With congressional action on drug prices currently in limbo, a letter from Sen. Elizabeth Warren (D-MA) outlined a set of actions the Biden administration should take, including using special patent authority, to lower drug prices for government programs. If carried out, the recommendations may have negative consequences for employer plan costs.
The letter calls for:
- Using existing “government patent use power” to purchase patented drugs from a low-cost manufacturer, authorize a third party (e.g., a contract drug manufacturer) to use a patent in the government’s place, or manufacture drugs itself;
- Using the Bayh-Dole Act, where the government has funded research that has led to a drug patent, to enable the government to manufacture drugs for its use or license production on the government’s behalf; and
- Using the same act’s authority to authorize generic drug companies to produce certain patented drugs to sell in the private market.
Negative impact on employer plans? It is unclear if the pharmacy supply chain would raise the price of other drugs to offset revenue losses if the Biden administration decided to take these actions.
Democrats are under pressure to lower drug prices ahead of the November elections. Sen. Manchin (D-WV) said this week that prescription drug pricing is an area of opportunity, but first “we have to get our financial house in order” to address runaway inflation.
Outlook: In the absence of congressional action to address drug pricing ahead of the midterm elections, it is likely that the Biden administration will use its own authority to focus on reducing drug costs for government programs only.
