Bayh-Dole on 200 drugs, 3

We are working through examples of the claim that Bayh-Dole has led to the creation of 200 new drugs. There’s been a lot of post hoc fallaciphizing–that because Bayh-Dole came before some of these new drugs, they must have come about because of Bayh-Dole. Worse, we find that a bunch of these drugs apparently were developed before Bayh-Dole or before Bayh-Dole had a chance to have produced anything approaching a drug available for commercial sale.

In all this, the only reason for Bayh-Dole is to offer the opportunity for federal contractors and federal agencies to deal in patent monopolies. The only reason for all the apparatus in Bayh-Dole is to ensure reasonable pricing when contractors and federal agencies do deal in patent monopolies. The problem with this scheme, however, is that as soon as a contractor or federal agency gets into an exclusive license arrangement and takes a financial interest in the licensee’s income or stock value or both (and on secret terms), there is no way for the public protection apparatus to operate. The contractor or federal agency licensor is so deeply conflicted that it cannot compete with its own licensee and it cannot march-in on that licensee even if a product is made available to the public on unreasonable terms. It has contracted itself out of the role of protecting the public interest with regard to reasonable pricing.

Here’s BIO’s version of the 200 drugs meme:

Here we are again, with 200 drugs–but now developed through “public-private partnerships.” No indication here whether those “partnerships” involved Bayh-Dole inventions or whether those drugs end up priced reasonably. Similarly, there’s not even any indication that the federal government has taken many patent rights away from “inventing organizations.” That’s because, for one, organizations don’t invent. Inventors invent, and when they do, the own their inventions. When those inventors invent in work under which they have agreed that the federal government should own their inventions with the expectation that those inventions will be made available to everyone, including themselves, the federal government is not “taking away” their patent rights–they agreed to the deal when they proposed the work for federal funding. It’s only when an organization gets in the way of that exchange and demands ownership of an invention before the inventors convey it to the federal government for open release that we have a circumstance in which the federal government might “take away” patent rights. Any such taking would have to be before 1968, when the NIH revived its IPA program and gave its nonprofit contractors the right–indeed a requirement–to take ownership of any invention arising in NIH-funded work on which a nonprofit contractor chose to file a patent application.

The BIO graphic comes down to “after Bayh-Dole, 200 drugs were created involving public funding in some way, where by contrast a situation that almost never happened previously did not produce a single one.” And we will discover that even the 200 drugs bit is wrong. It wasn’t 200 drugs, but fewer, and it wasn’t after Bayh-Dole, it was before Bayh-Dole as well as after, and even after Bayh-Dole not involving Bayh-Dole.

Here’s the claim made by Joseph Allen, cited by BIO:

Before Bayh-Dole not a single new drug was developed when the government took patents away from the inventing organizations, making them available through non exclusive licenses while destroying the intended incentives of patent ownership.  Since Bayh-Dole ended this waste  of taxpayer supported research, more than 200 new drugs and vaccines arising from academic inventions are combating the scourge of disease both here and around the world.

Allen gives no source for his claim. Maybe he just pulled it out of the air. But even so, consider the nature of the claim. Allen’s assertion is this: all reports of discoveries directed at public health published for all to use were never used. That’s the necessary upshot of Allen’s claim. If someone published a medical discovery, if there was no prospect of dealing in a patent monopoly in what was published, then drug companies would not use the publication, nor would anyone else. That’s just strange. If true, it argues that federal research in public health is a total waste of public money. It also argues that nothing in the course of development of a drug results in new patentable inventions–in new formulations, new methods of delivery, new assays to determine efficacy, and new applications. But it’s not true. Look at this table prepared by Mansfield in “Academic Research and Industrial Innovation“:

Mansfield asked business executives about products they had produced 1975-1985 with regard to academic research conducted in the 15 years prior to those products’ development. Drugs were the most highly cited as relying on academic research–not patents on academic research but the results of that research, generally. And this is almost entirely pre-Bayh-Dole. There’s the NIH IPA program, to be sure–but it resulted in only 4 products of 96 inventions claimed, if the internal memorandum kept by Howard Bremer is trustworthy. Clearly, companies depend on academic research to produce new drugs. It’s just wildly an open question whether any company needs exclusive control over patents held by nonprofits and federal agencies to do it.

