Nonsense about Bayh-Dole from Bio, 2018 edition–2

We are working through the 2018 version of Bio’s misinfographic about Bayh-Dole and its relationship to drug prices. Bio report metrics from an AUTM report as if they are facts. But these are not facts–they are estimates from an unvalidated model, without the ranges and without indicating that these figures are estimates for 20 years of activity, and without indicating that this activity is not at all restricted to Bayh-Dole related inventions.

Here, look:

AUTM doesn’t collect data on jobs or economic output and doesn’t even collect information specific to inventions made in federally supported research. The graphic doesn’t have anything specific to do with Bayh-Dole. The graphic depicts the output of an economic “model” that estimates “contribution” and “jobs” from things like royalties reported by universities. As far as I can tell, the actual model has not been published–just its “results.” Someone could go into a back room and come out an hour later with “results.”

Here’s the AUTM “report” that Bio appears to be using.

the total contribution of these academic licensors to industry gross output ranges from $320 billion to $1.33 trillion, in 2009 U.S. dollars; and contributions to gross domestic product (GDP) range from $148 billion to $591 billion, in 2009 U.S. dollars

So there’s a range to the “model.” $320 billion doesn’t look so hot, so Bio goes with the upper limit. No error bars in any of it. And that’s just an estimate of the “industry gross output”–whatever that means. I think it means that this is the amount estimated that industry sells that is in some way affected by a university license. That would include universities demanding a license from companies that developed products without the need or desire for a university license. The GDP estimates are about half the “gross output” estimates. And just in case you missed it in the Bio infographics, these estimates are for 20 years of data. So divide things by 20 to get an estimated annual contribution. Even at the upper end of the AUTM GDP estimate, we are at like a $30 billion annual contribution. In 2009, the US GDP was about $14.4 trillion. Where does that put the estimated AUTM contribution? 0.21%? Oh, and given that university patenting is like 40% federally funded inventions, we get 0.1%.  And we are talking just the output of an economic “model” and taking the high numbers. The contribution of Bayh-Dole, even with happily unverifiable “estimates” from a lobbying group (AUTM) for another lobbying group (Bio) is that the impact is a rounding error. Sucks.

Same false dealing by Bio for jobs:

Estimates of the total number of person years of employment supported by U.S. universities’ and hospitals’ and research institutes’ licensed-product sales range from 1.268 million to over 4.272 million over the 20-year period.

It’s not “jobs” but “total number of person years of employment.” Talk about being abstract. And again we have a range over 20 years. Bio would like us to think of it as merely the upper end (4.2 million person years) and heck, anything but over 20 years. It’s all very silly and not particularly intelligent. Whatever has been happening, there’s nothing to show that Bayh-Dole has anything at all to do with it.

That was an anonymous writer for The Economist in 2002. There’s nothing in the article that supports how Bayh-Dole “helped to reverse” anything. Before Bayh-Dole was the IPA program at the NIH and NSF that did much the same thing. Apparently the IPA program was part of the problem. But Bayh-Dole, doing the same thing, was part of the help. It’s just nutters. But wait, there’s more.

Here’s The Economist in 2005, three years after the pearl quote repeated by Bio, “Bayhing for blood or Doling out cash?”:

A law of unintended consequences

Yet the yelps from critics have grown louder over the years. Many scientists, economists and lawyers believe the act distorts the mission of universities, diverting them from the pursuit of basic knowledge, which is freely disseminated, to a focused search for results that have practical and industrial purposes. Whether that is a bad thing is a matter of debate. What is not in dispute is that it makes American academic institutions behave more like businesses than neutral arbiters of truth.

And here’s IP Watchdog discussing a recent contention by The Economist that patents are not necessary to innovation (“Patents are protected by governments because they are held to promote innovation. But there is plenty of evidence that they do not”):

In what can only be characterized as a bizarre, rambling, and intellectually dishonest article, The Economist has inexplicably taken the position that patents are not necessary for innovation.

Yes, The Economist is only good about Bayh-Dole and patents at some times and not at others. It’s just high school level writing to select quotes and not consider that editorial positions might change over time.

By the third page of the infographic, I’m worn out. So are you, no doubt. But bullshit has its aroma.

Now we have a bare assertion that Bayh-Dole “benefits” just about everyone. But we have seen that Bio has presented nothing of the sort. Nothing about benefiting taxpayers or consumers. Not even benefiting patients. And the benefit to the economy, even when using inflated unverifiable unvalidated estimates amounts to a rounding error. But now we get to the crunch–Bayh-Dole might be used to control drug prices and that would be awful.

If Bio is screeching about it, it must be that Bayh-Dole could indeed be used to control drug prices. It’s just not what Bio focuses attention on. March-in is not much use in dealing with drug prices. But enforcing Bayh-Dole’s nonprofit requirements would–especially the requirement that all income with respect to subject inventions go to support specified public purposes. March-in was designed not to operate. March-in was delegated to federal agencies so that each agency could decide whether to bother with Bayh-Dole. The NIH’s patent counsel drafted Bayh-Dole. The NIH is the last agency we would expect would ever use march-in.

Bio then spends the last page of the infographic presenting arguments that march-in would stifle medical innovation, hurt small businesses, and weaken the military. This is nonsense. Let’s show how the arguments don’t hold up. They are bluff and bullshit, like the rest of the infographic.

