The Biden administration could take redistribution to new extremes if the policy review launched in December comes to fruition. The White House wants to give federal agencies the right to seize certain pharmaceutical patents when they believe drug prices are too high.
President Joe Biden claims authority to take action under the Bayh-Dole Act of 1980, which allows nonprofits and small businesses to retain ownership of inventions made possible by federal contracts, grants or cooperative agreements, as long as patent and license such inventions. His impetus was all the innovation that was languishing under government ownership.
“In 1980, the federal government had approximately 30,000 patents, of which only 5 percent led to new or improved products,” according to Syracuse University’s Office of Technology Transfer. The government simply did not “have the resources to develop and commercialize the inventions.”
Under the Bayh-Dole system, it is easier for inventions (including pharmaceuticals) to move from the research phase to the market phase. Because the law’s purpose is to allow the public to benefit from innovation, it contains a provision that the government can take ownership of an invention if an institution does not commercialize it.
This clause, known as “running rights,” was designed as a safeguard against abuse of the system by companies that might purchase licenses solely to prevent competitors from using the new technology. The government has never actually exercised the right to march before. But they can apply if a patent owner fails to market an invention in a timely manner or attempts to license it on unreasonable terms, among some other reasons. In particular, these reasons do Not include “the White House thinks the price is too high.”
“The purpose of our act was to stimulate interaction between public and private research so that patients could receive the benefits of innovative science sooner,” wrote former Senators Birch Bayh (D-Ind.) and Bob Dole (R-Kan.), in a 2002 Washington Post editorial. They noted that even when early-stage research was funded by the government, the financial and time contribution required from private industry was still substantial. “Bayh-Dole did not intend for the government to set prices on resulting products” or be able to revoke a license “depending on the price of a resulting product.”
Now the Biden administration wants to allow the law to be used in a way its creators explicitly said it was not intended to be used. “When drug companies won’t sell taxpayer-funded drugs at reasonable prices, we will be prepared to allow other companies to provide those drugs at a lower price,” White House economic adviser Lael Brainard told reporters in December.
To that end, the Department of Health and Human Services and the Department of Commerce have proposed a new framework that allows price to be a factor in determining whether to exercise marching rights. If implemented, it would effectively give the government control over drug prices.