Feds Make a Pharma Patent Grab

A Biden administration ploy could give the federal government control over drug prices.

The Biden administration may take redistribution to new extremes if a policy revision floated in December comes to fruition. The White House wants to give federal agencies the right to seize some pharmaceutical patents when they deem drug prices too high.

President Joe Biden claims authority to act under the Bayh-Dole Act of 1980, which lets nonprofits and small businesses retain ownership of inventions made possible by federal contracts, grants, or cooperative agreements—so long as they patent and license these inventions. Its impetus was all the innovation languishing under government ownership.

"In 1980, the federal government had approximately 30,000 patents, of which only 5% led to new or improved products," according to the Syracuse University Office of Technology Transfer. The government simply didn't "have the resources to develop and market the inventions."

Under the Bayh-Dole system, it's easier for inventions (including pharmaceuticals) to get from the research stage to the market stage. Since the point of the law is to let the public benefit from innovation, it contains a stipulation saying the government can take ownership of an invention if an institution doesn't commercialize it.

This stipulation, known as "march-in rights," was designed as a safeguard against the system being abused by companies who might purchase licenses solely to keep competitors from using new technology. The government has never actually exercised march-in rights before. But they can apply if a patent holder doesn't commercialize an invention in a timely manner or tries to license it on unreasonable terms, among a few other reasons. Notably, these reasons do not include "the White House thinks it's priced too high."

"The purpose of our act was to spur the interaction between public and private research so that patients would receive the benefits of innovative science sooner," wrote former Sens. Birch Bayh (D–Ind.) and Bob Dole (R–Kan.), in a 2002 Washington Post op-ed. They noted that even when early-stage research was government-funded, the financial and temporal input required from private industry was still substantial. "Bayh-Dole did not intend that government set prices on resulting products" or be able to revoke a license "contingent on the pricing of a resulting product."

Now the Biden administration wants to allow use of the law in a way its creators explicitly stated 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 for less," White House economic adviser Lael Brainard told reporters in December.

To this effect, 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 march-in rights. If enacted, it would effectively give the government control over the price of drugs.