“It’s critical that the incoming Administration appropriately values the selfless contributions of those who work so hard to move NIH inventions from the lab into the marketplace where they can alleviate suffering. A sincere ‘thank you,’ rather than fault finding is in order. But sometimes no good deed goes unpunished.”
How many people or organizations could undergo an exhaustive investigation into everything they’ve done over the past 30 years and emerge unscathed? That’s what just happened to the technology transfer operations at the Department of Health and Human Services (HHS), with the spotlight primarily focused on the National Institutes of Health (NIH). Of course, an exercise like this has to find something, so the report that resulted from this exercise is titled “NIH Should Publicly Report More Information about the Licensing of Its Intellectual Property“. After extensive digging, all it uncovered are some pretty small potatoes.
The study was done by the Government Accountability Office (GAO) at the request of Rep. Carolyn Maloney (D-NY), who chairs the House Committee on Oversight and Reform, and Senator Debbie Stabenow (D-MI), Ranking Member of the Senate Subcommittee on Health Care. While the Congressional letter requesting the study is not provided, the GAO says: “You asked us to review HHS’s management of its intellectual property that has contributed to the development of new drugs.” An apparent motivation is revealed early in the document:
Since the 1980s, patients’ rights and consumer advocates have raised concerns about the price of drugs that include contributions made by HHS-funded research, including that funded by the NIH and CDC (Center for Disease Control and Prevention).
Hardly a Scalping
If discovering a justification for imposing price controls on therapies based on federally funded inventions was the objective, the result is a big disappointment. After an extensive, year-long review of every HHS patent and license made since the 1990s, all GAO could come up with was a recommendation that NIH should include a provision stating that if a court found one of their patents was used to violate antitrust laws, the license could be revoked. While prudent to have such language, that circumstance has never occurred in real life. GAO also said that NIH should provide more data about its licenses for public review.
NIH immediately accepted both recommendations. It will include language in its licenses regarding antitrust violations and will provide data such as the date of the license, its degree of exclusivity and whether or not the invention was made under a Cooperative R&D Agreement (CRADA). So, rather than a scalping, HHS emerged from this ordeal with a modest trim around the ears, if that.
The report indicates how hard it is to find licensees for most HHS inventions and, while most licenses are non-exclusive, exclusivity is normally required for discoveries selected for commercial development. GAO’s investigators then focused on 34 drugs developed under NIH licenses.
Knowing their audience, GAO began its discussion of drug development predictably:
Pharmaceutical and biotechnology companies seek to maximize profits, in part by investing in the development of drugs that can command high prices. High prices pose challenges for the public in being able to afford and receive access to drugs to treat diseases, according to scholars and public health advocates.
It found that of its 4,446 patents, HHS licensed 94 inventions, primarily from NIH, which resulted in 34 new drugs treating diseases like hepatitis, cancer and HIV. Of these, five were significantly successful, generating $2 billion in royalties for the agency. GAO reported that collaborative research often contributed to the 94 licensed inventions and “the vast majority of co-inventions are with universities.” That’s not surprising given that NIH extramural R&D is the primary source of life science research conducted on campus. It also shows how important research alliances have become since the passage of the Bayh-Dole Act in 1980.
GAO calculated that it typically took eight years after licensing for those drugs to reach the marketplace. Obviously, NIH isn’t licensing late stage discoveries, as the critics often allege.
No Justification for Marching In
After more than 30 pages, the report gets down to the nub:
While NIH does not consider the affordability of drugs that may result from the licensing of its inventions, the agency does consider whether to grant an exclusive license, which would have an effect on the number of competitors producing a drug and ultimately affordability. Federal law requires NIH to consider whether granting an exclusive license would “tend substantially to lessen competition or create or maintain a violation of the Federal antitrust laws.”
The language GAO quotes is from the Bayh-Dole Act, which governs how academic institutions and federal agencies like NIH license their inventions.
GAO states that both NIH and the Department of Commerce (which oversees the implementation of Bayh-Dole) agree that the march-in provision of the law, which agencies can use to require universities to license additional companies if the technology isn’t being developed or for unmet needs of a national emergency, “refers to incentives for public-private collaboration and not to considerations of affordability or price.” GAO also cites allegations that the march-in provision allows agencies to mandate “reasonable pricing” when their inventions are commercialized. That interpretation has been rejected as every march-in petition to control prices has been dismissed under Republican and Democratic Administrations since the theory was concocted 20 years after Bayh-Dole’s enactment.
Officials at NIH expressed a concern that attaching price-related conditions to licenses would deter companies from licensing government-owned intellectual property and deter innovation. Representatives from one drug industry association we interviewed confirmed that such conditions would make it riskier for companies to license intellectual property from NIH, but that each company would make its own calculation of the risk and reward.
So much for hopes that the report would give the critics new ammunition on that front. However, there had to be some fault finding, so the inquiry goes onto antitrust concerns.
New Language for Licenses
NIH is cited for not knowing that the Federal Trade Commission (FTC) had accused their licensee of the anti-cancer drug Taxol of engaging in anticompetitive behavior. GAO found that NIH had not incorporated language required under Bayh-Dole saying that licenses can be terminated if the licensee had been found guilty “by a court of competent jurisdiction” of using the invention to violate antitrust laws.
NIH acknowledged this omission but pointed out (let’s hope with a wry smile) that such language would have made no difference in the Taxol case as the FTC is not a court. However, NIH did agree to incorporate this provision in future licenses. As stated previously, this clause would have had no impact on any HHS invention licensed in the past 40 years, as this circumstance has never happened.
The biggest fault GAO found was that NIH makes limited information available to the public about its licenses. This has long been a complaint of the Bayh-Dole critics who have made a cottage industry of objecting to every notification that NIH intends to grant an exclusive license. But just like the finding on antitrust, that’s not much to show for an extensive year-long investigation.
You Forgot to Say ‘Thank You’
However, you can’t fault GAO for conducting a review requested by Congress. Still, it would have been nice to make some reference to the incredible impact that NIH funded inventions have had in protecting public health. According to an article in Nature Biotechnology:
Compared with other US public-sector research institutions, the US National Institutes of Health has contributed inventions that have had a disproportionately greater impact on the overall number of products produced, drugs granted orphan status and drugs granted priority review.
Ironically, it was then-GAO Comptroller General Elmer Staats who was the lead witness in the Bayh-Dole hearings. He testified on the ineffectiveness of the pre-Bayh-Dole policies in developing federally funded inventions into useful products. The Senate Judiciary Committee was stunned to learn that not a single new drug had been commercialized when NIH took inventions away from their creators before Bayh-Dole.
A 2011 study in the New England Journal of Medicine found that, under Bayh-Dole, approximately 153 new drugs and vaccines had been commercialized by “public-sector research institutions,” mostly with NIH funding. A soon-to-be- published update of that study indicates that number is now up to 300 drugs and vaccines fighting disease around the world. The critics of patents and exclusive licensing hope to return us to the pre-Bayh-Dole days when Washington micromanaged the process and innovation—and drug development—suffered.
At a time when HHS supported research alliances are developing desperately needed drugs and vaccines to combat COVID- 19 in record time, it seems like our technology transfer system should be getting kudos. It’s critical that the incoming Administration appropriately values the selfless contributions of those who work so hard to move NIH-funded inventions from the laboratory into the marketplace where they can alleviate suffering. A sincere “thank you,” rather than fault finding, is in order. But sometimes no good deed goes unpunished.
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