NIH Tech Transfer Workshop Underscores Fight to Properly Characterize Federal Drug Pricing Authority

“As someone who was in the room when Bayh-Dole was conceived… I can say with some authority that is not how the law works.” – Joseph Allen, Bayh-Dole Coalition July 31, the National Institutes of Health (NIH) hosted a virtual workshop titled Transforming Discoveries into Products: Maximizing NIH’s Levers to Catalyze Technology Transfer. Public comments submitted to the NIH ahead of the event reflect current tensions between advocates supporting either private commercialization or government pricing control of federally-funded medical breakthroughs commercialized by private companies.

Topics for panel discussion during the NIH’s workshop explored how NIH chooses the inventions it will patent and license, as well as the agency’s role in the broader biomedical research innovation ecosystem. Background materials provided by the NIH included a study on NIH intramural technology transfer licensing showing that NIH licenses produced reported sales of $133.5 billion between 1980 and 2021, including $61.6 billion in pharmaceuticals and $38.1 billion in vaccines.

PhRMA: March-In Rights, Reasonable Pricing Requirements Would Chill Private Sector

The Pharmaceutical Research and Manufacturers of America (PhRMA) lauded the Bayh-Dole Act’s establishment of technology transfer for federally-funded inventions, and the Federal Technology Transfer Act of 1986’s establishment of cooperative research and development agreements (CRADAs), for increasing private R&D spending to as much as eight times original NIH investments. Private industry partnerships have been remunerative for the NIH, which has received $2 billion in patent royalties between 1991 and 2019, funds that the agency reinvests into further research.

Maximizing private R&D investment to create innovative medical products is critical to the U.S. economy and patients alike. PhRMA’s comment noted that march-in rights under the Bayh-Dole Act, which allow the federal government to revoke patent licenses granted by the NIH, are only available in narrow circumstances when the licensee has not commercialized the product at all. The pharmaceutical industry organization also pushed back against calls for “reasonable pricing” requirements on CRADAs, which had been previously attempted by NIH from 1989 to 1995 before being eliminated due to their chilling effect on private-public collaboration.

Joseph Allen: NIH Must Continue to Preserve the Integrity of Bayh-Dole

Joseph Allen, Executive Director of the Bayh-Dole Coalition and staffer to Senator Birch Bayh during the passage of the 1980 Bayh-Dole Act, wrote that “NIH deserves considerable credit for [its] steadfast commitment to the rule of law” despite intense political pressure to exercise march-in rights to control drug pricing. “As someone who was in the room when Bayh-Dole was conceived… I can say with some authority that is not how the law works,” Allen wrote.

Past political pressures have caused the NIH to bow to advocates for reasonable pricing requirements, and Allen echoes PhRMA’s point that these requirements were eliminated from CRADAs once the NIH “realiz[ed] the disaster unfolding before its eyes” during the early 1990s. Once reasonable pricing provisions were removed, exclusive licenses under CRADAs increased fourfold, according to Allen.

Adam Mossoff: Price Control Advocates Mischaracterize Compulsory Licensing Mandate

The comment submitted by Adam Mossoff, Professor of Law at George Mason University’s Antonin Scalia Law School, featured a copy of his article The False Promise of Breaking Patents to Lower Drug Prices, forthcoming this year from St. John’s Law Review. This article explores arguments for pricing controls under Bayh-Dole as well as 28 U.S.C. § 1498, which provides a private cause of action against the United States for government use of a patented invention. Mossoff’s article lays out why neither Bayh-Dole nor Section 1498 authorize government pricing controls.

Patent owners suing over use of inventions directly by government agencies had their interests recognized by 19th century courts under the Constitution’s Takings Clause, Mossoff’s research shows. Section 1498 was codified by Congress in the early 20th century to settle confusion over jurisdictional issues in patent cases. An eminent domain statute, Section 1498 does not confer authority to regulate transactions between private parties, as has been misrepresented by price control advocates. Mossoff called out James Love as one speaker at the NIH event who has espoused such incorrect pricing control theories to politicians and federal officials.

Public Citizen: Reasonable Pricing, March-In Rights Are Needed to Support Access

Advocating for the use of march-in rights under Bayh-Dole to control drug prices was consumer advocacy organization Public Citizen. The group argued that the large amount of federal investment into drug development gives NIH the responsibility to improve medicine access across the world. Along with the use of Bayh-Dole march-in rights, Public Citizen urged NIH to make nonexclusive patent licenses the norm and introduce reasonable pricing provisions, such as Most Favored Nations clauses, in R&D funding agreements.

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