Universities Are Making Billions Gatekeeping Your Meds

The University of California is pushing back against the government’s plan to cut prices of expensive drugs developed with taxpayer funds, saying the reforms could stifle innovation. But the university is also likely worried about its profits: As Helen Santoro reveals in today’s featured article, UCLA has quietly reaped more than a billion dollars in payouts from its blockbuster cancer drug, Xtandi.

Rock the boat.

(AP Photo/Rick Bowmer/Jae C. Hong)

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Research universities, many of them public, have joined forces with pharmaceutical companies and Wall Street firms to fight new government efforts to curtail out-of-control drug prices, saying the regulations could stifle innovation.

But these universities are also likely concerned that drug-price reforms would hamper their profits. Case in point: the University of California, Los Angeles (UCLA) has quietly reaped more than a billion dollars in payouts from Xtandi, a lifesaving cancer drug that it developed with the help of government funding and now costs U.S. patients $200,000 a year.

The university is among those working to block the government from lowering the cost of prescription drugs like Xtandi that have been developed with taxpayer money. 

Since this first-of-its-kind prostate cancer drug was approved for use in 2012, UCLA has received $1.6 billion in royalty fees, patent income, and reimbursement payments thanks to its development of Xtandi, according to information obtained through the California Public Records Act by The Lever. 

As the price of Xtandi increases and demands mount to lower its cost, the public institution — which exists because of federal land grants and is supported by government funding — has seen its royalty fees grow substantially, increasing by $11.6 million from 2021 to 2022.

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These payouts are on top of the $520 million UCLA received in 2016 after selling some of its royalty rights — and suggest that UCLA has a vested interest in stopping new drug pricing reforms, thus allowing Xtandi’s price to reach ever higher.

“For UCLA, this has been the gift that keeps on giving,” said Robert Sachs, who was prescribed Xtandi after being diagnosed with advanced prostate cancer and petitioned government agencies to reduce the drug’s price. 

While researchers deserve compensation for developing breakthrough medicines, experts say the opposition against even limited drug pricing reforms hurts patients and their access to lifesaving medications. 

Last December, the Biden administration announced plans to use a long-standing federal law to lower the price of prescription drugs developed with taxpayer funds. The Bayh-Dole Act of 1980 allows government agencies to “march in” and license brand-name drug patents to generic manufacturers to sell the medication at a more reasonable price.

In response, the University of California system — along with pharmaceutical giants, generic drugmakers, and venture capital firms — argued that march-in rights were not meant to address high drug prices and that doing so would stifle innovation. 

The march-in provision “is not supported by the statute itself and the authors (Senators Bayh and Dole) have clarified that this is not the legislative intent,” the University of California wrote in a 2021 letter about these rights. “Any perceived possibility for misuse or added uncertainty on the interpretation of this provision will have significant harmful effects on the University’s ability to collaborate with or license federally funded inventions to an industry partner.” 

Steve Knievel, an expert in policy matters affecting drug pricing and medicine access at the consumer advocacy organization Public Citizen, says this pushback is likely from universities’ academic technology transfer offices, which manage researchers’ intellectual property and partner with outside companies to commercialize inventions. These offices “see licensing of inventions made at universities to be a potential way to make some serious funds,” said Knievel.

More expensive drugs therefore lead to more money for the university. “Their concern is: If the drugs are cheaper, we get less in our royalty payments from the drug companies,” said economist Dean Baker, who cofounded the Center for Economic and Policy Research think tank. 

In response to a request for comment, UCLA Health’s Senior Director of Communications Phil Hampton wrote in an email that, as noted in the university’s 2016 news release, “UCLA is using some of the revenue to support undergraduate scholarships and graduate student fellowships. In addition, inventors and Howard Hughes Medical Institute receive a share of the proceeds.”

“Unreasonable, And Indeed Outrageous”

The research that laid the groundwork for Xtandi came about in the early 2000s, thanks to grants from the National Institutes of Health (NIH) and the U.S. Army. UCLA chemist Michael Jung designed a molecule called enzalutamide, known commercially as Xtandi. With the help of then-UCLA professor of medicine Charles Sawyers, the two discovered that the molecule can block cell absorption of androgens — a group of hormones that includes testosterone and fuel prostate cancer cell growth. 

