Latest / Making Medicine / When the Feds Come Marching In: A Deep Dive on The Bayh-Dole Act

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When the Feds Come Marching In: A Deep Dive on The Bayh-Dole Act · Making Medicine

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  You're listening to Making Medicine Stories from the Early Stage Life Sciences Ecosystem, a
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  podcast that explores the people and deals that have led to the medicines, devices,
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  and technologies that keep us healthy. Let's get into the show. Hello,
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  this is your host, John Stanford, and welcome to this episode of
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  the Making Medicine podcast. We're quite fortunate to have Joe Allen, executive director
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  of the Bi Dole Coalition, with us to talk about his work at the
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  coalition, what's happening in the intellectual property or IP sphere, and the newly
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  announced Marchin Writes framework that everyone's talking about, commenting, and is at the
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  center of policy for technology innovation life sciences innovation. So we really have someone
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  who couldn't be more steeped in a very timely issue here today. So Joe,
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  thank you, thank you for being here today, and thank you for
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  all the advocacy. Your current role at the bi Dole coal which you really
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  built, is a byproduct in my view of your entire life's work. Can
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  you talk about this and why that legislation to some extent has been central to
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  your whole career. Well, first of all, thank you very much for
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  being here. I always enjoyed talking with you and appreciate having some time to
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  chat about this. Yeah, like a lot of things in my life,
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  I just kind of stumbled into something. It really wasn't that I had some
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  great plan. In fact, I'm still trying to figure out what my plan
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  is. But basically, I was a very young staffer on the Senate Judiciary
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  Committee, and I worked for Senator birch By, who was a Democrat from
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  Indiana, and one day we had Purdue University come into our office and say
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  they wanted to talk to us about a patent problem, and we had no
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  idea what it was. But Senator By, anybody any university from Purdue,
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  particularly his alma mater, went to the front of the line. So it
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  turned out that before nineteen eighty, if federal government funded any research and an
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  invention was made, the invention was taken away from them to Washington. There
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  was no incentive for commercialization, and they just started stacking up there and we
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  were appalled because it just didn't seem like it made any sense. So we
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  found out that Senator Robert Dole, who was a conservative Republican from Kansas,
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  had similar concerns. So By and Dole teamed up. It was an odd
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  couple kind of a combination because they were on different sides of the aisle.
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  This was an election year, very much like this year. But we said,
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  this is it. We just can't afford to squander hundreds of billions of
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  dollars or government funded research and not get anything out of it other than research
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  papers which were being picked up by our foreign competitors and turned into products and
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  sold back to us. So, in a nutshell, By Dole changed all
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  that, and it injected the incentives of patent ownership into federal R and D.
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  It said, basically, if a university or small company makes an invention
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  with government funding, they can own it. They can then commercialize it,
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  the government can use it for its own purposes, which is generally conducting more
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  research. That a university has to give a preference in licensing to a small
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  company because small companies drive our innovation largely, and also that we had to
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  give a preference for people to do domestic manufacturing. But we also wanted to
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  make sure that good faith efforts were being made to commercialize an invention, so
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  we put a thing called marching rights there, which actually at the time was
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  really not controversial. Actually, marching rights predated by Dole, and the premise
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  was we wanted to make sure that if the university had licensed an invention,
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  you know, particularly for a large corporation, that the company was making a
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  good faith effort to turn into a product. You didn't want somebody licensing a
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  technology to suppress it because maybe it competed with an existing product. And the
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  other thing was, in nineteen eighty universities were new at licensing, so we
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  also said we wanted to make sure they license their technologies on reasonable terms,
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  in other words, terms conducive to commercialization. For example, you couldn't say
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  that you have to hire the university president's daughter or CEO, you have to
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  build us a new basketball team, you know, a basketball stadium, you
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  know, whatever. It had to be things that they're conducive to commercialization.
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  So that how the law worked, and for twenty years no one questioned that.
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  But there are people who want to return us to the pre by Dole
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  era when everything was owned by the government and Washington micro managed it. So
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  twenty years after by Dole passed, the opponents of by Dole claimed they'd found
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  a secret meaning in the law. And I don't know about other laws,
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  but we didn't have secret meanings in by Doll. We said what we thought,
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  and they claimed that when we said that technologies have to be licensed on
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  reasonable terms, that also meant that the government can impose reasonable pricing. And
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  Senator By and Dole had been out of office for twenty years at that point.
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  But I called up Senator By and I said, hey, this is
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  Senator, this is really serious. Is turning your whole law on its head.
