[Ip-health] Norman Latker's letter to NIH

[James Love]

-------- Original Message --------
Subject: [techno-l] Abbott/Pfizer March-in Petition
Date: Fri, 23 Apr 2004 14:07:08 -0400
From: Norman Latker <NJL@browdyneimark.com>
To: <Techno-l@lists.uventures.com>

Below is the letter that I forwarded as an attachment with my earlier email.


NORMAN J. LATKER
5112 Edgemoor Lane
Bethesda, MD  20814

April 14, 2004

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

Dear Dr. Rohrbaugh:

	I would like to comment on recent petitions filed by Mr. James Love and
Mr. Sean Flynn of Essential Inventions, Inc, requesting the National
Institutes of Health to invoke the march-in provisions of the Bayh-Dole
Act to invalidate exclusive drug patents held by Abbott Laboratories and
Pfizer Inc.

	While the authors of the petition might be commended for embarking on
such an innovative approach to controlling drug prices, it must be
clearly understood that Bayh-Dole defines critically important aspects
of intellectual property law, and is decidedly ill suited for any other
purpose. Any attempt to use it as a weapon in the political debate over
drug prices is doomed for failure, as the enabling language required for
such uses is wholly - and intentionally -absent from the legislation.

	In the unlikely event that NIH were to grant the request of the
petition's authors, the decision would have virtually no chance of
surviving judicial review.

	Nonetheless, I feel compelled to speak out in defense of Bayh-Dole,
which has fostered the development of a potent four-way partnership
between researchers, their institutions, government and industry.  This
partnership has become a powerful engine of innovation, generating more
practical advances than the rest of the world combined.  Nowhere is this
more true than in the fields of medical technology and pharmaceuticals.

	Should the petitioners succeed in subverting one of the key precepts of
Bayh-Dole - that of according broad marketplace prerogatives to the
developers of government-funded inventions - this marvelous engine could
stall.
The Spirit Of Bayh-Dole

	I hope I can provide some perspective on the Bayh-Dole Act, large
portions of which I helped to draft back in the 1970s, when I served as
Patent Counsel for the Department of Health, Education and Welfare
(HEW). I was also an architect of the Act's implementing regulations, to
which the authors of the petitions heavily refer.

	The authors have woefully misrepresented the spirit and purpose of the
legislation, which was intended to enlist the marketplace to develop and
distribute government-supported innovations. Judging from the petition,
they appear to have been informed primarily by a recent article in the
Tulane Law Review, penned by Peter S. Arno & Michael H. Davis, which
unfortunately paints a highly distorted picture both of the Act itself
and the legislative process leading to its passage.

	Before the enactment of Bayh-Dole, an enormous amount of
government-sponsored research and innovation went to waste, as there
were no clear mechanisms in existence to transfer the resultant
inventions to the marketplace.

	Although there was spirited opposition to the bill, a powerful
bipartisan consensus was built around the basic notion that market
forces would do a far better job of disseminating such inventions to
society than government bureaucracies ever could.

	Put simply, the drafters of the act wanted to ensure that adequate
incentives were in place to facilitate invention and to attract
corporate investment into their development and distribution. We
understood that inventions resulting from government research are
conceptual in nature, and require significant investment by the private
sector to bring them into practical application.  This is especially the
case with regard to life science inventions, the subject of the march-in
requests.

	Our answer to the problem was that intellectual property rights should
be accorded in full to the innovators, rather than to the government
agency that financed their research, and that innovators should be free
to leverage their property rights to their advantage in the market place
as intended by the patent system.  The only conditions to be attached to
this freedom were envisioned as follows:

	a)	Reasonable efforts were required to develop the inventions to
practical application;
	b)	The inventions should be readily available to society;
	c)	The inventions should not be used in such a way that might threaten
public health;
	d)	If an invention were subject to a federal order of some kind, the
developer must comply with that order; and
	e)	The inventions should be manufactured within the United States.

	These conditions were translated into the legal language found in
section 203a of the Act, which is reproduced in the subject petitions.
The march-in clauses were conceived, as extraordinary measures to be
used only when there was overwhelming evidence to show that the public
resources invested into an innovation were being wasted or abused.  This
is clearly not the case with either Retonavir or Latanoprost, both of
which have been successfully developed and are readily available to the
public at large.

Control Of Drug Prices

	What I find most disturbing about the subject petitions is the attempt
to transform a fundamental piece of intellectual property law into an
administrative mechanism to control drug prices, with no regard for the
consequences.
The drafters of Bayh-Dole never envisioned that the law could authorize
government funding agencies to compel private entities to divulge
internal accounts or pricing information, which is why the Act lacks any
functional criteria specifying how this could be done.

                 Nonetheless, the petition's authors hold that the
government should issue multiple licenses for the drugs because the
companies are charging too much for them, and quite falsely assert that
the Act invests funding agencies with the authority to approve the
pricing of inventions after they have been developed and distributed in
the marketplace by private sector initiatives.