In 2005, UCLA licensed three Xtandi patents to the biopharmaceutical company Medivation, which later entered into a global agreement with Japan-based Astellas Pharma to develop and commercialize the drug. In 2012, the U.S. Food and Drug Administration approved the drug, and the pill, which is very effective at slowing prostate cancer growth, is now taken by hundreds of thousands of patients worldwide. In 2016, the pharmaceutical behemoth Pfizer spent $14 million to acquire Medivation, adding Xtandi to its ever-growing cancer-drug roster.

Now, global sales of Xtandi by Pfizer and Astellas Pharma are $5 billion each year. The U.S. market, where Xtandi costs $136.50 per 40-milligram pill, accounts for roughly half of those sales. In 2022, Medicare and Medicaid spent $2.6 billion on the drug. 

Regardless of the public funding that contributed to Xtandi’s creation — and the fact that all three of the drug patents currently licensed to Pfizer and Astellas Pharma state that “The Government has certain rights in this invention” — the medication has an average wholesale price of $199,290 per year as of 2023, making it unaffordable for many patients. The price has increased by almost $10,000 since January 2022. In Japan, where Astellas Pharma is based, the drug costs less than a fifth of the U.S. wholesale price. 

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As the first medication of its kind on the market, Xtandi’s exorbitantly high price set a precedent for other androgen-blocking prostate cancer drugs, said Sachs. For example, darolutamide, made by the Finnish pharmaceutical company Orion Corporation and drug giant Bayer, costs $14,303 for 120 tablets.

This is an exploitation of the “weak response of the United States to excessive pricing of drugs,” advocacy groups wrote in a 2016 letter to the NIH, Department of Defense, and Department of Health and Human Services requesting that the government use march-in rights to reduce Xtandi’s cost. 

“In our opinion, it is unreasonable, and indeed outrageous, that prices are higher in the United States than in foreign countries, for a drug invented at UCLA using federal government grants,” the groups wrote in the letter. 

The NIH and Department of Defense rejected the march-in request, and prices for Xtandi subsequently increased, according to James Love, director of Knowledge Ecology International, who has been following the march-in fight for years. 

During this time, a Canadian pharmaceutical company also offered to sell generic versions of Xtandi to the Centers for Medicare and Medicaid Services (CMS) for $3 per pill (the Medicare price at the time was $69.41 per pill). Andy Slavitt, then-administrator of CMS which runs all federal health care programs, turned down the offer. 

March-in supporters picked up the fight again starting in 2019, when individuals with prostate cancer, including Sachs, petitioned the U.S. Army, the Department of Defense, and the Department of Health and Human Services to grant march-in rights for Xtandi patents. Nineteen organizations and 25 members of Congress also urged the Health and Human Services Secretary Xavier Becerra to take action. 

However, these requests were once again denied. According to a 2023 letter from the NIH, the “practical application” of Xtandi, based on the U.S. Code for patent law, is “evidenced by the ‘manufacture, practice, and operation’ of the invention and the invention’s ‘availability to and use by the public,’” Therefore, the agency claimed that the University of California “does not fail the requirement for bringing Xtandi to practical application, as the drug is manufactured and on the market in the manner of other prescription drugs.” 

The definition of “practical application” under the U.S. Code on patent law also states that “to the extent permitted by law or Government regulations,” the invention must be made “available to the public on reasonable terms,” although the NIH did not mention this qualification in their letter. 

“What the Biden Administration is saying is that charging U.S. residents three to six times more than any other high-income country is reasonable,” Love wrote in a post about the NIH’s rejection of march-in rights. 

This rejection hasn’t stopped efforts to reduce Xtandi prices: On April 9, Knowledge Ecology International and other groups sent a letter to CMS demanding the Biden administration leverage their authority provided under patent law to “authorize qualified companies to make and sell generic versions of” Xtandi. 

