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`EXHIBIT 11
`EXHIBIT 11
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`Section 1498(A) is Not a Rx to Reduce Drug
`Prices
`
`SUSAN G. BRADEN & JOSHUA A. KRESH*
`
`ABSTRACT
`
`On June 20, 2018, The New York Times published an editorial captioned “How the
`Government Can Lower Drug Prices,” announcing that “a possible solution involves
`an obscure part of federal law known as Section 1498. The provision acts as a sort of
`eminent domain for patented inventions allowing the government to circumvent patent
`protections if the patent holder is compensated. In the case of a pharmaceutical, the
`Department of Health and Human Services (HHS) can authorize a drug maker to
`produce a low-cost generic version, which it would then buy in bulk.”1 The authority
`cited by The New York Times for this proposition was a 2016 law review article
`published in the Yale Journal of Law & Technology (Yale Article).2
`Fast forward to March 23, 2021. Within weeks of President Biden’s inauguration,
`Senator Bernie Sanders delivered the Opening Statement at a Senate Committee on
`Health, Education, Labor, and Pensions Subcommittee hearing citing The New York
`Times editorial as support for the introduction of S. 909, the Prescription Drug Price
`Relief Act of 2021, proposed legislation that would authorize the HHS Secretary to
`infringe on pharmaceutical patents or require pharmaceutical patent owners to enter
`compulsory licenses at royalty rates established by HHS should those patent owners
`be found to have charged excessive rates for the drug in question.3
`On February 17, 2022, Senators Elizabeth Warren and Angus S. King, Jr., with
`Congressman Lloyd Doggett, wrote a letter to HHS Secretary Xavier Becerra urging
`
`
`
`* Judge Susan G. Braden (Ret.) served as Chief Judge and Judge, United States Court of Federal
`Claims (2003–2019). She is a Jurist-In-Residence, Center for Intellectual Property X Innovation Policy,
`Antonin Scalia Law School George Mason University; United States Patent & Trademark Office (USPTO)
`Private Patent Advisory Committee (PPAC); Public Member, Administrative Conference of the United
`States; Legal Policy Advisory Board, Washington Legal Foundation; Board of Directors, United Inventors
`Association; and Board of Advisors, New Civil Liberty Alliance. The views expressed herein do not
`represent those of the USPTO nor the PPAC nor any other organization with which she is affiliated; they
`are the views of the author. Joshua A. Kresh is Managing Director of Center for Intellectual Property X
`Innovation Policy, Antonin Scalia Law School, George Mason University. Our colleague, Professor Sean
`M. O’Connor, provided the idea, inspiration, and support for this Article. The authors also express our
`appreciation for the insightful comments of academic, practitioner, and policymakers who support the rights
`of patent owners.
`1 How the Government Can Lower Drug Prices, N.Y. TIMES: EDITORIALS (June 20, 2018),
`https://www.nytimes.com/2018/06/20/opinion/prescription-drug-costs-naloxone-opioids.html.
`2 Hannah Brennan, Amy Kapczynski, Christine H. Monahan & Zain Rizvi, A Prescription for
`Excessive Drug Pricing: Leveraging Government Patent Use for Health, 18 YALE J.L. & TECH. 275 (2016).
`3 Prescription Drug Price Relief Act of 2021, S. 909, 117th Cong. (2021); Why Does the U.S. Pay
`the Highest Prices in the World for Prescription Drugs, Hearing Before the Subcomm. on Primary Health
`and Ret. Sec., 116th Cong. (Mar. 23, 2020), https://www.help.senate.gov/hearings/why-does-the-us-pay-the-
`highest-prices-in-the-world-for-prescription-drugs (opening statement of Senator Bernie Sanders).
