In 2022, prices for both brand-name and generic drugs in the United States were nearly three times as high as prices in comparably industrialized nations, with the cost of insulin products in particular being nearly ten times as high. As a result, three out of ten American adults cannot afford to take their medication as prescribed. Furthermore, in 2024, the United States experienced its worst drug shortage in over a decade, with more than 300 drugs in short supply. Generic drugs are particularly vulnerable to shortage, as manufacturers have poor economic incentives to produce drugs with slim profit margins. While the Biden administration has signaled its interest in addressing drug pricing, the federal government has not responded to this crisis effectively with its efforts to regulate the private pharmaceutical industry. For instance, the National Institutes of Health (NIH) refuses to exercise march-in rights for federally funded inventions under the Bayh-Dole Act. More recent efforts to negotiate drug prices under the Inflation Reduction Act (IRA) are limited in scope and have been subjected to a number of constitutional challenges by the pharmaceutical industry. Meanwhile, several states, including Illinois, Maryland, New York, and Minnesota, have tried to address this crisis with laws prohibiting generic drug price gouging. Several of these laws have been struck down as unconstitutional, while others are still being litigated. States need another way to ensure that their citizens have access to medicine, and public pharma paves an unexpected path forward.
Public pharma is the development, manufacture, and distribution of drugs and biologic products by the public sector, rather than by private entities. This Article posits that public pharma is one solution to mitigate the troubles previously outlined: drug shortages and drug prices. Through state-owned pharma, states can take control of unrestrained drug pricing, as well as protect against drug shortages by investing in domestic production. Some state entities are already manufacturing or planning to manufacture generic drugs and vaccines, including California’s CalRx and Massachusetts’s MassBiologics. However, state liability for patent infringement will be a major legal challenge to state-owned pharmaceutical institutions. To overcome these challenges, this Article considers lessons learned from sovereign immunity doctrine and proposes tools for states to provide reasonable compensation to patent owners. States succeeding in experimenting with public pharma can ultimately serve as an important stepping stone for the establishment of a federal public pharmaceutical sector to ensure uniform access to medicine across the nation.
To read this Article, please click here: Formulating Public Pharma