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  And the opponents who actually got an op ed and the Washington Post called
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  paying twice for the same drugs, claiming again that this hidden meaning of by
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  Dole now allowed the government to impose christ controls. So Senator By and Dole
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  immediately wrote back, they said, that's not how the law worked. But
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  nevertheless, the people that want to undermined Bidle have been filing petitions to the
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  government asking them to march in to impose prices on drugs. Everyone has been
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  denied, including by the Biden administration. But then suddenly, out of nowhere,
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  in last December, the Biden administration floated these what are called draft guidelines,
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  which now say that even though the Biden administration said previously, the marching
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  rights aren't for price control. Now maybe they are, so that in a
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  nutshells has sort of thrown the whole system up in the air. But that's
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  sort of how what I started doing back in actually nineteen seventy eight is still
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  relevant and I'm still working on it. So hopefully we'll reassert that the law
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  means what it says. But you know, these issues are very current right
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  now, because that is a big deal, Joe, thanks for that.
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  I think it's really telling that the seventies, I guess, are back in
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  vogue. And close that answer, talking about this frankly bizarre framework, you
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  go a little deeper about just exactly the significance that would have, and by
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  my understanding, not just in medical innovation and intellectual property, but even more
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  broadly. So I'd like to pick at that thread a little bit more,
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  as well as some of the efforts of the Coalition and even Congress to say,
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  hey, this policy really isn't the direction we want to go. Yeah,
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  most of us that lived through I really didn't want to go back to
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  the seventies again. But maybe we are. And you know, we talked
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  about the passage of Bidole in nineteen eighty there was an experiment. We really
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  didn't know what was going to happen. But the Economist Technology Quarterly, which
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  is not a US publication, said the bi Dole Act was probably the most
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  significant piece of legislation passed in the last half century. This is a quote.
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  More than anything, it helped reverse America's precipitous slide into industrial irrelevance.
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  So if you look at what's there's a huge American innovation renaissance, which actually
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  started in nineteen eighty. There was three things that kicked it off, one
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  of which was bi Dole, which now allowed industry to work with the public
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  sector and collaborate and then make sure we had sufficient patent rights out there to
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  encourage commercialization. The other thing that was part of that was the US is
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  really unique because our innovation system is largely driven by small companies. Small companies
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  license about seventy percent of university inventions, about seventy percent of federal laboratory inventions,
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  and even here in the United States, about fifty percent of our new
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  drugs come from small companies. So that link with small companies is really vital.
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  And also because of bi Dole, universities are now spinning off companies.
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  We actually form three new startup companies every day of the year, commercialized three
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  new technologies from under by Dole, and that's way beyond what anybody else in
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  the world does. Just before I finish that thought, the other two things
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  that happened all happened at the same time by serendipity. One of which was
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  the Supreme Court ruled and checker Bardy decision that life's organisms could be patentable they
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  were made. And the other thing was after I left the Senator Buyers Office,
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  I worked for a trade association and we passed the thing called the Court
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  of Appeal for the Federal Circuit, which at the time reimposed certainty in the
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  patent law. So all those things came together if you look in nineteen eighty
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  in nineteen eighty one eighty two, the US was on a serious decline.
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  The Japanese and the Germans were taking markets away from US, and a lot
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  of people were forecasting our best days were over. Well, that didn't happen.
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  We were completely reversed it. Now the US is dominant in most fields
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  of technology because of our public private partnerships and in fact, the response to
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  the COVID pandemic was a classic example where while most people were hunking down under
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  their beds, university researchers, federal lab researchers, and most importantly, industry
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  researchers all were working together twenty four to seven to combat the coronavirus. So
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  and again we led the world in that. So this really is a big
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  deal, the driver of our economy. And the other thing that you point
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  out is really critical. The Bi Doole Act applies to all federal R and
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  D, not just national suits of health. It applies to defense, energy,
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  NASA, agriculture, you name it. So you know, the critics
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  are always looking at drug pricing, and we'll talk for a minute later perhaps
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  about why marching rights. First of all can't be used for price control,
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  but even if they were, they would not reduce drug prices. But the
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  thing where there they really will have an impact is against small companies because anyone
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  can file a marching petition. The way the statute works, it's like a
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  whistleblower kind of thing where if somebody says, hey, we license this to
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  John and he's sitting on it, then the agencies can look at that see
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  if it makes sense, and if it does, they can have an administrative
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  procedure. There's a chance to appeal to the Court of Claims. But if
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  you go through all that, the government can force a university to license another
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  person if it looks like you're not commercializing it, or if you can't meet
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  the needs of a national emergency. But what's happening now is from the Biden
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  administration standpoint, unfortunately, choosing to misinterpret the law, even though that's who
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  was never authorized to say. If someone doesn't like the price of your product,
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  they can now petition the government, and the government, if they agree
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  with them, can license a copier. So that's not only bad legally because
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  the Bidoll Act does not authorize that, but the thing that makes it even
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  worse is no one can tell you upfront what a reasonable price is, so
