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Industries from healthcare and technology to agricultural and environmental sciences are awaiting final guidance from the National Institute of Standards and Technology (NIST) after it issued a request for information (RFI<\/a>) on its \u201cDraft Interagency Guidance Framework for Considering the Exercise of March-In Rights\u201d in December 2023.<\/p>\n At issue is a proposal which seeks to clarify the federal government\u2019s authority to intervene in the licensing of federally funded technologies under the Bayh-Dole Act. Considered as part of the Biden Administration\u2019s efforts to address healthcare costs, it could result in a policy shift with important implications for drug and medical device manufacturers.<\/p>\n Background <\/strong><\/p>\n The current patent framework has its roots in the 1970s, when the booming economy and period of technological innovation that the United States had enjoyed after World War II began to sputter. The same nation that had marveled as its flag was planted on the moon faced fuel shortages and persistent inflation. Meanwhile, once unlikely competitors such as Germany and Japan were outpacing<\/a> the U.S. in advancements in technology and manufacturing.<\/p>\n A 1979 report prepared by the Carter Administration captured the national feeling of discouragement in describing an \u201ceconomic malaise which arises out of a failure of American industry to keep pace with the increased productivity of foreign competitors.\u201d \u00a0Similarly, a 1980 House Judiciary Committee report<\/a> referenced a \u201ccrisis in U.S. productivity\u201d<\/p>\n Both reports identified the country’s patent system as a contributing factor to the stagnation of technological growth. Critics argued that U.S. patent laws, which gave the government ownership of inventions or technologies developed with federal funding, offered no incentives for the private sector to pursue new discoveries for commercial use.<\/p>\n Senators Birch Bayh (D-IN) and Bob Dole (R-KS) offered a new approach to patent ownership in federally funded research with The Patent and Trademark Law Amendments Act of 1980. The Act enabled universities, small businesses, and non-profits to own patents on innovations developed with federal funding and to license these inventions to the private sector. The legislation, which ultimately became known by the shorthand \u201cBayh-Dole\u201d, was promoted as a means of reinvigorating the nation\u2019s economic output by facilitating the transfer of technology from academia to industry.<\/p>\n Signed into law by President Carter, the Act was reinforced by President Reagan’s Executive Order 12591<\/a>.<\/p>\n Impact<\/strong><\/p>\n In the decades since its passage, many have lauded Bayh-Dole as a pivotal force in invigorating the U.S. biotechnology sector. In 2002, The Economist proclaimed<\/a> that \u201cthis single policy measure helped to reverse America’s precipitous slide into industrial irrelevance,\u201d underscoring its profound impact on national competitiveness in biotechnology and pharmaceutical industries.<\/p>\n However, Bayh-Dole has not been without its detractors. In opposing the original legislation in 1980, Sen. Russell Long (D-LA) described<\/a> it as ‘one of the more radical, far-reaching giveaways that I have seen in many years.’ Critics continue to argue that the act puts American taxpayers in the position of paying twice for technologies\u2014once through federal funding for research and again when purchasing products developed from that research. This criticism<\/a>\u2014that public investment yields private profits without corresponding public affordability\u2014hinges on the assumption that federal research dollars sponsor the more essential process of development. However, research<\/a> suggests that differentiating the value of basic research from that of the applied research entailed in commercialization is far from straightforward.<\/p>\n Proponents assert that without the incentives provided by Bayh-Dole, many significant medical and technological advancements might never have reached the public at all. \u00a0AUTM (formerly the Association of University Technology Managers) cites such diverse, if not immediately lifesaving, products as Honeycrisp<\/a> apples and Google<\/a> as evidence of Bayh Dole\u2019s value.<\/p>\n March-in Rights<\/strong><\/p>\n Of current interest is Section 203(a) of the Bayh-Dole which allows the federal government to retain ‘march-in rights\u2019 to ensure that inventions arising from federally funded research are not only patented but also actively commercialized for the public benefit. These rights enable federal agencies to intervene and, if necessary, relicense patents under specific circumstances. These include the failure to achieve ‘practical application’ of the invention within a reasonable timeframe, unmet public health or safety needs, insufficient efforts to alleviate these issues under the terms of exclusivity, and the failure to satisfy regulatory requirements.<\/p>\n To date, no federal agency has exercised march-in rights.<\/p>\n Noteworthy is the 2004 case in which some members of Congress joined patient advocates in petitioning the National Institutes of Health (NIH) to intervene after Abbott Laboratories increased the price of ritonavir from $2.14 to $10.71 per dose. Sold under the brand name Norvir\u00ae, the drug, which had been developed with some federal funding, was used off label to boost other protease inhibitors for the treatment of HIV\/AIDS. After extensive review and public testimony<\/a>, NIH chose not to exercise march-in rights. Citing<\/a> the need for careful and deliberate use of this authority, the agency observed that \u201cthe extraordinary remedy of march-in is not an appropriate means of controlling prices.\u201d<\/p>\n In 2020, after the FDA issued an emergency use authorization<\/a> for the use of remdesivir in the treatment of COVID-19, 34 states joined in petitioning<\/a> NIH, the Department of Health and Human Services, and the Food and Drug Administration (FDA) to exercise march-in rights to\u00a0 \u201cincrease the supply of this drug and lower the price\u201d.<\/p>\n The agencies declined to exercise march-in rights or to assign them to the states. The Government Accountability Office\u2019s subsequent clarification<\/a> that remdesivir was not, in fact, subject to the Bayh-Dole Act highlighted the complexity and specific criteria that govern the exercise of these rights.