March-In Rights Won't Lower Drug Prices
By Lou Berneman
Three dozen House and Senate lawmakers recently urged the White House to use an arcane procedure in a 40-year-old law to control drug prices.
I don't question these lawmakers' motives. Everyone wants innovative drugs to be more affordable. But based on my nearly 40 years of experience in helping commercialize university research, the proposed reform would inhibit entrepreneurs and venture capitalists from investing in academic startups.
The law that members of Congress seek to amend is the Bayh-Dole Act of 1980. Prior to this groundbreaking legislation, the government owned approximately 30,000 patents based on federally funded research at U.S. universities, medical schools and other research institutions, but had licensed only about 5% of them.
Bayh-Dole ignited 40 years of American innovation by enabling universities to retain ownership of their researchers' discoveries, even if those scientists received some government-funded grants. The law was intended to facilitate technology transfer from academia to the private sector, which would develop universities' embryonic discoveries into real-world products and services.
This academic-to-industry technology transfer was supposed to stimulate U.S. economic growth and improve global competition. And, indeed, it has.
Bayh-Dole laid the groundwork for extraordinary economic growth in cutting-edge industries, like life sciences, robotics, agriculture, aerospace, cloud and quantum computing, telecommunications, energy and more. Bayh-Dole has enabled the launch of more than 14,000 academic startups since 1996. Products ranging from Honeycrisp apples and high-definition televisions to services like Google's search engine have origins in academic technology transfer. Between 1996 and 2017, Bayh-Dole has had huge economic impact in the U.S. contributing up to $865 billion in gross domestic product and supporting 5.9 million jobs.
Despite this success, some policymakers now seek to weaken key provisions of the law. They want to use the law's "march-in" right provision to impose price controls on products that originated in federally funded research.
Senators Birch Bayh and Bob Dole, the law's two sponsors, never intended this. In a letter to the Washington Post, they wrote, "The law makes no reference to a reasonable price that should be dictated by the government."
The Commerce Department has proposed a rule to reaffirm the intent and longstanding interpretation of Bayh-Dole. This rule states, "March-in rights shall not be exercised by an agency exclusively on the basis of business decisions of a [company] regarding the pricing of commercial goods and services." The three dozen House and Senate lawmakers' letter to the White House asks the president to deny the Commerce Department's recommendation.
The Biden administration will soon decide whether to support the Commerce Department's understanding or yield to these lawmakers.
Bayh-Dole works, as is. Don't mess with it. Universities are licensing their most innovative discoveries to startups. If the integrity of these licenses granted to startups were breached by the government arbitrarily using march-in rights, venture investors would be reluctant to make future investments.
Lou Berneman is the founding partner emeritus of Osage University Partners. (OUP.vc), a venture fund that invests in university start-ups via relationships with more than 100 academic research institutions. Previously, Lou was managing director of UPenn CTT, director of licensing and business development at Virginia's Center for Innovative Technology, and president of the Association of University Technology Managers and former VP and Trustee of the Licensing Executives Society (USA & Canada). This piece was originally published by PennLive.
