(Bloomberg) — Bernie Sanders is worrying millionaires, billionaires and now drug patent holders.
Sanders and 11 other members of Congress sent a letter on Monday supporting an earlier petition to the National Institutes of Health (NIH) asking the agency to hold a hearing on exercising its so-called "march-in rights" on the prostate cancer drug Xtandi. A 1980 law lets federal agencies force companies to license patents to other manufacturers in the interest of public health or safety, or if an invention is not available to the public on "reasonable terms." In this case, the idea is to reduce Xtandi's price by breaking a patent-protected monopoly.
Shares of Medivation, the San Francisco biotech that sells Xtandi in partnership with the Japanese pharma company Astellas, fell around 6 percent on Tuesday. It's easy to see why investors are scared; Medivation depends almost entirely on Xtandi revenue.
But everybody ought to calm down a bit. This is a threat to Medivation and the drug industry generally. But no agency has ever used the "march-in" right on a drug. Using this authority in this way would set a scary and messy precedent on pricing and patents, and the NIH is unlikely to open that box of venomous snakes.
Medivation splits Xtandi sales with Astellas. Even so, the drug is projected to bring close to $1 billion in revenue to Medivation next year. Losing the patent would be devastating to the company, which reported $943 million in total revenue last year. All of that came from Xtandi sales or related milestone payments from Astellas.
Xtandi is a genuinely important drug; it's becoming a standard treatment for late-stage prostate cancer and may also work in breast cancer. What grates on Sanders and other lawmakers is that the government helped fund UCLA research that led to the drug's discovery. What's more, Xtandi is priced at $129,000 for a course of treatment in the U.S., according to the letter. Other countries pay a fraction of that amount; the letter states that Canadians pay $30,000.
The proposed solution — that the government forcibly license Xtandi's patent to other manufacturers in order to reduce prices — frightens the industry in a way that relatively minor Medicare reforms don't.
The pharmaceutical industry is built on intellectual property protection. The idea that central patents for a drug approved less than four years ago could be gone with a snap of government fingers could make it difficult to commercialize any drug government funding has touched. A lot of drugs simply might not get developed.
Like other expensive drugs, Xtandi makes a tempting target for the government to strip away patent protection because it costs Medicare and Medicaid hundreds of millions of dollars a year. But UCLA and the government weren't going to get Xtandi to market on their own. The government wants the pharma industry to keep improving drugs — but to do so, companies need some assurance the government won't just override their patents.
