Joe Allen has written a new piece warning of the dangers of trying to use Bayh-Dole march-in procedures to control drug prices. And he has a point–the Bayh-Dole march-in procedures were not designed to deal with pricing. In fact, the march-in procedures were designed not to work at all! The distinction to be made is between what folks like Norman Latker and Howard Bremer intended when they designed the march-in procedures, and what we must determine Congress intended when it passed the bill. Premise: Congress did not intend what Latker designed. The march-in procedures end up being an apparatus with no purpose but to give the appearance of public oversight. They have never been used. It is almost impossible for a federal agency to use them. They likely never will be used. If Latker and Bremer designed march-in so that it would never be used for *anything*, then they designed march-in so that it would not be used for pricing. Does the logic get any more direct? and yet, isn’t this a strange use of logic?
The reality is that Bayh-Dole authorizes federal agencies to march-in to address unreasonable terms. Price is a term. If price is unreasonable–not “high” or “unaffordable” but rather higher than what one would expect if there were competition even if a patent is used to suppress competition–then march-in is authorized. Thus, it is clear that march-in can be used to address unreasonable pricing, and the alternatives introduced–competition, so the theory goes–will address unreasonable pricing. If it doesn’t, then take a look at price-fixing.
But Joe Allen makes a few other assertions along the way that are worth examining. I will be brusque.
Allen claims
Not a single new drug had been developed from NIH funded research under the patent destroying policies preceding Bayh-Dole.
This is not true. Instances: Methotrexate, Cisplatin, MOPP. The policies before Bayh-Dole were not patent destroying. At worst, those policies prevented the creation of private monopolies around inventions that were made in projects dedicated to the public welfare. It takes some balls to argue that the public welfare depends on the formation of massive private monopolies to jack earnings 10x over what they would be with competition.
Take it further. March-in does not destroy a patent–it changes how a patent holder is compensated for the patent. Instead of selling directly, or licensing to only a single company to make and sell, the patent holder must grant licenses, or more licenses. For each license Bayh-Dole provides that the patent holder should enjoy “terms reasonable under the circumstances”–that would include reasonable compensation for the use of the patent, just as one would find for unlicensed government use of patented inventions under 28 USC 1498. Only if a patent holder refuses to grant such licenses on reasonable terms may the federal government grant licenses itself, on whatever terms the government chooses (which might not involve any compensation to the patent holder). March-in, then, changes the patent holder’s strategy for exploiting its patent position. It does not destroy the patent, it does not mean that the patent holder cannot make any more money.
Allen claims
The successful integration of public research institutions into the economy is based on the Bayh-Dole Act, which inserted the incentives of patent ownership into the government R&D system.
This is nonsense. The IPA system used by the NIH and the NSF already had done much the same thing for a decade before Bayh-Dole, and before that, the Kennedy patent policy permitted contractors to own inventions. It’s just that in the former approaches, patent ownership was based on an assessment of what was in the public interest, not on arbitrary law or who could make money exploiting public health needs. Not that the IPA system worked–it didn’t and was shut down, only to have Latker, who designed the IPA system, immediately draft the bill that became Bayh-Dole (not his first attempt at it, either). We might say, Bayh-Dole is based on a failed approach to placing federal inventions “into the economy.” If this approach is the basis for having research institutions “successfully integrated” into the economy, well, that’s a total disaster. Their confession, sometime in the future: “We took bureaucratic nonsense and duped a bunch of universities to adopt it, with awful outcomes that we hide and, well, pretty much lie about.”
Allen claims
Yet the patent system and Bayh-Dole are precisely what the critics seek to undermine.
No, what the “critics” seek is to make Bayh-Dole do what it claims to do–use patents to promote utilization of inventions and free competition and enterprise, not to create private monopolies.
The upshot. Allen waves his hands and wants price controls to go away. That much is clear. But Bayh-Dole had next to nothing to do with getting to market drugs invented at universities by researchers working with federal funding–those were already covered under the IPA program. There was no drug uptick after Bayh-Dole was passed. And there are mechanisms in Bayh-Dole to deal with monopolies and monopoly pricing–just not in the malformed march-in procedures.
Drug prices come down 80% or more when there’s competition. Bayh-Dole requires patents on inventions made with federal support be used to promote “free competition and enterprise.” That requirement is not met when a patent is licensed exclusively for its entire term and when the scope of exclusion prevents others from developing competing products using different formulations or developing applications of the invention that would treat other conditions.
