By Judge Susan G. Braden (ret.), who served on the U.S. Court of Federal Claims from 2003-2019, including as Chief Judge. A longtime member of Washington Legal Foundation’s Legal Policy Advisory Board, she currently is Jurist-In-Residence at George Mason University’s Antonin Scalia Law School’s Center for Intellectual Property X Policy and a member of the U.S. Chamber of Commerce and Global Innovation Policy Center’s Business Alliance to Stop Innovation Confiscation. She also sits on the Board of Directors of several private companies.

In 1980, Congress passed the bipartisan University and Small Business Patent Procedure Act “to promote the utilization of inventions arising from federally supported research or development … [and] ensure that inventions made by nonprofit organizations … are used in a manner to promote free competition and enterprise.” 1 Known as the Bayh-Dole Act after its Senate authors, this law enabled non-profit institutions to license their patents to the private sector with a “clear title” in order to attract venture capital and seed investors to develop the covered inventions or technologies with the goal of commercialization.

Certainly, there is a provision in the Act for a federal agency to “march-in” and reclaim a patent derived with federal funds, but the agency may do so only if the patent holder “has not taken … effective steps to achieve practical application of the subject invention . . .[or] action is necessary to alleviate health or safety needs which are not reasonably satisfied[.]”2 However, no Administration has ever granted a march-in petition—with good reason. Over the past 45 years, the Bayh-Dole Act has been credited with creating 4.2 million jobs adding $12.3 trillion to the U.S. gross domestic product—“help[ing] to reverse America’s precipitous slide into industrial irrelevance.” 3

Fast forward to 2023, as an election year approached with increased inflation, higher prices, and growing job uncertainty. A group of unelected bureaucrats in the Gaithersburg, Maryland offices of the National Institute of Standards and Technology worked in secret preparing “Draft Interagency Guidance Framework for Considering the Exercise of Bayh-Dole Act March-In Rights,” published on December 3, 2023 in the Federal Register for public comment. 4

On May 29, 2024, Senator Elizabeth Warren and Representative Lloyd Doggett implored the Biden-Harris Administration to “strengthen and finalize” the Guidance Framework to “reduce prices for American families by allowing the federal government to act when private actors, including drug manufacturers, charge exorbitant prices for products that taxpayers helped to develop. Our review of the comments indicate that the exercise of march-in has received broad support from seniors, dozens of health care providers, and from the broader public.” 5

Of course, Senator Warren’s letter did not mention that the Guidance Framework included no cost-benefit analysis by the Office of Management and Budget or the independent Congressional Research Service explaining the impact on the U.S. economy. 6 Nor did Senator Warren’s letter mention that such relevant federal agencies as the U.S. Patent and Trademark Office, the National Institutes of Health, the National Academy of Sciences, the National Academy of Medicine, the Department of Education and others were excluded from the interagency working group. And, as for the approximately 52,000 public comments received, it is true that 45,200 favored using “march-in” to seize pharma patents ostensibly to lower prescription drug prices. But it turned out they were manufactured robocomments. 7

More importantly, the premise of the Guidance Framework and Senator Warren’s concerns are misplaced and uninformed. A recent study of 361 novel, non-generic, small and large molecule drugs listed in the Food & Drug Administration’s Orange and Purple Books between 2011-2020 found: “92% of the therapies in our cohort have no mechanism of action or composition of matter patents with a government interest statement or federal funded development program. … 99% of the therapies in our cohort cannot be marched-in upon, as the key patents studied do not cover the entire asset’s intellectual property. There are only 5 out of 361 pharmaceutical products in which all available… patents include a government interest statement and could be subject to march-in[.]”8 Presumably, these 5 drugs were among the 10 targeted by the Biden-Harris Administration’s recent Inflation Reduction Act Medicare “negotiations.” 9 If so, what patents are the Biden-Harris Administration planning to “march-in” on to “promote free competition and enterprise?” That unanswered issue was the well-placed concern of numerous industries that filed comments requesting the Guidance Framework be shelved. 10 For example, during 1981-2000 alone, 6,812 Bayh-Dole patents were issued in the research field of semiconductors and electronics, 6,978 in computing equipment, 9,088 in telecommunications 3,104 in weapons manufacturing, 4,279 in metals manufacturing, 7,198 in electrical equipment manufacturing, 7,239 miscellaneous manufacturing. 11 Are the licensees of these patents at risk?

Senator Warren fired off her next missive on August 7, 2024 to the heads of HHS and Commerce to “carry out Congress’ will as specified in the Bayh-Dole Act … which clearly authorize expert federal agencies to consider price as a factor in determining whether a subject invention is available to the public on reasonable terms.” 12 In support, the Warren letter asserts that in the United States writ large “the words ‘reasonable terms’ have uniformly been interpreted to include price,” citing a 2001 Tulane Law Review article as the definitive authority. That publication, however, does not enact law nor interpret its meaning. Congress enacts the law, and it has not found any reason to repeal or amend the Bayh-Dole Act to include “price reasonableness” as a factor supporting march-in. Indeed, as the authors of the 1980 Act explained: “The law makes no reference to a reasonable price that should be dictated by the government. This was intentional. … [T]he ability of the government to revoke a licensed granted under the act is not contingent 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. The law instructs the government to revoke such licenses only when the private industry collaborator has not successfully commercialized the invention as a product.”13

