The Plight of the Public Sector Entrepreneur

Commercializing federally-funded R&D is already tough— now some want to make it even harder.

Tornado and BusinessmanBeing an entrepreneur isn’t easy. They have to fight against formidable odds to turn ideas into products. While that’s a tough road for anyone, it’s particularly difficult if you’re in the public sector. Despite the difficulties we lead the world in turning early stage federally-funded inventions into useful products. But that’s in jeopardy if some politicians have their way.

Years ago I headed the office at the Department of Commerce overseeing the implementation of the Bayh-Dole Act (which allows universities and companies performing federally-funded R&D to own resulting inventions so they can be commercialized) and fostering the adoption of the Federal Technology Transfer Act (which allows federal laboratories to perform cooperative R&D agreements with industry). Then, like now, we had newly appointed officials taking office trying to get a handle on their responsibilities. Our Assistant Secretary wanted to learn more about tech transfer, so I invited John Preston (who led MIT’s tech transfer office) to brief her.

John went through how tech transfer works, illustrated by the impressive accomplishments of MIT. He then said something that’s stayed with me through the years:

Passion is the most important ingredient for successful commercialization. The inventor, management, and the partnering company all must share the passion for success. If any party does not, the deal will fail.

He then laid out the killers of passion:

  • Greed
  • Destructive criticism
  • Lawyers and committees
  • Bureaucracy and red tape

After the meeting our Assistant Secretary taped that list to her office door.

While these killers of passion can reside in any large organization, the last three are particularly prevalent in public organizations. That makes our success in creating two new companies and two new technologies from academic R&D every day of the year quite remarkable. While attending the recent annual meeting of the Association of University Technology Managers (AUTM), the enthusiasm and energy that our public sector deal makers bring to the job despite the obstacles was evident. But there’s another killer of passion looming over them that’s missing from John’s list: politics.


Here’s an example. In his New York Times op-ed Trump Should Avoid a Bad Zika Deal Sen. Bernie Sanders asks the President to intervene against a pending exclusive license to develop a vaccine to fight the Zika virus:

Now his administration, through the Army, is on the brink of making a bad deal, giving a French pharmaceutical company, Sanofi, the exclusive license to patents and thus a monopoly to sell a vaccine against the Zika virus. If Mr. Trump allows this deal, Sanofi will be able to charge whatever astronomical price it wants for its vaccine. Millions of people in the United States and around the world will not be able to afford it even though American taxpayers have already spent more than $1 billion on Zika research and prevention efforts, including millions to develop this vaccine.

Spurring the development of vaccines needed to meet medical emergencies such as Zika often fall on the public sector because “developing a safe and effective vaccine is difficult in the best of times, and gets harder during an epidemic”. NBC News reported last year on efforts to develop an effective Zika vaccine:

While these approaches are promising, it is important to understand we will not have a widely available safe and effective Zika vaccine this year and probably not in the next few years, although, we may be able to begin an early phase I clinical trial actually within this calendar year,” Fauci (Dr. Anthony Fauci, head of the National Institute for Allergy and Infectious Diseases) said.

That’s because it takes years of testing to make sure a vaccine works safely. And then a commercial pharmaceutical company must sign up to make and sell a vaccine — and companies won’t do that unless they can see they won’t lose money on the project.

The National Institutes of Health and the Walter Reed Army Institute of Research are working closely with companies like Sanofi to try and meet the crisis. In the case of Zika where pregnant women are most at risk, the potential liabilities for those selling the vaccine are sky high.

Responding to Sen. Sanders in a letter to the New York Times, former NIH Director and current President of Global R&D for Sanofi, Dr. Elias Zerhouni noted:

Under the license agreement — and assuming the vaccine succeeds — my company, Sanofi, would make significant milestone and royalty payments to Walter Reed, allowing the United States government to recoup its investment.

Our work on the Zika vaccine will be led by Sanofi scientists based in the United States, where we employ some 15,000 people.

Sanofi has decades of experience in vaccine development and manufacturing. We have  partnered with governments and N.G.O.s around the world, ensuring access to lifesaving vaccines at reasonable prices, and we are proud of our continued efforts to do so.

Unfortunately, it’s still far from certain that the vaccine will succeed but at least the project is moving along. If politicians now want to intervene and restructure the agreement, will they be willing to take responsibility if the partnership falls apart?

An even greater threat is about to confront our technology transfer system. Congressman Lloyd Doggett and approximately 50 of his Democratic colleagues in the House of Representatives are sending President Trump a letter urging him to require the National Institutes of Health to provide guidelines for using the march in provisions of the Bayh-Dole Act to control drug prices.

Congressman Doggett made the same request a year ago to the Secretary of Health and Human Services in the Obama Administration (see NIH Pressured to Misuse Bayh-Dole to Control Drug Prices). That request, along with a petition for NIH to march in to force compulsory licensing of Xtandi because of its price were denied (see NIH Director Collins Stands Up to the March in Mob) for a good reason: Bayh-Dole does not give the government the right to regulate prices of products in the marketplace.

Rather, the march in provision is intended to insure that good faith efforts are being made towards commercialization and that sufficient quantities of resulting products are available to meet public health or safety needs. If the government is ever pressured to misapply the law for price control, the bottom would fall out of our public technology transfer system. Such a change would not be restricted to drugs but to any product commercialized under Bayh-Dole. What company would commercialize a federally funded invention if an agency could retroactively apply a completely arbitrary standard of fair pricing to justify taking the technology away through compulsory licensing? The answer is easy to guess.

Hopefully we will once again steer the world’s most successful tech transfer system away from the siren calls that would destroy it.

The entrepreneurial spirit of our current system is a beacon attracting likeminded souls from around the world. That was vividly brought home during a break at the AUTM meeting. A young man called me over to his table. We had met at a previous meeting and I had often wondered how he was doing. He is with the American University in Cairo. With him was a colleague from the American University in Beirut. They had come half way around the world to study our model in the hope of some day being able to apply it in their countries.

We should do everything we can to help people like that succeed– and to encourage and defend the entrepreneurs in our own public sector. They don’t get rich and are rarely recognized for their successes which are only achieved by constantly fighting off the forces seeking to extinguish their passion. Thankfully that hasn’t happened yet.



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Join the Discussion

One comment so far.

  • [Avatar for ORTA]
    April 4, 2017 12:40 am

    Excellent article. I agree it wouldn’t make sense to prescribe price controls covering private-sector sales in the license. However, given that Medicare is currently barred from negotiating prices (resulting in US taxpayers subsidizing the rest of the world for all sorts of drugs), it could make sense to ensure sales to the Govt are at a price no higher than the lowest price charged to a non-Federal entity in the U.S. within a CY. We have done this for all of our most recent exclusive licenses.