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High Noon for Bayh-Dole


Written by Joseph Allen
Allen & Associates
Posted: Jul 17, 2013 @ 7:45 am

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We have met the enemy— and he is us

~ Walt Kelly, creator of the comic strip Pogo

Senate Judiciary Committee Chairman Patrick Leahy (D-VT) asked NIH in a July 12 letter to force compulsory licensing of Myriad’s BRCA breast and ovarian cancer genetic test under the “march-in rights” provision of the Bayh-Dole Act. “Testimony presented to the U.S. Patent and Trademark Office made clear that many women are not able to afford the testing provided by Myriad.”  Senator Leahy also charged that the Myriad test “was developed with federally-funded research.”  See Leahy Urges Action.

Myriad received an exclusive license to develop the test from universities operating under Bayh-Dole Act. The law allows nonprofit institutions receiving federal R&D funds to own and license resulting inventions so they can be commercialized for use by the public.

Critics of Bayh-Dole have long sought to reinterpret its statutory standards under which the government can compel universities to issue compulsory licenses as a weapon to control prices. This was not the intent of the law.

The march-in provision has three triggers: cases where a licensee is deliberately suppressing commercial development so as not to compete with an existing product; cases where the licensee cannot produce enough products to meet public health or safety needs; or situations where a licensee has failed to meet its pledge to manufacture the product substantially in the United States.  None of these apply to the Myriad situation.

It is interesting to note that in its April 2010 report the HHS Secretary’s Advisory Committee on Genetics, Health and Society (SACGHS) actively sought a link between exclusive licensing, inflated prices and limited patient access to genetic tests. SACGHS considered the Myriad tests, but try as they might could find no clear evidence supporting its theory.

The assertion that the government funded development of the BRCA test must come to a surprise to Myriad. In IP Watchdog  the company said it invested over $500 million in developing and refining its BRAC tests and in persuading insurance companies to cover them—a huge benefit to women patients.  See A Patent Centric Look at Gene Patents. Myriad claims it took 17 years to break even. The article offers impressive evidence that the test is much more readily available in the US than in Europe where there are 25 test providers.

In the same PTO hearing cited by Senator Leahy, the Executive Director for Lynch Syndrome International said:  “Our family members are dying,” because without patent rights no company was committing similar resources to promote a test for their disease.  But rather than refighting old battles, let’s consider the implications on US industry of the proposed new standard for compulsory licensing under Bayh-Dole.

What will happen if the critics of Bayh-Dole are finally successful in their attempts to reinterpret the law as a means to control prices? Of course, this march-in could only happen after companies have invested years of effort and hundreds of millions – or billions — of dollars to develop a new product.  Thousands of companies have taken licenses from universities in good faith that Bayh-Dole will continue to operate as Congress intended. Many have founded companies driving our economy based on exclusive licenses to university technologies. At least 153 new drugs and vaccines are now fighting the scourge of disease world-wide under the auspices of the law.

How many of them could withstand the proposed test that if “many” can’t afford their products the government will force compulsory licensing to copiers if the result is cheaper prices?

In a fitting irony, Sen. Leahy’s letter came out the very same day as an article in Fierce Biotechnology titled Booming China poised to take a top position in global drug R&D.  China has invested $160 billion building biotech clusters and is now ready to leap over Japan to become number two in world R&D spending on drug development.  They are evolving from basic research– where they adopted our model of university/ industry partnerships built on Bayh-Dole– into drug production.  Like the US, their biotech clusters formed around Chinese universities which are spinning out new companies. In four years China produced more than 3,000 patents and 12 new drugs.  They plan on increasing to 100 new drugs in the next seven years, with the intention of challenging the U.S. You can bet the Chinese government will not be issuing compulsory licenses on its drugs to those who can undercut resulting prices.

