Headlines and news leaders are sharing the debate on using “march-in rights” purportedly to control the price of drugs under the Bayh-Dole Act. It is imperative to understand this rules change is much broader and will impact the university startup community, angel and VC investors plus the developers of research parks and tech hubs seeking these tenants.
The Bayh-Dole Act, passed in 1980, launched the university tech transfer industry, brought thousands of new technologies building a better world and spurred development of research parks and innovation districts in the U.S.
But the Act was never intended to control the price of drugs developed with federal funding, much less the price of other products developed with federal funding by universities and small businesses.
Under the proposed framework published by the U.S. Department of Commerce in December 2023, a federal agency may consider “[a]t what price and on what terms has the product utilizing the subject invention has been sold or offered for sale in the U.S.” – broadening the criteria for using the march-in tool.
This proposed interpretation is a stark departure from a long-standing interpretation of the Bayh-Dole Act. More importantly, this policy change applies to ALL technologies funded by the federal government at universities and small businesses, including SBIR and STTR-funded companies using patents funded by government sources.
This proposed move casts a long shadow over those trying to build communities of innovation in the U.S. and compete with countries such as China.
Technology commercialization is a challenging task as it is. The federal funding under the bipartisan CHIPS and Science Act was a welcome shot in the arm in increasing U.S. competitiveness.
The proposed Bayh-Dole Act implementing regulations, however, remove much of this momentum and adds uncertainty in investing in any startup funded with federal funding subject to the Act.
Venture capitalists, angel investors, real estate developers and others will shy away from providing needed capital with the threat of the government “marching in” to take away the patent rights of a company owner or prospective tenant if the product is sold at an “unreasonable” price, whether it is a drug, a new clean energy technology or an improvement for self-driving cars.
Ironically, the proposed new rule is expected to have a direct impact on numerous technologies developed with federal funding, except for a specific class of technologies — new medicines. Despite the intricate and lengthy process involved in the multi-patent nature of drug discovery, this particular rule is not anticipated to directly affect the development of new medicines. Instead, its application is expected to extend to thousands of other technologies that have been developed through federal funding.
AUTM’s Mike Waring provides additional background (below) on this issue from a university tech transfer perspective, and the resource page at Bayh-Dole Coalition has a wealth of background information.
WHAT SHOULD YOU DO?
Send your comments HERE to the U.S. Department of Commerce/NIST by Feb. 6, 5:00pm ET.
READ the NIST interagency RFI (draft).
Your comments should be brief (one or two sentences) but should include details on the possible deleterious impact of this rule on your operations or funding. It is also recommended to send copies of your comments to your state’s Congressional delegation.
Association of University Research Parks (AURP)
Brian Darmody, Chief Strategy Officer
briandarmody@aurp.net
301-928-0527
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AUTM INSIGHT COLUMN
1-3-24
NIST MARCH-IN INQUIRY A “CALL TO ARMS” FOR ACADEMIC TECH TRANSFER
Scottish poet Robert Burns once wrote the famous phrase “the best-laid plans of mice and men often go awry.” Two hundred-plus years later, that sentence brilliantly describes the Request for Information (RFI) recently issued by the National Institute of Standards and Technology (NIST) regarding potential changes to the way march-in rules can be applied against federally funded inventions.
This RFI is based on assumptions that are dead wrong – and they are dangerous for the future of American innovation and competitiveness.
In its zeal to go after what it believes is “unreasonable” pricing, mostly for some drugs, the Administration wants to allow the National Institutes of Health (NIH) and every federal research agency increased authority to “march in” and take back the patent or copyright for federally funded inventions, using pricing as an excuse.
If ever there were a “call to arms” for tech transfer, this is it. AUTM will be weighing in with strong comments urging NIST not to move forward with this proposal, and every AUTM member needs to do the same. The deadline for comments is February 6. (AUTM has requested that the comment period be extended, but we should not assume that request will be granted.)
In crafting your feedback on this RFI, you’ll want to remind the authors why the Bayh-Dole Act is essential for US innovation and how the proposed changes, if implemented, are destined to go awry. You are welcome to borrow from this column in your comments.
When the Bayh-Dole Act was passed in 1980, it became a watershed moment for American innovation. Prior to Congress acting on this landmark legislation, the federal government retained the IP rights for inventions discovered using federal research dollars. But it was clear that this system was not incentivizing the further development of countless new medicines and technologies. By allowing universities and researchers to retain those IP rights, the law provided incentives for investors and licensees to help move these ideas out of the lab and into the marketplace.
The result is staggering: trillions in economic impact, thousands of patents, millions of new jobs, all ensuring America’s global innovation leadership.
The NIST RFI claims changes should be made to this process to promote reasonable pricing. In doing so, it is making three huge mistakes.
First, there is nothing in the Bayh-Dole Act that says price can be used as a factor to invoke march-in rights. Indeed, both Senators Birch Bayh (D-IN) and Bob Dole (R-KS) publicly stated that the legislation was never intended to do that. March-in was a fail-safe mechanism mostly to prevent inventors from sitting on technology and not moving it toward commercialization. The very assumption made by the NIST RFI that the government CAN do this contradicts the federal law that created march-in rights in the first place.
Second, even if march-in could be invoked to control drug prices, it will not have that effect. A recent study showed that between 2011 and 2020, 99% of approved drugs would not be subject to march-in, and that 92% of approved drugs received no federal funding at all.
Thus, a march-in decree designed to hand over a patent for others to make a drug at lower cost simply will not work as a broad price-control solution. And even if the patent for a federally funded drug were to be taken away, patients in need of that drug would have to wait years for other manufacturers to be able to replicate it in their own labs and bring it to market. This notion is wrong-headed from start to finish.
Third, the RFI fails to acknowledge the likelihood that uncertainty about whether march-in rights might be invoked will have a chilling effect on investment in innovation as a whole. Who will want to risk millions or billions of dollars with the knowledge that someday down the road, the government might decide the market price for that technology is “unreasonable”? Who will be making that decision? Federal bureaucrats with no understanding of economics?
This issue goes well beyond drugs and would affect a range of new discoveries in such fields as agriculture, clean energy and more.
We could see investors refusing to support federally funded inventions for fear the invention has already been contaminated by government involvement. Indeed, NIH itself went through this exercise in 1989 when it imposed “reasonable pricing” conditions in its agreements between federal labs and outside parties. Six years later, NIH revoked the policy, with Director Harold Varmus admitting that the policy “drove industry away” from potential collaborations.
We need every AUTM Member to express our concerns about this dangerous proposal. To file comments, simply go to www.regulations.gov and enter NIST-2023-0008 in the search field. Click the “Comment Now” icon, complete the required fields and attach or enter your institution’s comments. To read the RFI itself, go to https://federalregister.gov/d/2023-26930.