Column: Biden says he wants to bring down drug prices. His actions tell a different story

You might get the impression from the Biden administration’s insulin price cut and its initiative allowing Medicare to negotiate over other pharmaceuticals that the drug pricing issue is finally being taken seriously in Washington.

Sadly, no.

The evidence that nothing much has changed arrived just this week, with a notice from the Department of Health and Human Services rejecting a petition for a price cut on Xtandi, a wonder drug for prostate cancer that was developed with public funding at UCLA.

The drug is marketed in the U.S. by Pfizer and the Japanese drug company Astellas for $189,800 a year. In Canada, a year’s supply costs $32,558, and in Japan it costs $31,594. Neither country contributed a dime to Xtandi’s development. In no other developed country does it cost more than $57,000.

The action by HHS is its attempt to close the book on a four-year effort by prostate cancer patients and others to force the agency to utilize its rights under federal law to ensure patient access to government-funded drugs “on reasonable terms.”

“It’s not just disappointing,” says Robert Sachs, 74, a retired telecommunications executive who filed the original petition in November 2021 and waited while government officials assured him and his fellow petitioners that their request would be “carefully considered.”

“After almost a year and a half, for them to send us a two-page letter that could have been written a week after we filed our petition and just contained boilerplate is hard to understand,” Sachs says. He and his fellow petitioners are appealing the rejection.

The agency’s rejection is at odds with Biden’s stated goal of bringing down prescription drug prices across the board, which he expressed in a July 2021 executive order. In that order, Biden observed that high U.S. drug prices are partly “the result of lack of competition among drug manufacturers.” The law allows the government to provide that competition to bring prices down, but HHS won’t budge.

HHS’ rejection also comes at a time when Moderna and Pfizer, the developers of the most widely used COVID vaccines, are coming under fire for planning to jack up the prices of the vaccines fivefold, to $130 per shot. That decision landed Moderna Chief Executive Stéphane Bancel in the hot seat for nearly two hours during a Senate committee hearing Wednesday.

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Bancel explained that Moderna’s price is based on “the value of a product to the healthcare system. ... How much money can be saved” from its usage.

This is a standard price-setting method among drugmakers. In this, the pharmaceutical industry is unique: No other industry asserts that its prices should be based on the higher costs of alternatives.

As I observed in January, it’s impossible to overstate the moral depravity of this method. The companies are saying, in essence, that they deserve a cut of the savings in lives and money attributable to their products, and they’ll decide the size of that cut for themselves — independent of considerations such as the cost of developing and manufacturing the drugs, the effect that higher prices will have on patients’ access, or the contributions of others, including taxpayers.

It’s also a method that will fatten the profits of the companies and their shareholders to an extraordinary degree. Even at the lower average price of about $26 per shot for its COVID-19 vaccine, Moderna collected $20.6 billion in profits on $36.1 billion in sales over the last two years.

Those are essentially the only profits and sales the company has ever received, and they were entirely due to the vaccine, for which the company received more than $2.5 billion in federal grants and guarantees before testing was even completed.

Without that assistance, Moderna would almost certainly have been dead in the water and its vaccine might not exist. The profits were sufficient to fund nearly $4.2 billion in stock repurchases in 2021 and 2022, money that went directly to shareholders, including its largest individual owner, Bancel (with 7.3% of its shares).

Biden has been crowing about his action to cap insulin prices for Medicare members at $35 a month. That’s a popular initiative that will bring financial relief to thousands of diabetics. But it only underscores HHS’ dereliction in the Xtandi case.

Let’s make a couple of points about Xtandi crystal clear.

First, the role of government funding in the drug’s developing isn’t in dispute and can’t be minimized. Sometimes public funding makes an indirect or attenuated contribution to a drug’s invention, say through public funding of basic scientific research.

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That’s not the case here. The government’s contribution, through direct funding provided to UCLA researchers by the National Institutes of Health and the Defense Department, is cited on each of the three patents covering Xtandi.

Each patent states forthrightly that “the government has certain rights in the invention.” UCLA sold its rights in 2016 for $520 million.

Xtandi’s pricing testifies to the lobbying power of Big Pharma. Last year, Pfizer spent $14.8 million on government lobbying; PhRMA, the drug industry lobbying arm, $29.2 million; and Astellas Pharma, $2.4 million.

The U.S. Chamber of Commerce spent $82 million on lobbying last year; as Matthew Cunningham-Cook and David Sirota of the Lever point out, Pfizer’s chief federal lobbyist, Jennifer Walton, is on the chamber’s board of directors.

The legal grounds for the Xtandi users’ petition stems from the Bayh-Dole Act of 1980, which governs the exploitation of inventions developed with federal funding. Bayh-Dole allows private companies to commercialize inventions that grew out of federally funded research, but it reserves certain rights for the government to protect the taxpayers’ investments.

Chief among them are “march-in rights,” which allow the government to order rights holders to license a federally funded invention to other manufacturers.

The law allows the government to offer a license itself to alternative drugmakers to ensure that the drug is widely accessible if it concludes that a manufacturer hasn’t taken sufficient steps to make a product publicly available or hasn’t brought it out on “reasonable” terms.

Pfizer, PhRMA, Astellas and the U.S. Chamber of Commerce have all listed Bayh-Dole march-in rights as a top lobbying concern.

The government has never exercised its march-in rights. Xtandi was an ideal test case, because of the government’s indisputable role in its development, and because its U.S. price plainly narrows patients’ access to the drug.

Deductibles and co-pays can bring the out-of-pocket cost of Xtandi even for Medicare enrollees to nearly $10,000 a year. “For many people who are contending with prostate cancer, that’s real hardship,” Sachs told me.

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HHS outsourced its analysis of the petitions to the NIH, which observed in its response that since more than 200,000 prostate cancer patients had been treated with the drug from 2012 to 2021, Xtandi was “widely available” and therefore the march-in option didn’t apply. The NIH didn’t estimate how many patients might have been treated if the price were lower, however.

Nor did the NIH acknowledge the burden on taxpayers. Medicare spent more than $7.8 billion on Xtandi from its introduction in 2012 through 2020. In some years, the drug has been among the top 10 costliest drugs for Medicare.

The NIH also asserted that because the patent expiration on Xtandi is so near, opening the door to generics manufacturers, there is no point in undertaking a full-scale analysis of the march-in option.

The petitioners dispute that. The patents expire in 2027. “Every year of monopoly pricing is not only worth billions to Astellas and Pfizer,” they write in their appeal, “but more importantly imposes high costs and restricted access to a life-extending treatment for many advanced prostate cancer patients.”

The NIH analysis “effectively declares that drug prices are irrelevant, and more specifically, that price discrimination against U.S. cancer patients is irrelevant,” the petitioners say in their appeal. They’re asking that HHS deal directly with their case instead of fobbing it off to the NIH, which would bring it under the purview of HHS Secretary Xavier Becerra.

Becerra and Biden have talked incessantly about how high drug prices impose a unique burden on American patients and taxpayers, compared with consumers in every other developed country. They’re right, and Xtandi is a perfect example. They should stop talking, and start acting.