<\/p>\n Most recently, in March 2023, the NIH declined a petition<\/a> to use march-in rights to take possession of a patent for Xtandi, a treatment for prostate cancer manufactured by Astellas. Three U.S. senators joined petitioners in arguing<\/a> that Xtandi\u2019s high price violated Bayh-Dole Act provisions to make federally funded inventions available on \u201creasonable terms.\u201d NIH responded<\/a> by stating that Xtandi is widely available on the market and has treated over 200,000 patients therefore use of march-in rights was not warranted. HHS affirmed<\/a> the NIH decision in February, but observed that the agency recognized \u201ca need to evaluate how pricing may be a contributing factor when weighing the use of the march-in authority\u201d.<\/p>\n \u00a0<\/strong>Possible Change<\/strong><\/p>\n The Biden Administration first telegraphed a potential change in the exercise of march-in rights in an executive order<\/a> released in July 2021. In it, President Biden asked the director of NIST to consider not finalizing provisions on march-in rights and product pricing put in place by President Trump in the final weeks of his presidency.<\/p>\n In March 2023, NIST published a final rule<\/a> which did not include a proposed change prohibiting the use of march-in rights on the sole basis of pricing.<\/p>\n The same week, the Department of Commerce (NIST\u2019s parent agency) and HHS issued a joint statement<\/a>announcing that the Interagency Working Group for Bayh-Dole would develop a framework for implementation of the act\u2019s march-in provision.<\/p>\n Under the proposed new framework, which was released on December 7, 2023, the federal government could specifically consider the consumer price of a product developed from federally funded research in determining whether to exercise march-in rights.<\/p>\n The draft guidance addressed various scenarios where march-in rights could be considered, focusing on whether the contractor has made the product available at a reasonable price and whether the product meets public health and safety needs among other factors.<\/p>\n This change, which aligns with the Biden Administration\u2019s focus on addressing high drug prices., would represent a significant shift. Not only have previous interpretations of Bayh-Dole not explicitly included price as a criterion for exercising march-in rights, in testimony in the Norvir case Birch Bayh specified<\/a> that the legislation which bears his name was meant \u201cnot to set prices, but to ensure competition and to meet the needs of our citizens.\u201d<\/p>\n Response<\/strong><\/p>\n Reactions to the proposed changes in march-in rights criteria have varied.<\/p>\n The Center for American Progress, which has previously asserted<\/a> that a drug\u2019s affordability should meet the criteria for the exercise of march-in rights, praised<\/a> the proposed change as an effective means of \u201ctaking on big pharma\u2019s high prices\u201d.<\/p>\n The Federal Trade Commission applauded<\/a> the proposal as offering an \u201cimportant check on companies charging Americans inflated prices for drugs developed with taxpayer-funded research.\u201d The agency also acknowledged that exercising march-in rights for pharmaceuticals could be complicated. A single drug may be associated with over 100 different patents comprising a so-called \u201cpatient thicket\u201d. Only those patents arising from government-funded research would be subject to march-in.<\/p>\n Academic research institutions contend that the proposed framework could disrupt established technology transfer practices and disincentivize licensing agreements. In their comment letter, a\u00a0 coalition of universities, including the Association of American Universities, Association of Public and Land-grant Universities, and the Association of American Medical Colleges, said<\/a> that, by “increas[ing] uncertainty and ambiguity around the criteria for Bayh-Dole march-in consideration” the framework would have “a detrimental and destabilizing effect on university and medical school technology transfer efforts and planning.”<\/p>\n The coalition further contended that allowing reasonable pricing as a criterion for the exercise of march-in rights would invite \u201ccorporate gaming\u201d of the system. It suggested that without a requirement that petitioners have standing and with no penalty for filing frivolous petitions, the proposed framework could \u201cembolden corporate entities to file petitions in bad faith or to undercut competitors in commercialization efforts.\u201d<\/p>\n In its comments<\/a>, the National Pharmaceutical Council (NPC) stated that using price as a factor in the exercise of march-in rights would have \u201can overarching chilling effect on private and public partnership across the industry.\u201d<\/p>\n Acknowledging the value of NIH funding in drug development, NPC contended that the framework \u201cdoes not adequately consider the significant contributions from and risks taken by the pharmaceutical industry.\u201d It pointed to a 2023 study<\/a> that found that for every dollar in NIH spending in research private companies spend $10 to translate discoveries into patient treatments.<\/p>\n The U.S. Chamber of Commerce went beyond opposing the change. It joined<\/a> PhRMA, the Bayh-Dole Coalition, the Biotechnology Innovation Organization, and others in criticizing NIST\u2019s 60-day comment window, which spanned both government and religious holidays, as too brief. It also filed Freedom of Information Act requests<\/a> with the Department of Commerce and NIST requesting records relating to the development of the proposed rule as well as the working group.<\/p>\n Conclusion<\/strong><\/p>\n While NIST is primarily a nonregulatory agency, it has been delegated important authority in the matter of march-in rights. Stakeholders across sectors are waiting for clarity in what could\u00a0represent a major departure from previous policy.<\/p>\n [\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":" [vc_row full_width=”stretch_row” gap=”35″][vc_column][vc_column_text] Industries from healthcare and technology to agricultural and environmental sciences are awaiting final guidance from the National Institute of Standards and Technology (NIST) after it issued a request for information (RFI) on its \u201cDraft Interagency Guidance Framework for Considering the Exercise of March-In Rights\u201d in December 2023. At issue is a proposal […]<\/p>\n","protected":false},"author":29,"featured_media":6748,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","ap4_related_services":"","footnotes":""},"categories":[428,507,628],"tags":[],"class_list":["post-8062","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-life-sciences-companies","category-medical-advacements","category-medical-devices-and-technology"],"yoast_head":"\n