On December 7, the White House unveiled a plan purporting to reduce the price of prescription medications. However, the proposal, which focuses on the use of the 43-year-old Bayh-Dole Act, raises significant legal and policy concerns.
The Act, designed to promote innovation by decentralizing the licensing process for federally funded research, would be manipulated under the new White House plan. The plan proposes using the Act’s march-in rights to force patent owners to revoke existing licenses in favor of granting them to generic companies. This proposition does not stand on firm legal ground, as the Bayh-Dole Act does not stipulate the use of march-in rights for price control.
Opponents argue that this approach threatens to stifle investment in potentially transformative and life-saving technologies. Since its enactment in 1980, the Bayh-Dole Act has played a pivotal role in facilitating access to promising technologies, previously languishing due to government exclusive patent policies. It has contributed to the commercialization and release to the marketplace of inventions backed by government funding. This achievement was made possible by allowing non-governmental institutions to hold patents arising from public funding and to consequently license these to private entities for product development.
In an attempt to make federally funded research results more accessible to the public, the Act’s authors included a march-in clause. This clause allows the government to re-license patents for research that isn’t being commercialized. Under the White House’s plan, this clause would be used to re-license patents behind successful consumer products whenever federal officials deem their price overly high. Yet, these march-in rights were never intended to function as a price control, as clarified by senators Birch Bayh and Bob Dole, the initial sponsors of the law, in a statement in 2002. According to them, they explicitly stated that the government should not set the prices of resulting products.
It’s not only the legalities that pose a challenge to the new plan. Allowing the government to void exclusive patent licensing agreements could lead to economic ruin. Patents incentivize companies to make risky investments in promising technologies. Therefore, any proposal that undermines patents and property rights also threatens innovation and market entry.
Moreover, it’s not only the Bayh-Dole Act that potentially faces reinterpretation. Eminent domain legislation, codified in Section 1498, is currently under scrutiny from several law professors at Ivy League institutions. Their contention is that the government may use Section 1498 to infringe any US patent that could “benefit the government.” If followed, this interpretation would oblige taxpayers to pay compensation for patent infringements.
Given these implications, more than two dozen law professors, former judges, and former government officials have urged lawmakers to oppose the misuse of the Bayh-Dole Act and Section 1498 for political objectives.
While prescription drug costs remain a critical topic, the proposed plan by the Biden administration to misuse march-in rights, as argued by retired Federal Appeals Court judges Paul Michel and Kathleen O’Malley, displays evident legal and policy shortcomings that cannot be overlooked.