`
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`him to use “existing executive authority” to lower drug prices.4 On March 24, 2022,
`eight public interest groups forwarded the HHS Secretary a “Petition To Make Drugs
`More Affordable,” citing the Yale Article.5 On April 22, 2022, Senator Warren again
`wrote to the HHS Secretary attaching an April 22, 2022 letter from “over 25 legal and
`public health experts” describing 28 U.S.C. § 1498 as the “government patent use
`power,” i.e., a “tool” that can be used “to intervene when patients and public health
`are harmed by excessive drug prices.”6 The chief author of this letter is none other than
`one of the authors who penned the 2016 Yale Article. And, on June 23, 2022, eight
`Senators and 103 members of Congress sent a letter to the HHS Secretary to “utilize .
`. . government use compulsory licensing under 28 U.S.C. 1498 . . . to lower
`prescription drug prices.”7 In light of the close margins in the 118th Congress,
`continued pressure on the executive branch to exert 28 U.S.C. § 1498 (a) should be
`expected.
`In Richmond Screw Anchor Co. v. United States, 275 U.S. 331, 345 (1928),
`however, the United States Supreme Court held that the “intention and purpose of
`Congress in the act of 1918 [(the predecessor to Section 1498)] was to stimulate
`contractors to furnish what was needed for [World War I], without fear of becoming
`liable themselves for infringements to inventors or the owners or assignees of patents.”
`In 1949, Congress amended the Act of 1918 to precisely limit Section 1498(a) solely
`as a waiver of sovereign immunity to provide a private party with standing and a
`judicial forum in which to sue the government for patent infringement.8 No federal
`court, however, has held that the government has an absolute right to infringe privately
`held patent rights and therefore, historically, they have narrowly and strictly construed
`Section 1498(a), as we discuss below.
`
`I.
`
`INTRODUCTION
`
`This Article argues that the authors of the Yale Article have misled some legislators
`and members of the public to believe government infringement of pharmaceutical
`
`
`
`4 Letter from Senator Elizabeth Warren, Senator Angus S. King, Jr., and Congressman Lloyd
`Doggett to Xavier Becerra, Sec’y, U.S. Dep’t of Health & Hum. Servs. (Feb. 17, 2022), https://www.warren.
`senate.gov/imo/media/doc/2022.02.17%20Letter%20to%20Sec.%20Becerra%20on%20Xtandi%20March
`-in%20Petition%20(2).pdf.
`5 Letter from Action Center on Race & the Economy, Center for Popular Democracy Action,
`Indivisible, People’s Action, PrEP4All, Public Citizen, Social Security Works, and T1International, to
`Xavier Becerra, Sec’y, U.S. Dep’t of Health & Hum. Servs. 3 n. 9 (Mar. 24, 2022), https://www.citizen.org/
`article/make-meds-affordable-petition/ (introducing and including petition).
`6 Letter from Senator Elizabeth Warren to Xavier Becerra, Sec’y, U.S. Dep’t of Health & Hum.
`Servs. (Apr. 22, 2022), https://www.warren.senate.gov/imo/media/doc/2022.4.22%20Letter%20to%20Bec
`erra%20on%20Drug%20Pricing%20Executive%20Authorities.pdf; Letter from Amy Kapczynski, JD,
`Aaron S. Kesselheim, MD, JD, MPH, Christopher J. Morten, JD, PhD, David Herman, Christopher
`Umanzor,
`to Senator Elizabeth Warren
`(Apr. 22, 2022), https://www.warren.senate.gov/imo
`/media/doc/2022.4.20%20Letter%20to%20Warren%20on%20Drug%20Pricing%20Executive%20Authori
`ties.pdf.
`
`7 Letter from Elizabeth Warren et al. to Xavier Becerra, Sec’y, U.S. Dep’t of Health & Hum. Servs.
`(June
`23,
`2022),
`https://www.warren.senate.gov/imo/media/doc/Bicameral%20Letter%20Urging%
`20HHS%20to%20Lower%20Drug%20Prices%20FINAL1.pdf.
`8 28 U.S.C. § 1498(a); see Brennan et al., supra note 2, at 301 n.128; see generally Sean M.
`O’Connor, Taking, Tort, or Crown Right? The Confused History of Government Patent Policy, 12 J.
`MARSHALL REV. INTELL. PROP. L. 145 (2012).
