Property Rights Key to Bayh-Dole Act’s Success

By James Edwards
August 9, 2016

Innovation keyA vacation to Africa would be a highlight of most anyone’s year, if not lifetime.  But one couple has a competing highlight:  the wife’s lung cancer coming under control.  She could make the trip all because her cancer medicine used her own immune system to identify and fight the cancer.  In a clinical study, that medicine added an average of 3 months to the lives of patients.  It also reduced or completely shrunk tumors in nearly one-third more patients, and the shrinkage lasted nearly three times longer, than another therapy.

Lung cancer kills the most Americans each year of any cancer, and cancer is the second-leading cause of death.  But, as my friends have seen firsthand, biopharmaceutical progress is lengthening lives and improving health for cancer patients.

Unfortunately, some politicians and advocacy groups would short-circuit these kinds of medical advancements.  They demand the misuse of a narrow provision of the Bayh-Dole Act that’s intended for exceptional circumstances.  In the name of reducing drug costs, using this extraordinary measure would poison America’s intellectual property environment.  So-called “march-in rights” would upend a key element of the U.S. innovation system, namely sound and secure intellectual property rights.

Over 35 years ago, the Bayh-Dole Act started a success story.  This law facilitates commercialization of federally funded research by providing reliable property rights to related inventions.  This law unleashed thousands of inventions that otherwise would have never moved toward commercial application.  Taxpayers paid for research advancements, so why not enable universities and private companies to bring the new knowledge to practical use?

America has benefited from the IP-based commercialization ecosystem that Bayh-Dole created: more than 11,000 start-up companies since 1980 (more than 900 in 2014 alone), 3.6 million jobs created and $518 billion added to the economy since 1996, a thousand new commercial products on the market, university patenting and technology transfer activity flourishing, and promoting private-sector and academic collaboration.

Before Bayh-Dole, the U.S. government owned 28,000 patents from research it funded in universities and research labs.  But commercial entities used only 5 percent of those promising inventions because the government retained and controlled the property rights and resisted exclusive licensing.

The Congressional Research Service reports, “One of the major factors in the reported success of the Bayh-Dole Act is the certainty it conveys concerning ownership of intellectual property.”  A health-innovation business book affirms that Bayh-Dole “has had a substantial impact in enabling publicly funded technology to be developed and commercialized within the private sector” in research-intensive sectors such as pharmaceuticals and biotech.

The focus of the political advocates pushing march-in may be lower drug costs.  But the long-term costs of ripping apart IP rights are far higher and more fundamental than advocates acknowledge.  The long-term price of exercising these exceptional prerogatives could include creating a crisis in confidence over use of federally funded research discoveries, dried-up private investments where basic research has federally funded fingerprints, hesitation to commercialize university research, and a corresponding drop in start-ups, new products, economic development and technological advancements.  March-in could effectively repeal Bayh-Dole.

Also, march-in on pharmaceuticals might backfire.  If government takes away IP rights long after many intervening decisions, investments, commitments and succeeding inventions have occurred, government is essentially imposing price controls.

Artificially constrained pricing doesn’t make a product cheaper.  It makes a product scarcer.  Foreign price controls such as in France and Japan deprive patients from new, more effective therapies most Americans would readily be given.  Advocates may claim to aim at a single industry sector and a few expensive medicines.  But they’re aiming a shotgun, not a rifle, so other intellectual property-oriented economic sectors will suffer, too.

For those companies whose business models don’t depend on intellectual property, government grabbing back a patent may not seem like a big deal.  But for those sectors that make sophisticated products, require capital-intensive operations, rely on research and development investments and are heavily regulated, patents and IP are crucial.

The strong, secure property right to their inventions and the exclusivity of the IP they license from others form the basis of trust and confidence on which progress is achieved.  IP is vital to investors and business allies.  And IP-backed private investment is critical for discovering and commercializing breakthroughs like new cancer medicines.

Fortunately, the National Institutes of Health so far has consistently declined demands to “march in” because of certain drugs’ current sticker prices — NIH’s most recent determination, regarding Xtandi, was announced this past June 20.

NIH cited its previous decisions on march-in, saying, “As set forth in NIH’s prior march-in determinations (1997 Cell Pro; 2004 and 2013 Norvir; 2004 Xalatan), practical application is evidenced by the ‘manufacturer, practice, and operation’ of the invention and the invention’s ‘availability to and use by the public . . . “  Xtandi is broadly available as a prescription drug.”

How long will the NIH be able to hold out against continued pressure to use march-in?  This episode surely won’t be the last time march-in is demanded.

Soon after the couple’s return home from Africa, doctors found that the obstinate cancer had spread, discovering enlarged lymph nodes.  They knew a specific gene, BRAF, was involved with their patient’s form of cancer.

A medication now available to lung cancer patients with this gene targets that specific gene and disrupts this cancer.  In trials, the disease didn’t progress in any patients while they underwent this treatment.  Within weeks, this biologic drug eliminated the swelling of the lymph nodes and the wife’s lung tumor had stabilized.  Also, the new drug is administered as a pill, meaning fewer shots.

Advocates with a political axe to grind may think they’re saving the nation on drug costs.  But what they’d really be doing is sacrificing the patients whose lives depend on tangible progress achieved only through a long, expensive process of research, development and commercialization, of which the Bayh-Dole framework is one important part.

The Author

James Edwards

James Edwards consults on intellectual property, health care innovation, and regulatory and policy issues. Among other clients, Edwards advises the nonprofit group Eagle Forum on patent policy and is Co-Director of the Inventor's Project. He participates in the Medical Device Manufacturers Association's Patent Working Group. Edwards mentors start-ups and early-stage companies, largely in the med tech space, and is involved in several IP-centric projects.

Edwards served as Legislative Director to Rep. Ed Bryant, R-Tenn., then a member of the U.S. House Judiciary Committee, and handled IP legislative matters. Edwards also worked on the staffs of Rep. John Duncan, R-Tenn., the U.S. Senate Judiciary Committee, and Sen. Strom Thurmond, R-S.C. In addition, he was an association executive at the Healthcare Leadership Council. Edwards earned a Ph.D. at the University of Tennessee, and bachelor's and master's degrees at the University of Georgia.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 5 Comments comments.

  1. xtian August 9, 2016 10:07 am

    link (1997 Cell Pro; 2004 and 2013 Norvir; 2004 Xalatan), is dead. Please provide.

  2. Edward Heller August 9, 2016 6:30 pm

    James Edwards, I totally agree.

    The issue of whether a patent is property right or a government privilege (public right) is the issue to be decided by the Supreme Court in two cases that are on cert. now, Cooper v. Lee and MCM Portfolio LLC v. Hewlett Packard. The petitions will go to conference on Sept. 20. If the Supreme Court grants cert., it is important that you and anyone and everyone who are fighting this issue chime in with amicus briefs to express your views.

  3. Chris Gallagher August 10, 2016 10:22 am

    “March-in could effectively repeal Bayh-Dole.”

    Jim Edwards is absolutely correct. Price-based Bayh-Dole march-in or any other politically-driven exercise of BD march-in rights would infect TT’s entire commercialization dynamic with lethal uncertainty.

  4. Renee Quinn August 10, 2016 6:12 pm

    Xtian, I just tried the link and it works fine for me. Are you still having the issue?

  5. xtian August 15, 2016 9:25 am

    Renee – link now works.