Property Rights and State AGs’ Assault on Remdesivir: A Conservative Perspective

By James Edwards
August 16, 2020

“Remdesivir and other medicines that survive the clinical trials-regulatory approval process should carry a price tag that reflects not only the huge investments in the one success and the nine others that fell short, but also reflect the value the invention adds. And notably, Gilead is donating 190,000 remdesivir treatments this year, right off the bat.”

https://depositphotos.com/362140294/stock-photo-remdesivir-vaccine-possible-treatment-corona.htmlBy now, everyone in the IP arena has heard about the demands of more than 30 state and territorial attorneys general (AGs) regarding the promising COVID treatment remdesivir. These AGs seem to disrespect the exclusive rights of limited duration that patents afford.

California Attorney General Xavier Becerra (D) and Louisiana Attorney General Jeff Landry (R) led a bipartisan effort getting colleagues to write the U.S. Department of Health and Human Services and call for what’s tantamount to eminent domain on intellectual property.

Extremists on Both Sides

To a conservative who works on IP matters, this demand in and of itself is troubling. Bedrock conservative principles include property rights, free enterprise and the rule of law. The AGs advocate government’s abrogation of all three of these foundational principles.

Their effort is all the more concerning because the chief law officers of several states with Republican (and presumably at least somewhat conservative) governors signed this letter. Besides Louisiana’s AG, GOP signatories include those from Alaska, Idaho, Kansas, Nebraska, North Dakota, Ohio, South Dakota and Utah. Here they are, advocating the unlawful exercise of a narrow provision of a law that doesn’t even apply to the underlying patents.

When the radical fringe element of one party or the other lines up behind some wacky idea, that’s not surprising. That’s like Rep. Lloyd Doggett’s (D-Tex.) compulsory licensing bill, H.R. 1046. But this letter draws anti-IP extremists from both parties.

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The Demise of Core Principles

Moreover, these AGs display disregard for private property rights. They seem eager to deprive Gilead Sciences, which owns the patents, and company inventors, of the fruits of their labor on a drug therapy that has been in development for a decade, with billions of private dollars poured into the invention, the R&D and the drug development. So much for property rights and free enterprise.

Core conservative principles lead one to value, encourage and protect private initiative. This involves fostering and respecting private investment of time and resources that lead to innovative breakthroughs. It respects private risk and reward; conservatives generally are aware that startups and small businesses drive the U.S. economy, most startups fail, and new enterprises built around IP are more likely to survive and thrive.

This leads to an appreciation for private risk-taking, sinking capital into R&D for the long haul and bringing to market the tangible fruits of private enterprise’s labor. Conservatives tend to view the products of R&D, where the risks are great, failures are frequent and the rewards on the handful of successful products of high value, as reflective of the value of the innovation process and the “new and improved” consumer and market benefits these inventions bring. That’s why patent exclusivity is so vital a part of the innovation ecosystem.

Whether it’s a standard-essential microchip in 5G or a vaccine, treatment or cure for COVID-19, exclusivity over the IP is central to reaping the invention’s rewards. Remdesivir and other medicines that survive the clinical trials-regulatory approval process should carry a price tag that reflects not only the huge investments in the one success and the nine others that fell short, but also reflect the value the invention adds. And notably, Gilead is donating 190,000 remdesivir treatments this year, right off the bat.

Flawed Cost and Legal Analyses

As for its value, remdesivir reduced COVID hospitalizations by four days in a clinical trial, which produces significant direct health care savings. It also preserves medical capacity and resources, speeds COVID patient recovery and restores these patients’ economic and social contributions throughout society. That’s a win for society, but the AGs view it only as a cost to state health budgets absent any accounting for value and savings. From a principled perspective, such grossly imbalanced accounting treats high-value inventions as commodities.

These AGs portray this antiviral medicine, which the Food and Drug Administration has only approved for emergency use in hospitalized COVID patients whose cases are serious enough to require oxygenation, as expensive and in short supply. It’s neither.

More tellingly, they call for the march-in provisions of the Bayh-Dole Act to be used as the means of this IP eminent domain — but without the just compensation part the Fifth Amendment so annoyingly requires for government takings of private property.

There is no federal research funding behind remdesivir’s patents, and the risk has been borne by this firm and investors. Thus, Bayh-Dole may not lawfully be employed. The AGs say, use it anyway. So much for the rule of law.

A Naked Power Play

The demands by the state AGs, as unprincipled as they are, should give pause. The blue-state AGs’ outrageous stance deserves pushback from the IP community. The red-state AGs should be further reminded of the foundational conservative principles they’re forsaking. This is happening.

The Conservatives for Property Rights website has posted a blog on this matter, calling the AGs’ demands “nothing more than a naked power play. These lawless demands must be rejected if remarkable COVID and other medical innovation is to continue apace.”