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`patent rights is sanctioned by Section 1498(a) and will reduce drug prices. First, we
`take issue with the Yale Article for its failure to cite empirical evidence that
`government infringement of pharmaceutical patents will lower drug prices. Next, we
`critique the Yale Article’s proposal that HHS engage in the unprecedented misuse of
`executive authority to infringe on pharmaceutical patents, ignoring the history and
`limited scope of Section 1498(a), as reflected in decades of case law. Consequently,
`we believe that any unilateral executive action authorizing infringement of
`pharmaceutical patents or compelling owners of pharmaceutical patents to license
`them at royalty rates set by HHS, or another federal agency, should be nullified by the
`federal courts. If not, Section 1498(a) will require the government to pay
`pharmaceutical patent owners “reasonable and entire compensation” as damages,
`including lost profits. And those damages will be paid from congressional
`appropriations. As such, the misuse of Section 1498(a) is not a Rx for reducing drug
`prices, but in effect is a tax imposed on American citizens.
`
`II. NO EMPIRICAL EVIDENCE SHOWS THAT GOVERNMENT
`INFRINGEMENT OF PHARMACEUTICAL PATENTS WILL
`REDUCE DRUG PRICES
`
`The Yale Article states with alarm that the cost of pharmaceuticals in the United
`States is “soaring,” but admits the “increase in prescription spending can be attributed
`almost entirely to recently approved drugs that treat the Hepatitis C virus (HVC).”9
`The drug at issue was HARVONI™, a breakthrough patented pharmaceutical
`developed and manufactured by Gilead Sciences, Inc. (Gilead). The Yale Article
`asserts, based on inferences and assumptions, that “Gilead’s prices vastly exceed the
`cost of producing these drugs.”10 The Yale Article accurately reports the initial list
`price of HARVONI™ was approximately $100,000 for a twelve-week regimen.11 This
`initial price, however, was reduced by 46% within twelve months; by 2018, Gilead
`released its own generic drug, EPCLUSA™.12 The myopic focus on the introductory
`price of these drugs, hyped by the Yale Article as an example of “one of the most
`pressing domestic policy issues in the United States today,”13 however, did not take
`into account that new competition on the horizon could have a significant downward
`effect on these drug prices—which happened.
`In 2017, the U.S. Food and Drug Administration (FDA) approved AbbVie, Inc.’s
`MAVYRET™, which reduced HCV treatment time to eight weeks at an estimated
`wholesale cost of $26,400.14 A few months later, MAVYRET™ weekly new
`
`
`9 Brennan et al., supra note 2, at 277.
`10 Id. at 278.
`11 Id. at 277.
`12 Richard Staines, Gilead Launches Generics of Own Hepatitis C Drugs in US to Cut Health Costs,
`PHARMAPHORUM (Sept. 25, 2018), https://pharmaphorum.com/news/gilead-launches-generics-of-own-
`hepatitis-c-drugs-in-us-to-cut-health-costs/.
`13 Brennan et al., supra note 2, at 277.
`14 Ned Pagliarulo, AbbVie Surprised Investors with its Hepatitis C Success. Will it Last?
