Three Congressional Letters Show the March-In Debate Has Shifted

When the Biden Administration unleashed its proposed march-in guidelines last December, it claimed they would be a powerful tool for lowering drug prices by allowing the government to “march in” to license copiers under the authorities of the Bayh-Dole Act.

It did so despite previously joining every other Administration denying price control petitions as not authorized under the law. It should have known the proposal would have minimal impact on drug prices—but would have a devastating impact on American innovation. That’s because the guidelines apply to all federal R&D agencies—not just the National Institutes of Health — so they cover inventions across the spectrum, not just the life sciences.

Now the chickens are coming home to roost. Three Congressional letters illustrate the point.

Those who browbeat the Administration into going out on this limb now say they haven’t gone far enough and need to also seize privately funded inventions. Others are speaking out against the guidelines as their predicted damage to American innovation is becoming evident.

Letter #1: Taking it Further

Two letters illustrating the debate issued the same day. On February 6, 2024, a number of progressive Democrats joined Senator Elizabeth Warren (D-MA) and Rep. Lloyd Doggett (D-TX) asking  the Administration to make the guidelines even harsher. While the proposal provides no definition of what constitutes a “reasonable price” justifying the government marching in, they suggest a laundry list of possibilities, including the price charged to the government versus those in the commercial market, prices of similar products, prices charged in comparable wealthy countries, or prices charged for similar products. Of course, since the law never contemplated such actions, all of these are purely arbitrary.

But the real nugget was buried at the end. Those seeking to misuse Bayh-Dole for imposing government price controls on drugs know that it alone will have little impact. That’s because the vast majority of patents needed to copy most drugs are created by the private sector and are not susceptible to march in rights, which only cover inventions made with federal support.

Their solution: the government  should also misuse the authorities of Sec. 1498 to seize privately funded patents as well:

“It is imperative that the Administration protect these investments and access to critical innovations by exercising its clear statutory authority, which also includes licensing authority on all patents using Section 1498 and the use of royalty-free rights. Not only does the framework fail to mention separate authorities, it dismisses their use by encouraging agencies not to exercise march-in rights ‘if only one of several patents necessary to produce a product is subject to march-in.’

“When issuing the final framework, we strongly urge you to include a directive to agencies to review all federally funded inventions under their purview within six months and determine whether to use march-in rights, either solely or in conjunction with Section 1498 and/or royalty-free rights.”

Letter #2: Small Business Concerns

Republican members of the Senate Small Business Committee expressed a different perspective in their letter to Secretaries Becerra and Raimondo. They see the guidelines having a devastating impact on small business.

“It is jarring to see the expanded range of possible circumstances in which the Administration seems intent on seizing patents held by small business owners— including those developed within the Small Business Innovation Research and Small Business Technology Transfer (SBIR-STTR) programs. Broad exercise of march-in authority under the Bayh-Dole Act could disincentivize small businesses from competing for federal research and development (R&D) dollars, discourage commercialization, and stifle America’s innovation ecosystem at large.”

They conclude by asking the Administration to explain how the interests of small companies will be protected—and whether a formal analysis of the impact of the guidelines was conducted under the Regulatory Flexibility Act (spoiler alert: it wasn’t).

Letter #3: Broad Bipartisan Opposition

The only bipartisan letter authored by Senators Chris Coons (D-DE) and Thom Tillis (R-NC) together with Representatives Darrell Issa (R-CA) and Jake Auchincloss (D-MA) was co-signed by 24 colleagues from both sides of the aisle and sent directly to President Biden on February 21, 2024.

After reviewing the tremendous impact of the Bayh-Dole Act, and that Senators Bayh and Dole plainly stated that their law gives the government no authority  to march in to control the price of a successfully commercialized invention, they state:

“Testifying at a public meeting that the National Institutes of Health held on the issue, Senator Bayh further explained that the proponents of using march-in rights to control prices had misinterpreted the law’s legislative history and that Congress would have to amend the law to allow ‘reasonable price’ to be a factor in triggering march-in rights.

‘But Congress has not chosen to amend the law, and for decades, the executive branch never suggested that it had the authority to override that decision. As recently as March 2023, your Administration rejected a petition seeking march-in based on price, joining every previous administration—Republican and Democratic alike—in denying petitions on that basis.

‘Given this long-standing precedent, we were surprised that NIST included “reasonable pricing” as a factor in its draft framework for considering the exercise of march-in rights. Proponents claim this change will help lower prescription drug prices, but that is simply not the case.”

“That leaves only the serious unintended consequences of NIST’s draft framework, which would apply to all types of technologies and products, not just pharmaceuticals. Under the proposed framework, entrepreneurial startups and small companies across industries—from green technology and precision agriculture to advanced computing and semiconductors—would be subject to march-in petitions challenging their pricing decisions by rival businesses and even our foreign competitors and adversaries, who could use this tool to cast a cloud over the companies that drive our economy. The increased risk of losing control over critical patents also threatens to deter the private investment necessary to commercialize products incorporating federally-funded research, preventing the public from benefiting from that research. The result would be to reverse the very advances the Bayh-Dole Act has achieved, and to disastrously disincentivize innovation.”

Their conclusion: “The draft framework will hamstring U.S. innovation to the advantage of our competitors and adversaries, and thus, we urge you to reconsider the NIST proposal.”

Pull the Plug

Let’s hope this wise counsel prevails. The guidelines are a fiasco. The damage will only increase the longer they loom over American innovation. It’s time to pull the plug on these ill-conceived march-in guidelines.

Image Source: Deposit Photos
Author: jtanki03
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