It’s not some basic bit of science that determines what can be used to prevent competition and recover not only one’s cost of development but also the cost of development for everything else one has taken in and not been successful with, plus as much profit as possible. Any patent or other proprietary position (trade secrets, say or exclusive source of materials) that one might have can do the trick.

We might also pause of what Allen means by the “intended incentives of the patent system.” Allen appears to mean just what we might have feared–that the patent system is intended to allow companies to buy up rights to health-related inventions and for two decades price-gouge the suffering public for maximum profit. We can debate whether or not this is an intent of the patent system. But really, our debate is whether it is an intent of Congress that in allocating funding for health research that federal agencies and contractors should actively seek out companies committed to unreasonable pricing of products based on inventions arising from such work. Allen appears to claim so. But it’s a tough thing to swallow, don’t you think? Why would Congress put all sorts of price control protections in Bayh-Dole and still intend price-gouging speculation as the driving force. I know, I know–other than that Congress has been bought out by big pharma. Other than that, is there any public policy rationale to support such an intent? No.

Here’s a paper that might be the source of the claim about 200 drugs and Bayh-Dole–though the paper does not make any such claim:

Stevens, et al., “The Role of Public-Sector Research in the Discovery of Drugs and Vaccines.” New England Journal of Medicine, 2011.

The study finds that from 1962 to, apparently, 40 years thereafter but somewhat longer–“153 new FDA-approved drugs, vaccines, or new indications for existing drugs were discovered through research carried out in PSRIs [“public-sector research institutions”].

There’s nothing to identify that these “drugs” were made in work receiving federal funding or that they are based on patents obtained by the institutions that hosted the research. Some clearly were, as 22 of the drugs were from the NIH. But Bayh-Dole came into effect in 1981, and any drugs making it to the FDA Orange Book based on discoveries made in Bayh-Dole research would, we expect, not show up until, well, a few years to do the research, another year to get a patent application prepared and filed, three years or more to get a patent issued and secure an exclusive licensee, and then maybe a decade to develop and test–so maybe 1995 or so.

Here’s the article’s account of its scope:

Our study encompasses a broad range of relationships. In some cases, the PSRI made the initial discovery independently and subsequently licensed it to the company that developed the drug. In other cases, the relationship started with a public–private collaboration, and the initial patents are jointly owned by the PSRI and its corporate partner, which generally obtained a license to the PSRI’s undivided interest in the patent. Sometimes, simultaneous inventions in the public and private sectors resulted in interference proceedings, which were resolved through negotiation rather than through the patent office. In a few cases, the company that developed the drug did not respect the PSRI’s intellectual property and litigation ensued, ending in the judicial imposition of a license.

Nothing specific to federal funding and certainly not to Bayh-Dole. Not even 200 drugs. The article points out there were 206 new drug applications based on these 153 new drugs–so maybe that’s where the 200 drugs meme comes from. But there’s no indication of what of those 153 drugs came after 1995 and thus might have some relationship to Bayh-Dole. And there’s nothing to indicate that prior to Bayh-Dole, there were no drugs developed in which the federal government received ownership from a nonprofit contractor. As if such a thing would be important. From 1968 to 1978, the NIH ran its IPA program that allowed nonprofit contractors to take title to inventions–health-directed inventions–made with NIH support. There would be, then, nothing to intervene to force the NIH to take title to such inventions except if a contractor refused to take title–thus, there simply would be no circumstance under which the NIH would demand title, having already promised by federal contract with over 70 nonprofits not to do such a thing.

