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Knowledge Ecology International v. National Institutes of Health

United States District Court, D. Maryland

April 11, 2019

KNOWLEDGE ECOLOGY INTERNATIONAL, Plaintiff,
v.
NATIONAL INSTITUTES of HEALTH, et al., Defendants.

          MEMORANDUM OPINION

          PETER J. MESSITTE UNITED STATES DISTRICT JUDGE.

         Knowledge Ecology International (KEI), a nonprofit organization that advocates for greater public access to affordable medicine and related intellectual property concerns, has sued the National Institutes of Health (NIH), the National Cancer Institute (NCI), and senior officials of both organizations, alleging violations of the Federal Property and Administrative Services Act, 40 U.S.C. §§ 101 et seq., and the Administrative Procedure Act, 5 U.S.C. §§ 701-706. KEI takes issue with NIH's decision to grant a particular exclusive license to a private pharmaceutical company, despite objections that KEI filed after the notice of the proposed license was published in the Federal Register. KEI also appeals NIH's refusal to allow it to administratively appeal the decision.

         Defendants have filed a Motion to Dismiss, (ECF No. 5), arguing that KEI lacks standing to pursue its claims. The Court heard oral arguments on the Motion on October 15, 2018. The parties thereafter filed supplemental briefing on the propriety of NIH's denying KEI the right to appeal. The Court has considered the initial briefs of the parties, their oral argument, and their supplemental briefs. For the reasons that follow, Defendants' Motion to Dismiss (ECF No. 5) is GRANTED.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         KEI, an organization based in Washington, D.C., conducts research, writes, and advocates on behalf of patients, taxpayers, and consumers. Its work focuses principally on assessing and, where it deems appropriate, opposing proposed exclusive licenses of federally-invented medical technologies to private organizations. KEI representatives frequently testify before governmental bodies with respect to these issues as well as drug pricing issues, especially where questions of intellectual property and public health intersect. KEI has been recognized by the MacArthur Foundation for its work, having won the MacArthur Award for Creative and Effective Institutions in 2006, and has been accredited as a non-state actor of the World Health Organization. It has a Board of Directors, a Board of Advisers, and a staff that it claims are directly affected by drug-pricing issues generally and, specifically, by the high price of cancer drugs. KEI maintains multiple email lists through which it communicates with patients, taxpayers, consumers, academics, and other interested persons. It lacks, however, a formal membership structure.

         In the present case, KEI challenges the propriety of an exclusive license of a federally-owned and federally-funded cancer treatment technology that NIH, through NCI, proposes to grant to Kite Pharma, Inc., a wholly-owned subsidiary of Gilead Sciences, Inc., a multi-billion dollar company. The treatment to which the license in question extends is a type of immunotherapy related to chimeric antigen receptor therapies, or CAR T treatments.[1] CAR T treatments are considered among the newest and most promising therapies for cancer. There are currently two CAR T cancer treatments on the market. Both treatments allegedly cost consumers hundreds of thousands of dollars for just one round of therapy, while the costs to the manufacturers are allegedly as low as $15, 000 per treatment. KEI points out that exorbitant prices for such treatments as these stem, at least in part, from rights granted to patent holders, who are then able to exclude competition via patents and related exclusive rights. KEI argues that high drug prices tend to decrease when patent terms expire and the field is open to competition. High prices of treatments create severe hardships for patients who benefit or would like to benefit from such therapies.

         KEI alleges that NIH took a final action reviewable under the Administrative Procedure Act when it proceeded to grant the exclusive license to Kite Pharma without complying with 40 U.S.C. § 559, which requires the agency to seek and obtain the advice of the Attorney General, before “dispos[ing] of property to a private interest, ” as to whether that disposal “would tend to create or maintain a situation inconsistent with antitrust law.” 40 U.S.C. § 559(b)(1). KEI also objects to NIH's decision to deny it the right to administratively appeal NIH's rejection of its comments with respect to the license.

         These are the facts:

         On December 20, 2017, NIH posted a notice in the Federal Register pertaining to its proposed granting of a worldwide exclusive license to Kite Pharma of patents for a CAR T technology for cancer treatment. Compl. ¶ 47. The notice included details about the specific patents and relevant cancers, see Id. ¶¶ 48-49, and opened a period for public comment, which encompassed the Christmas holidays and the New Year, to close on January 4, 2018.[2] Id. at ¶ 50. On January 4, 2018, KEI submitted written comments objecting to the exclusivity of the license and requesting the inclusion of what it deemed to be public interest safeguards in any license that might be issued. Given what it termed the early stage of clinical trials and relevant patent proceedings, KEI advised that the proposed exclusive license was premature, indicating that it would therefore be unwise for NIH to create a monopoly on this government-funded and invented technology. Finally, KEI recommended the inclusion of certain contractual protections in any license that it believed would protect U.S. residents against excessive prices and barriers to access. Id. at ¶¶ 51-53.

         On January 25, 2018, Defendant Dr. David Lambertson sent an email to KEI, acknowledging receipt of its comments, but rejecting KEI's substantive objections and suggestions, indicating that “NCI intends to proceed with the negotiation of the proposed exclusive license.” Compl. ¶ 54.

         On February 13, 2018, KEI sent an email to both Dr. Lambertson and NIH, inquiring whether NIH, under 40 U.S.C. § 559, had requested and obtained advice from the Attorney General in regard to NIH's compliance with antitrust laws prior to transferring a patent and related rights to a private interest. Id. ¶ 55. On February 15, NIH replied to KEI, saying, “[t]he statute you reference is directed to the disposal (assignment) of government property. It has little relevance to our patent licensing activities, which are principally governed by the Bayh-Dole Act and its regulations.” ECF No. 5-2 at 27. KEI contends that this reply constituted an admission that Defendants have violated 40 U.S.C. § 559 and the black letter obligations of the FPASA- specifically, that Defendants did not seek or obtain the antitrust advice of the Attorney General regarding the disposal of government property, i.e., the license of the CAR T technology to a private party (Kite). Id. ¶¶ 64-65.

         On February 14, 2018, KEI sent an email to Dr. Lambertson and co-Defendant Dr. Francis Collins, Director of NIH, notifying them of KEI's intent to file an administrative appeal of the decision and requesting that NIH provide guidance with respect to its appeal procedures, which were not available on the NIH website, KEI noting in its email that the link to what appeared to be NIH's appeal procedures was “broken.” Compl. ¶ 56. But on February 26, Dr. Lambertson, prior to receiving or viewing the KEI inquiry regarding an appeal, responded to KEI's February 14 email. In his response, Dr. Lambertson made no mention of KEI's request for information as to NIH's appeal procedures, stating simply that NIH had “determined that there is no likelihood that KEI will be damaged by the agency action. Accordingly, we will not entertain an appeal of our decision.” Id. ¶ 58.

         There appears to be no express basis for KEI to further pursue the matter administratively, and no other possible remedy other than the present filing in this Court. Compl. ¶ 59.

         Nevertheless, the position of the NIH Defendants is that KEI lacks standing to bring this ...


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