More than two dozen policymakers recently sent a letter to the U.S. Secretary of Health and Human Services, Xavier Becerra, calling on him to misuse a provision of the Bayh-Dole Act to lower the price of the prostate cancer drug Xtandi.
The lawmakers’ request, if Becerra grants it, would chill innovation and disincentivize the launch of new startups and inventions.
To understand why, just consider the status quo before Congress passed the Bayh-Dole Act in 1980. Prior to that landmark law, the government retained the patents on any discoveries made at university labs that received federal funding. But the government did a poor job of licensing out those patents to companies that were interested in further researching and developing them, and turning university researchers’ good ideas into tangible products. As a result, taxpayer-funded ideas sat on the proverbial shelf, gathering dust.
The Bayh-Dole Act changed this by allowing universities, research institutions, and small businesses to retain the IP rights to any products they discovered using federal dollars. These entities can then license the IP to startups that turn the research into valuable products, ranging from firefighting drones to airport scanners that monitor for explosives.
The law has been a tremendous catalyst for innovation. It has helped launch over 15,000 startups, contributed over $1 trillion to the U.S. economy, and supported millions of jobs.
Bayh-Dole does include a “march-in” provision — which allows the government to relicense patents that resulted from federally-funded research, but only in limited circumstances, such as when a patent licensee fails to make a good faith effort to bring a product to market.
The two chief architects of the bill, the late Senators Birch Bayh (D-IN) and Bob Dole (R-KS), made clear in a 2002 letter to the Washington Post that they “did not intend that government set prices on resulting products.”
But now, policymakers want Secretary Becerra to ignore the plain intent of the law and invoke the march-in provision to relicense Xtandi’s patents to generic drug companies, which could presumably make the medicine and sell it far below its current cost.
This request to Secretary Becerra is more than just a call to misuse an old law.
If the government sets the precedent that it can relicense patents on a whim, the entire innovation ecosystem will be at risk. Private companies will not spend millions of their own capital to license and commercialize patents that benefited from government research grants if those licenses can be arbitrarily taken away. And American workers and consumers will be worse off as a result.
Frank Cullen is executive director of the Council for Innovation Promotion.