The Taxpayers Protection Alliance (a CPR member organization) says in a statement, “The AGs’ proposed actions would undermine innovation and set a disturbing precedent for property rights violations.”

The Trade Alliance to Promote Prosperity’s blogpost says, “No one can predict where the palliative therapies or the cure for COVID-19 will originate, but we know that the United States biopharmaceutical industry is well-positioned to help in their discovery because our country has aligned incentives to achieve the objective of providing the most innovative environment—including strong IP protections. Misapplication of Bayh-Dole would disrupt that innovative environment, ultimately to the detriment of Americans’ health.”

A Prescription to Recover Lost Minds

Here’s a conservative prescription for the derelict GOP AGs who signed the Becerra-Landry letter; this medicine should help them recover their lost minds. Repeat 50 times a day until socialistic symptoms have disappeared: “Private property rights, free enterprise and the rule of law — these are the paramount American and conservative principles I shall live by.”

Image Source: Deposit Photos
Author: MysteryShot
Image ID: 362140294

The Author

James Edwards

James Edwards consults on intellectual property, health care innovation, and regulatory and policy issues. Edwards advises companies, trade associations, and conservative organizations on patent policy and is Co-Director of the Inventor's Project. He participates in the Medical Device Manufacturers Association's Patent Working Group. Edwards mentors start-ups and early-stage companies, largely in the med tech space, and is involved in several IP-centric projects.

Edwards served as Legislative Director to Rep. Ed Bryant, R-Tenn., then a member of the U.S. House Judiciary Committee, and handled IP legislative matters. Edwards also worked on the staffs of Rep. John Duncan, R-Tenn., the U.S. Senate Judiciary Committee, and Sen. Strom Thurmond, R-S.C. In addition, he was an association executive at the Healthcare Leadership Council. Edwards earned a Ph.D. at the University of Tennessee, and bachelor's and master's degrees at the University of Georgia.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 11 Comments comments. Join the discussion.

  1. MaxDrei August 16, 2020 5:10 pm

    The need for a sovereign government to use a patented invention in the service of society (for example for national defence purposes) is recognised in the patent law of many countries. Example: Australia. See Link below. In the UK you find it in the age-old but still very relevant “Crown User” sections of the patent statute. Within the UK Ministry of Defence, there is career-long steady employment for a bunch of patent attorneys negotiating fair compensation for a whole host of defence contractors who are always saying that they are seeing their patented inventions incorporated in various bits of military kit (and will sue if the compensation offered is not high enough).

    So far so conventional, routine, boring. What’s not to like? Would you deny your government the means to defend the country effectively? The exclusive rights given by a patent are not natural. Rather, they are a restraint on free trade that is brought into existence by the legislative branch. Who shall deny that this branch can also trim those rights as it sees fit, in the national interest?

    Of course, extension to a patent on a guided missile against COVID-19 is more of a novelty than air-to-ground guided missile technology but nothing to get steamed up about. The Red-Blue uproar, the Red-Blue song and dance, very impressive to the gullible voters and the vested interests, it’s all confected, isn’t it James?

    https://www.ipaustralia.gov.au/about-us/public-consultations/archive-ip-reviews/ip-reviews/consideration-of-crown-use/issues-paper

  2. Anon August 17, 2020 7:18 am

    should carry a price tag that reflects not only the huge investments in the one success and the nine others that fell short,

    Full stop.

    NO other area of innovation carries with it such preposterous terms.

    This very point — so subtly attempted to be inserted as some type of given — is a poison that needs to be rooted out and obliterated.

    This type of “oh, well, we can fail and ‘get lucky’ one in ten times” does only one thing: inoculate the process of innovation in this art from itself being optimized, and made a subject of innovation itself.

  3. Anon August 17, 2020 7:22 am

    And on the flip side,

    MaxDrei once again shows that he lacks any understanding of the legal principles of the US Sovereign, with his view that government exists for government’s existence FIRST, with: “The exclusive rights given by a patent are not natural. Rather, they are a restraint on free trade that is brought into existence by the legislative branch. Who shall deny that this branch can also trim those rights as it sees fit, in the national interest?

    Oy vey — wrong from the foundation on up.

  4. Reg August 17, 2020 9:22 am

    Mr. Edwards, you write that
    “There is no federal research funding behind remdesivir’s patents, and the risk has been borne by this firm and investors.”

    There may be no funding behind Remdesivir patents, but there is indeed millions in taxpayer dollars going into NIH funding on Remdesivir, from which Gilead certainly has benefited. In their letter, the state attorneys general write:

    “Remdesivir has benefited from millions of dollars of public funding, including a $30-million NIH-funded clinical trial estimated for this fiscal year alone.”

