Opinion: Don’t sacrifice the miracle of American innovation
A Washington-based advocacy group has just petitioned the government to seize the patent covering the prostate cancer drug Xtandi so generic manufacturers can copy the medication.
The group behind this petition has issued similar calls in the past. But both Democratic and Republican administrations have rejected such petitions on the grounds that they misconstrue current law, as the current administration should likewise recognize.
The government contributed approximately $500,000 to research at UCLA that served as the foundation for Xtandi. The university’s findings were eventually licensed by Astellas — which, after more than $1.4 billion of investments and years of research and development, created the medication.
Since the government funded early-stage research underpinning Xtandi, the petitioners argue, federal officials should forcefully lower its price by licensing the medication to generic manufacturers. Of course, that’s not warranted by the law that took the medication from bench to bedside: the Bayh-Dole Act.
Prior to 1980, America had an innovation problem. The government funded basic research at university and non-profit labs and retained the patents resulting from the research. Inventors had no incentive to move their discoveries from the laboratory into the marketplace. It was up to the government to license these patents for commercial development.
The process was a mess. Twenty-six different licensing policies governed the federal agencies funding research. The government often offered only non-exclusive licenses. Private companies were loath to invest their time and money in such a dysfunctional system.
As a result, fewer than 5% of federally funded discoveries were licensed for commercial development. More than 28,000 taxpayer-funded insights languished. Not a single new drug was developed from federally funded R&D.
The Bayh-Dole Act broke that gridlock by allowing university research labs to retain their patents and license them to private firms in exchange for royalties.
The result opened a floodgate of American innovation. The law has helped grow the U.S. economy by up to $1.7 trillion. Over the past 25 years, U.S. universities and research institutions have been granted more than 80,000 patents, and some 70% of university innovations have been licensed to small companies.
The Bayh-Dole Act contains a “march-in” clause that allows the government to require the patent owner to license additional companies if efforts are not being made to develop the technology.
Some organizations have long sought to use the government’s march-in authority as a mechanism to impose price controls, especially on pharmaceuticals. Administrations since have rejected all such petitions. The Obama administration dismissed more of these off-base petitions than any other.
This petition grossly distorts the Bayh-Dole Act. If it were adopted, innovators would know that anyone could ask the government to “march in” to allow copiers to undercut them in the marketplace.
No one would make investments under such conditions. Once again, taxpayer-funded discoveries — like the one that led to the prostate cancer drug the petition concerns — would languish in labs.
Secure intellectual property rights underpin innovation, as President Obama and his team understood. In 2016, the organization behind the latest march-in petition submitted almost identical petitions to the Department of Health and Human Services, the Department of Defense and the National Institutes of Health. All three rejected them. The petitioners appealed under the Trump administration, which again rebuffed them.
Protecting innovation isn’t a partisan issue. The Biden administration can prevent a catastrophic drop in private-sector research and development investment by rejecting this latest march-in petition.
Niels Reimers is the founder and former executive director of Stanford University’s Office of Technology Licensing.