Joseph Allen: Plan to lower drug costs may actually hurt U.S. legacy of innovation

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Joseph P. Allen

By JOSEPH P. ALLEN

For 43 years, the Bayh-Dole Act has been driving American innovation. It provides the incentives needed to transform inventions from ideas in the laboratory into useful products, improving lives here and around the world. It allows universities and small companies to retain ownership of what they invent if they use federal funds to do it. The universities are expected to obtain patents, which they keep, and use any royalties to fund more research and reward their inventors. 

Before 1980, few federally funded inventions were commercialized. They were mired in government micromanagement that destroyed the intended protections of our patent system, which are necessary to motivate companies to invest the time and money required for development. 

The Bayh-Dole Act, spearheaded by former U.S. Sens. Birch Bayh of Indiana and Bob Dole of Kansas, cut that Gordian knot. It decentralized technology management, shifting it from the federal government to the universities that make discoveries with agency support. It provided the needed incentives for commercialization, launching an unprecedented era of American innovation that continues to this day.

But that changed in December, when the Biden administration issued its draft guidelines for implementing the law — guidelines that attempt to change its meaning. Now anyone accepting federal research and development funds does so at their peril.

When crafting the law, the authors wanted to ensure that good faith efforts were made to develop government-funded discoveries whenever possible. It was feared that big companies might license a university’s federally funded invention and keep it from being developed if it threatened an existing product. There were also concerns that since universities were new at technology transfer, they might include unreasonable terms in their licenses that discourage development. The law included “march-in” rights, meaning the government can force a university to license its technology to others in those cases, or do so itself if the school refuses.

Luckily, that tool has never been needed.

For the past 20 years, those opposed to the law, wanting us to return to the pre-Bayh-Dole days of D.C. micromanagement, have filed a series of petitions against successfully developed products, asking the funding agency to march in and impose price control. They claimed that if a product was commercialized but not sold “at a reasonable price,” the government could license others to make it more cheaply. Every filing was rejected under Democratic and Republican administrations. Most were rebuffed under the Obama-Biden administration.

In March 2023, the Biden administration issued one of the clearest rebukes to that argument to date. That makes it astonishing that nine months later, the current administration’s guidelines endorsed the “reasonable pricing” theory it had just rejected.

The White House claims that it is unleashing a potent new weapon to control drug costs, saying the government can affect prices by licensing copiers. But the proposed action will have little, if any, impact on drug prices. It will, however, have a major impact on the entrepreneurial small companies that drive American innovation. 

Seventy percent of university patent licenses go to small businesses. Under Bayh-Dole, we form approximately three new startups around university inventions every day of the year. No other country comes close to that record.

These companies are highly dependent on attracting high-risk venture capital. But now investors will shy away, knowing that rival companies or foreign competitors can file march-in petitions alleging that a product’s price is too high. The possibility of a filing throws a cloud over the technology to hamstring our entrepreneurs when they are most vulnerable.

The vast majority of drugs have multiple patents protecting them, most of which were derived from the company’s own research. Those are not subject to march-in rights. A new study found that 99% of new drugs developed between 2011-20 would not be affected by march-in rights. But march-in rights don’t only apply to drugs — they apply to any invention made with federal funding.

Small companies licensing academic, environmental, energy and food production inventions are more likely to have key patents covered by Bayh-Dole. It’s now open season on them.

In 1980, I helped enact Bayh-Dole to free America’s research system from the crushing weight of government red tape and bureaucracy. In the decades since, this landmark law has reinvigorated U.S. innovation — which has delivered thousands of groundbreaking products to ordinary consumers and generated trillions of dollars in economic growth.

It’s imperative that the Biden administration abandon its destructive proposal, which risks undoing that enormous progress. The stakes couldn’t be higher.

Joseph P. Allen served on former U.S. Sen. Birch Bayh’s staff and helped enact the Bayh-Dole Act. He now serves as executive director of the Bayh-Dole Coalition. This column first appeared in the Seattle Times.