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  you know who is going to commercialize a new product if it looks like and
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  again, the odds against success are formidable, and particularly in life sciences,
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  I mean and life sciences is like ninety eight to one. They're going to
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  fail and probably lose a lot of money. But even in clean battery technologies
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  and environmental technologies, you know, the odds of a startup or somebody taught
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  starting an early stage technology, which is what most government inventions are have a
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  successful product or daunting. But our system works because people are willing to assume
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  that risk. But now, if it looks like if you do succeed,
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  your brother in law who hates you, a competitor or the Chinese can file
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  a petition and say, hey, we really don't think that this new water
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  purification technology is reasonably priced. We could make it cheaper, and we want
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  the EPA now to march in and license it to a competitor. You know,
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  no venture capitalist is going to fund that, and no startup company is
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  going to waste their time and their own money, you know, trying to
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  build a company. If it looks like at the end of the day,
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  someone can say I just don't like your price, and then if the government
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  agrees with that some im GS fourteen, they can license your competitor. And
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  you know what's going to happen is this is going to unleash It's going to
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  leash the furies on American innovators because what's what would happen is not only would
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  competitors be doing this and big companies be doing this, but scam. They
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  won't be scams. They'll be basically be shakedown artists. We'll be saying,
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  hey, John, really would be a shame while you're trying to get a
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  venture funding. I filed a marching petition. Maybe you should either make it
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  worth my while to go away or maybe open to copy. And you better
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  not do anything. So it now turns BI DOLE on its head. By
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  Dole right now, for forty three years until last December, was very predictable
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  and no one was abusing it. Now no one can tell you what the
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  rules are. And David Cappo said, who was a former director of the
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  Patent Office under the Obama administration, this new Biden effort is making federal R
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  and D toxic. Now you're really scared about doing anything with this because you
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  never really know if someone's going to come in and say I don't like your
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  price, I can make it cheaper, and is the government going to license
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  somebody else or not. So the time when we're being pressed by the Chinese,
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  and by the way, the Chinese have adopted by DOLE is the best
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  practice for their own universities. Now we've taken something which is the lynchpin of
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  American innovation, which has worked for forty three years. The law has not
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  been changed, This is not in the statute. Everyone's I think most people
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  are agreeing with that. But now suddenly you're turning making BIDOL a weapon against
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  against American innovation. And that's frankly why we're so exercised about this, because
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  this is a great example of the United States shooting itself on the foot.
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  Chinese didn't do it to us, Vladimir Putin didn't do us too, And
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  it's got to be taken off. It's got to be taken off. This
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  is something which really is going to have a huge impact, and it's not
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  a small thing. Well, I think you covered a lot of critically important
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  ground there that was very informative, even to me. It's any federally funded,
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  and I don't know that we all appreciate just how much basic research comes
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  from that early stage federal funding in agriculture defense. You sort of name it.
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  You've got some bright idea and you get early SBIR funding. We're really
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  and you said the magic word for the investors who listen to the show,
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  certainty, And every single one that's come on talks about the need for certainty
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  in order to be able to deploy capital, and this puts it on a
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  ten. I want you mentioned that one of the drivers of this, as
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  inaccurate and sort of foolish as it is, was to address drug pricing,
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  and yet you made them mention that it would do very little. Can you
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  expound a little bit further on that. Yeah, I mean, the irony
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  of this whole thing is is astounding. Let's just go back just a little
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  bit. I don't want to get too much of the wastter, but just
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  to give a timeline for your listeners. As I mentioned, there have been
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  a series of petitions to the federal government esking the marching against drugs to reduce
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  their price. Everyone has been dismissed for twenty years under Republican and democratic administrations.
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  In fact, the most were dismissed in the Obama administration, but the
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  critics keep filing over and over again. They've founded at least six or seven
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  petitions just on one drug, which is called extandy XTA n d I.
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  It's a prostate cancer drug. So that was that's been denied under the Obama
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  administration and the Trump administration, but they re fouled it again. In the
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  Biden administration and the current administration sat on the petition to nih to march in
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  for about a year and a half. Then suddenly last March they issued one
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  of the strongest denials of a marching petition wh's ever been issued, saying we
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  are not going to march in on exstendy again their price control. It has
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  been commercialized, it's met the standards of by DOLE, and the government's not
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  going to impose a price. But you had people like Senator Warren and Senator
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  Sanders who have been apoplectic about trying to misuse by DOLE. So I think
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  as a fig leaf, the Biden administration said we're going to form this interagency
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  committee to look at marching guidelines and whether price can be a factor, which
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  I wasn't thrilled about, but you know, what are you going to do?
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  So that was going on, and then in December that same guideline came
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  out and said, in fact, price could be a factor. So that's
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  what's really sort of thrown the whole thing in limb. But just before the
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  guidelines issued in December, I think it might have been in either late October
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  or November, there's a group called Vital Transformation, which does excellent research.
