Indeed, the law ignited a nationwide resurgence in innovation that still thrives today. In 2002, the Economist labeled it as “potentially the most brilliant legislative act implemented in America throughout the last 50 years.” After my retirement, I realized its huge importance and became part of the advisory board of an organization solely focused on preserving and celebrating it. However, the effectiveness of Bayh-Dole Act is now critically endangered due to a draft policy under review by the current administration, which initiated a public feedback period ending on February 6.
The administrative proposal, aimed at reining in US drug prices, banks on an abstract clause in Bayh-Dole that permits the government to “march in” and reclaim patents. Basically, it empowers the government to seize an exclusively licensed patent from an organization and transfer the license to a rival company. The intention behind this clause was to enable government intervention if a company fails to commercialize a federal-funded discovery and offer it to public within a reasonable time frame. Now, it is being suggested by the administration to control skyrocketing prices of pharma products by reclaiming patented branded drugs if not provided at a “reasonable” cost.
At first glance, it might seem prudent as the US deals with some of the world’s steepest drug prices and many life-saving medications remain inaccessible to those who can’t afford them. However, the attempt to control drug pricing via the march-in clause will prove largely ineffective. Many drugs are protected by private patents, obtained subsequently during the development process by biotech and pharma firms, so acquiring just an early-stage patent will hardly aid in generating generic alternatives. Also, this approach might impose an enormous disincentive at the early phases of drug development when firms license the original innovative patent from universities and research institutions.
If the current administration approves the draft march-in policy as it is, it could let the federal government disregard licensing contracts between universities and private companies based on possibly obscure and subjective factors such as what defines a “reasonable” price. This is bound to make technology development drastically riskier. Big corporations could have abundant reasons to back out, and investors in startup firms, who play crucial roles in bringing innovative university technology into the market, might be equally hesitant to invest. Every patent linked with federal funding might become undesirable overnight as even just the inclusion of a single cent from public funding could potentially make the finished product a target for patent reclamation due to pricing.
Furthermore, the draft policy is represented as a “drug pricing” strategy, but it draws no line between university breakthroughs in life sciences and those in any other tech-intensive industries. Consequently, investments in IP-driven sectors ranging from biotech to aerospace to alternative energy would tumble. Technological advancement would come to a halt. The technology transfer system instituted by the Bayh-Dole Act would rapidly crumble. If the administration does not retract its proposition, the US will revert to the era when the most promising federal-backed discoveries remained stuck in university laboratories. The patenting of innovations based on breakthrough research would shrink, and the emergence and growth of innovation centres that I have had the pleasure of observing, would be threatened.
Lita Nelsen served as member of the Technology Licensing Office at the Massachusetts Institute of Technology from 1986 until 2016, holding the directorship during 1992-2016. She is a part of the Bayh-Dole Coalition’s advisory council, a consortium of organizations and individuals dedicated to preserving Bayh-Dole Act and enlightening policymakers and the public about its merits.
