents in diverse circumstances. A more detailed a complete list of examples is available here: http://keionline.org/cl

What Senator Sanders is proposing is to add one more mechanism in U.S. law to overcome abuses of patent monopolies. Sanders wants to end the monopoly if the price to Veterans is excessive, or is a barrier for their access. Given the sacrifices that veterans have made for this country, Sanders thinks they deserve this consideration. We agree.

More context:

AMENDMENT NO.____ Calendar No.____

Purpose: To authorize the Secretary of Veterans Affairs to pay a reduced amount in royalty to use a patented invention relating to certain medical technologies.

IN THE SENATE OF THE UNITED STATES—114th Cong., 1st Sess.

S. _________

(title) _________________________

Referred to the Committee on _____________ and ordered to be printed

Ordered to lie on the table and to be printed

AMENDMENT intended to be proposed by Mr. SANDERS

Viz:

At the appropriate place, insert the following:

SEC. ___. USE BY DEPARTMENT OF VETERANS AFFAIRS OF PATENTS ON CERTAIN MEDICAL TECHNOLOGIES.

(a) IN GENERAL.—Subchapter II of chapter 73 of title 38, United States Code, is amended by adding at the end the following new section:

"§ 7330B. Use by Department of patents on certain medical technologies

"(a) IN GENERAL.—Notwithstanding any other provision of law, for purposes of providing hospital care and medical services to veterans under chapter 17 of this title, if the Secretary determines that the price of a medical technology is excessive or presents a barrier to care, the entire compensation for the use of a patented invention relating to such medical technology to be paid by the Department to the owner of such invention shall be set by the Secretary and be limited to the royalty that is reasonable and affordable taking into account the budgetary resources of the Department for the fiscal year in which the Secretary seeks to acquire the medical technology.

"(b) EXCESSIVE PRICE OR BARRIER TO CARE.—In addition to any other circumstance in which the Secretary may determine that the price of a medical technology is excessive or presents a barrier to care under subsection (a), the Secretary shall determine that such price is excessive or presents a barrier to care if—

"(1) the price of the technology is the primary factor prohibiting the Secretary from being able to provide access to the technology to all veterans for whom the technology is considered clinically appropriate; and

"(2) there is no comparable and equally efficacious technology available to the Department at a reasonable and affordable price.

"(c) REASONABLE AND AFFORDABLE ROYALTY.—In determining a reasonable and affordable royalty under subsection (a), the Secretary shall consider the following:

"(1) The impact of paying the royalty on the budget of the Department for providing hospital care and medical services to veterans under chapter 17 of this title.

"(2) The extent to which the owner of the patented invention has recovered or is expected to recover, through sales other than under this section, the research and development costs incurred by such owner.

"(3) Such other factors as the Secretary considers appropriate, including the impact of the patented invention on improving health outcomes for individuals.".

(b) CLERICAL AMENDMENT.—The table of sections at the beginning of chapter 73 of such title is amended by inserting after the item relating to section 7330A the following new item:

"7330B. Use by Department of patents on certain medical technologies.".