Federal Supply Deal For COVID-19 Antibody Treatment Lacks Some Customary Protections

Regeneron, maker of the experimental coronavirus antibody treatment President Trump received, released on Thursday its $450 million federal contract to supply up to 300 million doses of the medicine to the government for national distribution.

The contract, which the government hasn't made public, includes weaker than usual protections for taxpayers' interests. Drug policy experts said that could make it more difficult for the government to restrain pricing if Regeneron were to engage in price gouging down the road.

Regeneron's antibody therapy may soon be authorized by the Food and Drug Administration for emergency use. Operation Warp Speed, the Trump administration's push for COVID-19 vaccines and therapies, announced in July that it would finance Regeneron's efforts to scale up manufacturing.

Such federal funding usually comes with contractual strings attached to protect taxpayers. These include clauses laid out by the Bayh-Dole Act, enacted in 1980, which allows the government to "march in," as the law puts it, and take control of a drug or vaccine if a manufacturer that received federal funding can't or won't make the product or sets an unreasonably high price.

But the Regeneron contract the company included in a quarterly securities filing explicitly excludes this, stating, "The parties agree that the Bayh-Dole statute does not apply to this Project Agreement." Instead, the Regeneron contract has overwritten these rights with new ones, narrowing when the government can march in and take control.

"For 40 years, the Bayh-Dole Act has ensured that the American people maintain rights to inventions funded with taxpayer money," Robin Feldman, a University of California Hastings College of the Law professor who focuses on the pharmaceutical industry and drug policy, wrote in an email to NPR. "With these contracting practices, the administration is essentially giving away the store."

Regeneron spokesperson Alexandra Bowie provided the following statement in response to NPR's request for comment:

"The primary purpose of the ATI agreement is to manufacture and supply the Government with REGN-COV2. The Government approached us to negotiate the ATI agreement under OTA authority. The parties carefully negotiated provisions that protect the Government's interest in any intellectual property developed under the agreement, and we'll of course respect those rights. 

For many years now, we have been developing our rapid response capabilities to address pathogens that pose significant risk to public health. We have successfully worked with the Government to help fight diseases like Ebola and COVID-19, and we're proud to continue those efforts together." 

According to the contract, the government can only march in during a formal public emergency, not once the coronavirus becomes endemic, as it's expected to. And it can only do that if Regeneron is unwilling or unable to make the antibody cocktail — not if it raises the price in an unreasonable way.

Overall, this is leverage the government can no longer use to keep Regeneron's antibody therapy affordable. "If you take that leverage away, the government just has fewer cards to play," said James Love, director of Knowledge Ecology International, a nonprofit public interest group focused on intellectual property. "There's just less they can say about the way you price your product."

What's more, the patents may not be able to be used in related inventions to treat other diseases in the future, he said.

Based on how they're laid out in the Regeneron contract, the data rights, which typically govern disclosure and sharing of key studies, cell lines and the know-how to make a product, are also cause for concern, said attorney Kathryn Ardizzone of Knowledge Ecology International. Many of these rights don't kick in for 10 years, according to the contract.

"If the contract followed standard law, the government would obtain unlimited rights in data delivered under the agreement even if funded exclusively by Regeneron — and it would not have to wait 10 years for those rights to kick in," she said. She went into more detail in a blog post about the issue.

Bowie, the Regeneron spokesperson, said in a statement that "because this is a manufacturing and supply agreement, data generated from this work is pretty minimal."

Love disagrees. The know-how associated with how to manufacture biologics is critical in getting a generic-like drug, called a biosimilar, approved and on the market.

Notably, the Regeneron contract is not directly with the federal government. Instead it is through a third party called Advanced Technologies International, which NPR brought to light with regard to four of the Operation Warp Speed vaccine contracts in September. The federal government awarded funds to this third party, which then awarded a contract and funds to Regeneron.

The third party involvement has made it difficult for the public to see the terms of this government spending. NPR is still seeking the vaccine agreements from the Department of Health and Human Services. The Regeneron contract is the first Operation Warp Speed contract awarded through Advanced Technologies International that has become public.

"At the very least, it should have been no worse than what the government would obtain under a standard contract," Ardizzone said, explaining that using a nontraditional contract called an Other Transaction Agreement, as it has done with Regeneron, could give the government the flexibility to make its rights stronger. "But instead it has actually weakened the rights that the government would have had under a standard contract."

Regeneron is the second company in the last week to release its contract for Operation Warp Speed funding, exceeding the federal government's own efforts at transparency. On Oct. 23, HHS released its $1.5 billion contract with Moderna but redacted many key terms — including the already-public value of the contract, which it called perplexingly a trade secret. Moderna released the contract with fewer redactions as part of a securities filing on Oct. 30.

You can contact NPR pharmaceuticals correspondent Sydney Lupkin at slupkin@npr.org.

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