A Proposed Breach in IP Protection to Address Drug Costs – At What Expense?

Americans made it no secret that health care remains a leading issue this past Election Day. This is certainly not a new phenomenon but a continuation of dissatisfaction and frustration, much of it surrounding the cost of health care anywhere from the experience at the pharmacy counter to the day the hospital bill is due. Costs are indeed a major concern, even for manufacturers who provide generous and reliable benefits to employees. Ninety-eight percent of NAM member companies offer health benefits to maintain a healthy workforce, attract and retain talent, and because they believe it is the right thing to do for their employees.

As policymakers begin efforts to address concerns with the rising cost of health care, the direction and tone that elected officials take will matter in the coming weeks and months. The simple question that should be asked during each opportunity to consider a health care reform proposal should be, “at what expense?”

One proposal that would be at the expense of hard-earned intellectual property (IP) protections is H.R. 6505, the Medicare Negotiation and Competitive Licensing Act of 2018. While the bill was introduced in this Congress, it’s expected to return next year. The bill, in its simplest form, amounts to a government taking of intellectual property if a Medicare Part D drug price negotiation doesn’t achieve the “right price.”  Compulsory licensing as it is more commonly known, is the kind of government-led action that is seen in places like Russia, Columbia or Brazil and it’s a giant headache for American manufacturers who are selling American products in these markets.

Innovation and intellectual property are the lifeblood of our economy, creating fundamental incentives that drive U.S. global leadership in health care and broader manufacturing. Strong IP protection, including patent protections for innovative pharmaceuticals, encourages more research and development (R&D), fostering a more competitive market among innovative medicines.

Such protection also encourages new discoveries, new pipelines and private-sector investments that are unique to the private sector and could not be replicated by the government. Moreover, strong protection and enforcement of intellectual property—both at home and abroad—create greater certainty for manufacturers in the United States that their inventions will be safe and incentivizes the opportunity to create new cures. These protections go far beyond the innovative biopharmaceutical manufacturing sector and are particularly important for inventors and for small and medium-sized manufacturers for whom the cost of protecting IP rights can be very high relative to annual sales.

As a nation, we go to great lengths overseas to protect American brands. Some foreign governments want to seize the hard-fought benefits created by American innovators and entrepreneurs and give that IP to their own companies that have not taken the expensive risks or invested millions of dollars to create and manufacture innovative products that their American counterparts have. If we tell foreign governments they cannot harm our businesses and workers by stealing our intellectual property, our own government cannot do so either. The same broad questions should apply to the taking of private-sector IP to manage the price of Part D medicines: at what expense? We still have a lot of unmet medical needs in the United States that will require major investments in time, resources and research. Let’s not give up critical IP protections in the face of continuing progress and global leadership.

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