Misusing This Law would Destroy Market Opportunity for Start-Ups
By Kirsten Leute
The federal government rejected a petition to unilaterally slash the price of the prostate cancer drug Xtandi in a closely watched decision this year. Making drugs more affordable is undoubtedly a worthy goal. But in this instance, American patients should be grateful for the government's restraint.
In recent years, a number of organizations have formally petitioned the Department of Health and Human Services (HHS) to use its so-called "march-in" rights to lower Xtandi's price. Had the government agreed to such a drastic intervention, the consequences for biotech innovation -- and, indeed, innovation of all sorts -- would have been devastating.
March-in authority is a provision of the 1980 Bayh-Dole Act, the legislation that allows universities and non-profits to own and subsequently license the patents on their federally-funded discoveries for commercial development.
As someone who spent a good chunk of my career shepherding discoveries through this process at Stanford University, I can attest that this system of technology transfer has worked well -- and that march-in misuse would seriously erode this process.
It's important to understand what start-up funding is all about. Yes, a discovery with great potential is necessary -- but it's not nearly sufficient. Many other elements are necessary, including investors. Before investors invest, they assess the market opportunity. They have to know there's a market for the product they are considering developing. Given the long and costly path to the market for such products, exclusivity is often an essential element of start-up opportunities in the bioscience space.
March-in misuse destroys market opportunity by eliminating such exclusivity. Investors will not fund new ventures to develop a product if the government can destroy its initial market exclusivity on a whim. That's exactly what allowing others to enter with an identical copy would do.
Since Bayh-Dole's passage, more than 15,000 start-ups in areas from biotech to cloud computing have come out of the technology transfer system the law put in place. Today, the United States leads the world in bioscience innovation, generating well over half of all new medicines. That's market opportunity and innovation working in tandem.
Lawmakers established march-in rights for use only in extraordinary circumstances. For instance, should a drug manufacturer be unable to produce its patented medicine in sufficient quantity during a public health emergency, Bayh-Dole would allow the government to march in on that drug's patent and license it to other firms to boost supply.
The circumstances under which march-in rights can be used are very limited -- so much so that these powers have never once been invoked by the federal government.
Lately, however, a growing chorus of activists and lawmakers have pressured the government to use march-in to reduce the price of certain expensive drugs -- most recently Xtandi. Such a move would be disastrous.
If the government decides it can use its march-in rights whenever it sees fit in a putative attempt to cut drug prices, that could destroy the market opportunity. If that occurred, countless federally-funded medical and other tech breakthroughs could remain in university laboratories and never find their way to market.
America's unique approach to technology transfer has fueled pathbreaking discoveries in our economy for decades and fostered a tech start-up culture that remains the envy of the world. Misusing Bayh-Dole's march-in rights would deal a blow to this system, squandering the enormous potential of America's brightest scientists and entrepreneurs.
Kirsten Leute is Partner, University Relations at Osage University Partners. She previously served as Associate Director of the Stanford University Office of Technology Licensing. This article originally appeared on InsideSources.com.
