Biden Accomplishments Threatened by Revised Rules on Patents

The Biden White House has done more than any administration in living memory to make medicines affordable for ordinary Americans.

The president's chief legislative achievement, the Inflation Reduction Act, capped out-of-pocket prescription costs for seniors, set a monthly out-of-pocket price limit of $35 on insulin for Medicare enrollees, and allowed the government to negotiate drug prices for the first time. 

These actions are good politics and good policy precisely because they are easy to understand, straightforward to implement, and directly address the issues at hand. 

Unfortunately, the Biden administration recently proposed another drug-related policy that -- while well-intentioned -- is neither easy to understand or implement. Instead of directly addressing drug prices, it's at best a bank shot that could weaken America's world-leading research universities and cause serious unintended consequences in a variety of high-tech industries.

The proposal would reinterpret a law popularly known as the Bayh-Dole Act. President Carter signed it in 1980, and President Biden himself, then a U.S. senator, voted for it.

Prior to Bayh-Dole, the government retained the patent rights on any university research discoveries made with federal grant funding. But companies had little incentive to license that research and try to turn theoretical discoveries into tangible products. Before 1980, fewer than 5% of the 28,000 patents held by the government were licensed by commercial partners. Taxpayer dollars were effectively being wasted -- they were leading to initial discoveries, but weren't resulting in new medicines or technologies.

The bipartisan Bayh-Dole Act helped America end the economic stagnation of the 1970s. The legislation ensured that universities that received funding from the National Science Foundation, the National Institutes of Health, and other government agencies could keep their patents and exclusively license them to companies interested in commercializing those discoveries. 

Once companies gained the ability to license universities' discovery on an exclusive basis -- and thereby prevent competitors from stealing their ideas -- they jumped at the opportunity. The law catalyzed a public-private innovation system that has produced more than $1.9 trillion in industrial output and supported at least 6.5 million jobs in just the past 25 years. 

Thanks to royalty payments, the Bayh-Dole Act also created a new revenue stream for academic institutions, helping universities purchase state-of-the-art equipment, modernize facilities, and hire more researchers. 

Yet this cycle of innovation is now in danger. 

Bayh-Dole contains "march-in" rights that allow the government to relicense a federally funded patent if the licensee isn't actively working to commercialize it. 

For more than 20 years, well-intentioned activists have urged Washington officials to march-in on the patents of already commercialized drugs and relicense them to generic manufacturers, who could presumably produce cheaper knockoff versions. 

Republican and Democrat administrations alike have always declined their petitions, arguing -- correctly -- that the law doesn't authorize the federal government to march-in on the basis of price. The late Senators Birch Bayh (D-IN) and Bob Dole (R-KS) repeatedly noted that march-in rights were never intended to be used as backdoor price controls. 

But in December, the Biden administration broke with this precedent when it published draft guidance that effectively authorizes federal agencies to march-in on the patents of expensive products. 

I understand the temptation to slash drug prices by any means available. But even if this new interpretation of the scope of march-in rights were legally sound -- and it isn't -- the strategy would prove mostly ineffective. Most medicines are protected by a number of different patents, only some of which are federally funded. Very few drugs could be reproduced in their entirety solely by marching-in on patents that stemmed from federal grants. 

While the draft guidance's impact on drug prices would be minimal, the damage to other sectors would reverberate across the entire economy. The guidance clearly states that it is "not meant to apply to just one type of technology or product." 

In other words, it risks chilling investment into all university research that receives federal funding. The change would undermine efforts to address climate change, farm more sustainably, and compete globally in quantum computing, artificial intelligence, and every other high-tech field.

If President Biden wants to straightforwardly reduce out-of-pocket drug costs, he can -- and should -- crack down on the "pharmacy benefit manager" middlemen in the supply chain who inflate patients' out-of-pocket spending by billions of dollars annually. There are already multiple bipartisan bills in Congress that'd check PBMs' power and make medicines more accessible.

But he'd be wise to abandon this backdoor attempt at drug price controls. Destroying the private sector's confidence in patent protections would do far more harm than good.

Howard Dean is the former chair of the Democratic National Committee and former governor of Vermont.