Abstract
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Use of March-In Rights To Lower Drug Prices: Can the Recent Draft Guidance Effectively Marshall in a New Day for Promoting Access to Federally Funded Treatments?
Introduction
In an interview published in the New York Times on December 25, 2023, Dr. Monica M. Bertagnolli, the recently appointed Director of the National Institutes of Health, was asked whether she would be open to the use of march-in rights to re-license patents on drugs developed with tax dollars as a way of lowering drug prices. Her response: “Absolutely.” 2 However, Dr. Bertagnolli quickly followed up: “But I would have to really be certain that if march-in rights are ever used, that the result is the intended one – meaning people get better access, because that’s really the goal. We want every single person to have access to the benefits of biomedical research.” 3
March-in rights have been the subject of debate since their inception as part of The University and Small Business Patent Procedures Act of 1980, also known as the Bayh-Dole Act. But the debate has very recently taken an interesting turn with the Biden Administration’s push to consider the use of march-in rights in situations where a company is not charging a “reasonable” price for a product developed with the assistance of federal agency funds. Dr. Bertagnolli’s comments should be understood in this context. But how did we get here?
Background
The federal government’s funding of health related research and development has been substantial for quite some time. Overall investment in R&D by the federal government is even larger: since 2017 the federal government has spent in excess of $120 billion each year on extramural research and development at universities, non-profits, and small and large businesses. 4
Prior to passage of the Bayh-Dole Act, inventions developed with federal funding were often simply owned by the U.S. government and/or were subject to certain agency-specific policies. 5 This regime resulted in a patchy framework which was cumbersome for industry and university technology transfer offices and systems to effectively access and which led to a sizeable number of government patents that remained unlicensed. 6 Not surprisingly, such policies were found to be insufficient for fostering transfer of the technology derived from large amounts of federal support to downstream applications. 7
The Bayh-Dole Act was passed with a view toward addressing such deficiencies. Indeed the stated objectives of the Bayh-Dole Act as set forth in the statute include, among other things, use of the patent system “…to promote the utilization of inventions arising from federally supported research or development.” 8 Other objectives cited in the statute include promoting “collaboration between commercial concerns and nonprofit organizations, including universities” and ensuring “that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions…”. 9
Essentially, the Bayh-Dole Act sets forth the rights of persons, nonprofit organizations, small business firms (“contractors”), other contractors, 10 and the U.S. government in inventions conceived or first actually reduced to practice in the course of work performed under a federal funding agreement. Thus, since 1980 the Bayh-Dole Act has provided a uniform framework for addressing issues of patent ownership and commercialization across federal agencies. 11 Instead of leaving it to individual agencies to determine which federally funded inventions may be patented (and ownership of such patents with the U.S. government), the Bayh-Dole Act permits U.S. non-profit organizations, universities, and small businesses to obtain title to inventions achieved with federal support while the government retains the right to practice and use the technology. 12
Significantly, the Bayh-Dole Act also allows the federal government to “march-in” and license such patents to others if the beneficiary of the federal funding fails to make reasonable efforts to use the patented technology. The provision of the Bayh-Dole Act relating to march-in rights specifically grants the federal agency which provided any amount of funds for an invention the right to require the recipient “contractor, an assignee, or exclusive licensee…to grant a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants, upon terms that are reasonable under the circumstances” only if one of four circumstances applies.
13
These four circumstances are met when (1) “…the contractor or assignee of the invention has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use;” (2) it “…is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;” (3) it “…is necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably satisfied by the contractor, assignee, or licensees;” or (4) it “…is necessary because the agreement required by section 204 [to manufacture the product covered by the patent or to perform the patented manufacturing method substantially in the United States] has not been obtained or waived…”.
14
To date, such march-in rights have never been exercised. 15
Current draft guidance framework and debate
On December 7, 2023, the Biden administration released a “proposed framework” entitled “Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights.” The proposed framework was published in the Federal Register the next day, along with a request for comment by the public to ensure that the proposed framework is clear, and that its application would actually fulfill the objectives of the Bayh-Dole Act and the purposes of its march-in provisions. 16
Perhaps most notably—and as NIH Director Bertagnolli very recently acknowledged—the proposed framework contemplates use of the march-in rights of the Bayh-Dole Act as a tool to lower the price of taxpayer funded drugs deemed unreasonable or to otherwise make such drugs more accessible to the public.
As a preliminary matter, the draft guidance states that determining whether march-in rights are to be invoked is an “extremely fact-dependent” exercise, but the relevant agency must at least consider “(1) whether Bayh-Dole applies to the invention(s) at issue: (2) whether any of the statutory criteria for exercising march-in applies under the circumstances; and (3) whether the exercise of march-in rights would support the policy and objectives of Bayh-Dole.” 17
By statute, the use of march-in rights must be limited to inventions funded by the government. This aspect of the framework is therefore relatively straightforward.
However, as mentioned above, one of the circumstances under which the government may exercise march-in rights is when the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention. Here the proposed framework states that if a contractor or licensee has commercialized a product, “but the price or other terms at which the product is currently offered to the public are not reasonable, agencies may need to further assess whether march-in is warranted.” 18 Whether such action is actually required will, under the proposed framework, be considered in view of the objectives of the Bayh-Dole Act which include the need to protect the Government and/or the public against nonuse or unreasonable use of the subject invention as mentioned above.
Notably, the draft guidance does
According to the proposed framework, in such a scenario march-in actions might be justified either because the contractor or assignee of the invention has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention, or because it is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees. 20 However, the agency would likely need to assess other information before making a determination, for example, how does the increased price compare to prices for other masks, how does the price point compare to the cost of developing and manufacturing the masks, and whether the contractor is exploiting the health or safety need in setting a product price that is egregious within the U.S. market and unjustified given the totality of the circumstances. 21 If so, according to the draft guidance, march-in might help address the health need. On the other hand, if other mask manufacturers are charging similarly high prices to fund facility expansion, or if the timing does not favor march-in (e.g., in view of the term remaining on relevant patents, the time required for any regulatory approvals of new products, etc.) then march-in might not provide a solution.” 22 These are just a sampling of myriad inquiries expressed within just Scenario 6.
Other relevant considerations contemplated by the draft guidance include whether the contractor or licensee had made the product available only to a narrow set of consumers or customers because of high pricing or other extenuating factors and/or whether the contractor or licensee has provided any justification for the product’s price or background on any extenuating factors. 23
Conclusion
Achieving balance between access to federally funded treatments at a reasonable price and promotion of innovative medicines is no easy feat, and the criticism of the draft guidance has been strong from certain corners. The Pharmaceutical Research and Manufacturers of America have called the proposed framework “a road map for seizing patents” as well as “another loss for American patients and inventors.” 24
Yet, by way of example, the price tag for the recently approved CRISPR treatment for sickle cell anemia is expected to be on the order of $2.2 million for a single patient. 25 If such prices do not raise concerns regarding taxpayer’s access to medicines, what will?
Unfortunately, the draft guidance issued in early December appears to raise more questions than answers. While the proposed “framework” clearly articulates that any march-in rights must be compliant with the goals and objective of the Bayh-Dole Act, details critical for predictable and consistent application of this framework appear missing. What price is too high? Which considerations should carry the most weight when determining whether march-in is warranted. How, if at all, should agencies deal with intellectual property beyond the subject inventions that could prevent other licensees from making the product or offering the service in question? The time period for comment on the proposed framework ends February 6th, but the debate will certainly not end there.
Footnotes
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.