The authors noted that nine drug manufacturers, many of which are based in India, are currently making generic versions of Xtandi, and some of these drugmakers have tentative approval from the FDA to sell their medication in the U.S. 

A Billion-Dollar Jackpot

Meanwhile, UCLA has earned millions of dollars in payouts — mostly royalty fees — from Xtandi sales each year. From 2012, when the drug was approved by the FDA, until the summer of 2023, quarterly royalty payments grew from $564,000 to $48 million, an 85-fold increase, according to data reviewed by The Lever.

In 2016, the university also sold a portion of the royalty rights it co-owned for $1.1 billion to Royalty Pharma, a company that purchases biopharmaceutical royalties to collect future payouts. Of this amount, UCLA received $520 million, which was put into a portfolio anticipated to bring in “approximately $60 million annually until 2027,” according to a university news release.

The remainder of the proceeds was split between the inventors, including Jung and Sawyers, and the Howard Hughes Medical Institute in Maryland, where Sawyers also worked when the drug was invented. 

These payouts are on top of the billions of dollars the University of California system receives from federal, state, and local governments. During the 2022-2023 school year, the 10 universities in the system were awarded $5.5 billion in public money, with UCLA receiving more than a billion dollars.

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Despite such massive benefits from taxpayer money, the University of California system continues to try to block the government’s use of march-in rights, spending $1.2 million lobbying on the Bayh-Dole Act, intellectual property and technology transfer issues, and other matters last year, according to lobbying records. 

The University of California, along with Astellas Pharma and Pfizer, even went as far as to sue an India-based drugmaker in 2022 that wanted to sell generic versions of Xtandi — alleging that these generics would infringe one of the drug’s patents. Last year, the Indian drug manufacturer dropped all claims for the Xtandi patent.

This comes after the academic institution signed a landmark set of ethical licensing guidelines in 2007 that said universities should find “a way to share the fruits of what we learn globally, at sustainable and affordable prices” and “construct licensing arrangements in ways that ensure that these underprivileged populations have low- or no-cost access to adequate quantities of these medical innovations.”

Academic Opposition

UCLA is not the only research university opposing march-in rights. Others including Stanford University and the University of North Carolina at Chapel Hill have also submitted comments to the government decrying the fair drug pricing initiative.

March-in rights “will result in disincentivizing private sector partners from licensing advancements made through federally funded research,” a group of educational associations, including the Association of Public and Land-grant Universities, wrote in response to the draft march-in rights framework proposed by the National Institute of Standards of Technology last December. “We recommend a complete and timely rescission of this framework by the administration.” 

The Bayh-Dole Coalition, a group of research universities and other scientific organizations, also staunchly opposes march-in rights, writing in their comment that the “draft framework is being justified as a weapon to lower drug costs. It is no such thing,” and the “proposed framework violates both the letter and spirit of the Bayh-Dole Act and would cause untold harm to American companies, workers, and consumers if implemented.” 

Although the Bayh-Dole Act is pivotal in helping universities license their inventions to the private sector, the creation of blockbuster drugs like Xtandi — which march-in rights were designed to address — is very rare. 

“There have been really some big moneymakers where the university gets a small licensing fee on some key patents on a blockbuster drug that can bring in some serious revenue,” said Knievel from Public Citizen. However, he added, “Most of the university grants don’t lead to those sorts of inventions. It’s sort of like they are playing the lottery.” 

A few other academic institutions have hit the drug jackpot. In 2007, Northwestern University invented the pain and epilepsy medication Lyrica that was commercialized by Pfizer and resulted in a $700 million payout from Royalty Pharma — the same company that bought Xtandi royalty rights from UCLA. That same year, New York University hauled in $650 million from Royalty for its arthritis drug Remicade. 

Because of how unusual it is to create a successful drug — and the many regulations involved — Knievel said the government’s march-in rights would only be used in rare circumstances. So he doesn’t believe the drug reforms would stifle innovation or destroy the pharmaceutical industry. 

“If we’re only asking for some modicum of fairness, companies will retain the ability to be extremely profitable, we’ll still get plenty of new drugs that we need,” said Knievel.

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