Is taking aim at pharma hitting farms?

Defenders of a 42-year-old law are claiming that attempts by some members of Congress to lower the price of a particular drug could jeopardize scientific innovation in the United States—including ag innovations.

The bipartisan Bayh-Dole Act (formal name: the Patent and Trademark Law Amendments Act) was passed in 1980, co-sponsored by Sens. Birch Bayh, D-IN and Robert Dole, R-KS. It was called “possibly the most inspired piece of legislation to be enacted in America over the past half-century” by The Economist magazine. Ever since its passage, it has enjoyed strong bipartisan support.

Before Bayh-Dole, all scientific research generated at U.S. universities with the help of federal funding was the property of the federal government. At the end of World War II, President Harry Truman had enthusiastically endorsed a famous post-war report by American engineer and science administrator Vannevar Bush called “Science the Endless Frontier.” Bush’s report argued the federal government should continue its partnership with industry and universities that had brought victory in World War II. His report became the conventional wisdom of the postwar world, and the foundation of science policy.

But after a few decades, a problem became apparent. The government was not transitioning discoveries to market. Prior to Bayh-Dole, the federal government had spent $75 billion on research, often in collaboration with universities. But only 5% of the 28,000 inventions and patents that resulted made it to the marketplace. “They were just sitting on the shelf, benefiting nobody,” said Joe Allen, executive director of the Bayh-Dole Coalition, which was formed in 2021. This was the opposite of the government’s intent to fund research to begin with.

Market incentives

Bayh-Dole introduced market incentives to speed up technology transfer. It allowed research partners, including universities, to retain intellectual property rights in products and inventions they developed with federal funding—subject to certain conditions. They were not obligated to do so and had to file a declaration of intent within a certain time-window if they intended to commercialize their discoveries. Once they did, they had to meet certain goals and timetables, or lose their rights. “By ensuring that academic institutions and companies would own inventions they make with government support, Senators Bayh and Dole spurred the transformation of laboratory discoveries into new products benefitting the American taxpayer—and citizens throughout the world,” according to the Bayh-Dole Coalition’s website.

The law’s effects have been spectacular by any measure. According to the Association of University Technology Managers, the licensing of academic patents contributed up to $1.9 trillion to the U.S. economy and supported up to 6.5 million jobs over the last 25 years. The Economist magazine credited the law with reversing American industrial stagnation of the 1970s, writing, “More than anything, this single policy measure helped to reverse America’s precipitous slide into industrial irrelevance.” Bayh-Dole has been so demonstrably successful that China has enacted its own version in an attempt to reap the benefits of public-private partnerships that Bayh-Dole helped American enjoy.

The protections and incentives of Bayh-Dole have fostered the development and transition to market of hundreds of innovations that define life today, according to the Bayh-Dole Coalition website. These include Google, Allegra, neoprene, the flu mist, the nicotine patch, live pneumonia vaccines, magnetic resonance spectroscopy, high-def television, the pain drug Lyrica and hundreds of others. All made it to market because Bayh-Dole allowed co-creators to profit from the fruits of their labor.

Ag innovations have been among those fostered and protected by Bayh-Dole. Allen cites the Honeycrisp apple, which was under development for 10 years. Researchers at the University of Minnesota developed the Honeycrisp apple by merging the Keepsake and MN1627 apples; they patented their invention in 1988 and soon the university began licensing Honeycrisp apple trees to nurseries. Biopharmaceuticals for the livestock industry have also benefited from Bayh-Dole (High Plains Journal, July 10, 2020).

How ‘march-in’ works

Bayh-Dole did impose conditions on product developers to ensure that the products were developed and actually made it to market. That meant meeting filing and reporting conditions. A partner who failed to meet those conditions could, in theory, have their IP rights taken away and assigned to someone else who could do better. The Bayh-Dole provision that allows the government to do this is called “march-in” for short since it allows the government to “march in” and transfer the rights to another party if the license-holder is not meeting his or her conditions.

The idea of using “march-in” in order to lower drug prices has been debated in medical and legal journals for years. The latest challenge has come from a petition brought by Robert Sachs and Claire Love, and their lawyer Eric Sawyer. They have petitioned the NIH to exercise march-in rights for enzalutamide, a prostate cancer drug also known by its brand name Xtandi, to lower its price. The NIH, the only agency to be petitioned to exercise march-in rights under Bayh-Dole, has received eight march-in petitions and has denied each one—including one concerning Xtandi in 2016, when the University of California in Los Angeles sold its rights to Japanese company Astellas Pharma Inc. In fact, no federal agency has ever exercised its power to march in.

The Xtandi petition has attracted the support of some powerful members of Congress, including Sen. Elizabeth Warren, D-MA, who earlier this year asked Xavier Becerra, secretary of health and human services, to allow open hearings on the Xtandi petition.