                The assertion that funding agencies are vested with the
jurisdiction to approve pricing is said to rest on the Act's definition
of "practical application" which includes a requirement that the
invention be made available to the public on "reasonable terms".  The
petitioners argue that the latter term is to be interpreted, in an
ordinary context, as including a "reasonable price", and that the
funding agency is therefore authorized to assess what a "reasonable"
market price might be.

The Scalia Rule

                  That "reasonable terms" must include the notion of
price, they maintain, is evidenced by a number of court decisions
supporting that definition.  They also cite the Scalia rule:

                  [First], find the ordinary meaning of the language in
its textual context; and second, using established canons of
construction, ask whether there is any clear indication that some
permissible meaning other than the ordinary applies.  If not - and
especially if a good reason for the ordinary meaning appears plain - we
apply the ordinary meaning.

	Scalia's instruction to refer to the "textual context" of the language
is indeed helpful-but not to the argument put forth by the authors of
the petition.  The march-in conditions and the entire body of the
Bayh-Dole Act stress the overriding importance of delivering
intellectual property rights to innovators and developers. Property
rights are inherently invested with the ability to set prices. The Act
also emphasizes the broad dissemination of the benefits of the invention
to society.

                 In context, therefore, "reasonable terms" cannot be
interpreted to mean a limitation on the developer's ability to set
prices in the marketplace.

                  In fact the opposite is true:  if the rights-holder
were not given the freedom to set prices, it would not be willing to
commit resources required to ensure an invention's delivery into the
marketplace, thereby obviating the requirement that it be widely
available.  No commercial concern would invest in the commercial
development of any invention knowing that their sales price could be
challenged by the government after marketing.

                  Again, if the drafters had intended such an
interpretation, we would have inserted specific criteria into the law to
enable the funding agency to assess exactly what a reasonable price
might be.  No such criteria are found, precisely because controlling
patent rights on the basis of price was antithetical to what the
drafters had in mind.

The Price Of Drugs

                  Of course it could be argued that extremely high
prices might prevent an invention from achieving widespread application,
and the petition authors attempt to show that this is the case with
Retonavir or Latanoprost.

                  However, while the authors might show that the drugs
are expensive, they fail utterly to substantiate the notion that high
prices have curtailed their availability, or their continued improvement
by the developer. For example, the authors fail to show that the 600-800
people nationwide who do not have access to Retanovir would necessarily
be granted access if the price of the drug were reduced. They also fail
to mention the tens of thousands of people who do have access to the
drug, and that many of these individuals receive it for free.

                  Price comparisons with other countries are also of
dubious value.  The authors argue that since the developers companies
offer the same drug at lower prices in other countries, that this
somehow violates the notion of reasonable terms. Not only do they fail
to substantiate this logically, they also fail to point out that the
average prices paid for drugs overseas are often reduced by means of
direct government subsidies and/or price controls, neither of which are
effected through intellectual property law.

	The authors also imply that since the drug was developed in the United
States, it is unfair that Europeans are getting it cheaper:

	"Prices in the U.S. are generally 2-5 times the price in most European
countries, despite American taxpayers funding its early development."

	Even if one accepts the prices the authors provide for Latanoprost in
various countries at face value - although one must wonder about the
methodology used, and how representative or timely the data really are -
they provide no insight into how or why drug prices come to be lower in
other countries.

	Note that prices are lower not only in the low income countries like
Nicaragua where weak spending power could compel lower prices - but also
in countries like Germany and Sweden, where per capita spending power is
roughly equivalent to that in the U.S.  The primary reason is that the
vast majority of drug purchases in such countries are financed by
governments, which use their monopoly power to keep the price of
medications low.

Healthcare Policy

               That is not to say that the needs of the minority who do
not have access should be ignored. But it must be plainly understood
that medical access problems in the United States stem from the way
healthcare entitlements are ascribed and healthcare resources are
distributed.

               Healthcare reform has been under consideration in the
Congress recently and the possibility of the policies of state-mandated
price controls or broad entitlements to healthcare as they exist in
European countries have been discussed.  But the appropriate means to
effect such policies must be through public debate, legislation and/or
referenda.

                Obviously any healthcare reform effort could face
resistance from vested interests, and it is tempting for some to look
for shortcuts.  But twisting intellectual property law into a political
weapon of expediency is not the answer.

     	In the absence of government price controls, drug companies will
seek to maximize their profits by balancing prices with the need for
market penetration - and that is exactly what the drafters of Bayh-Dole
expected.  Pricing freedom is one reason often cited by the
pharmaceutical industry for concentrating their research and development
activities in the U.S.  It is why the U.S. remains the world leader in
medical research, and why so many drugs are made available here first.

	If a political consensus were to emerge that drug prices need to be
controlled by the government, the only legal and appropriate means of
instituting such controls would be through a full-fledged legislative
process, tested by the courts and administered through empowered organs
of government.

	Accordingly, I feel strongly that the petitioners' request for a
march-in action, motivated entirely by a desire to control drug prices
and based on a misinterpretation of the law, must be denied.

Sincerely,

Norman J. Latker