Underscoring what public-private sector partnerships mean to the American public, the day before the Leahy letter the Boston Business Journal reported that: “The number of annual drug approvals for neglected diseases in the U.S. doubled in recent years…”  The story found that 50% of the new approvals from 2009 to 2012 came from public-private sector partnerships. This is what the Bayh-Dole Act was intended to do.

March-in rights are a fail-safe mechanism underscoring the Act’s intent that federally funded inventions achieve practical application so they can be used by taxpayers while growing the economy. Congress worried that dominant companies might intentionally license university technologies with the intent of suppressing them.  Thus, the first march-in clause is triggered if good faith efforts are not being made to develop the invention. The second and third are triggered if the developer cannot produce sufficient product to meet public health or safety needs. An example is when factory contamination problems curtailed production of Genzyme’s drug Fabrazyme.

Past efforts to read price controls into the march-in rights procedure have been appropriately rebuffed.  In dismissing one such attempt, then NIH Director Elias Zerhouni stated: “the extraordinary remedy of march-in rights is not an appropriate means of controlling prices.”

When a march-in petition was filed seeking compulsory licensing to lower the price of Norvir, Dr. Zerhouni stated that the drug had been available to the public for many years:

Accordingly, this drug has reached practical application and met health and safety needs as required by the Bayh-Dole Act.  The NIH believes that the issue of drug pricing is one that would be more appropriately addressed by Congress, as it considers these matters in a larger context.

The NIH is cognizant of the care with which Congress crafted the march-in language and understands that it has the responsibility to exercise its march-in authority deliberately and with great care.

Senator Birch Bayh spoke at NIH against attempts to misconstrue his law as a price control mechanism:

If Congress does decide to amend Bayh-Dole someone must clearly define what is a “reasonable price.” Congress must keep in mind that the vast majority of technologies developed under the law are commercialized by small companies that “bet the farm” on one or two patents.  Copycat companies are always waiting until an entrepreneur has shown the path ahead.  They can always make things cheaper since they have no significant development cost to recover.

What will happen to the start-up companies arising from Bayh-Dole that are driving our economy forward with this sword hanging over their heads? What evidence is there that large drug companies will not simply walk away from collaborations with our public sector?

The answers to Sen. Bayh’s questions should be evident. Somewhere in China, they must be smiling to see us attack a law so fundamental to our continued prosperity.   Luckily, the Bayh-Dole Act hasn’t changed.  Let’s hope that NIH continues to enforce the law as it’s written. The stakes couldn’t be higher.


About the Author

Joe Allen is a 30-year veteran of national efforts to foster public/private sector commercialization partnerships, and author of numerous articles on technology management for national publications. Joe served as a Professional Staff Member on the U.S. Senate Judiciary Committee with former Senator Birch Bayh (D-IN), and was instrumental in working behind the scenes to ensure passage of the historic Bayh-Dole Act. Joe has served as the Executive Director of Intellectual Property Owners, Inc., a trade association representing major R&D companies, he was involved in the creation of the Court of Appeals for the Federal Circuit, and he also served at the U.S. Department of Commerce as the Director of the Office of Technology Commercialization. From 1992 until 2004, Allen was with the National Technology Transfer Center (NTTC), becoming President in 1997. Clients included NASA, the Department of Defense, EPA, the Department of Veterans Affairs, and the Department of Commerce. Between 2004 until 2007, Allen was the Vice President and General Manager of the West Virginia High Technology Consortium Foundation. In 2008, Joe founded Allen & Associates to continue to facilitate public/private partnerships between universities, federal laboratories and industry.

3 comments
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  1. Good post with clear, cogent reasoning.

    Thank you Mr. Allen.

  2. Joe,

    Thanks for letting others know why Leahy doesn’t know diddly about “march-in-rights” by one who does. Then Congressman (now Senator) Sherrod Brown (D-Ohio) tried the same misguided approach earlier with Norvir and Xalatan years ago and was correctly rebuffed by NIH.

  3. Another good Job Joe.
    Thank you
    Guven

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