“To claim, as KEI and other critics do, that the public is paying for the research and development of drugs using taxpayer dollars, is at best, disingenuous and at worst, deliberately misleading in order to elicit a desired political response.”
Recently, Knowledge Ecology International sent to Congress a letter objecting to the draft “Green Paper on Unleashing American Innovation” disseminated by the National Institute of Standards and Technology (NIST) in December, 2018. The KEI letter was signed by 10 other organizations* (the Organizations).
The letter, unfortunately, is full of misstatements, distortions, falsehoods and disingenuous arguments. Examples include:
“ . . . proposals recently published by NIST . . . are designed to limit the government’s rights in patented inventions;
“NIST is proposing regulations that would greatly narrow the government’s ability to curb excessive prices on drugs . . . that were invented on federal grants and research contracts . . .”;
“[The] government’s royalty-free right to inventions . . . would be narrowed [and] prevent the government from using the royalty-free right to provide affordable drugs to Medicare . . .”;
[The false claim that] “March-in rights on federally-funded inventions [have been] available . . . to curb excessive prices on government funded inventions.”
It would be easier to focus on the letter’s one accurate statement: that high drug prices are a serious concern for people everywhere. It is very unfortunate that KEI, in my opinion, utilizes tactics which continually sacrifice fair and constructive dialog in favor of apparently achieving goals “by any means necessary.”
The most disturbing element of the letter is KEI’s advocacy of inappropriate and unjustified use of government march-in rights under the Bayh-Dole Act as a purported means of controlling drug prices. In doing so KEI and the Organizations are threatening medical advances and thereby undermining their own missions.
A Complete Misunderstanding
The KEI and Organizations’ advocacy for march-in ignores and undermines the role and importance of universities (and academic teaching hospitals) in the innovation pipeline that leads to new therapies that address critical health needs. The letter’s objections demonstrate a complete misunderstanding of drug development and how academia and academic technology licensing to industry contribute to public health.
Consider these points:
- The Bayh-Dole Act does have a march-in provision that can be deployed in four situations:
- 1- when a contractor (e.g., a university) or assignee has not taken, within a reasonable time, effective steps to achieve practical application of a subject invention;
- 2- to alleviate health or safety needs which are not reasonably satisfied by the licensee, e.g., when there are not adequate supplies of a critical licensed product available;
- 3- to meet the requirements for public use specified by federal regulations; or
- 4- when an exclusive licensee has not adhered to U.S. manufacturing requirement regulations.
The law does not address nor was it ever intended as a mechanism to control prices. NIH has, for that reason, rejected all march-in requests to date. KEI’s endlessly repeated claims that march-in is an effective and legitimate price-control mechanism does not make it true.
- Critics like KEI say that taxpayers are paying twice for drugs—first, when the federal government funds university research that led to a new chemical entity; and second, once a therapy is approved, for the resulting expensive medicines. Certainly KEI and the Organizations know this is untrue. Tufts University estimates the cost of bringing a new drug to market at $2.6 billion. . The average federal grant to an NIH-funded university researcher is $520,000, thus taxpayers have paid only a tiny fraction of the total cost. To claim, as KEI and other critics do, that the public is paying for the research and development of drugs using taxpayer dollars, is at best, disingenuous and at worst, deliberately misleading in order to elicit a desired political response. Take the drug Xtandi® as an example. It is an admittedly expensive therapy, but less than $2 million in federal money was invested in related early work at UCLA versus almost $900 million invested by companies like Astellas that developed it (Ashley J. Stevens, unpublished data).
- Related to the preceding point, those who advocate expanded use of march-in rights are ignoring other facts about drug discovery and intellectual property (IP) protection. Their demand that the government march-in and grant additional licenses to other commercial entities is a misleading diversion. Such a move would have little effect for two reasons: first, a march-in request would not occur until a product is “unreasonably” priced for sale so it will take other licensees years to catch up with the first licensee in the manufacturing and distribution. Therefore a competing, allegedly cheaper therapy will not arrive quickly. Second, drugs and therapies typically are protected by a bundle of associated IP rights. The original licensee will have established the numerous additional patents, know-how and trade secrets needed to justify the huge expenditures required for Investigational New Drugs through Phase III clinical trials. Forcing additional licenses will not provide a second licensee with the necessary combination of IP protections nor will it result in the early introduction of competing, less expensive products.
- Finally, by supporting a false narrative about the use and alleged benefits of a “march-in strategy,” KEI and the Organizations are undermining the contributions of academia to innovation in medicine. Why? Because, for the reasons stated above, march-in will have no positive effects, but will have one substantial and provable negative effect. It will ensure that pharmaceutical or biotechnology companies will avoid licensing and developing any therapeutic that has been “tainted” with federal money given to a university grantee. This outcome was shown in the early 1990s when NIH CRADAs (Cooperative Research and Development Agreements) contained a “reasonable pricing” provision for resulting products. The result was a sharp drop off in the number of public-private partnerships in areas including drug development. As soon as the clause was removed and the policy changed by Harold Varmus in 1995, the number of partnerships increased significantly and quickly.
A 2011 paper published in The New England Journal of Medicine reported that 153 new FDA-approved drugs, vaccines or new indications for existing drugs were discovered through research carried out in public sector research institutions during a 40-year period. Follow on research indicates that number has risen to 285. (Ashley J. Stevens, unpublished data) What if, during that period, the kind of march-in rules advocated by KEI, and unfortunately endorsed by the Organizations, had been in place? It is likely that few, if any, of these advances would have been developed because industry will avoid investments where outcome and profitability could be threatened by political considerations. The recent Information Technology & Innovation Foundation (ITIF) report discusses the life science innovation cycle and the key role played by Bayh-Dole. It notes the Act’s catalytic role in stimulating innovation across many sectors, especially in the life sciences. Further, it states that calls to use march-in provisions to control drug prices threaten to undermine a successful innovation ecosystem and reduce the pace of U.S. biopharmaceutical innovation.
There are legitimate strategies and initiatives that could address high prices and the inequities extant in health delivery in the United States and globally without threatening IP rights and university innovation. However, the contribution of academia in the drug development innovation pipeline and the critical role of academic-industry licensing arrangements are real and indispensable.
KEI is propagating, and the Organizations are endorsing, the false argument that Bayh-Dole march-in is a legal and effective way to lower drug prices. This threatens and undermines one of the most effective and proven ways that new therapies and medical advances reach the public: out-licensing of promising early stage academic discoveries for investment and development by the commercial sector.
* The Organizations include: Health GAP; Housing Works; Doctors Without Borders USA; Public Citizen; Social Security Works; The Institute for Agriculture and Trade Policy; Union for Affordable Cancer Treatment; UNITE HERE; Universities Allied for Essential Medicines; and Yale Global Health Justice Partnership.