`BIOPHARMADIVE (Aug. 2, 2018), https://www.biopharmadive.com/news/abbvies-surprised-investors-mav
`yret-hepatitis-c-success-will-it-last/529158/; see also Press Release, AbbVie, AbbVie Receives U.S. FDA
`Approval of MAVYRET™ (glecaprevir/pibrentasvir) for the Treatment of Chronic Hepatitis C in All Major
`Genotypes (GT 1-6) in as Short as 8 Weeks, https://news.abbvie.com/news/abbvie-receives-us-fda-
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`prescriptions “outpaced” Gilead’s HARVONI™ and EPCLUSA™.15 As a result of
`these drugs, Hepatitis C virus-caused disease has steadily declined, leaving a “smaller
`and smaller pool of patients.”16 While the Yale Article was published in 2016 and
`subsequently did not have the benefit of this information, we are skeptical of the
`authors’ contention that the price of HVC drugs raises “the problem that economists
`have long identified with patent-based drug pricing: the potential for massive social
`‘deadweight’ losses that stem from supra-marginal cost pricing”17 that must be
`remedied by the government’s infringement of these patented pharmaceuticals. The
`raison d’être advanced for the federal government “breaking” pharmaceutical
`companies’ patent rights is the promise of “significant social gains to be had from
`bringing compensation in line with the risk-adjusted cost of developing a drug.”18 Of
`course, these “social gains” are not identified, nor how the government will determine
`the “risk-adjusted cost of drug development,” nor who within the government will
`decide when these “significant social gains” require infringing a patent issued by the
`United States Patent and Trademark Office (USPTO), the sole federal agency
`authorized by Congress “[t]o promote the Progress of Science . . . by securing for
`limited
`Times
`to . . . Inventors
`the
`exclusive
`Right
`to
`their
`respective . . . Discoveries.”19
`The Yale article also did not account for the subsequent development that both list
`and net prices of pharmaceuticals, primarily those composed of small-molecule drugs,
`began to fall around the time of its publication; a trend that has continued.20 Biologics
`have become “the driver behind overall drug spending in the United States in recent
`years.21 In inflation-adjusted terms, biologic drug spending increased from $291 to
`$435 per capita from 2014 to 2018, while small-molecule drug spending fell from
`$689 to $610 per capita during this same period.”22
`The following chart, based on data obtained and compiled by Drug Channels
`Institute, an organization that collects and reports on approximately 1,000 brand-name
`
`
`
`approval-mavyret-glecaprevirpibrentasvir-for-treatment-chronic-hepatitis-c-in-all-major-genotypes-gt-1-
`6-in-as-short-as-8-weeks.htm.
`15 Pagliarulo, supra note 14.
`16 Id.
`17 Brennan et al., supra note 2, at 279.
`18 Id. at 282.
`19 U.S. CONST. art. I., § 8, cl. 8.
`20 A “small-molecule drug” is composed of “organic compounds affecting molecular pathways by
`targeting important proteins. These compounds have a low molecular weight, making them penetrate cells
`easily.” Qingxin Li & CongBao Kang, Mechanics of Action for Small Molecules Revealed by Structural
`Biology in Drug Discovery, 21 INT’L. J. MOLECULAR SCI. 5262 (2020).
`21 What Are “Biologics” Questions and Answers, U.S. Food and Drug Admin. (Feb. 6, 2018),
`https://www.fda.gov./about-fda/center-biologics-evaluation-and-research-cber/what-are-biologics-
`questions-and-answers (defining a “biologic drug” as being composed of “sugars, proteins, or nucleic acids
`or complex combinations of these substances, or may be living entities such as cells and tissues.” Biologic
`drugs are not easily identified or characterized and are extremely sensitive to environmental factors such as
`heat and microbiological contamination); see also Why Does the US Pay the Highest Prices in the World
`for Prescription Drugs? Hearing Before the Subcomm. on Primary Health and Retir. Sec., 117th Cong. 2
`(Mar. 23, 2021) (statement of Alex Brill, Resident Fellow, American Enterprise Institute) (pointing to
`biologics as the current driver of overall drug spending in the United States) [hereinafter Statement of Brill].
`22 Statement of Brill, supra note 21 at 2.
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`drug prices,23 shows the list price growth of brand-name pharmaceutical drugs
`decreased from 13.5% in 2014 to 4.2% in the first three quarters of 2020. In addition,
`net price growth declined -2.2% in 2020; the gross-to-net gap in prices was -6.4%.
