Winning the Patent Policy Wars

This article is based on remarks made by Joe Allen to the annual meeting of the Association of University Technology Managers in San Diego, CA.

David and Goliath, by James Tissot. Copyrighted 1904.

When I left home for the airport the temperature read one degree. So after landing in San Diego and heading towards the 80 degree sunshine, I was feeling pretty good. While walking through the terminal a man going the other way looked at me, stopped and said: “Did anyone ever tell you that you look like Bernie Sanders?” Actually that’s pretty ironic given the topic I want to discuss today. If you were looking for someone offering you free stuff, you’re in the wrong place.

We’re in the business of transforming early stage, publicly funded research into useful products. The odds against success are long as commercialization requires years of hard work, a lot of money and some luck. We’d like to think that this effort is universally appreciated. Many in this profession ignore the public policy debates — the patent policy wars — swirling around, thinking that no one will believe our critics or that someone else will defeat them. That’s a serious mistake.

We need to understand that there always have been and always will be those vehemently opposed to what we do. Some have a visceral dislike of the patent system, believing it’s “unfair” because it prevents inventions from being freely used. Others feel that university-industry alliances are immoral and that technology transfer is a rip off. Luckily, these critics are a small minority, but a very vocal one whose influence goes well beyond their numbers. They are good at stirring the media with claims that the public is being cheated.

We must realize that we are not going to convert these people and they are not going away. We are locked in a constant battle for the hearts and minds of policy makers and the public. Engaging in this struggle is simply part of the job, which we ignore at our peril.

One of the latest fights is an attempt to misuse the Bayh-Dole Act to control prices for drugs developed from university or federal inventions. Such actions are not authorized by the law and would have disastrous consequences on public health (see Bayh-Dole Under March-in Assault: Can It Hold Out?) but a small, determined group keeps pushing the idea.

[Joe-Allen]

They persuaded 50 Members of Congress to write HHS Secretary Sylvia Burwell and NIH Director Francis Collins urging that the march-in rights clause of Bayh-Dole be re-interpreted to sanction compulsory licensing of costly drugs. Secretary Burwell was pressed on the issue during her recent Congressional testimony. Here’s what The Hill reported:

Rep. Lloyd Doggett (D-Texas), one of the authors of the letter, asked Burwell Wednesday if the proposal in the letter is receiving her “thorough consideration.”

Burwell confirmed that the proposal is being considered.

“It is,” she said. “Your letter we have received, thank you, and we are continuing to try and pursue every administrative option. We’ve proposed legislative and statutory changes as part of the budget, but are looking at a wide array, of which we welcome your letter and your suggestions.”

The prospect of “march-in rights” would be a major step in fighting high drug prices, which have become a major issue in the presidential campaign. Democrats Hillary Clinton and Bernie Sanders have pounded drug companies, and even Republican Donald Trump called for allowing Medicare to negotiate drug prices, an idea strongly opposed by pharmaceutical companies.

The Obama administration has proposed Medicare negotiation and other legislative ideas around drug prices in its budget, but Doggett argued that executive action is needed.

“Clearly legislation is required, but you and I know that lightning could strike the Capitol dome in the same place not twice but 10 times, and this Congress would not be willing to stand up to the pharmaceutical lobby,” Doggett said. “It is essential that the administration use every tool at its disposal.”

Fortunately, Paul Howard of The Manhattan Institute responded in March-in is a cure worse than the disease. Howard observed:

Recently, HHS Secretary Sylvia Burwell responded to Democratic lawmakers’ calls for action on “the soaring cost of pharmaceuticals.” She stated that her department is considering issuing guidelines on “march-in rights,” which would allow federal agencies to essentially break patents on high-cost medicines to lower prices.

Politicizing drug development—allowing bureaucrats to pick drug classes or diseases where government will break patents to lower prices—will only hurt patients. A better strategy is to address the high cost of co-pays and co-insurance and streamline drug development to encourage more market competition based on price and value.

He went on discussing Bayh-Dole:

But the law also allows federal agencies that fund research to compel patent-holders to grant licenses to third-party manufacturers for specific public purposes, such as alleviating public health or safety needs not achieved by the contractor.

Over 50 House Democrats view the current cost of prescription drugs in the United States as just such a public health emergency, despite the fact that total spending on prescription medicines in the U.S. is just 10 percent of overall health expenditures, the same as it was in 1960. (Adding in hospital administered medicines raises this somewhat to 14-15 percent.)

The other 85-90 percent of U.S. healthcare spending doesn’t attract anywhere near as much acrimony.

Why? The backlash is based largely on how we pay for drugs compared to other kinds of health services. As unified insurance deductibles, closed formularies, and high-deductible plans proliferate, patients find themselves much less insured against drug costs than against hospital admissions.

Rather than fixing the underlying problem, with the invocation of march-in rights we’re railing against companies bringing important new medicines to patients.

He concludes:

There are three better policy prescriptions for improving patient access.

