Bayh-Dole Forecast: Sunny with 20% chance of Shark Attack

Mayor Vaughn: I don’t think either of you are familiar with our problems.

Hooper: I think that I am familiar with the fact that you are going to ignore this particular problem until it swims up and bites you on the a…

(From the movie “Jaws”)

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(This month’s column is based on my presentation at the annual meeting of the Association of University Technology Managers)

It’s hard to believe when attending this meeting with thousands of people from all over the world who work so hard bringing new products to the public, improving our quality of life and strengthening the economy that there are some who would enjoy nothing better than eating you alive. These are folks who believe that what you are doing is wrong. They think it is unfair. They are always out there and always will be.

For many in our profession this is hard to believe. They keep their noses to the grind stone licensing important inventions from some of the most creative minds in the country, partnering with entrepreneurial companies that transform these early stage discoveries into revolutionary new products alleviating disease, feeding the hungry and protecting the planet. Each year the AUTM licensing survey shows that this is not just hyperbole. Consider this data from the most recent report for 2013:

• 818 start up companies formed around university inventions (that’s more than two for every working day of the year);
• 4,200 patent based start ups in operation– most located in the same state as the university which spawned them, growing the regional economy;
• 719 new products from licensed patents hitting the market; and
• The US economy benefiting from $22.8 billion in product sales.

Not bad work in an otherwise lackluster economy.

Several years ago BIO supported a study on the economic impact of university patent licensing. It found that between 1996 and 2010 you contributed $836 billion to US gross domestic output, impacted the US gross domestic product by $388 billion while supporting 3 million good paying jobs.

That’s a significant return on investment for the research dollars entrusted to you by hard pressed taxpayers. Even so, there are some who despise the Bayh-Dole Act– and the patent system– believing they promote the interests of a few who exploit the needs of the many. In case you missed it, here are some examples from just last month:

On January 23, Elizabeth Warren Has a New Target People Hate Almost As Much As Wall Street ran on Sen. Warren’s new bill to fine pharmaceutical companies found guilty of misconduct to help fund the National Institutes of Health. But the story includes another target as well:

According to Dean Baker, a left-leaning economist at the Center for Economic and Policy Research, Warren’s bill could ultimately represent a big giveaway to the pharmaceutical industry. He points out that money used to fund NIH research often leads to contracts with biomedical and pharmaceutical companies that ultimately end up with patents for whatever new drugs have been created. Those patents, of course, allow the drug companies to drive up prices and are hugely profitable. Baker wishes that Warren’s bill also stipulated that patents for discoveries made with the new funding remain in the public domain.

“I really wish she would tackle that,” Baker said of the patent issue. 

On January 5, Stop Subsidizing Big Pharma appeared as an op-ed in The New York Times. While it criticizes the Cystic Fibrosis Foundation for funding a breakthrough drug with a high initial price tag, Bayh-Dole is also in the crosshairs:

The idea of a public-private research transfer is not without precedent. In 1980, Congress passed the Bayh-Dole Act, which allowed publicly funded universities to sell off exclusive licenses on their research to private industry. The act was intended to drive funding for academic research and innovation.

But the resulting race for private funding has created perverse incentives to research blockbuster drugs, even if they are not the most imperative from a public policy standpoint. The impetus to produce more and more profitable research has also driven down the quality of academic work, promoting ghostwritten papers, sloppy peer review and the burying of unfavorable clinical-trial results. Venture philanthropy builds off the model created by Bayh-Dole, but with tax exemptions and a sheen of generosity on top of the lucrative payoff…

Biotech patents developed through venture philanthropy should not have exclusive rights attached to them. This would allow generic versions of drugs onto the market, which would go a long way toward keeping health care costs down and not driving the uninsured into debt.

Of course, these views are palpably wrongheaded, but they resonate with many. Obviously, someone at The New York Times thought enough of this argument to prominently feature it on their editorial page.

The critic’s main point is that products—particularly drugs— would be cheaper if only they were in the public domain without patent protection and exclusive licenses. We have a painful history before the enactment of Bayh-Dole proving that this theory is flat wrong. Prior to Bayh-Dole, not a single new drug was developed when the government took the invention away from the inventing organization and put it in the public domain.  Hundreds of billions of dollars in federally supported R&D resulted in 28,000 inventions wasting away on the shelves in Washington because there was no patent incentive for anyone to develop them. That was the main driver for enacting Bayh-Dole. Republicans and Democrats agreed that we could no longer afford to squander discoveries made by our universities, the greatest public research institutions in the world.

