Juelsgaard Intellectual Property and Innovation Clinic students Mark Cantu (JD ’24), Tim Fellows (JD ’24), and Mike Roesler (JD ’24) recently submitted a comment to the National Institute of Standards and Technology (NIST) supporting the agency’s proposed framework interpreting the criteria necessary to exercise patent march-in rights under the Bayh-Dole Act. The Clinic filed the comment on behalf of Harvard Medical School Professor (and Visiting Professor of Law at Yale) Aaron Kesselheim, a nationally recognized expert on American healthcare law, policy, and ethics.
The Bayh-Dole Act was passed in 1980 to create a standardized process across federal agencies for government contractors to obtain patents on the results of federally funded research. One clause in the act, known as the “march-in” clause, gives agencies the power to compel licensing of those patents in certain situations, for example, when the contractor is either unwilling or unable to commercialize and license the technology on “reasonable terms.” Scholars have argued for over 40 years that these “reasonable terms” should include price—in other words, that a federal agency can compel licensing of a federal grant-derived patent due to a contractor charging an unreasonable price.
In the almost 45 years since Bayh-Dole was passed, the National Institute of Health (NIH) has reviewed seven march-in petitions for drugs patented using their research grants, including one covering a cancer treatment (Xtandi) for which Americans were charged three to five times as much as patients in other wealthy nations. The NIH declined to pursue any of the petitions. The Act in theory can apply to any industry receiving government funding, but the central role of patents in the pharmaceutical market has centered most march-in commentary there. In those 45 years, no agency besides NIH has reviewed, let alone acted on, a petition.
In January 2021, in the final days of the Trump Administration, NIST requested comments on a proposed rule stating that price could never be the sole factor in a successful march-in petition, contradicting the plain meaning of the word “terms” in the Bayh-Dole Act. Shortly after taking office, President Biden issued an executive order strongly encouraging NIST to remove the price provision before finalizing the rule, which the agency agreed to do.
In December 2023, NIST released a proposed framework which would officially endorse, for the first time, the view that price could be one of many factors in a totality-of-the-circumstances march-in petition evaluation. While this framework is not an official rulemaking, its language will likely serve as a guidepost for future regulation.
Our comment makes three points about the framework.
First, our comment explains the policy goals of the Bayh-Dole Act, and why the proposed framework advances those goals. The Act was intended to foster connections between public researchers and private companies to ensure that federal research leads to tangible benefits for taxpayers. This requires a balance between private profit incentives and public needs. Our comment explains that federal agencies having the power to police egregious overpricing is a necessary element of that balance.
Second, we argue that considering price won’t have a negative impact on innovation. March-in rights are not blindly aimed at situations involving high prices. They are intended for situations involving unreasonable prices. Agencies are instructed to take all factors into consideration when exercising their rights, and to act only in cases where the broad goals of the Act are threatened. Profits are not the problem. Unreasonable windfall profits are the problem.
Finally, we argue that, while the framework overall is a very positive step, it creates artificially high barriers for agencies that might be considering marching in. The Act repeatedly refers to “unreasonable” prices in the context of the Act’s goals. The framework goes beyond this statutory language and applies heightened standards like “extreme, unjustified, and exploitative,” which are confusing to apply and arbitrarily limit agency discretion. While our client approves of the framework (either as-is or with the improvements he recommends), it is just one small step towards managing soaring drug prices.
Even in a best case scenario, the usefulness of the march-in process is limited. First, the framework is not binding on agencies. Second, even if it were, it doesn’t assign agencies any affirmative duties, just factors to consider. And third, it is only applicable to patents obtained with federal funding. Modern consumer products, especially complex products like pharmaceuticals, often involve hundreds of patents if not more. Unless every patent for a medication is the result of federally funded research, march-in rights won’t offer a one stop solution to high prices. Nonetheless, any measure which can remove some barriers to lower prices is a step in the right direction.
NIST’s proposed framework attracted national attention and received over 50,000 comments during its 60-day comment period. How this framework is handled by NIST moving forward will set the tone for future attempts to rein in excessive drug pricing.