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  So they were intrigued about this whole idea about marching in against drugs, and
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  so they did some research and they looked at I think, I believe it's
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  every drug that's been approved by the Food and Drug Administration. I believe from
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  twenty thirteen to twenty nineteen. My dates may be a little bit off.
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  That's that's pretty much the ballpark. And what they found was ninety nine percent
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  of them could not be marched in on for a simple reason under the Bidole
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  Act, the government is only you're only talking about marching you know, having
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  the government license other federally funded inventions. But if you look at drugs,
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  and again, because companies are not just waiting for the federal government to come
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  up with a patent, there's ongoing research in the industry. And as you
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  blisters very well known, you know, drug development's one of the most expensive
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  and long term things you can ever do. So what happens is even if
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  the comp many licenses a university invention, that's going to be part of a
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  very broad patent portfolio to use the drug. So what Vital Transformation found out
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  was you couldn't copy the drug just on the bidole patent because that does not
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  give you access to the industry patents. So ninety nine percent of them would
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  not be copyable, but one of the exceptions and you know, again we're
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  talking about ninety nine percent, but the exception would be extending because extend.
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  These drugs actually came primarily from the University of California, which is why the
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  opponents keep filing on extending. So what's happened is after that study came out,
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  Now even the very people who've been pushing the Biden administration to march in
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  for price control are now conceding then, in fact, marching rights will not
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  reduce drug prices. So rather than being they're wrong, now they're going to
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  the next step. Now they say the government should use its authority under Section
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  fourteen ninety eight, which allows the government to seize patents that they need to
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  for their own purposes. It came out of World War Two. Now they're
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  trying to say, now we need to misuse section fourteen ninety eight, so
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  the government can not only sees bi dole patents, but also private patents.
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  And you know that's where this issue is going. Next but we're not there
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  yet. But it just shows you even if you did what the critics say
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  and have been claiming for twenty years that using marching rights is a huge lever
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  for lowering drug prices. Now we find out looking at the data, which
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  even they've acknowledged is accurate. No, by doll marching rights will not reduce
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  drug prices. They can't because you can't get access to the drugs for ninety
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  nine percent of them. But here's what it will do. Let's get outside
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  of drug development. Now, if you look at people on you know,
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  small companies spinning off campus on clean energy, environment, agriculture, actually even
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  even life sciences. When you're spinning off campus as a startup company is a
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  fledgling company, your critical patents probably are covered by by DOLE. So here's
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  the upshot. If this smithsuse is not going to lower drug prices, but
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  now you've put a target on the very companies that drive American innovation because their
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  patterns are likely to be covered by by DOLE. And they're the ones now
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  who are susceptible to somebody saying I'm going to march in on you, and
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  I'm going to make it publicly known, So no VC is going to come
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  anywhere near you. Even if they don't succeed, they can they can kill
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  you at a time when you critically need funding. And you also mentioned another
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  thing which I just want to mention talk about in passing the Small Business Innovative
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  Research Act is also covered by by DOLE. So this is not just university
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  inventions. These are small business inventions. And as you well know, the
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  administration now they have the clean Technology Initiatives, or they have initiatives across the
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  board, you know, billion dollar programs going on now to help us be
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  competitive in new technologies. Most of those are driven by small companies, and
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  this marching thing is a death knell to those companies because again, as you
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  said very well, VCS wants certainty, even not only VCS. If I'm
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  going to start a company and I'm putting up my house is collateral, or
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  I'm willing to dedicate ten years of my life, I'm not going to do
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  that. If so I can come in and copy it. So you know,
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  the iriy of this whole thing is astounding. I think I believe the
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  Biden administration is starting to realize they've made a real blunder. Here. But
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  now the problem is, you know, how can you sort of climb down
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  off the ledge after we've got this thing hanging over us. Well, Joe,
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  I think a lot of credit is owed to you and the Bidole Coalition
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  for really yeoman's work in calling attention to the origin of this law, the
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  bipartisan congressional intent of it, and I think in this environment that is so
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  important, and this has been a big priority for Incubate and bringing the voice
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  a venture capital on this issue. We submitted comments and we've been talking about
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  it, but it's so great to have you, really one of the leaders
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  in this entire space, taking some time with us today to talk about the
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  issue, give us a little hope that maybe they'll change direction given me strong
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  pushback and unified pushback from policymakers, investors, and other stakeholders. So,
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  ladies and gentlemen, I want to give a big thank you to Joe Allen
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  and all the folks at the Bidole Coalition for the meaningful work they do.
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  Thank you for joining us today and our audience for listening and sharing and giving
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  feedback. Check out more from Incubate at www dot Incubatecoalition dot org and while
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  can stay informed on what's happening in life, science, venture capital. As
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  always, a special thanks to Grace Moster and the making of today's podcast,
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