`
`
`
`The most important takeaway from this chart is that, by 2018, at least 90% of all
`prescriptions in the United States were filled with generic drugs, a trend attributed by
`some to “the concentration of purchasing power by payers and the aggressive use of
`utilization management tools to rapidly shift utilization towards generics.”24
`Moreover, the price of certain generic drugs “more than doubled prices,” including
`one from Exelan Pharmaceuticals, Inc. that treated high blood pressure “by
`536% . . . depending on the dosage and package size.”25 In contrast, during the same
`year, pharmaceutical manufacturers raised prices by 6.6%, but even this increase did
`not allow those firms to “realize all or any of the benefit from price increases because
`of the discounts they provide to health insurers and pharmacy-benefit managers, the
`companies that oversee drug benefits for employers.”26
`
`
`
`23 DRUG CHANNELS INST., https://drugchannelsinstitute.com/. The CEO of Drug Channels Institute,
`Dr. Adam J. Fein, Ph.D, is an expert in the U.S. pharmaceutical industry and a regular contributor to the
`Wall Street Journal, The New York Times, and Forbes. Leadership, DRUG CHANNELS INST.,
`https://drugchannelsinstitute.com/about/leadership/.
`24 Intellectual Property and the Price of Prescription Drugs: Balancing Innovation and Competition,
`Hearing Before the S. Comm. on the Judiciary, 116th Cong. 4 (May 7, 2019) (statement of James Stansel,
`Executive Vice President and General Counsel, Pharmaceutical Research and Manufacturers of America);
`see also id. at 6 (citing projections by IQVIA, a provider of analytics and clinical research services to the
`life sciences industry, that between 2019 and 2023, IQVIA estimates “annual net price growth for brand-
`name drugs will be just 0 to 3 percent.”).
`25 Joseph Walker, Prescription Drugs List Prices Rise Average of 6.6%, WALL ST. J., Jan. 30, 2022,
`at A7.
`26 Id.; see also, Andrew Brownlee & Jordan Watson, The Pharmaceutical Supply Chain, 2013–2020,
`BERKELEY RSCH. GRP. (Jan. 7, 2022), https://www.thinkbrg.com/insights/publications/pharmaceutical-
`supply-chain-2013-2020/ (“Brand manufacturers retain just 37 percent of total spending on prescription
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`The Yale Article also gives short shrift to the time-consuming and expensive U.S.
`Food and Drug Administration (FDA) regulatory approval process.27 As the following
`chart shows, this process can take many years, during which the twenty-year statutory
`term of a patent continues to run and while the patent holder receives no revenue.
`
`Drug Development and Clinical Trial Process28
`
`
`To address the time and cost of drugs receiving approval from FDA, Congress
`enacted the Drug Price Competition and Patent Term Restoration Act of 1984
`(informally known as the Hatch–Waxman Act)29 to establish a “unified framework to
`coordinate drug approval and resolution of patent rights relating to generic versions of
`patented drugs.”30 On one hand, the Hatch–Waxman Act provides pharmaceutical
`patent owners with the potential for up to a five-year extension (restoration) on a
`patent’s term, which is supposed to compensate patent owners for lost market
`opportunity.31 The Act also provides for a data package exclusivity period, during
`
`
`
`medicines (brand and generic medicines).”); see also id. (“2020 marks the first year on record where
`nonmanufacturer stakeholders—including PBMs, health plans, hospitals, the government, pharmacies, and
`others—received the majority of total spending on brand medicines.”). PEW CHARITABLE TRS., THE
`PRESCRIPTION DRUG LANDSCAPE, EXPLORED 1
`(Mar. 2019), https://www.pewtrusts.org/-
`/media/assets/2019/03/the_prescription_drug_landscape-explored.pdf [hereinafter PEW CHARITABLE TRS.]
`(finding pharmaceutical manufacturer rebates increased from $39.7 billion in 2021 to $89.5 billion in 2016
`only “partially offsetting increases in list prices”); compare PEW CHARITABLE TRS. at 14 (finding
`pharmaceutical manufacturers’ net revenue on retail prescriptions grew only an average of 3.6% annually
`from 2012–2016), with PEW CHARITABLE TRS. at 14 (finding pharmacy net revenue on retail prescriptions
`increased from $30.8 billion to $76.9 billion in 2016); Letter from Senator Thom Tillis to Janet Woodcock,
`MD, Acting U.S. Food & Drug Comm’r and Drew Hirshfeld, Acting Comm’r for Patents (Jan. 31, 2022)
`(questioning the accuracy of drug price research from the Initiative for Medicine, Access & Knowledge and
`a project from the University of California Hastings Law School); Adam Mossoff, Unreliable Data Have
`Infected the Policy Debates Over Drug Patents, HUDSON INST. (Jan. 19, 2022).