The Congressional challengers point out that Xtandi “can cost Americans as much as six times what it costs individuals in other high-income countries.” The average wholesale price for one Xtandi capsule in the U.S. is $130, versus just $20 per capsule in Japan, the lawmakers added, citing data from Knowledge Ecology International. A year’s worth of Xtandi in the U.S. costs nearly $160,000 more than the drug’s price in Japan, they said.

Bayh-Dole defenders worry that the Xtandi issue is only the opening wedge of a campaign by Democrats in Congress to use march-in to lower drug prices generally. More than 50 House Democrats have expressed support for the idea. In March, another petition to Becerra by a coalition of six non-profits urged that he use march-in powers to lower the price not only of Xtandi but of five other drugs, including Paxlovid (nirmatrelvir and ritonavir); Epclusa (sofosbuvir/velpatasvir; Descovy (tenofovir alafenamide and emtricitabine); Symbicort (budesonide/formoterol); and insulin. The letter noted, “The list is not exhaustive and, instead, represents a starting point with drugs across disease areas.”

If that happens, Bayh-Dole defenders say, the market incentives that Bayh-Dole was intended to create will evaporate. Companies would be afraid to risk development capital only to lose the fruits because politicians thought their price was not “reasonable.” Scientists might be reluctant to collaborate on significant innovations if they knew they could never share in the profits from them.

Price and march-in

Under Bayh-Dole, march-in rights can be exercised “when action is necessary because the contractor or assignee has not taken or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use” or when “action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees.”

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In 2002, the law’s authors, Sens. Bayh and Dole, wrote in a seemingly definitive editorial, “Bayh-Dole did not intend that government set prices on resulting products. The law makes no reference to a reasonable price that should be dictated by the government. This omission was intentional; the primary purpose of the act was to entice the private sector to seek public-private research collaboration rather than focusing on its own proprietary research. … The ability of the government to revoke a license granted under the act is not contingent on the pricing of a resulting product or tied to the profitability of a company that has commercialized a product that results in part from government-funded research. The law instructs the government to revoke such licenses only when the private industry collaborator has not successfully commercialized the invention as a product.”

One possible obstacle to invoking march-in to control prices is a rule proposed in January 2021, under the Trump administration, to prevent just that. The National Institute of Standards and Technology, part of the Department of Commerce, proposed a rule under Bayh-Dole stipulating, “March-in rights shall not be exercised exclusively based on the business decisions of the contractor regarding the pricing of commercial goods and services arising from the practical application of the invention.” Biden’s Commerce Secretary, Gina Raimondo, has not finalized the rule, and is under pressure not to finalize it.

Many powerful interests are waiting to see which way Becerra will rule. The stakes are high. When he was attorney general of California, Becerra signed a letter urging President Donald Trump to use march-in rights to lower the price of remdesivir. Before that, as a member of Congress, Becerra was one of 51 Democratic members of Congress urging the Obama administration to use march-in to lower drug prices—which it declined to do.

Jim Mintert, executive director of the Center for Commercial Agriculture at Purdue University, told HPJ that while technology transfer is not his area of expertise, “In general, restricting the opportunity to benefit financially from innovation is a bad idea. In the long run it discourages innovation which we, as a society, have benefitted from enormously. It will slow the pace of innovation and in place of innovation it will lead to a status quo with respect to innovative technology development and adoption.”

Ken Williams is the chief commercialization and licensing officer at K-State Innovation Partners, the technology transfer office of Kansas State University, an ag research powerhouse. “Because of Bayh-Dole, nearly every research university has an office like ours,” he told HPJ. “These offices have helped to deploy a treasure trove of innovation that has benefited all Americans. Prior to Bayh-Dole, there was limited infrastructure for patenting and tech transfer and near zero commercial incentive to advance government owned and controlled innovation. Any actions taken by the government that may limit that incentive should be heavily vetted across the broader research and design landscape and with an eye toward the long-term greater good. Increasingly, many cutting edge ag and animal health innovations have greater time, expense, and regulatory pathways to market as well.”

Williams pointed out that while Bayh-Dole does give commercial partner companies access to technologies that benefit from the 20-year monopoly protections allowed under U.S. Patent Law, those same laws only allow for such protection if the patents issued enable others to create those same inventions, thus after the processes or inventions go off-patent and become public property, others can recreate them freely, which is a huge long-term benefit of our current system. The ownership provisions allowed for under Bayh-Dole coupled with the 20-year protection window of the patents, he said, is necessary to develop commercial markets and allow for companies to recoup their often large research and development costs—which can also chew up a lot of the time within the 20-year window.

All in all, said Williams, Bayh-Dole does a good job of balancing the long-term needs of the many—robust competition that unleashes long-term innovation that is eventually accessible by all—against the short-term needs of the few. “We should be very careful about making any changes that disincentivize ag tech leaders from making those big bets on innovation … once that starts to happen, we all lose.”

David Murray can be reached at [email protected].