[Joe-Allen]

It’s up to us to make sure we don’t ever forget this hard learned lesson. We need to educate policy makers, the media and the public on the realities of commercialization. Taking a new invention to market is a high risk endeavor much more likely to fail than to succeed. That’s why the Founding Fathers put the incentives of the patent system into the Constitution even before the Bill of Rights. They knew that their fledgling country needed to promote innovation if it was ever going to be more than a supplier of raw materials to Europe. The protections of the patent system were made available to any citizen, rich or poor. Abraham Lincoln called the creation of the patent system one of the greatest advances in human history. It allowed people of humble birth to rise as far as their talents could take them. That was unheard of in other countries at that time—and still is in much of the world.

In one hundred years we went from a nation of small farmers into the greatest driver of innovation in history. This advance was led by people of modest means who burned with the fires of genius and were able to protect their discoveries through the patent system. They changed lives around the globe.

Unfortunately, we are now witnessing an unprecedented attack on the patent system under the guise of “patent reform.” One aspect of the debate is the claim that universities are patent trolls. The other panelists will go into more detail, but know this: the stakes are sky high. How tragic if the United States of America turns its patent system into a tool that rich and powerful companies use to suppress innovation that challenges their comfortable status quo.

So what should we do? Just because there are sharks doesn’t mean you stay out of the ocean. Similarly, just because we have critics doesn’t mean that we must helplessly sit around until we’re eaten. We can’t wait until we are attacked to promote our views. We need to get ahead of the curve and aggressively publicize what we’re doing to protect the public interest. That means showing how Bayh-Dole and the patent system advance human well-being and wealth creation not just here but around the world.

If you’re from a federally- supported university you have a moral obligation to serve the public interest. This not only means having the highest professional integrity, but also having a duty to speak up. You should be letting your colleagues on campus, policy makers and the media know that commercializing federally funded discoveries means that taxpayers fully benefit from academic research. Not only are you making their lives better, but Bayh-Dole creates new products, companies and jobs driving the American economy.

The law is an acknowledged international best practice which is why this meeting draws attendees from so many countries. We are happy to share our experiences with them because the more nations joining in unleashing the inherent creativity of their people, the better for everyone.

Unlike the critics, we can actually document our case. However, while it’s important to have facts, success stories are more useful in winning hearts and minds. Let me share one with you.

A couple of months ago I moderated a panel for the Congressional Technology Transfer Caucus on the work that the National Center for Advancing Translational Sciences is doing with patient foundations fighting orphan diseases. One speaker cut through the clutter and brought a hush to the room.

Dr. Bruce Trapnell with Cincinnati Children’s Hospital described the current treatment for Pulmonary Avleolar Proteinosis (PAP), a disease that gradually fills its patient’s lungs with fluid. Once every couple of months children suffering from PAP come to the hospital and have two tubes forced into their lungs. One lung is filled with salt water and the other with oxygen. The doctors then literally pound the salt water out to clear the lung of its blockage. A short time later the procedure is repeated on the other lung.

Can you imagine how it feels taking your child to the hospital knowing what’s awaiting them? Can you imagine what it’s like for the child knowing what they’re about to go through? What it must be like for the doctors having to administer this procedure not from any sense of cruelty, but because it’s the best procedure currently available?

Like many academic researchers, Dr. Trapnell is spending his life looking for a better treatment. He identified a drug, Leukine, approved for other uses that might be the breakthrough he needed. Unfortunately, the market for PAP treatments is so small that the company wasn’t interested. Finally a small biotech acquired Leukine. The company executive thought it was one of the most exciting molecules he had ever seen. However, no VC would provide development money.

He approached NIH in desperation and secured support for human proof of concept research. That was successful and the company got an accelerator loan keeping it afloat until it was acquired by Genzyme which became the 6th business to own Leukine. The drug was placed in the oncology portfolio where it sat on the shelf. On a whim a Genzyme researcher searched the Internet and found the name of an expert on orphan drugs that he called out of the blue to see if Leukine might have other applications. The expert turned out to be Dr. Trapnell at Cincinnati Children’s Hospital!

This miraculous connection led to a R&D partnership between NIH, Genzyme and Cincinnati Children’s Hospital which just went back to the FDA with several completed safety studies showing that Leukine works to treat PAP. Now there’s new hope for those suffering from the disease.

Similarly, every time a researcher on campus gets an inspiration that leads to a patent, finds a company willing to invest the time and money for development that eventually turns into a useful product despite formidable odds, it really is a miracle. Without the patent system and Bayh-Dole these miracles won’t occur. Without them children suffering from diseases like PAP face a miserable existence with little hope during the short time they are here on earth. Keep that in mind the next time someone attacks us.

There really is a world at stake in who wins this debate.