`27 See 21 U.S.C. § 355(a)–(b) (2012).
`28 See Drug Development, Review & Lifecycle Management, BIOTECHNOLOGY INNOVATION ORG.,
`https://www.bio.org/policy/human-health/drug-development-review-lifecycle-management.
`29 See Pub. L. No. 98-417, 98 Stat. 1585(1984) (codified at 21 U.S.C. § 30; 21 U.S.C. §§ 355, 360cc).
`30 FEDERAL JUDICIAL CENTER, PATENT CASE MANAGEMENT 10-2 (3d ed. 2016).
`31 A study conducted of 170 top-selling drugs which had a first generic equivalent approved between
`2000–2012, found that only 49% (or eighty-three drugs) received a patent term restoration. The median
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`which a generic manufacturer is prohibited from referencing any proprietary
`regulatory data of a pharmaceutical “originator” for five years in pursuit of obtaining
`FDA approval for a competing drug.32 On the other hand, after this period expires, a
`generic manufacturer can accelerate approval for a “follow-on” drug, if it is the
`“bioequivalent” of a patented drug, among other criteria.33 As a prerequisite, the
`generic manufacturer must file an Abbreviated New Drug Application (ANDA) and a
`statement certifying the patents that claim the listed drug have expired, will expire, are
`invalid, unenforceable, or will not be infringed (or there are no listed patents).34 Next,
`if the generic manufacturer wants to market its product prior to the expiration of a
`patent, it must provide the “originator” with notice and certification attesting to the
`same requisites as the ANDA filing.35 Then, an “originator” has forty-five days in
`which to lodge an infringement action challenging the certification in a federal district
`court, thereby triggering an automatic thirty-month stay of FDA’s approval of the
`ANDA.36 During the stay, FDA may not approve the ANDA unless: the patent expires;
`a federal district court determines the “originator’s” patent is invalid, unenforceable,
`or not infringed; or the thirty-month stay expires, whichever comes first.37
`After the Yale Article was published, the Technology Law & Policy Clinic of New
`York University School of Law, co-published with PrEP4All, released a student
`publication (NYU Student White Paper), parroting the same rhetoric: “[P]atents permit
`[pharma] companies to set and keep prices astronomically high—much higher than
`needed to fund future drug development, and much, much higher than the
`manufacturing cost.”38 Like the Yale Article, the NYU Student White Paper, cites no
`empirical data to support the assertion that pharmaceutical prices exceed costs incurred
`to conduct research, develop, and obtain a patent, or much less garner FDA approval
`to manufacture, market, and distribute a pharmaceutical drug and then educate the
`
`
`
`extension length was only 2.75 years. See Unsustainable Drug Prices (Part III), Hearing Before the H.
`Comm. on Oversight and Reform, 117th Cong. (2021) (statement of Dr. Aaron S. Kesselheim, Professor of
`Medicine, Harvard Medical School and Director, Program on Regulation Therapeutics and Law,
`Department of Medicine, Brigham and Women’s Hospital (citing Reed F. Beall, Jonathan J. Darrow &
`Aaron S. Kesselheim, Patent Term Restoration for Top-selling Drugs in the United States, 24 DRUG
`DISCOVERY TODAY 20–25 (2019).
`32 21 U.S.C. 355 § (3)(ii)–(iv).
`33 See id. § 355(j)(4)(F) (“bioequivalence” requires a generic manufacturer to demonstrate its drug
`delivers approximately the same amount of active ingredients into the bloodstream as the same amount of
`the reference drug).
`34 These drugs are listed in an annual FDA publication, “Approved Drug Products with Therapeutic
`Equivalence Evaluations,” known as the Orange Book. Approved Drug Products with Therapeutic
`Equivalence Evaluations | Orange Book, U.S. FOOD & DRUG ADMIN., https://www.fda.gov/drugs/drug-
`approvals-and-databases/approved-drug-products-therapeutic-equivalence-evaluations-orange-book. See
`21 U.S.C. §§ 355(b)(2)(A)(ii)–(iv), (j)(2)(A)(vii)(IV).