We lose with prices 10x higher than needed–and there’s still profit at 1x! We lose because the pace of development slows during the term of monopoly. We lose because other uses of the invention are prevented. Barnett Rosenberg, the inventor of Cisplatin (made with federal funding, but not under Bayh-Dole) once wondered why there had been no further developments of treatments using platinum:
At the time, Rosenberg said he was “euphoric” over the life-saving capabilities of cisplatin. However, he also said it was “disturbing” that a discovery he had made more than 25 years earlier remained the gold standard for cancer treatment.
“For years I’ve been saying this is the first platinum-based drug we discovered,” he said. “It can’t possibly be the best one. It’s disappointing that the scientific community has not been able to find better ones.”
No need to wonder. Rack it up to the effective use of a massive private monopoly to harvest the maximum income, not to produce the widest opportunity for others to develop alternatives and improvements. The licensing strategy used by Michigan State and Research Corporation precluded further scientific work, eliminated competitive incentives, and delayed development.
There were indeed complaints about federal agency decision-making when it came to requests by contractors to retain title to inventions made in research intended to advance the public welfare. For the NIH, much of that came down to whether private monopolies to exploit public suffering were in the public interest–were even ethical. The drug companies, built for such exploitation, of course disagreed. But they never were the only way by which new drugs have become available for public use. Patent attorneys–working at the NIH and for universities–aimed to make patents appropriate the value of publicly funded research and hand that value to monopoly interests in exchange for a share of the action, and Bayh-Dole was their love child.
Joe Allen must dearly love his love child, but it’s grown into a love monster. It’s not just that it is a badly drafted law–awful, really, a franken mash-up of words from the Kennedy patent policy and the IPA contracts. It’s not just that it has a rotten architecture–in patent law rather than in federal procurement regulations but leaving key provisions to be drafted without Congressional oversight–such as the standard patent rights clause, march-in procedures, and licensing procedures. It’s not just that it guts public oversight and accountability where these should be most clear. It’s not just that it places no requirements on universities to have, actually, a viable technology transfer policy and practice. It’s not just that it gives the impression that universities are free to appropriate whatever inventions they please, without obligation to inventors or to companies that might also sponsor their work. It’s not just that it has never worked as claimed, despite the expenditure of hundreds of millions of dollars (much of that also public money at state universities and at state economic development agencies).
It’s just that, as love monsters go, Bayh-Dole does nothing for research, nothing for the expansion of scientific frontiers, nothing for innovation. It is a law that routes public value through private monopolies so patent attorneys have work and interlopers can speculate on the future value of patents rather than support directly the underlying research. Bayh-Dole creates betting pools on the value of research in the public interest.
What Joe Allen works so hard now to preserve (not that he sees it this way) is the idea that without such betting pools, the public would see no benefit from federally supported research proposed and conducted by university faculty and students. Perhaps–and this is a serious perhaps–public funding for research into new bioactive compounds should not have much of anything to do with the commercial drug industry. Perhaps the role of the federal government should be to explore alternatives to the idea that drugs must be monopolized and speculated upon before they can reach public use. Perhaps the speculation bit should come later, after there’s an infrastructure for characterization and exploration and variation and use. Perhaps it is no good thing that the U.S. is the biggest market in the world for drugs–a speculative bubble in which the value of the benefit has been inflated by a factor of 10. By what? By private monopolies. By Bayh-Dole.
If Bayh-Dole can’t be enforced to create or at least allow competition, then it should be reformed or repealed so that it is clear that it must create competition. And in any event, federal funding for research should return to the exploration of how to expand the frontiers of science and to develop new ideas for public use, as part of a commons of use, before any commercial product is considered, and without private speculative monopolies that exclude use and exclude further independent research and discovery. Bayh-Dole positions private monopolies on university research in the wrong place–too soon, with too great scope, without accountability. Bayh-Dole has been a devastatingly bad idea. It can be fixed (as in cat, not car) so as not to do more damage. Or it can be fixed (as in car, not cat) to do less damage. Or it can be repealed. The Kennedy patent policy was pretty straight. Returning to it is not so bad. The IPA program was a bit screwy, but there are ways to make it work, if it is not so capricious and does not end up being another excuse for private speculative monopolies, as it was for a decade before being shut down.
If we back up to the fundamental question, it is what to do about federal support for research that has as its goal the advancement of the frontiers of science. Don’t try to call it “basic” research–just talk about research that aims to figure out new phenomena, new laws of nature, or push back on the claims made about the state of scientific knowledge we consider the consensus. When the government funds that research, what sort of private monopolies should be created, and who should get to decide when and how and why? That’s the fundamental question. That’s the discussion to have. Are we to have a broader public domain? A broader federal commons? Or a fragmented speculative game to produce private monopolies, led by universities administrators and patent brokers?