Introduced by Senator Leddy of Chittenden District, Senator Sears of Bennington District, Senator Cummings of Washington District, Senator Bartlett of Lamoille District and Senator MacDonald of Orange District
Subject: Health; pharmaceutical drugs; eminent domain; patents; compulsory licensing
Statement of purpose: This bill proposes to allow the state to offer to residents pharmaceutical drugs at lower prices through the exercise of eminent domain powers.
AN ACT RELATING TO COMPULSORY LICENSING OF PHARMACEUTICAL DRUGS
It is hereby enacted by the General Assembly of the State of Vermont:
Sec. 1. LEGISLATIVE FINDINGS
(a) According to Boston University School of Public Health, individuals in this country pay an average of 81 percent more for patented brand-name drugs than do Canadians or individuals in six western European countries.
(b) Compulsory licensing is used in other industries in this country, and there is federal statutory authority allowing the United States government using compulsory licensing in the pharmaceutical industry.
(c) Other countries issue compulsory licenses for pharmaceuticals. In Africa, compulsory licensing has been used to lower the prices of necessary pharmaceuticals used to treat HIV/AIDS.
(d) Compulsory licensing could be used by Vermont to lower pharmaceutical prices for specific drugs needed for use by the state. If the state chose to manufacture the pharmaceuticals subject to the license, compulsory licensing could also be used by Vermont as an important economic development strategy.
Sec. 2. 18 V.S.A. Part 5, chapter 93 is added to read:
Chapter 93. COMPULSORY LICENSING
OF PHARMACEUTICAL DRUGS
§ 4801. Eminent domain; determination of necessity
(a) The commissioner of health may issue a declaration of compulsory licensing if the public health or safety of Vermont residents would be served by the state issuing a license to manufacture a specific pharmaceutical drug for use by the state. “Use by the state” means the provision of a pharmaceutical drug subject to the license allowed pursuant to this chapter to an individual for whom the state provides financial payment or assistance for health benefits, including state employees, beneficiaries of Medicaid, the Vermont health access plan, Dr. Dynasaur and other state pharmacy programs, individuals under the supervision of corrections or the department of children and families, free health clinics, and beneficiaries of workers’ compensation.
(b) The declaration of necessity shall include:
(1) the public health and safety basis for issuing the license to manufacture, which may consider whether:
(A) the pharmaceutical is essential for maintaining health or life;
(B) the cost of the pharmaceutical as sold to Vermont citizens is high in comparison to the cost in other states or countries;
(C) the cost of the pharmaceutical as sold to Vermont citizens is prohibitively high relative to the incomes of Vermonters; or
(D) there are extenuating circumstances justifying the price of the pharmaceutical drug under consideration.
(2) a list of the relevant patents, exclusive marketing periods, copyrights, trademarks, and any other relevant property to be licensed under this chapter; and
(3) the proposed license, including royalty rate, with a default rate of four percent of the state’s acquisition price if not otherwise specified.
(c) The declaration of necessity shall be published in one or more major newspapers published in the state and on the department of health’s website.
(d) Notice of the declaration and a copy thereof shall be sent to the registered agent in the state of incorporation of each company that may be affected by the licensing within five days of the declaration being published in one newspaper.
(e) The licensure process shall be conducted by the department of health.
§ 4802. Notice of intervention and hearing
(a) Within 30 days after the date of publication in the newspaper, any person affected by the licensing may appeal the licensure of any property listed in the declaration by filing a notice of intervention with the human services board and serving it on the commissioner of health and the office of the attorney general. The notice of intervention shall include the aggrieved party’s name, address, telephone number, and a short statement for the basis of the appeal.
(b) If a notice of intervention is filed and served, the human services board shall hold a public hearing on whether the health and safety of Vermont residents would be served by the issuance of the license. The board shall:
(1) provide at least 15 days’ notice of the hearing date;
(2) afford all persons reasonable opportunity to submit data, views, or arguments, orally or in writing, which opportunity shall be no less than seven calendar days after the public hearing;
(3) consider fully all written and oral submissions;
(4) issue an opinion within 90 days following the public hearing, including the decision regarding issuance of the license and the basis for the decision; and
(5) put all witnesses under oath under the penalty of perjury and make a record of the proceedings by recording or court reporter.
(c) If no notice of intervention is filed, the commissioner of health may issue the license pursuant to section 4803 of this title.
§ 4803. License
(a) The department of health shall issue a license for the manufacture of the pharmaceutical drug described in the declaration, including just compensation to the owner of the property being licensed and any terms or conditions contained in the opinion of the human services board after the expiration of the 30‑day appeal period provided for in section 4802 of this section if no notice of intervention is filed or 31 days after the issuance of the board’s opinion.
(b) The department of health is authorized to assign the license to one or more manufacturers of pharmaceutical drugs solely for the manufacture of the pharmaceutical drug for the use by the state and other states which have issued substantially similar licenses.
(c) The state may also use the process described in this chapter as a remedy in litigation, in support of negotiations for lower pharmaceutical prices, or for other public purposes.
§ 4804. Coordination with other states
(a) If another state issues a license under a process similar to this act, the department of health may fully recognize the validity and effect of such licenses with the state.
(b) The department of health shall specifically recognize any such license by publication in one or more major newspapers published in the state and on the department of health’s website. Within 30 days of publication in one newspaper, the department shall issue a license to the out-of-state licensee on substantially similar terms and conditions.
(c) When another state has issued a license and the department has followed the procedure set forth in subsections (a) and (b) of this section, the department need not comply with the other requirements in this chapter.
(d) The department of health may enter into joint purchasing agreements with other states to maximize efficient manufacture of the licensed pharmaceutical drug for the states having issued licenses. The purchasing agreement shall exempt the state from any state procurement laws in order to enable a single pharmaceutical drug manufacturer to receive multiple licenses from multiple states for a single pharmaceutical drug.
§ 4805. SOVEREIGN IMMUNITY
Nothing in this chapter shall operate as a waiver of the state’s sovereign immunity.
Sec. 3. 3 V.S.A. § 3090(b) is amended to read:
(b) The duties of the board shall be to act as a fair hearing board on appeals brought pursuant to section 3091 of this title. The board shall also have the authority to hold public hearings on the licensure of pharmaceutical drugs as provided for in chapter 93 of Title 18.
The Vermont General Assembly
115 State Street