March in tanks innovation which is the key internal link to economic growth—case turns the DA

The Biden administration is considering exercising something called “march-in rights” as a policy prescription to curb drug prices. But as with any prescription, there is a need to weigh efficacy against the side-effects. In this case, there is  that the vast majority of drugs would not be impacted by march-in rights because most of the patents underlying them are not federally-funded. On the other hand, the harm that this policy will inflict on a pillar of the nation’s innovation system will be substantial. 

This pillar of the U.S. innovation system, the of 1980, provides that recipients of federal research funding have the option to retain patents on the inventions arising out of their research. The Act also establishes safeguards to ensure protection from the non-use or unreasonable use of federally funded innovations. One such safeguard, march-in rights, to require the licensee to grant a license to “any responsible entity or entities” when they determine that the inventor is not moving to commercialize the technology, or that action is needed to protect public health or safety.

No federal agency has exercised march-in rights since the enactment of Bayh-Dole in 1980. Earlier in 2023, the National Institutes of Health (NIH)  calling on it to take control of patents on the prostate cancer drug Xtandi on the grounds that its price was too high.

In March 2023, the Department of Health and Human Services and the Department of Commerce  they would “pursue a whole-of-government approach to review its march-in authority” in order to develop a framework which articulates guiding criteria and processes for making determinations “where different factors, including price, may be a consideration in agencies’ assessments.” On December 7, 2023, the White House announced a proposed framework for the federal exercise of march-in rights while the National Institute for Standards and Technology concurrently  of the framework describing a number of ways that federal agencies might consider price as a factor in determining whether to exercise march-in rights.

For decades some members of Congress and some academic observers  that federal agencies should make use of march-in rights in cases where a federally-funded innovation was arguably overpriced, particularly in the area of prescription drugs. But in 2002, former Senators Birch Bayh and Bob Dole, the sponsors of the Bayh-Dole Act,  in an editorial that “Bayh-Dole did not intend that government set prices on resulting products… The law instructs the government to revoke such [patent] licenses only when the private industry collaborator has not successfully commercialized the invention as a product.” The senators’ statement underscores the fact that Bayh-Dole was enacted to spur innovation, not to serve as a price regulation function.

Periodic calls for the exercise of march-in rights do not fully take into account the transformative effect Bayh-Dole has had on U.S. innovation, productivity, and economic growth. In the 1970s the U.S. was beset by an array of economic ills—inflation, high unemployment, stagnant economic growth—that came to be known as “stagflation.” An advisory committee to President Carter  that “diminished patent incentive” was playing a role in U.S. economic stagnation, with the erosion of patent protections inhibiting innovation. Other , including the “Chicago School” of economists. As a result, a number of policy measures were taken to strengthen the U.S. innovation system, including enactment of Bayh-Dole (1980), changes in U.S. antitrust enforcement policy (1981), the creation of a special U.S. Court of Appeals to hear patent cases (1982), and Supreme Court decisions expanding the scope of patentable subjects, including  and  (1980-81).

These measures unleashed a sustained surge in U.S. innovation which has transformed our economy and society, giving rise to entirely new industries. “[M]ost  that university patenting ‘exploded’ in the U.S. during and after the period in which the Bayh-Dole Act was enacted.” Following the Act’s passage many universities set up or expanded  to enable commercialization of federally funded research.