WTAS on reasonable pricing and public-private partnerships

What They are Saying: “Reasonable pricing” clauses in government licensing agreements are unnecessary and would harm public-private collaboration

Megan Van Etten
Megan Van EttenAugust 8, 2023
WTAS on reasonable pricing and public-private partnerships

WTAS on reasonable pricing and public-private partnerships.

Some policymakers in Washington, led by Sen. Bernie Sanders, are trying to re-write the rules on public-private partnerships in a way that would kill collaboration on pandemic-related technologies. It was a disaster for American patients and taxpayers when pricing-related clauses were included in government licensing deals in the past. The NIH imposed “reasonable pricing” conditions on private sector agreements in 1989, but revoked the policy in 1995 after acknowledging that such conditions significantly chilled collaboration between the public and private sectors.   

Here is what health care policy leaders have said about past attempts to add similar provisions and the need for public-private collaboration:

  • “[National Institutes of Health (NIH)] does not perform product development or commercialization. And unlike their counterparts at universities, NIH investigators cannot spin out a company around an invention. So, it’s essential that there be a way for intramural ideas and technology to be transferred to industry partners.” Tom Misteli, Director of National Cancer Institute, Center for Cancer Research
  • “An extensive review of this matter over the past year indicated that the pricing clause has driven industry away from potentially beneficial scientific collaborations with PHS scientists without providing an offsetting benefit to the public…Eliminating the clause will promote research that can enhance the health of the American people.” Harold Varmus, former Director, National Institutes of Health (NIH)
  • With pandemic vaccines, [affordability] has never been a problem. They’re usually developed with a lot of government assistance, and there’s no example of a pandemic vaccine that wasn’t affordable.” Roy Blunt, former U.S. Senator (R-MO)

  • “The complementary relationship between public and private R&D spending arises mainly because NIH funding focuses on basic research that leads to the discovery of new drugs, whereas private spending focuses on applications of such research. Private R&D spending on clinical testing, incremental innovation, product differentiation, and safety all follows from basic research.” Congressional Budget Office

  • Government alone has never developed the new advances in medicines and technology that become commercial products. For that, our country relies on the private sector. The purpose of our act (the Bayh-Dole Act) was to spur the interaction between public and private research so that patients would receive the benefits of innovative science sooner.Bob Dole, Former U.S. Senator (R-KS), and Birch Bayh, Former U.S. Senator (D-IN)
  • “We have seen this scenario play out before: Europe followed this playbook in the 1980s and early 1990s, putting in place strict drug price controls and regulatory barriers to innovation, and the result was ceding half-century-long leadership to the United States. Suppose the United States follows the EU’s path, as many in Congress appear to want to do. In that case, these measures will increase the odds of other nations, especially China, capturing market share in this critical innovation-based industry. The result will be fewer good jobs, a larger trade deficit, less drug innovation, higher overall health costs, and more foreign supply-chain dependency.” Joe Kennedy, Senior Fellow, Information Technology and Innovation Foundation  

Without the investment and expertise of the biopharmaceutical industry, the knowledge gained through research by NIH may generate interesting ideas, but very few, if any, new medicines. Dawn O’Connell, the United States Department of Health and Human Services assistant secretary for preparedness and response said in a recent hearing, “There is a risk if we were to add some limitations in the contracting that we limit the number of companies that are willing to come forward and do this work.”

So-called “reasonable pricing” policies are unnecessary and would do more harm than good – preventing public-private partnerships that promote drug development and the advancement of life saving medicines for patients.

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