The article helpfully provides an appendix that lists the drugs identified by the authors. There, oddly, there’s nothing to indicate what role each public-sector research institution had–all we can surmise is that each was an “assignee” of an invention. We don’t know if the invention came in work with federal funding, or if that funding was Bayh-Dole based. We don’t know, too, whether the approved drug spent much time on the market, was withdrawn for adverse effects, or–and the important part–was priced reasonably.

The only reason for Bayh-Dole is to enable nonprofit federal contractors and federal agencies to deal in patent monopolies on health-related inventions, using exclusive licenses and assignment of inventions.

But the only things, then, that matter, are that these contractors, licensees, and assignees (i) produce new medical treatments (use) and (ii) offer these treatments to the public at a reasonable price (on reasonable terms).

Much of the apparatus of Bayh-Dole is caught up in requirements to promote reasonable pricing. There’s a limitation on the use of the patent system to suppress use (35 USC 200) and a policy to promote free competition (also 35 USC 200). There was a limitation on the length of an exclusive license offered by a nonprofit to a large company (removed in 1984), there is a march-in provision triggered by the failure of a contractor or assignee to achieve the practical application of a Bayh-Dole invention–defined (35 USC 201(f)) as the use of the invention with benefits available to the public on reasonable terms. Reasonable terms, to the public, is nothing if it doesn’t include reasonable price.

Bayh-Dole also gives federal agencies the right to practice and have practiced any inventions subject to Bayh-Dole–and “practice” means to “make, use, and sell” in federal invention policy from which the Bayh-Dole wording is lifted. Thus, in the default instance, the federal government is always set up as a competitor with any non-federal development and exploitation of a Bayh-Dole invention. If we expect that competition, at least in the absence of collusion–might influence price, then we might also expect that the federal government has a responsibility to compete whenever a federal contractor fails to develop a medical treatment or does develop a treatment but does not make it available at a reasonable price.

We might expect, as well, that federal agency exclusive licensing for medical treatment inventions creates an unacceptable conflict of interest with that agency’s responsibility to compete with non-federal development of such inventions. If the federal agency has taken a financial interest in an exclusive licensee’s products (or, yet worse, in the stock value of the exclusive licensee), then how can we expect the federal agency to also be ready to compete with that licensee, even when public responsibilities would dictate that it perform that role? We can’t expect anything like that. And, in point of historical fact, we have never seen a federal agency compete with an exclusive licensee–either its own exclusive licensee or the exclusive licensee of one of its non-profit contractors. It’s not that such competition is not, somehow, necessary, but rather that federal agencies are so conflicted that they cannot envision disrupting their exclusive relationships. In essence, the companies they choose to take exclusive control of federal inventions become extensions of the federal agencies and nonprofit contractors and in that role dictate public policy, including abandoning the idea of reasonable pricing as a public benefit of public research support for health-directed inventions.

Not only does the NIH have a choice of whether to farm out research to contractors and thus locate inventions with them rather than at the NIH, but they also have the choice whether to license exclusively or non-exclusively, and if non-exclusively whether to require the same from contractors. Nothing in Bayh-Dole dictates any of these choices. Bayh-Dole does not require the NIH to distribute health research that might be inventive, does not require the NIH to license inventions exclusively, does not require the NIH to allow contractors to exploit inventions exclusively or license them exclusively. And in any of this, Bayh-Dole does not require, even for exclusive exploitation of patents, that resulting products be made available at unreasonable prices–prices set without competition, prices set to return a speculator’s profit rather than a reasonable profit.

Thus, we have a study that found 153 new therapeutic products associated with “public” research institutions. But there’s nothing in that study that shows that Bayh-Dole has anything to do with it. And there’s nothing in the study that considers how other drugs may have been developed without patents held by those same research institutions–published literature, say, on which companies might build and develop their own, more targeted patent positions, to the extent they need those positions to develop a new drug. All we have is a claim of 153 new therapeutics, rounded up now to 200 and attributed without substance to Bayh-Dole.

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