At the same time, it is employing a looser standard of federal contracting — called “other transaction authority” — that avoids some contracting rules that protect taxpayer investments, said Knowledge Ecology International, a consumer advocacy organization that obtained copies of government agreements with industry under a Freedom of Information Act request.
“The amount of money the government is throwing at companies is unprecedented,” said James Love, KEI’s director. “Normally when you write bigger checks, you should have more leverage, not less leverage.”
Unlike many other countries, the United States does not control prices of drugs invented or developed with taxpayer dollars. A potential exception is contained in a 40-year-old law called Bayh-Dole. The law grants the government power to license a generic competitor if a company is not making a taxpayer-funded drug available to the public on “reasonable” terms.
The government has never exercised the authority, called “march-in rights,” and the limits of the power are disputed. But consumer advocates said they believe the mere threat can serve as a check on drug prices, especially in an emergency like the current pandemic.
KEI said march-in rights appear to be weakened in the “other transaction authority” agreements it reviewed between the Biomedical Advanced Research and Development Authority (BARDA) and drug companies Johnson & Johnson, Roche and Regeneron.
“The government has limited its ability to intervene if the pharmaceutical companies … charge unreasonable prices for the resulting covid-19 vaccines or treatments,” KEI said in its news release Wednesday.
BARDA is part of the Department of Health and Human Services. The department responded in an emailed statement that its flexible contracting approach has allowed BARDA to quickly shift gears toward the most promising coronavirus countermeasures.
“Agreements under other transaction authority save time and tax dollars by providing flexibility that is not available in typical federal contracts to purchase material,” the department said. HHS “has been able to enter into partnerships with companies to access entire portfolios of potential products and technologies in the company’s development pipeline. If the science on one potential product doesn’t work out or a new threat emerges, the work can shift quickly to develop a different product candidate in the portfolio to meet the nation’s health security needs.”
The statement continued, “HHS always seeks best value to the taxpayer, and when purchasing products that are manufactured with companies’ financial resources, one of the considerations in the price is any federal funding that was provided to develop the product.”
J&J has a $456 million contract with BARDA to develop a coronavirus vaccine and a $152 million contract to conduct screening of drug compounds that could be covid-19 treatments, according to the BARDA website. Regeneron has contracts worth up to $130 million to develop two therapies for the disease. Roche’s Genentech subsidiary has contracts worth $47 million to develop a pair of therapies.
J&J and Regeneron did not immediately respond to requests for comment. Genentech has a collaboration with BARDA dating to 2018 that has included work related to influenza and exposure to mustard gas. It said its coronavirus clinical trial of Actemra, an anti-inflammatory drug on the market to treat rheumatoid arthritis, is being paid for through a collaboration between BARDA and the company.
“Conducting this clinical trial in partnership with BARDA is an important example of how the U.S. government, the biotechnology industry and health care communities can work together to tackle public health crises,” the company said in an email. “The protection of intellectual property rights in all pharmaceutical research and development is essential to successfully drive the innovation that patients facing serious and life-threatening diseases depend upon.
“Genentech takes the responsibility of pricing our medicines very seriously, taking into consideration the value they bring to patients and society and the critical importance of enabling access for those who need them,” it said.
J&J has said it does not intend to profit from its vaccine, although that assertion has been challenged by advocacy groups who say it stands to gain billions in revenue if it is successful.
KEI said it also obtained agreements BARDA has with Moderna and Sanofi and found those contracts do contain Bayh-Dole taxpayer safeguards.
The Washington Post reported last year that use of “other contracting authority” agreements has jumped in defense contracting under the Trump administration. A report by the Center for Strategic and International Studies said the Defense Department’s use of OTAs had increased by about 350 percent since President Trump took office, totaling about $26.8 billion last year.
Correction: An earlier version of this story misspelled the name of the anti-inflammatory drug Actemra. This has now been corrected.