The False Promise of Breaking Patents to Lower Drug Prices

Adam Mossoff (George Mason University), The False Promise of Breaking Patents to Lower Drug Prices (2023):

The patent system is at the center of heated policy debates about drug prices, as some scholars and policy organizations claim that patents are a principal cause of rising drug prices. They propose price controls be imposed on drug patents to lower drug prices, and they claim federal agencies are authorized to do so by two federal statutes: § 1498 and the march-in power in § 203 of the Bayh-Dole Act. These price-control theories of § 1498 and the Bayh-Dole Act allege that Congress has already authorized federal agencies to break patents by imposing price controls on sales of patented products in the marketplace. This Article explains that these statutes do not authorize agencies to impose price controls on drug patents, as evidenced by their plain text and by longstanding judicial and agency interpretations of these two statutes.

The price-control theories of § 1498 and the Bayh-Dole Act contradict the text and function of both statutes. Section 1498 is an eminent domain statute, applying only when a patent is “used by and for the United States.” This is not the case of a private company authorized by the government to sell a patented drug at a lower price than the drug innovator who owns the patent. Section 203 in the Bayh-Dole Act specifies only four delimited conditions when an agency may “march in” and license a patent without authorization by a patent owner. All address circumstances when a product is not available at all in the marketplace; price is not a specified condition. In sum, neither § 1498 nor the Bayh-Dole Act authorize a federal agency to impose price controls in private transactions in the marketplace between companies and consumers. There is a significant body of scholarship and policy work-product advancing the price-control theories of § 1498 and the Bayh-Dole Act, but these are policy arguments masquerading as statutory construction. It is time to lay these statutory myths to rest and to have a forthright policy debate.