`35 See id. §§ 355 (b)(3)(C), (j)(2)(B)(iii).
`36 See id. §§ 355(c)(3)(C), (j)(5)(B)(iii); see also 35 U.S.C. § 271(e)(2).
`37 See 21 U.S.C. § 355(j)(5)(B)(iii)(1); see also id. § 355 (c)(3)(C)(i).
`38 JOSEPH ADAMCZYK, ADRIENNE LEWIS & SHIVANI MORRISON, N.Y.U. TECH. L. & POL’Y CLINIC,
`§ 1498: A GUIDE TO GOVERNMENT PATENT USE: A PATH TO LICENSING AND DISTRIBUTING GENERIC
`DRUGS (2020–2021), https://static1.squarespace.com/static/5e937afbfd7a75746167b39c/t/60099e3582c
`53f4f1b6a4a57/1611243061897/P4A++1498+A+Guide+to+Government+Patent+Use.pdf%22%20%5Ct
`%20%22_blank; Id. at 9.
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`medical community and patients about a new drug.39 It is well established, however,
`that “[i]t takes on average over 2 billion dollars and close to 10 years of R&D, at a
`90% failure rate, before a new investigational drug can be approved and made
`available for patient care.”40 The authors of the NYU Student White Paper tout the
`“versatility” of Section 1498(a), as “leverage” the government can use in negotiating
`pharmaceutical prices, by assuming “reasonable and entire compensation generally
`will be less than the cost of acquiring the patented technology on the open market—
`sometimes significantly so.”41 The NYU Student White Paper, however, cites no
`empirical data to support the authors’ contention that Section 1498(a) damages for
`infringement of pharmaceutical patents will be less than paying for a license or that it
`“generally reimburses the patent holder for the fair market value of the patent rights
`over the life of the patent.”42
`Another reckless idea of the NYU Student White Paper suggests, if an “originator”
`files a Hatch–Waxman Act case against a generic manufacturer in a federal district
`court, HHS promptly should license the generic to infringe the pharmaceutical
`patent.43 The NYU Student White Paper then recommends HHS intervene in the
`Hatch–Waxman case to seek dismissal and transfer the case to United States Court of
`Federal Claims under Section 1498(a), effectively divesting the pharmaceutical
`“originator” of the Hatch–Waxman Act thirty-month automatic stay.44 This scenario
`would have an Executive Department interfere with a Hatch–Waxman action
`authorized by Congress and should be rejected by a federal court as a violation of the
`Administrative Procedure Act (APA),45 not to mention raising separation of powers
`
`
`
`39 Letter from Drew Hirshfeld, Acting Comm’r for Patents to Senator Elizabeth Warren and
`Congresswoman Pramila Jayapal 9–10 (Aug. 13, 2021) (“Developing the dossier of data necessary to obtain
`marketing approval for a new drug or biologic product in the U.S. is a complex, lengthy, and very costly
`endeavor, often taking years to complete[.] In 2020, HHS’s Center for Drug Evaluation and Research
`reported than a total of just 53 ‘novel drugs’ were approved.”); see also Dr. Eric Topol, The Hyper-
`Acceleration of the Life Sciences, WALL ST. J., Mar. 19, 2021, at C4 (“[T]he average time in the life sciences
`for translating research into clinical practice is 17 years . . . . The successful mRNA vaccines that set such
`a high bar of efficacy and safety so early in the pandemic were not conceived in 2020. The use of mRNA
`was pioneered in the basic research of Katalin Karikó and Drew Weissman at the University of Pennsylvania
`three decades ago.”).
`40 Letter from James C. Greenwood, President and CEO, Biotechnology Innovation Organization,
`Letter to Alex M. Azar, Secretary, U.S. Dep’t of Health & Hum. Servs. 2–3 (Mar. 12, 2018); see also
`Unsustainable Drug Prices (Part III), Hearing Before the H. Comm. on Oversight and Reform, 117th Cong.