11 COMMENTS

  1. Bayh-Dole has been a horrible failure as public policy. It has induced university administrators to claim ownership of inventions that they should never have claimed. It has kept 99% of claimed inventions behind paywalls where the inventions are unavailable for research or production use in industry–because someone has to come take an exclusive license to “commercialize” the invention first, and that rarely happens. Bayh-Dole has failed to protect university inventors from the greed and foolishness of university administrators. Pin that on Bayh-Dole. That will be the law’s legacy.

  2. The current prescription drug market is a complete and utter scam. They create drugs to “cure” phantom diseases and symptoms. Then they create more drugs to treat the side effects of the drug they prescribed you. Then you develop a “new” syndrome or disease and they prescribe you a new drug to treat that problem. Before long you are taking three or four drugs for something you don’t even have. It was all planned by the pharmaceutical companies to keep you “sick” and under their control.

    The US government is complicit in this scam because without it Medicare, Medicaid and private insurances wouldn’t require the billions of dollars necessary to keep them in existence.

    The majority of drugs on the market are completely unnecessary, you have just been told they are necessary by a criminal enterprise that will under most circumstances never be prosecuted.

  3. IMHO, this is a bad time to be talking about supporting drug companies and drug costs when half or more of the united states population took a “vaccine” that hurts, injuries or causes death to those that took the “vaccines.” Personally, at this point in history, I do not support any drug companies. Maybe I cannot see the “whole” picture, but this article just seems weird at this time.

  4. Someone out there have any idea why my 2 RXs increased 33% in 3 months time? Bottom line: did the manufacturing process/ingredient cost increase or is it the pharmaceutical industry gouging us again?

  5. One of the fallouts from Bayh – Dole was regulatory capture of the FDA and other public health regulators by Big Pharma. This means that nothing is approved unless Big Pharma wants it approved. This also means that every single alternative treatment is banned by governments at the direction of Big Pharma.

    Proof of this? Best recent example is the total ban on alternative approaches to treatment of COVID. Every single therapeutic was banned in favor of the vax which isn’t a vax at all. All criticism of these bans were censored by the Dementia Hitler regime, Big Tech and Big Pharma. Cheers –

  6. All I can say is: Ozempic.

    How does a drug make it into tv commercials before phase 2 clinical trials are completed, mainstreamed by doctors into the general population, and for at least a year no one hears the words “stomach paralysis” until people have gone on, come off, and suffered severe complications from the drug?

    You have to be completely unhinged if you haven’t learned already: stay away from big pHarma.

  7. Blah blah blah…. Both party’s have done nothing but talk about lowering prescription costs for decades . I currently suffer from pancreatic cancer and one of my prescriptions alone costs $2800 a month . Big Pharma has the thumb on both parties . Just look at the Covid debacle .

    • There are alternative healthcare systems being built with doctors who treat to help patients, not make them sicker. Start looking at websites like brighteon.com for ideas of who, where, when and why. There is help for cancer that works. Just gotta be open to looking for the help.

  8. Selling prescription drugs for a high price was always used as an argument to benefit increased innovation, perhaps as the myth of ‘trickle-down’ economics, and incorrect intuition that it was the cost of compounding the drug that was the second most costly aspect. However, with the increase of more and more intervention by this or that layer beyond the actual drug research and the consumer that reasoning seems to hold less and less water, considering that actual manufacturing of most commonly used drugs is hardly seen as a significant issue, considering the increased involvement of politics -> maintaining quality of overseas production (and this doesn’t seem to be happening enough) and kickbacks -> mega-big pharma monopolies which consist of stockbrokers, exclusivity and kickbacks -> production which might be impacted by raw material shortages, factory closures, hurricanes near Puerto Rico, wars -> distribution contracts and kickbacks -> health insurance, government lobbying, contracts, and possible kickbacks -> PBM agreements, contracts with healthcare providers, kickbacks -> drug insurance, contracts, kickbacks -> prescriber detailing and education -> pharmacy chain monopolies comprised of stockbrokers, specialized pharmacies, prescribers, contracts, kickbacks, and harried pharmacists working for numbers -> patients that may or may not be able to pay for the full prescription so sometimes diseases are worsened during times when cannot afford medication, and may require different prescriptions and use of newer therapeutic agents

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