In the remainder of her August 2024 letter, Senator Warren touts the Bayh-Dole Act’s “clear and lawful delegations of regulatory authority” to support NIST’s actions to promulgate “the statutory  ‘procedures’ to initiate a march-in process and through ‘government regulations, identif[y] the criteria to determine whether ‘an invention is being utilized and that its benefits are … available to the public on reasonable terms.’” 14 With this sleight of hand, the Warren letter tries to morph the Guidance Framework into federal regulations. Yes, the Bayh-Dole Act affords federal agencies the right to issue regulations, but they must conform to the requirements of the Administrative Procedure Act (“APA”). 15 Why does this matter? Because all agency guidelines, including the Guidance Framework, are not law and any agency attempting to enforce the Guidance Framework invites a lawsuit under the APA, since Congress did not designate “price reasonableness” as a criteria for “march-in.” Moreover, the Guidance Framework clearly implicates the Major Questions Doctrine, which prohibits agencies from “asserting highly consequential power beyond what Congress could reasonably be understood to have granted.” 16 Aside from private lawsuits, any agency head enforcing the Guidance Framework could well expect an impeachment initiative by Congress, together with an appropriations rider to prohibit the use of federal funds for such an unauthorized activity. In sum, as the Supreme Court recently held in the Loper Bright decision federal agencies no longer may dictate the scope of their legal authority or the meaning of the regulations they write—it is the “Courts [that] must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires.” 17 If the Biden-Harris Administration unwisely decides to issue the Guidance Framework and circumvent the APA by exercising “march-in” to seize pharmaceutical or other patents, the targets of such an action will have the opportunity to see whether the Supreme Court meant what is said.

One more thought. Recall the scene in the movie “Cat on a Hot Tin Roof” when the character Big Daddy belts out: “Didn’t you notice a powerful and obnoxious odor of mendacity in this room. …There ain’t nothin’ more powerful than the odor of mendacity!”

The odor of mendacity wafts from every paragraph of the Draft Interagency Guidance Framework and supporting letters penned this summer by Senator Warren and her colleagues.

Notes

  1. 35 U.S.C. § 200.
  2. 35 U.S.C § 203(a).
  3. Innovation’s Golden Goose, The Economist (Dec. 14, 2002).
  4. National Institute of Standards and Technology, Department of Commerce, Federal Register Notice, “Request for Information Regarding the Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights,” Dec. 8, 2023.
  5. May 29, 2024 letter from Senator Elizabeth Warren and Congressman Lloyd Doggett to Secretary Gina Raimondo, Secretary, Department of Commerce and Laurie Locascio, Under Secretary of Commerce for Standards and Technology.
  6. But see May 1, 2024 letter from Senator Chris Coons, Senator Thom Tillis, Representative Darrell Issa, and Representative Jake Auchincloss to Gene L. Dodaro, Comptroller General requesting a study “to determine the impact of the draft framework on U.S. prescription prices, U.S. innovation, and U.S. national interests.” Among the specific questions to be addressed included:  “To what extent did NIST conduct any analysis to assess the potential economic impact of the [Guidance Framework]?”.
  7. Kelly L. Morgan, “Massive Replication of Comments Submitted to NIST March-In Rights RFI Should Cause Concern,” IP Watchdog (Mar. 26, 2024).
  8. See https://vitaltransformation.com/wp-contnet/uploads/2023/11/march-in v11 BIO-approved-30/Nov2023.pdf slide 19 (emphasis added); see also Lisa Larimore Ouellette & Bhaven N. Sampat, “The Feasability of Using Bayh-Dole March-In Rights to Lower Drug Prices: An Update” (Mar. 2024) (National Bureau of Economic Research study finding the NIST Guidance Framework would affect only 2.5 % of all drug products approved by the Food and Drug Administration between 1985 and 2022).
  9. “Drug Price Controls Mean Fewer Cures: The Inflation Reduction Act is already causing cuts in R&D spending for new medicines.” Wall St. J. (Aug.15, 2024); see also “5 Takeaways from first Medicare drug-price negotiations,” The Hill (Aug., 16, 2024) (“We really don’t know the true savings Medicare is getting for each drug.”).
  10. See, e.g., Comments filed by: the Biotechnology Innovation Center; the U.S. Chamber of Commerce; the Business Council of New York State, Inc.; Small Business & Entrepreneurship Council; National Venture Capital Association; Ohio State Innovation Foundation, the National Association of Manufacturers, the United Inventors Association.
  11. S. Abdulla & Corrigan, ‘Bayh-Dole Patent Trends, Charting Developments in Government-funded Intellectual Property Through Time,” Center for Security and Emerging Technology, Data Brief, Georgetown University (Aug. 2023).
  12. August 7, 2024 letter from Senator Elizabeth Warren, Senator Angus S. King Jr. and Congressman Lloyd Doggett to Xavier Becerra, Secretary of Health and Human Services Department and Gina Raimondo, Secretary, Department of Commerce.
  13. Birch Bayh and Robert Dole, “Our Law Helps Patents Get New Drugs Sooner,” W. Post, (Apr. 11, 2002) A28; see also June 30, 2024 letter from Senator Bill Cassidy, M.D., Ranking Member, U.S. Committee on Health, Education, Labor, and Pensions to Xavier Becerra, Secretary, Department of Health and Human Services Department requesting by July 19, 2024: “Please explain the specific statutory authority that the National Institutes of Health, a subagency of HHS, would have to use price as a justification to use march-in rights for drug patents?”.
  14. Supra note 12.
  15. 5 U.S.C.§§ 551-59.
  16. W. Virginia v. Env’tl Prot. Agency, 597 U.S. 697, 724 (2002).
  17. Loper Bright Enters. v. Raimondo, No. 22-4751, 2024 WL 3208360 at *22 (U.S. June 28, 2024).