Defending the Bayh-Dole Act, or why governments shouldn't dictate the cost of drugs
Innovators in the U.S. must maintain their intellectual property rights if they are to provide the returns expected by current and future investors.
For decades, Americans have benefited — financially and medically — from a carefully balanced partnership between the U.S. government and sponsored private investors for developing a range of new drugs that have addressed the health conditions of millions.
That relationship is now threatened.
The Bayh-Dole Act of 1980 allowed companies acquiring inventions made with federal sponsorship to retain and profit from their licensed ownership. For over 40 years, the act has benefited Americans and the world in major drug discoveries. Federally funded research is now behind about a third of U.S. patents.
The act provides for “march-in rights” through which the government can invoke some degree of control over patents developed in part from public funding to ensure public access to them. Petitions for these rights have been submitted over the years but have had little success.
In December 2023, the National Institute of Standards and Technology, which is charged with implementing Bayh-Dole, published a draft guidance on expanding “march-in rights” to enable federal agencies to take the private intellectual property of a medicine if its price is deemed to be “unreasonable.”
A fundamental rule of free market capitalism is the right to profit from an invention or discovery. Without a balance of incentive and protection, inventors would not accept the risks involved in research and development to discover new products and advance them to the market.
In the United States, Congress’s response to the economic downturn of the 1970s included managing inventions created by government-sponsored R&D. At the time, inventors receiving federal funding were required to assign their inventions to the federal government, unless the public interest was better served by allowing their retention of exclusive rights. As a result, the government had accumulated several thousand patents from R&D, but less than 5 percent were commercially licensed. So many lost opportunities!
If the proposal from National Institute of Standards and Technology is accepted, it will harm American companies, employees, consumers and patients because it will lead to reduced investment and technological progress. Developers will be deterred from licensing discoveries made through government-funded research. Federal agencies’ ability to take control of intellectual property would discourage competition and private investment, particularly for startup companies, which are often where the riskiest efforts and advances are made. The effects would be felt worldwide and would threaten progress on global health.
Canadians, for example, are all too aware of their governments deciding what drugs should cost, entitling them to threaten the intellectual property of drug developers if they don’t comply with their demands. For many years, “compulsory licensing” allowed generic copies of patented medicines to be made in or imported into Canada.
In contrast, the Bayh-Dole Act gives investors and inventors assurance that, if they invest time, effort and money in startups that rely on exclusive patent licenses, companies are able to control intellectual property rights for their discoveries and products. The result has been a dramatic increase in private sector and university research in the United States that has provided enormous value to patients following the development of new life-saving treatments. Bayh-Dole works well with the U.S. Orphan Drug Act of 1982 to reduce barriers and add incentives for scientists and investors to make large bets on small markets for orphan drugs for rare disorders.
Innovators in the U.S. must maintain their intellectual property rights if they are to provide the returns expected by current and future investors. The new interpretation of march-in rights causes huge uncertainty. If drug developers can lose the exclusive license to their products, investors will likely take their money elsewhere.
Increased march-in rights would also create a pathway for governments and companies in other countries to exploit the process, demanding access to U.S. intellectual property. This would not only hurt American businesses and patients but those in other industrialized countries too.
The National Institute of Standards and Technology should cancel its ill-conceived proposal. Continued research into new treatments that benefit not only Americans but patients around the world needs to be protected, especially for those with health needs.
Nigel Rawson is a senior fellow at the Center for North American Prosperity and Security.
John Adams is co-founder and CEO of Canadian PKU and Allied Disorders Inc.; a senior fellow at the Center for North American Prosperity and Security; and volunteer board chair of Best Medicines Coalition.