Today, the White House released a statement proposing new action to lower health care and prescription drug costs. Among these proposals, is a new framework that would allow the federal government additional leeway in granting compulsory licenses to other drug manufacturers when the cost of taxpayer-funded and patented drugs is deemed to restrict access to the drug. The Federal Government has long had the ability to compel licenses to taxpayer-funded and patented drugs under the Bayh-Dole Act of 1980, if the drug was developed with government funds and is “not accessible to the public.” Historically, the accessibility of a drug was determined by the patent owner’s ability to supply the drug in sufficient quantities. The proposed new rule, promulgated under the Department of Commerce and Health and Human Services, would also allow the government to consider the price of a drug in determining whether it is “accessible to the public.” The proposed rule is currently open for notice and comment by the public.
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Franchise Fees Imposed Through Franchisor Operations Manuals Violate Federal and State Law If Not in FDD (Washington State Opinion)
National franchisors should take note that Washington State released Franchise Act Interpretive Statement No. 9 (the “Statement”) discussing the disclosure of fees to prospective franchisees in the Franchise Disclosure Document (FDD) prior to the inception of the franchisor-franchisee relationship. The question presented was whether a franchisor may impose fees on the franchisee through its operations manual or otherwise, where such fees were not disclosed in the FDD.
It is commonly known in the franchising industry that franchisors generally keep the substantive contents of their operations manuals – to which franchisees are normally bound – confidential. Some franchisors give their prospective franchisees the opportunity to review the franchise’s operations manual, but usually only after signing a confidentiality agreement, for example. Even when such an opportunity is available, however, not all franchisees are actually aware of it or otherwise elect to forgo their chance to review the manual. Nevertheless, some franchisors list additional fees in their operations manuals that are not disclosed in their respective FDDs.
Federal law states that an FDD must disclose “all fees and payments, or commitments to pay, for services or goods received from the franchisor or any affiliate before the franchisee’s business opens.” 16 CFR 436.5(e). Further, “all other fees that the franchisee must pay to the franchisor or its affiliates, or that the franchisor or its affiliates impose or collect in whole or in part for a third party,” must be disclosed as well. Accordingly, Washington state took the position in its Statement that the imposition of additional fees via an operations manual violates both federal and Washington state law, when such fees are not also disclosed in the FDD. Such violations may entitle franchisees to a host of legal remedies against a franchisor.
The entirety of Franchise Act Interpretive Statement No. 9 is available here. For more information about franchising, please contact Keith Kanouse and Kelly Malloy.