The Democrats’ trillion-dollar tax and spend plan known as “Build Back Better” contained numerous socialist policies including price controls on American medicines and a 95% excise tax on manufacturers.
Now that this bill has stalled, Democrat lawmakers, including Sen. Elizabeth Warren and Reps. Peter DeFazio and Lloyd Doggett are pushing a different proposal to undermine American pharmaceutical innovation and manufacturing through the use of “march-in” rights that would seize or relicense patent rights on the medicine Xtandi, a prostate cancer drug, based on provisions with the 1980 Bayh-Dole Act.
These lawmakers argue that Health and Human Services Secretary Xavier Becerra has the authority to act based on the argument that the drug, which was partially developed through federally funded research, is too expensive.
However, there is no provision within Bayh-Dole allowing the seizure of IP rights based on the government’s belief over what is or is not a reasonable price.
It should be alarming that some on the left want to have the U.S. government seize the IP rights of businesses in the U.S. in this way. Not only would this likely violate the law, it would also provide an implicit endorsement of the rampant theft of American IP by China and other foreign rivals. How can the federal government be trusted to fight for the interests of IP-dependent U.S. workers and businesses overseas when they are pursuing policies domestically that obliterate this IP?
Additionally, Democrats ignore that while the federal government did provide some funding on basic research, the drug was developed privately. The federal government provided $500,000 to fund research at the University of California Los Angeles that served as the foundation for Xtandi. However, those inventions were licensed to Astellas, a private company that then invested $1.4 billion in research and development expenses on the drug.
In fact, the late Sens. Birch Bayh and Bob Dole — the two co-authors of the law — are on record stating that the government can only use march-in rights in very narrow circumstances, such as “when the private industry collaborator has not successfully commercialized the invention as a product.”
As they note, there is no justification for the government to use this based “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.”
This is why every administration in the last 20 years, including the Obama-Biden administration, has rejected utilizing march-in rights to seize the IP rights on a drug in this way.
Before Bayh-Dole, the government took ownership over inventions that were supported by federal funding. As a result, tens of thousands of government-funded inventions were never put to use and not a single new drug funded with government support was developed.
Bayh-Dole allowed academic institutions and businesses to keep ownership of their IP and license it out.
This success of this system is clear — Since Bayh-Dole was passed it has been a key driver in research and innovation, contributing to over $1.3 trillion in U.S. economic growth, more than 4.2 million jobs, and over 11,000 new startup companies. The government has never had to use march-in rights at all because the incentives of the free market.
Indeed, if the left succeeds in using Bayh-Dole to seize IP rights of Xtandi, it will set a precedent that they can do so for dozens or hundreds of other medicines.
This is not a hypothetical — Ms. Warren and Sen. Bernie Sanders have repeatedly talked about using march-in to seize IP rights on an aggressive scale in the 2020 presidential election.
Rather than pushing policies that undermine American medical innovation, we should be looking to strengthen it. Thanks to strong IP, the U.S. is a world leader in the development of new cures. According to research by the Galen Institute, the U.S. had access to 90% of the 290 new medical substances that were launched worldwide between 2011 and 2018. Foreign countries had a fraction of this — the United Kingdom had access to 60% of medicines, Japan had 50%, and Canada had just 44%.
Strong IP rights for medicines also support millions of American jobs. Nationwide, the pharmaceutical industry directly or indirectly accounts for over 4 million jobs across the U.S and in every state, according to research by TEconomy Partners, LLC.
The attempt to use march-in rights to seize IP rights or relicense the underlying IP on Xtandi is just another effort by the left to undermine American medical innovation and aggressively use the law to expand the size and scope of government. Not only would it undermine the success of Bayh-Dole and harm workers and businesses, but it would serve as an implicit endorsement to the tactics of China.
• Alex Hendrie is director of tax policy at Americans for Tax Reform