It doesn’t matter what percentage of drugs are developed in the U.S. What percentage of drugs based on a federally funded invention are developed in the U.S.? Bio doesn’t say. Could it be that there aren’t many? And are these inventions licensed to U.S. companies? Or do universities license to whomever shows up? It would appear that 43% of the world’s prescription drugs are created in conditions with price controls. That suggests that price controls do not inhibit medical innovation. But price controls may well inhibit medical profits. That much is clear.

That the NIH tried and then abandoned a “reasonable pricing” standard also doesn’t matter. The NIH invoked that standard for its own licensing, not that of university owners of subject inventions. And a public survey is an easy instrument to game into whatever finding one wants to have. No doubt if one surveyed patients paying $100,000 for a drug, asked if they liked patent monopolies on such drugs, they might respond differently. Frankly, I don’t know of anyone in the public that thinks in terms of patent monopolies without restriction on reasonable terms as a “return on their research investment.” It might be a consideration for people speculating on pharmaceutical stocks, but not for people thinking about federally supported biomedical research.

Again, we aren’t concerned with university “innovations” generally. University “innovations” includes software, research tools, materials, data sets, engineering inventions–whatever. And only 40% to 45% or so of university-owned utility patents are federally funded (while the federal government provides about 60% of university research funding). And so a lot fewer of those 40% to 45% of federally supported inventions are directed at biomedical uses. So the total percentage of “innovations” licensed to small companies is meaningless here, other than to distract. Clinical trials may be undertaken by small companies, but where’s the match up with clinical trials undertaken by small companies holding exclusive licenses from universities for federally supported inventions?

It’s pretty standard for small companies in biomedical to be backed by large sums of private investment capital, banking on the idea that once a candidate compound makes it through the first phase of clinical trials, the company will be bought out by a big company. So, sure, there a plenty of clinical trials fronted by venture-backed startups, but anything successful gets sold out to a big company. That’s the general plan. Nothing here that indicates that small companies all on their ownsome develop new drugs through to commercial sales based on university-licensed, federally supported inventions.

No doubt university licensing of biomedical inventions to speculative investors is a fun thing for speculative investors and university administrators alike. But Bayh-Dole has nothing to do with that. If the federal government insisted that all such inventions were to be made generally available on a non-exclusive basis (as was, without any such requirement, Stanford and the University of California’s gene-splicing inventions), then new classes of compounds would become platforms for competitive development, standards upone which any number of variations might be based. Nothing suggests that anything really good would be ignored. Even if the big pharmaceutical companies boycotted such inventions, as they did in the 1960s, there’s nothing to indicate that the situation would be bad for small companies. They would take licenses at lower cost with lower risk, add new inventions by way of development, and stake their competitive positions on their new inventive developments, not on the common standard.

Nothing about Bayh-Dole has anything to do with it. In the original Bayh-Dole, there was a stipulation that nonprofits could grant exclusive licenses to big companies for no longer than the first to come of five years from first commercial sale or eight years overall. That provision was removed three years later, before it could ever be put into practice. Limiting the patent term would create opportunities sooner for “free competition” and competition might indeed lower drug prices. At least it is something we might try. Heck, “free competition and enterprise” is even expressly in Bayh-Dole’s statement of Congressional policy.

The Department of Defense was one agency that consistently opposed any restrictions on its contractors’ control of inventions made with DoD funding. The DoD’s position was codified in the Kennedy patent policy, and retained by the Nixon revisions. For the DoD, Bayh-Dole did next to nothing. Furthermore, “private-sector” partnerships are not the issue–the issue is the disposition of inventions made at universities and other nonprofits in federally funded research. Those “critical medical countermeasures” that the military uses are entirely available to the military through Bayh-Dole’s unconditional non-exclusive, royalty-free license to practice and have practiced any subject invention. There’s absolutely no need for the military to march-in on Bayh-Dole inventions to meet military needs. The DoD can authorize anyone it wants to manufacture, at whatever price it can negotiate. The DoD does not have to purchase federally supported “medical countermeasures” from the open market, as commercial products. Indeed, there may be good reasons for the DoD to want access to such “medical countermeasures” in forms other than as commercial products.

In any event, Bayh-Dole price controls have nothing to do with DoD “medical countermeasures.” It’s a non-argument. Bayh-Dole disappears and the DoD doesn’t notice, other than for some minor administrative bother. However, it is something of a shock that the DoD doesn’t act on its Bayh-Dole standard patent rights clause license and authorize the development of what it wants at the price it is willing to pay. There’s absolutely no reason that the DoD should pay patent monopoly prices. That’s not the idea of a “private-sector” partnership unless corruption and waste are included in the idea. Oh, wait. Perhaps they are.

What do we learn from this exercise? Bio puts out misinformation. Bio gets it wrong about Bayh-Dole, makes estimates appear to be facts, obscures context, and generally aims to mislead the public and decision-makers. N

There’s a political argument (that goes back to Albert Carr, a former presidential advisor) that if no one expects the truth, then bluffing is ethical. It’s a kind of game played by people wanting power. Say whatever will give you power and pity the poor fool who thinks you are telling the truth. If someone wants to show your bluffing to be bullshit–fine, move on to different bluffing.

That may indeed be how public policy in matters of research inventions gets made. But no one should be deluded by Bio on the matter.

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