[Ip-health] Nat'l Tech Transfer Ctr on March-in

[Sean Flynn]

March 31, 2004

Dr. Mark Rohrbaugh
Director of the Office of Technology Transfer
Office of Intramural Research
National Institutes of Health
6011 Executive Boulevard, Suite 325
Rockville, Maryland 20852


Dear Dr. Rohrbaugh:

I recently became aware of a petition addressed to you by Mr. James
Love, President of Essential Inventions, Inc. requesting that the
National Institutes of Health exercise the march-in rights provision of
the Bayh-Dole Act to lower the price of several drugs developed from NIH
extramural research.

While the subject of delivering affordable health care is certainly a
serious issue, the provisions of the Bayh-Dole Act do not provide for
governmental actions such as those requested by Essential Inventions.
Indeed, such actions were never contemplated by the Congress and are not
reflected in the legislative history of the law.

The interpretation of the intent of Congress in passing this landmark
legislation reflected in Mr. Love's petition is, therefore, entirely
fanciful.

While serving former Senator Birch Bayh on the Senate Judiciary
Committee, I staffed the hearings and wrote the report of the Senate
Judiciary Committee on the bill. I also served for many years as the
Director of Technology Commercialization at the U.S. Department of
Commerce. There I oversaw the implementation of the regulations for
Bayh-Dole and chaired the Interagency Committee on Technology Transfer
which developed guidelines for utilizing the Federal Technology Transfer
Act, under whose authorities NIH develops many of its intramural
partnerships with U.S. industry.

Regrettably, Mr. Love and several others making the same case mix up the
legislative history of the Bayh-Dole Act with hearings on rival
legislation that was not enacted. The only legislative history with any
bearing on the law are the hearings of the U.S. Senate Judiciary
Committee in the 96th Congress on S. 414, the University and Small
Business Patent Procedures Act (commonly called Bayh-Dole), the report
of the Senate Judiciary Committee on the same, and the Senate debates on
S. 414.

Fortunately, we do have an unambiguous opinion from Senators Birch Bayh
and Robert Dole themselves on the topic at hand. The Washington Post ran
an article by Professors Peter Arno and Michael Davis on March 27, 2002,
Paying Twice for the Same Drugs, making the same arguments as Mr. Love.
They wrote:

Bayh-Dole is a provision of U.S. patent law that states that practically
any new drug invented wholly or in part with federal funds will be made
available to the public at a reasonable price. If it is not, then the
government can insist that the drug be licensed to more reasonable
manufacturers, and, if refused, license it to third parties that will
make the drug available at a reasonable cost.

A joint letter by Senators Bayh and Dole on April 11, 2002, to The
Washington Post effectively refutes this argument. Here is the complete
text of what the authors of the law said was their intent with regard to
fair pricing of resulting products:

As co-authors of the Bayh-Dole Act of 1980, we must comment on the March
27 op-ed article by Peter Arno and Michael Davis about this law.

Government alone has never developed the new advances in medicines and
technology that become commercial products. For that, our country relies
on the private sector. The purpose of our act was to spur the
interaction between public and private research so that patients would
receive the benefits of innovative science sooner.

For every $1 spent in government research on a project, at least $10 of
industry development will be needed to bring a product to market.
Moreover, the rare government-funded inventions that become products are
typically five to seven years away from being commercial products when
private industry gets involved. This is because almost all universities
and government labs are conducting early-stage research.

Bayh-Dole did not intend that government set prices on resulting
products. The law makes no reference to a reasonable price that should
be dictated by the government. This omission was intentional; the
primary purpose of the act was to entice the private sector to seek
public-private research collaboration rather than focusing on its own
proprietary research.

The article also mischaracterized the rights retained by government
under Bayh-Dole. The ability of the government to revoke a license
granted under the act is not contingent on the pricing of a resulting
product or tied to the profitability of a company that has
commercialized a product that results in part from government-funded
research. The law instructs the government to revoke such licenses only
when the private industry collaborator has not successfully
commercialized the invention as a product. (Emphasis added).

The law we passed is about encouraging a partnership that spurs advances
to help Americans. We are proud to say it's working.

Birch Bayh/Bob Dole

In their typically succinct manner, the authors of the law effectively
rebut the argument now before you.

The Bayh-Dole Act has become a linchpin of our economy. While not
perfect, the U.S. record of commercializing new products and services
funded by the Government is the envy of the world. The Economist
Technology Quarterly said: "Possibly the most inspired piece of
legislation to be enacted in America over the past half-century was the
Bayh-Dole act of 1980." Any legislative or administrative actions
undertaken to alter this Act must be done very carefully.

We have already witnessed well-intended Congressional attempts to impose
fair pricing clauses on NIH intramural research partnerships. These
efforts failed. Technology transfer cannot be a vehicle for trying to
control prices. Rather than allowing Government to dictate drug prices,
companies simply walked away from partnering with NIH. Wisely
recognizing its mistake, Congress rescinded the fair pricing
requirement. NIH's subsequent success in building effective partnerships
with industry is well documented, and is a great benefit to the public.

President Johnson asked in 1968 how many NIH owned inventions had been
commercialized. The answer was none. At that time there were no
incentives for industry to undertake the risk and expense inherent in
developing such early stage inventions. We should reflect that because
of the Bayh-Dole Act, many life saving drugs and therapies are now
available for those in need. By altering this delicately balanced law,
we may well discover that publicly funded inventions go back to
gathering dust on the shelves. Before Bayh-Dole such discoveries were
not available at any price.

Sincerely,

Joseph P. Allen
President
National Technology Transfer Center