The Regulatory Review Reminds Us: If Merck And BMS Insist, With PhRMA... The Federal Government May Just "Make Its Own" Patented Drugs...

Of course, the more likely approach would be for the feds to simply buy the patented drugs at a discount in Canada, in vast bulk, and reimport the same to the US for VA / TriCare, Medicare and Medicaid patients. [Under existing law, if a finding of a strong national interest was made by CMS or HHS via a white paper, the government would not even be liable for money damages to Merck, under the patent statutes.]

Alternatively, to get drugs quickly, the US government could directly contract with other (say, EU-based) pharma producers and have them manufacture the patented drugs, when the Canadian stock-piles ran low. The point here -- quite cogently made by the outlet The Regulatory Review this morning -- is that if Merck overplays its litigation hand, the feds may just break the patent case glass -- and go forward, without them.

The magazine makes a very solid case that no Constitutional right is foreclosed, when the feds require Merck to negotiate on price, on life-saving drugs in very high demand. That is, there is no right to force the government to be price-gouged:

. . .Beyond producing medicine itself, the government could also contract with third parties to produce patented medicines. In 1918, Congress expanded Section 1498 to cover actions by government contractors. Courts have held that Section 1498 provides the exclusive remedy for acts of patent infringement by government contractors when the contractors act for the government with its “authorization or consent.”

The federal government has contracted with third parties to produce patented medicines before. In the 1960s, the U.S. Department of Defense purchased patented drugs from unlicensed manufacturers to obtain lower prices on the drugs. And more recently, lawmakers and commentators have urged the government to use Section 1498 to introduce generic drugs into the market as a strategy to lower prices of patented medicines.

The option of public production reveals a weakness in Merck’s claim that Medicare’s price negotiation program will result in a taking of its patent rights. By merely limiting the price the government is willing to pay for Merck’s patented medicines, the government is not limiting Merck’s right to exclude others from the market. The price negotiation program allows Merck to remain the exclusive manufacturer of its patented products. If the government got into the manufacturing business, on the other hand, Merck could face competition on the market.

This distinction could be significant for the constitutional analysis of the price negotiation program. A patent merely confers a right to exclude. It does not give the patent holder the right to sell the patented product, nor does it give the patent holder the right to sell products at any particular price. The price negotiation program therefore does not infringe Merck’s right to exclude others from making, using, or selling its patented medicines. It simply places a cap on the price that Medicare is willing to pay. . . .

This is a return to power ally stuff on a sunny Monday. . . and we genuinely counsel Mr. Davis, as CEO of Merck, to pull his horns in -- before the feds simply start to play hardball, themselves. Word to your mother. Out, grinning.

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