`5 (2021) (statement of Dr. Carl L. Garthwaite, Herman Smith Research Professor in Hospital and Health
`Care Services Management and Director of Program on Healthcare at the Kellogg School of Management,
`Northwestern University) (“The development of pharmaceuticals is a long and risky process where firms
`make investments that only expect to payoff [sic] over a potentially decades long time horizon.”)
`[hereinafter Statement of Garthwaite]; Joseph A. DiMasi, Henry G. Grabowski & Ronald W. Hansen,
`Innovation in the Pharmaceutical Industry: New Estimates of R&D Costs, 47 J. HEALTH ECON. 20, 31
`(2016) (estimating $2.87 billion in “capitalized cost” (2013 dollars) to bring a new drug to market).
`41 ADAMCZYK ET AL., supra note 38, at 24.
`42 Id.
`43 Id. at 34.
`44 Id.
`45 See 5 U.S.C. § 706(2)(A) (federal agency action is subject to judicial review under, among others,
`an “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law” standard); see also
`Motor Vehicle Mfg. Ass’n v. State Farm Auto Mut. Ins. Co., 463 U.S. 29, 43 (1983) (emphasis added)
`(stating that a federal agency’s decision is arbitrary, if it “has relied on factors which Congress has not
`intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation
`
`

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`issues. In the alternative, having the HHS Secretary contract with a generic to infringe
`a pharmaceutical patent or intervening sua sponte in a Hatch–Waxman case to deprive
`a patent holder of the thirty-month automatic stay granted by Congress could be well
`viewed by a federal court as unlawful because it is “not one of those areas traditionally
`committed to agency discretion.”46
` A particularly problematic suggestion of the NYU Student White Paper is for the
`government “to coordinate with generic manufacturers to work around . . . non-patent
`exclusivities.”47 Generic manufacturers that engage in “coordinating” price or supply,
`however, risk violating the antitrust law and facing private treble damage actions.48
`
`III. FEDERAL COURTS SHOULD HOLD THAT SECTION 28
`U.S.C. § 1498(A) IS NOT APPLICABLE TO GOVERNMENT
`INFRINGEMENT OF PHARMACEUTICAL PATENTS TO
`REDUCE DRUG PRICES
`
`The Yale Article also proclaims: “28 U.S.C. § 1498[(a)] permits the government to
`‘use’ patents at any time without permission of the patent holder, as long as reasonable
`compensation is provided.”49 Not quite.
`In 1949, Congress amended 28 U.S.C. § 1498 to clarify the parameters of the waiver
`of sovereign immunity in the event the government infringed a patent:
`
`Whenever an invention described in and covered by a patent of the United
`States is used or manufactured by or for the United States without license
`of the owner thereof or lawful right to use or manufacture the same, the
`owner’s remedy shall be by action against the United States in the United
`States Court of Federal Claims for the recovery of his reasonable and
`entire compensation for such use and manufacture . . . . For the purposes
`of this section, the use or manufacture of an invention described in and
`covered by a patent of the United States by a contractor, a subcontractor,
`or any person, firm, or corporation for the Government and with the
`authorization or consent of the Government, shall be construed as use or
`manufacture for the United States.50
`The first federal appellate court to consider Section 1498(a) held:
`
`
`
`for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be
`ascribed to a difference in view or the product of agency expertise.”).
`46 Dep’t of Com. v. New York, 139 S. Ct. 2551, 2568 (2019); see also Liesegang v. Sec’y of Veterans
`Affs., 312 F.3d 1368, 1372 (2002) (“This court reviews questions of statutory interpretation without
`deference.”).
`47 ADAMCZYK ET AL., supra note 38, at 3.
`48 15 U.S.C. § 1 (prohibiting “[e]very contract, combination . . . or conspiracy, in restraint of trade or
`commerce among the several States”); see also 15 U.S.C. §15(a) (“[A]ny person who shall be injured in his
`business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district
`court of the United States[.];”) 15 U.S.C. § 15c (authoriz