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Team Biden Looks for an Excuse to Impose Price Controls

The Wall Street Journal

The Biden administration hopes to use a more than 40-year-old law to confiscate patents and impose price controls on prescription drugs. These are the government’s current target, but the administration’s actions could affect virtually any discovery developed at a university, medical school or research institution that receives even minimal government financial support.

The bipartisan Bayh-Dole Act, also known as the Patent and Trademark Act Amendments of 1980, allows universities, medical schools and research institutions to use federal funds for research to develop innovative technology and products. These institutions can then file patent applications, license their discoveries, and try to generate revenue that can help cover the costs of university programs. Some of this revenue usually goes to the inventors, acknowledging a principle that Abraham Lincoln aptly articulated: The patent system adds “the fuel of interest to the fire of genius.”

UCLA’s Dr. Dennis Salmon, who has received numerous National Institutes of Health research grants, helped discover a gene common in a very aggressive form of breast cancer in the 1980s. That initial research led to the development of Genentech’s anticancer drug Herceptin.

Creating something of value in a university lab isn’t the same as manufacturing a product, pricing it and marketing it to the public. That’s why Bayh-Dole allows universities and research institutions to license their innovations to businesses that have the capital, factories and marketing expertise to bring an innovation to market.

One of the primary beneficiaries of Bayh-Dole is the prescription-drug industry. Researchers at universities and medical schools are working constantly to find the next life-saving drug. Drug companies often pay universities or other public research institutions to license a discovery and bring promising research to the public. These companies invest hundreds of millions and even billions of dollars for the costly clinical trials required to bring a new drug to market. This system has worked remarkably well for 43 years.

But the Biden administration is grumbling over the price of a few prescription drugs and is looking to use a provision in Bayh-Dole known as march-in rights to impose price controls on drugs developed through these partnerships.

Under Bayh-Dole, march-in rights allow the government to step in and license a patent without the holder’s approval if there hasn’t been a good-faith effort to bring an important innovation or discovery to market. These rights are meant to ensure commercialization of a product, not set its price.

Concerned groups have petitioned the NIH several times to use march-in rights to lower the price of prescription drugs. In 2004 petitioners urged the NIH to use march-in rights for Norvir, an HIV treatment, and Xalatan, for glaucoma, and in both 2016 and 2023 for Xtandi, a prostate-cancer drug. NIH denied all of those requests because the drugs were in the market, just not at the lower price available in some other countries.

Recognizing the current roadblock to imposing price controls, Health and Human Services secretary Xavier Becerra and the Commerce Department on March 21 announced the formation of a Bayh-Dole working group to “develop a framework for the implementation of the march-in provision” in which several factors, including price, can be considered when triggering march-in rights.

Put simply, the Biden administration is searching for some justification to claim that the law allows the government to impose price controls on certain prescription drugs. But prescription-drug companies aren’t the only beneficiaries of federally funded research. Any industry that has relied on government-backed research could become a future target.

In 2020, 10 federal agencies provided more than $40 billion in federal funds for research at universities and related institutions. HHS was the leader at $23 billion, followed by the National Science Foundation, the Energy and Defense Departments, the National Aeronautics and Space Administration and the U.S. Department of Agriculture. If Mr. Becerra’s effort to expand Bayh-Dole’s march-in provision is successful, accepting money from these or other federal agencies could put a researcher’s patent at risk.

A professor at the University of Nevada, Reno, was awarded a $1.55 million NSF grant in 2021 to conduct research on drought tolerance and water-use efficiency in plants. If new patented seeds were to emerge from his research, they might be subject to march-in rights.

And in January, the Energy Department announced it would provide $125 million “for basic research on rechargeable batteries.” That funding may lead to patentable discoveries. But if Mr. Becerra gets his way, the government could march in if it doesn’t like the final price of a product developed under the patent.

If the Biden administration can use march-in rights to impose price controls on prescription drugs, it or a future administration could do so for any innovation that benefited from federal funding. It is vital to the future of American innovation that march-in orders not be abused for political purposes.