Democrats are urging President Biden to seize intellectual property rights through a misuse of his executive powers by having the administration utilize “march-in” provisions set by the Bayh-Dole Act, a law passed in 1980.
Not only would this constitute a blatant misuse of executive authority, but it would threaten medical innovation and American competitiveness and put the U.S. on the pathway toward socialist price controls.
Last month, a coalition of leftist special interest groups sent a letter to HHS urging the agency to use march-in rights to lower the price of six different products/classes of drugs. Additionally, Democrat lawmakers, including Senators Elizabeth Warren (D-Mass.) and Angus King (I-Maine) and Representatives Peter DeFazio (D-Ore.) and Lloyd Doggett (D-Texas), sent a letter to HHS Secretary Xavier Becerra urging him to use the Bayh-Dole Act’s “march-in” provision in order to manipulate the price of one specific prostate cancer medication, Xtandi.
One bill, introduced by Senator Patrick Leahy (D-Vt.), could also undermine American intellectual property rights. The Restoring the America Invents Act would increase the cost of enforcing patents by creating various procedural hurdles and would allow the Patent Trial and Appeal Board (PTAB) to be used as a tool for litigation gamesmanship.
Before Bayh-Dole, the government took ownership over inventions that were supported by federal funding. However, this meant that tens of thousands of government-funded inventions were never put to use and not a single new drug funded with government support was developed.
Bayh-Dole allowed academic institutions and businesses to keep ownership of their IP to encourage medical innovation. After all, the government never conducted the research, they simply financed it. Oftentimes, the government’s financing comes nowhere close to the amount privately invested in the creation of the drug. In fact, the federal government provided just $500,000 to fund research for the creation of the aforementioned drug Xtandi, while Astellas, a private company, then invested $1.4 billion in research and development expenses on the drug.
The law also included a provision allowing the federal government to “march-in” and relicense the institution’s IP in very narrow circumstance such as if the licensee was not making “good-faith efforts to develop the technology into a usable, real-world product.” However, the incentives of Bayh-Dole have worked and the government has never used march-in.
Joseph P. Allen is the executive director of the Bayh-Dole Coalition and previously served as a staff member of the U.S. Senate Judiciary Committee, helping draft the Bayh-Dole Act. Certainly, he understands the intentions of this law. In an op-ed entitled, “President Biden: Don’t misuse Bayh-Dole march-in rights,” Allen says the following:
“While making health care more affordable is a laudable goal, it can’t be done on the back of Bayh-Dole. That’s not how the law works — and pretending it does would have disastrous consequences…
Allowing the government to march in because someone believes the price a company charges for its therapy isn’t “reasonable” — a completely undefined term — would be a devastating blow to the U.S. economy and the health of Americans.”
As Allen alludes to, if Democrats are successful in undermining IP rights, medical innovators will have no incentive to create new treatments and cures, as they will have no way to recoup the investments they made in developing new medicines.
Additionally, if innovators can expect their property rights to be seized on the government’s arbitrary determination of what the price should be, then this certainly would quell innovation. It would also harm the pharmaceutical industry, which supports millions of high-paying jobs.
By allowing the government to seize IP rights for such arbitrary and subjective reasons, the IP rights of life-saving remedies like vaccines would be weakened. This is especially concerning, as President Joe Biden has endorsed a global effort to seize the intellectual property rights of American manufacturers. The Chinese state media has already praised President Biden for giving into “global pressure” on the issue.
It should be alarming that many on the left want to have the U.S. government seize the IP rights of businesses by misusing march-in. Not only would this violate the law, but it would also provide an implicit endorsement of the rampant theft of American IP by China and other foreign rivals.
This isn’t the only way Democrats are taking aim at medical innovation. In their Build Back Better bill, they included a proposal that would allow government bureaucrats to impose price controls on up to 20 medicines in Medicare Part B and Part D. If the manufacturer does not accept this government-mandated price, the drug manufacturers are hit with a 95 percent excise tax on the total revenues of the drug. In short, price controls are enforced by threats of confiscatory taxation.
President Biden must resist this misuse of the Bayh-Dole Act. Doing so would weaken U.S. intellectual property rights, stall medical innovation, cost jobs and economic growth, and set a dangerous precedent.