First, policymakers could work to reduce co-pays for low- and middle income patients – research from the RAND Corporation suggests that this “stimulates increases in revenues and ultimately in innovation, which generates substantial long-run benefits.” Second, we should develop credit markets that would allow patients to amortize the up-front costs of expensive, but life-saving medicines over many years, as they do with home mortgages. Finally, reforms designed to lower the costs and time required to bring new drug competitors to market would help ensure multiple products competing against each other in a given therapeutic class. Insurers could then offer larger market share in return for lower drug prices, or rebates tied to better health outcomes.

For example, discounts for Hepatitis C medicines like Solvaldi are around 50 percent, and are apt to rise even higher after Merck received FDA approval for another competitor late last month.

Breaking patents—or even routinely threatening to break them—is one case where the cure is worse than the disease. (emphasis added)

Hopefully once again NIH will deny the request as it has done repeatedly in the past. Should they ever buckle to political pressures to misuse Bayh-Dole the precedent would be set for marching in on any technology, not just drugs, when someone feels that the price is too high. Since there are no standards for what’s a “fair price” and the bureaucracy would be making the determination, who would spend years of effort and millions of dollars (or billions in the case of new drugs) commercializing a federally funded invention or forming a start up company with this sword hanging over their heads? What company would believe that universities or federal labs are reliable R&D partners if the rules change with the political winds? The Bayh-Dole system would collapse.

This illustrates a key point: we cannot afford to sit back and take the punches of the critics. We must immediately respond, informing policy makers and the public of the enormous stakes riding on the outcome of these critical policy battles. And never doubt your influence.

A great example of how effective you can be is the recent “patent reform” crusade.   Backed by huge corporations enlisting top lobbyists making significant campaign contributions, the supporters began the fight with prominent lawmakers lined up solidly behind them. The stage was set through an impressive PR campaign in leading newspapers, TV and radio that patent trolls lurked under every bridge and major changes were needed to protect the public from an out of control patent system. Conventional wisdom proclaimed their success inevitable and anyone standing in the way was doomed.

When universities pointed out that the patent reform bills undermined their commercialization efforts and start up company formation, they were denounced as patent trolls. One year ago The Washington Post ran an op-ed titled “Here’s why patents are innovation’s worst enemy” hyping a study alleging that patent licensing harms innovation. It concluded: “Patents simply have no role in the era of exponential technologies. We don’t need toll roads for innovation, we need faster highways.”

Today the patent reform steamroller doesn’t look so formidable. Universities, small companies, venture capitalists, the life science industry and inventors showed how the deeply flawed bills harmed the entrepreneurs we depend on to create jobs and grow the economy. It was David v. Goliath and the patent reform giant was brought to its knees.

So having won that round, why not sit back and relax? Because the fight simply shifted to another front. Constantly remaining on the defensive is a sure recipe for disaster. We need to get ahead of the curve and educate policy makers and the public on what we do and why it’s important before our backs are again pressed to the wall.

Policy fights are determined by two factors: solid data and good stories driving the point home. We have both. Here’s some easily understood data showing the benefits of academic patent licensing which:

• Contributed more than $1.18 trillion to the U.S. economy over 18 years while supporting 4 million good jobs;
• Spurs the creation of more than two new companies and two new products every day of the year; and
• Created 200 new drugs and vaccines fighting the scourge of disease world-wide — when no drugs were developed from federal funding under previous patent policies.

We also have powerful stories. One of my favorites occurred at the 30th anniversary of the Bayh-Dole Act. Towards the end of the program, Betsy de Parry rose to speak. She immediately turned around, hugged Senator Bayh exclaiming: “If it wasn’t for your law, I wouldn’t be alive today.” Betsy is a cancer survivor due to a drug commercialized from university research. Anyone in attendance remembers that moment.

Yesterday I was sitting in a presentation when one of the speakers showed a photo of a woman who suffered excruciating pain every day of her life after a childhood bout with polio. But there she was standing tall and beaming because a university based therapy alleviated the pain, restoring her life. These stories would not have happened without strong patents and the Bayh-Dole Act. One of the most outrageous claims of the critics is that such discoveries would have been commercialized anyway. That’s nonsense and we must say so!

The first time I ever spoke on tech transfer was at your annual meeting in 1978. I was on Senator Bayh’s staff and our Chief Counsel agreed to discuss the bill, which we were introducing. He hurt his back and asked me to fill in. I was really nervous talking to an audience that knew much more about patent licensing than I ever will. They immediately put me at ease making it clear that passing our bill was vitally important to the nation.

That meeting was the largest you had ever had– 50 people attended. Now there are thousands here from around the world and the breakout sessions have bigger audiences than the entire1978 meeting. But here’s something for you to consider: those 50 people changed the world. They did the hard work of explaining that without restoring the incentives of the patent system through Bayh-Dole important discoveries would wither away, benefitting no one. They faced determined opposition but refused to be intimidated. They didn’t do this to enrich universities, but so hard pressed taxpayers receive the full benefits from the public research they fund.

They also created the profession that employs you today. Now they are gone and it’s your turn to step up to the firing line. If you shrink from the task thinking that someone else will defend your interests, you are greatly mistaken. Remember, we have to win every fight to protect Bayh-Dole — the opponents only need to win once. People like Betsy du Parry depend on us. We can’t let them down. The torch has been passed to your hands. Don’t let it go out.

Thank you.