The Biden Administration last week announced it would be seizing patents for drugs and drug manufacturing procedures developed using government money.

A draft of the new law, seen by Reuters, said that the government will consider various factors including whether a medical situation is leading to increased prices of the drug at any given time, or whether only a small section of Americans can afford it.

The new executive order is the first exercise in what is called "march-in-rights" which allows relevant government agencies to redistribute patents if they were generated under government funding. The NIH has long maintained march-in-rights, but previous directors have been unwilling to use them, fearing consequences.

"We'll make it clear that when drug companies won't sell taxpayer funded drugs at reasonable prices, we will be prepared to allow other companies to provide those drugs for less," White House adviser Lael Brainard said on a press call.

But just how much taxpayer money is going toward funding drugs? A research paper from the Insitute for New Economic Thought showed that "NIH funding contributed to research associated with every new drug approved from 2010-2019, totaling $230 billion."

The authors of the paper continue, writing "NIH funding also produced 22 thousand patents, which provided marketing exclusivity for 27 (8.6%) of the drugs approved [between] 2010-2019."

How we do drug discovery and production in America has a number of fundamental flaws that have created problems in the health service industry.

It costs billions of dollars and sometimes as many as 5 to 10 years to bring a drug to market in the US, which means that only companies with massive financial muscle can do so with any regularity, and that smaller, more innovative companies can't compete with these pharma giants.

This also means that if a company can't recoup that loss, a single failed drug can result in massive disruptions to business. To protect themselves, pharmaceutical companies establish piles of patents on drugs and drug manufacturing procedures. Especially if the drug in question treats a rare or obscure disease, these patents essentially ensure the company has monoselective pricing regimes.

However, if a company can convince the NIH that a particular drug should be considered a public health priority, they can be almost entirely funded by the government, as the research paper showed.

Some market participants, in this case the famous billionaire investor Mark Cuban, have attempted to remedy the issue of drug costs in America by manufacturing generic versions of patented drugs sold for common diseases.

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