A Wake-Up Call for American Innovation
By Andrei Iancu
American innovation faces an existential threat: the steady erosion of intellectual property rights. Early stage biotech funding is on track to decline 40% this year, and leading investors have made clear that one reason for the retreat is their declining faith in the sanctity of patents.
This retreat is understandable. Investing in life science is risky and expensive. Patents and other intellectual property are what offer the possibility of financial upside if all the risks are overcome and the technology actually makes it to market.
Yet in recent years, Washington has seemed hellbent on weakening the patent system.
Consider last year's Inflation Reduction Act, which allows the federal government to impose severe price caps on prescription drugs as early as nine years after FDA approval. Whatever one thinks of the price of branded medicines, price controls amount to cryptic patent reform.
Here's how. Just 12% of potential treatments entering clinical trials receive FDA approval. For the rare candidate that does succeed, clear patent terms allow firms to determine their own prices for a short period of time before generic competitors are allowed to enter the market. This is what allows developers to earn a return for investors and also make up for losses on failed projects.
The IRA undermines this system entirely by arbitrarily knocking years off of a drug's patent life.
Indeed, the IRA is already factoring into investment decisions. Recent SEC filings reveal that numerous biotech companies are putting promising drug development projects on ice because of new price controls. In total, the IRA could stop the development of up to 139 new medicines over the next decade.
Attacks on patent rights go far beyond the IRA.
A number of Democratic members of Congress are pressuring the Biden administration to misuse a decades-old law -- the Bayh-Dole Act -- to "march in" and nullify exclusive licensing agreements for patented medicines developed with the help of government funds. The White House recently launched a working group to explore whether the government has authority to do so.
Many of those same lawmakers are claiming that the government can legally ignore any patent it wants under Title 28, Section 1498(a) of the U.S. Code. Section 1498 does not permit the government to authorize private parties to infringe a patent in order to reduce prices. Yet Sen. Bernie Sanders (D-VT) recently urged the Biden administration to authorize the generic production of Eisai's breakthrough Alzheimer's treatment, Leqembi, claiming that Section 1498 provided the legal framework to do so.
U.S. policymakers' efforts to undermine our IP laws even extend beyond our borders. Last year, thanks to support from the Biden Administration, the World Trade Organization waived global patent protections for Covid vaccines, despite zero evidence that IP was hindering global immunization efforts. Now, the WTO is considering expanding that waiver to Covid tests and diagnostics, and the U.S. position remains a mystery.
American IP rights have never been on more unstable footing. Without a course correction -- soon -- investors will turn to safer bets and stop funding the transformational research and development that advances life science and other critical technologies.
Andrei Iancu is board co-chair of the Council for Innovation Promotion. He served as the undersecretary of commerce for intellectual property and director of the US Patent and Trademark Office from 2018 to 2021. This piece originally ran in RealClearHealth.