    Further,
    “A study from four institutions, including the University of Liverpool and Howard University, found that remdesivir can be manufactured at $0.93 per day or $12.50 per patient. Yet, in June, Gilead announced that the company will charge government programs, including the U.S. government’s Indian Health Services and the Department of Veterans Affairs, $2,340 for a six-vial, five-day treatment course ($390 per vial).
    For patients with private insurance, as well as Medicare and Medicaid, Gilead will charge 33% more or $3,120 (the equivalent of $520 per vial) for the exact same treatment.”

    Perhaps $3120 price tag for a 6-day regimen is needed to support Gilead’s CEO pay (reportedly, US$31 million compensation in Mr. O’Day’s first year) rather than in the “huge investments” and “added value” of this promising drug.

  5. Xtian August 17, 2020 11:28 am

    All right, I’ll play. Let the gov’t take Gilead’s patents from them.

    Gilead’s response: “O.K. I will now stop making remdesivir.”

    Gov’t: “O.K. so who is going to make the drug?

    Generic Co.: ” I will!”

    Gov’t: “Great we need 200,000 units by next week.”

    Generic Co.: “Well, it will take 6-8 months before I can get a plant and equipment running. Then another 6-8 months before the FDA approves my manufacturing process. Assuming I can reference Gilead’s NDA filing. So I can have the supply in 12-16 months.”

    Gov’t: “That’s not fast enough! And by the way, when there is an adverse event, you, generic company are liable!”

    Generic Co.: “No way on the liability. That should stay with Gilead. We didn’t develop the drug”

    Gov’t:”You right, well stick that with Gilead. So when can you get drug on the market?”

    Generic Co.: “Well, I could do it faster if you (gov’t) forced Gilead to tell me what equipment they use, have Gilead’s employees teach my employees how to make it, and basically transfer Gilead’s NDA over to me! Then it will only take 6-8 months!”

    Gov’t: “I’ll get right on it. I think we can use eminent domain to do this, Right?!”

  6. anon August 17, 2020 11:56 am

    This article would have been much better if it had dispensed with all the notion of coming from a conservative perspective. I agree with the points being made, but the last thing I want to do is associate my thinking and align my reasoning with those who support Trump. We all know that conservatives love to take scientific and/or health-related issues (e.g., climate change, covid), and twist them into non-data driven political issues. While this commentary is data driven, it nonetheless ties it to a political issue. The result left me with a sour taste that wants me to distance myself from the author’s point of view, not embrace it.

  7. American Cowboy August 17, 2020 3:10 pm

    Unfortunately, my experience is that Republicans are less helpful for the patent system than Democrats. I was surprised to reach that conclusion, but my experience is the PTO does more obnoxious things under Republican presidents than the Dems. I ascribe this to a lack of sophistication in free market politicians (aided and abetted by the big money interests) saying that patents are monopolies and so should be as limited as possible. For example, the good Republican senator Tillis wants to be helpful… but made two suggestions to the PTO that burden applicants. Another example is the lawsuit inspiring rules package put forth during the G.W. Bush administration.

    Of course, Dems are not free of blemishes, see AIA signed by Obama.

    On most things I agree with the conservatives, but on patents they seem to keep making mistakes.

  8. MaxDrei August 18, 2020 4:40 am

    As to the AIA, Cowboy, see the Link below, the Dahl paper and the comments thread, for evidence that the AIA was good for promotion of science and the useful arts in the USA, and in addition the USA’s patent system, so as to retain the USA’s innovative edge over the rest of the world:
    https://patentlyo.com/patent/2020/08/patently-o-bits-and-bytes-by-juvan-bonni-46.html

    Its the rentier capitalists that are the problem.

  9. Anon August 18, 2020 7:54 am

    Its the rentier capitalists that are the problem.

    ?

  10. Anon August 18, 2020 8:19 am

    Lower case anon @ 6,

    I do not see how you arrive at your own political take here. There is no tie here to anything remotely resembling a ‘this view supports Trump’ ideology.

    None.

    Your view of what conservatives ‘like to do’ is MORE a reflection of your own biases than any actual conservative viewpoint. That sour taste is your own — you might be better off owning it and to try to stop projecting your own biases into the piece.

  11. Damian Wasserbauer, Esq. August 18, 2020 8:37 pm

    This article is troubling as the author fails to account governmental use and US patent laws enabling renumeration to the patent owner in the United States Court of Federal Claims. Mr. Edwards, you should know that this United States Court of Federal Claims is a United States federal court that hears monetary claims against the U.S. government. Since 1988 there are special provisions in the law for vaccines. http://www.uscfc.uscourts.gov/vaccine-programoffice-special-masters.

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