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NIH decision seen as boost for research commercialization.

A recent decision by the National Institutes of Health offers needed encouragement for commercializing federally funded innovation, according to supporters--and proves that the Bayh-Dole Act is working as it should to incentivize innovation. The decision, released on November I, rejected a petition to use a key provision of the Bayh-Dole Act to moderate the prices Americans pay for a product developed with federal funding. Although the case involved NIH, it could have established a precedent for a wide range of federal agencies that fund research, such as the Department of Defense and the Department of Energy.

The Bayh-Dole Act, enacted in 1980, gives ownership of patents resulting from federally funded research to the universities or companies that actually do the research. Before that, the funding agency retained control of patents resulting from federal funds, a practice that made commercialization of such discoveries difficult, if not impossible. However, the patent grant is not unconditional. Bayh-Dole includes a "marchin" provision that allows the funding agency to rethink the exclusivity of a patent granted under the law and award additional licenses to other "reasonable applicants" if the agency determines that specific criteria, including the "health and safety needs" of consumers, have not been effectively met.

Among these considerations, some argue, should be pricing structures under which some drugs cost significantly more in the United States than they do elsewhere in the world. NIH has considered two march-in petitions, one in 2004 and one this year, both focused on drug prices. The most recent case concerned ritonavir, a drug developed with federal funds to treat HIV/AIDS and hepatitis. The drug, patented by Abbot Laboratories (now AbbVie) and marketed globally under the name Norvir, is significantly more expensive in the United States than in comparable countries. In October 2012, the American Medical Students Association (AMSA), Knowledge Ecology International (KEI), US Public Interest Research Group (PIRG), and the Universities Allied for Essential Medicines (UAEM) filed a petition asking NIH to exercise its marchin rights for AbbVie's ritonavir patents, claiming that the pricing of the drug is unfair to US taxpayers, who financed its development. As Krista L. Cox, staff attorney for KEI, wrote, "It is appalling that US residents pay much higher prices for the very inventions funded through their taxpayer dollars."

After more than a year of investigation and consideration, NIH investigators determined that, according to a written statement from director Francis S. Collins, "The NIH continues to agree with the public testimony in 2004 that the extraordinary remedy of march-in is not an appropriate means of controlling prices of drugs broadly available to physicians and patents." That statement coincides with the arguments of opponents of the petition, who claim the effort was an inappropriate use of the law, and that a decision for the petitioners would threaten future innovation by discouraging private-sector partners from commercializing federally funded research across a spectrum of research fields.

Opponents of the NIH petition argue that using Bayh-Dole march-ins to control prices would create a cloud of uncertainty over the prices that could be charged for new products--uncertainty that would frighten away companies that might otherwise commercialize the outcomes of federal research dollars. The result would be a shutdown of an innovation pipeline that has already fostered new inventions, new industries, and new jobs. Those arguing against the petition noted that when the US House of Representatives passed a 2010 resolution of support for Bayh-Dole with a nearly unanimous vote, the Act had already helped create 6,500 new companies and 280,000 new high-technology jobs for an estimated $450 trillion contribution to the United States' gross industrial output.

Joe Allen, who served on the staff of the US Senate Judiciary Committee that produced the legislation and currently works as executive director of Intellectual Property Owners Inc., a trade association representing major R&D companies, said the goal of lowering the US price for ritonavir is admirable, but using the Bayh-Dole march-in provision would have hurt the law's ability to foster innovation. "If company leaders believed that federal funding agencies would use the march-in authority to monkey with prices after significant investment in research and development, they would never get involved in partnering on research in the first place," Allen said. Allowing the use of Bayh-Dole to adjust prices for inventions resulting from federally funded research would leave companies in an untenable position: "With this added burden, what company would license embryonic academic inventions already requiring billions of private development dollars, and more than a decade of testing and regulatory hurdles?"

Former US Senator Birch Bayh, one of the original sponsors of the legislation, warned NIH in 2004 about what he called a "misinterpretation" of the law to control product prices. "One is entitled to second guess us and say that we should have allowed the government to have a say in the prices of products arising from federal R&D," he said. "However, if changes are believed warranted, we have a process for doing so. That is to amend the law. You simply cannot invent new interpretations a quarter of a century later."

No march-in petitions have been granted by any federal agency since the inception of Bayh-Dole. While some critics cite that fact as a failure of the law, Allen and Bayh contend just the opposite is true. "The law provides incentives for universities to monitor development of licensed inventions," says Allen. "Their royalties are based on successful development. By monitoring milestones and benchmarks agreed to under the license agreement--and terminating licenses when necessary-universities have successfully fulfilled the intent of Congress that federally funded inventions be developed whenever possible. That no documented cases exist over 28 years where the march-in provision should have been used but was not is strong proof that the current system is working remarkably well."

This decision marks the second time under two administrations that the argument to use the march-in provision to moderate prices has been rejected. But the debate isn't likely to end soon. The petitioners are promising an appeal.

DOI: 10.5437/08956308X5702001

Gerrill Griffith, Contributing Editor

Pittsburgh, Pennsylvania
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Title Annotation:News and Analysis of the Global Innovation Scene; National Institutes of Health
Author:Griffith, Gerrill
Publication:Research-Technology Management
Geographic Code:1USA
Date:Mar 1, 2014
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