America’s ascendance as the world’s leader in life-sciences innovation has been the result of thoughtful, intentional public policies, including robust funding for the National Institutes of Health (NIH). The benefits of that funding have been significantly amplified by the 1980 Bayh-Dole Act, which gives universities and research institutions ownership of the intellectual property (IP) stemming from discoveries made in part from federally funded scientific research.
Hailed as “possibly the most inspired piece of legislation to be enacted in America over the past half-century,” the Bayh-Dole Act plays a critical role in spurring commercialization of basic life-sciences research from U.S. universities into life-saving medicines. Yet, in an attempt to control drug prices, some have called for the federal government to inappropriately exercise controversial provisions in the law that allow it to “march in” and grant licenses for patents that resulted from publicly funded R&D.
On March 7, 2019, the Information Technology and Innovation Foundation (ITIF) held a discussion on the Bayh-Dole Act’s key role in catalyzing American leadership in life sciences and why implementing march-in rights would harm research universities and limit further innovation.
The event was moderated by Stephen Ezell, vice president of Global Innovation Policy at ITIF. He explained that, while the United States is the leader in life-sciences innovation now, this was not always the case. In the late 1970s, Europe led in life sciences; however, by 2014, 60 percent of new drugs were first introduced in the United States. According to Ezell, this has been the result of intentional, conscientious policy decisions specifically designed to make America a leader in the life sciences. One of these key policy decisions was to protect intellectual property, a major facet of the Bayh-Dole Act.
The Bayh-Dole Act led to a tenfold increase in academic patenting in its first 20 years and over 80,000 patents and 12,000 start-ups resulting from academic tech transfer. In addition, the legislation has facilitated over 200 drugs and devices through public-private partnerships. The federal government plays a vital role in funding research, but the private sector invests in innovation too; in fact, there is $100 of private investment for every $1 of public investment in a new drug.
The Bayh-Dole Act does contain special provisions where the government can intervene in patent ownership. Under certain circumstances, the government retains the right to “march-in” and require patent holders to grant licenses:
- If the contractor fails to take effective steps to achieve practical application of the subject invention;
- If the product can’t be substantially U.S.-manufactured;
- If the contractor can’t meet requirements for public use specified by federal regulations; or
- If action is needed to alleviate health or safety needs which aren’t “reasonably satisfied” by the patent holder.
It is imperative to note that these march-in requirements do not refer to reasonable pricing. The legislation’s architects, Senator Birch Bayh and Senator Bob Dole, purposefully did not want the law to justify the government setting drug prices. In fact, ensuring “reasonable” prices can have adverse effects on innovation. In 1990, the NIH imposed “reasonable price” requirements on Cooperative Research and Development Agreements (CRADAs), which stunted life-sciences innovation; by 1995, the agency repealed the price requirements. Rather, the Bayh-Dole march-in rights should be used to ensure commercialization activity, address conditions of a national emergency, and guarantee that drugs are being substantially manufactured in the United States. The NIH has petitioned the government six times to use the march-in rights, but the government has never done so.
Following Ezell, Joseph Allen, president of Allen & Associates, Inc., gave his perspective on the Bayh-Dole Act. Allen served on the U.S. Senate Judiciary Committee for Senator Bayh and helped secure the passage of the legislation. In his view, the Bayh-Dole Act is “Jeffersonian,” in that the government is purposefully not micromanaging innovation; rather, it merely funds the research and sets some guidelines. The legislation, in his view, is not intended to enrich universities, as they are “stewards of the public interest;” rather, the return on interest (ROI) for the Bayh-Dole Act are the technologies commercialized and the contributions made to the economy. For example, every day, there are two new companies, on average, that start around the research from a university. He also emphasized the effect the law has had on human lives, giving an example of a woman who credits the legislation for creating a new drug, and thus, saving her life.
Steve Susalka, chief executive officer at the technology transfer firm AUTM, elaborated more on the commercialization of research. First, he outlined how technology transfer occurs. It starts with research, which is often publicly funded; as such, taxpays have a vested interest in U.S. universities, hospitals, and government labs producing valuable basic research. This research leads to inventions; in fact, almost 25,000 inventions were created in such institutions in 2017 alone. Lastly, technology transfer offices identify the commercial partner that will move that invention to market. Susalka emphasized the direct relationship between research and inventing and how vital it is to strengthen intellectual property protections, such as the Bayh-Dole Act.
“It is not an understatement to say that the Bayh-Dole Act catalyzed academic tech transfer to a level never before seen and is now being emulated across the globe,” Susalka said.
Melissa Brand, associate counsel and the director for intellectual property policy at the Biotechnology Innovation Organization, shared the industry’s perspective on the Bayh-Dole Act. There is approximately a 90 percent failure rate when creating new drugs, and the process is very long. Without the system created by the Bayh-Dole Act, universities wouldn’t be willing to take on the risks that lead to innovative discoveries. From her perspective, the Bayh-Dole Act has been incredibly important in maintaining the biopharma ecosystem and has been a useful part in facilitating drug approvals.
Lastly, Congressman Doug Collins spoke on the importance of innovation and the need for cultivating more of it. According to him, it is essential to understand that innovative thoughts and ideas are the essence of who we are as a country. He also discussed the significance of the patent system, which some in Congress are beginning to doubt; in his view, if intellectual property is not valued, there is possibility of falling behind as a nation.
Following Congressman Collins’ speech, Ezell, Allen, Susalka, and Brand discussed the impact and nuances of the Bayh-Dole Act and took audience questions.