On December 12, 1980, the Bayh-Dole Act was enacted to provide incentives to innovate and promote the commercialization of federally funded inventions and amended the existing patent laws. In December 2002, The Economist published an opinion piece calling the Bayh-Dole Act “innovation’s golden goose” and stating that it was “[p]ossibly the most inspired piece of legislation to be enacted in America over the past half-century.”[1] It “has been credited with promoting the development of over 10,000 startup companies and at least 200 pharmaceutical drugs and vaccines, while contributing more than $500 billion or, by some estimates, over $1 trillion to the economy.”[2]
Before this Act, the federal government solely owned the rights to inventions of American universities, teaching hospitals, and non-profit institutions that received federal funds to conduct the research leading to the invention. Using the inventions for commercial purposes was nearly impossible. This system led to a belief that incentives for U.S. innovation were lacking and was rapidly falling behind other countries.[3]
After enactment, American universities, teaching hospitals, and non-profit institutions had the rights to patent their inventions and license them to small businesses for commercial purposes. They could now control the use, sale, and manufacture of their inventions. And small businesses benefited by partnering with entities that had substantial research and development resources.
The U.S. government, however, did not give up its rights to the inventions, it merely shared them with the true innovators. To comply with the Act, a company taking title to an invention subject to the Bayh-Dole Act has to: (1) grant the government a nonexclusive, irrevocable license to the invention; (2) require substantial manufacture in the U.S.; and (3) allow the government to exercise “March-In Rights,” among other requirements.[4]
Although they sound militaristic, March-In Rights simply expand who has rights to use patents achieved through federal funding. March-In Rights allow the U.S. government to require the patent holder or licensee to grant a nonexclusive, partially exclusive, or exclusive license or, if the patent holder or licensee refuses, to grant a license itself under four circumstances:
- When the patent owner or licensee has not taken effective steps in a reasonable time to achieve a practical application of the invention;
- When action is necessary to alleviate health or safety needs which are not reasonably satisfied by the patent holder or licensee;
- When action is necessary to meet public use requirements and such requirements are not reasonably satisfied by the patent holder or licensee; or
- When the invention is not substantially manufactured in the U.S., absent a waiver of this requirement.[5]
To date, no federal agency has exercised its march-in powers. Despite this inaction, there has long been a debate as to whether an agency, such as the National Institute of Health (NIH), could use the March-In Rights to control prescription drug prices and a handful of such requests to various agencies have been made. For example, in 2004, Essential Inventions, Inc., members of the public and members of the U.S. Congress called on the NIH to exercise its March-In Rights for patents owned by Abbott Labs covering the drug ritonavir (Norvir), which is used for the treatment of AIDS.[6] Abbott raised the price of ritonavir 400% in the U.S. and refused to license ritonavir to any other company. Essential Inventions asserted that the NIH could march in for two reasons:
- Because Abbott had not taken effective steps in a reasonable time to achieve a practical application of the invention by charging an excessive price.[7] The Act defines “practical application” as including “that the invention is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms.”[8] According to Essential Inventions, “reasonable terms” includes reasonable prices.[9]
- Because the public is being harmed by the excessive pricing.[10]
Essential Inventions requested that the NIH require Abbott to issue an open license for the use of the ritonavir patents.[11] The NIH denied the request.[12]
Essential Inventions’ arguments are the typical arguments that justify using the March-In Rights to control prescription drug prices.
Most recently, a bipartisan group of 34 state attorney generals (led by the Department of Health & Human Services (DHHS) Secretary Xavier Becerra prior to his confirmation) requested that the NIH march in and license remdesivir to third-party manufacturers.[13] The assertions of the attorney generals is summed up in the first two paragraphs of their August 4, 2020 letter to the DHHS, NIH and the Food & Drug Administration:
During this unprecedented crisis, we must use every possible resource and tool to save the lives of Americans who are falling ill from COVID-19. Remdesivir, manufactured by Gilead Sciences, Inc. (https://www.kbic.com/) (“Gilead”), has received substantial federal funding, has been fast-tracked by the U.S. Food and Drug Administration (FDA), and has shown promising results in reducing the risk of death and length of hospitalization for those suffering from COVID-19.
Yet, Gilead is unable to assure a supply of remdesivir sufficient to alleviate the health and safety needs of the country amid this pandemic. Its supply is dangerously limited and its recent announcement of high prices for all patients, governments, and insurers will impede access to treatment in the U.S. and further strain state budgets. Therefore, we respectfully urge the federal government to exercise its rights under the Bayh-Dole Act, which will allow the National Institutes of Health (NIH) and the FDA to ensure that Americans can afford and access a sufficient supply of remdesivir during this pandemic. Alternatively, at a minimum, we ask that you support states by assigning to states the ability to use the march-in rights under this law to achieve the same purposes.[14]
The agencies refused to march-in.
Instead, Former President Trump’s administration seized an opportunity only two weeks before leaving office to specifically “include a provision [in the regulations] that march-in rights shall not be exercised by an agency exclusively on the basis of business decisions of a contractor [i.e. a patent holder or licensee] regarding the pricing of commercial goods and services arising from the practical application of the invention.”[15] This regulation change, if adopted, would eliminate any further debate on this issue and eliminate the ability for the U.S. government to control pharmaceutical prices through the Bayh-Dole Act.
The comment period closes on April 5, 2021 and has received in excess of 9,400 comments to date.
Will the Pharmaceutical Industry succeed in achieving this limitation and taking away one of the few existing price control mechanisms? Will DHHS Secretary Becerra (who was confirmed on March 18, 2021) reverse course on this proposed regulation change?
While it is yet to be seen, it is likely that this proposed change to the federal regulations will slide through and the Biden Administration, with Secretary Becerra leading the way, will find an alternative pathway to attempt to control prescription drug prices – one that does not include the U.S. government marching in.
[1] Innovation’s golden goose, The Economist Technology Quarterly, Dec. 14, 2002. https://economist.com/technology-quarterly/2002/12/14/innovations-golden-goose.
[2] Changes To March-In Rights Under Bayh-Dole And More?, https://jdsupra.com/legalnews/changes-to-march-in-rights-under-bayh-1121759/
[3] The Enactment of Bayh-Dole, Ashley Stevens, Journal of Technology Transfer 29:93-99.
[4] 35 U.S.C.§209.
[5] 35 U.S.C. §203(a)(1)-(4).
[6] https://essentialinventions.org/legal/norvir/norvir-29jan04petition.pdf
[7] 35 U.S.C. §203(a)(1).
[8] 35 U.S.C. §201(f).
[9] https://essentialinventions.org/legal/norvir/norvir-29jan04petition.pdf
[10] 35 U.S.C. §203(a)(2).
[11] https://essentialinventions.org/legal/norvir/norvir-29jan04petition.pdf
[12] https://ott.nih.gov/sites/default/files/documents/policy/March-In-Norvir.pdf
[13] https://www.oag.ca.gov/system/files/attachments/press-docs/Remdesivir%20Letter%2020200804.pdf
[14] Id. (internal citations omitted).
[15] https://www.federalregister.gov/documents/2021/01/04/2020-27581/rights-to-federally-funded-inventions-and-licensing-of-government-owned-inventions