Some university researchers worry that the federal government is attempting to control prescription drug costs by misapplying a 40-year-old “march-in” provision that could disturb relationships between universities and and corporate research partners.
In the 1980s, a federal Bayh-Dole Act enabled universities, nonprofit research institutions and small businesses to own, patent and commercialize inventions developed under federally-funded research programs.
Bayh-Dole (sponsored by Sens. Birch Bayh, D-Ind., and Bob Dole, R-Kans.) created important links between doing “basic” research and creating “inventions” that today helps small biotech businesses and start-ups create new products. Large pharmaceutical companies later may buy out a biotech start-up company and then use their significant capital for the “development” research that brings products to market.
Over the past 40 years, research estimate that Bayh-Dole added $1.7 trillion to the U.S. economy.
Kevin Walters is the strategic research coordinator at the Wisconsin Alumni Research Foundation, which is a repository for funds acquired through research deals between university researchers and the private sector, and invests money for use in future research.
UW-Madison is a Morrill land grant college, which grew out of the agricultural industry and the agricultural experiment station dates to the 1890s. Harry Steenbock, a UW-Madison professor of biochemistry, graduated in 1916 and produced “irradiated Vitamin D” or Vitamin D fortification of milk, a process developed in 1923 to 1925. Steenbock realized that when the sun hits a person’s skin it creates Vitamin D. In the laboratory, he and his assistants used the same process — using ultraviolet light.
“If humans ingest that fortified food, where sterols have been exposed to ultraviolet light, food would have that vitamin D in it,” Walters said. Children suffering from rickets, if they consume irradiated sterols, could be cured.
Steenbock wanted to make sure scientists could control products they would have enough vitamin D in it to be useful. He also wanted Wisconsin dairy farmers to have the first crack at it, and that margarine manufacturers did not have the first crack at it.
“He was concerned that if the product were put into margarine, the margarine would have the Vitamin D and be nutritionally superior to butter,” Walters said.
In 1925, a group of U of W-Madison alumni formed the non-profit WARF as a supporting organization for the university. Royalties from the commercial property goes back to each appropriate department, some to the researcher-inventors, and the portion goes into the foundation’s investment portfolio. Funds from that portfolio go back into research grants to the university at about $100 million per year now.
In the COVID era, the rules may change for the worse, Walters said.
Biden administration officials, supported by some Democratic senators, are threatening to use “march-in” rules in the Bayh-Dole Act to control the prices of products where the federal government paid for basic research.
If the federal government unilaterally disturbs deals between universities and private companies that would drive companies away from university collaborations, Walters said it could build a “wall” between basic and applied research and could stifle developments that benefit farmers and humanity in general.
Federal agencies like the Department of Energy are considering implementing stricter licensing requirements that could make university tech transfer riskier for agricultural research universities.
Advocacy groups are pressing the Biden administration on the issue. Most are focused on drug prices, he said, but a group called the Bayh-Dole Coalition is concerned it could disrupt a “whole food chain” of research impacts that don’t involve drugs.
Walters estimates that about 30% of drug costs involve products that were developed at least in part with federally-funded research.
A useful drug may have started with a federal grant from the National Institutes of Health, but university technology transfer centers such as WARF became involved later, followed by small biotech start-up companies, which may have been acquired by a large pharmaceutical company who puts a lot more money into developing it, he said.
WARF and its counterparts invest the proceeds from product royalties, according to the agreements, and then put that money back into more research.
If federal officials become overly aggressive on pricing, it could mean less basic research will be done. More will be done privately, protected as trade secrets.
“In the long run I think you would have less funding for ‘blue sky’ research,” Walters said.
“This is not just about drug prices,” Walters said. “What we’re wanting to make sure we’re doing is making sure that those focusing just on the patient side of this are not losing sight that there is a whole food chain here, a whole giant economy here. We’re trying to serve all of these economies at the same time.
“On whatever side of this question that you are on — a lot of people tend to think that the other side is in it for the money, and my side is in it to feed the poor and cure the sick,” Walters said. “Different people are operating in different contexts, making moral judgements.
“Farmers and agriculture could lose out in this struggle, if federal officials make it more difficult to transfer technology from the university laboratory to commercialization,” Walters said.
March-in and on
“March-in” interventions are important if inventions aren’t being used for the public good. For example, if a university doesn’t have the equipment or means to develop an invention into a commercial product. It could also involve a drug company that makes a marketing agreement but doesn’t do it as a defensive measure against competitors.
If the drug company acquires the patent rights to prevent others from doing so, then the federal government could require the patent owner to grant licenses to third parties.
But advocacy groups have petitioned NIH and NSF to use the march-in rights when drugs become expensive.
According to Walter, a faculty member will go to WARF and disclose an invention. WARF determines if the invention has potential commercial applications, whether they can be patentable, whether it should be patentable. If the answers are yes, they’ll approach a company for license it, or might help create a company with a faculty member.
Often it takes five to 10 years to develop the idea, in cooperation with partners. Sometimes — in the case for the discovery of an elm tree resistant to Dutch elm disease, for example — it might take 30 years.
Walters said federal officials may mistakenly think there are many competing companies wishing to invest in the development of an invention.
“Usually there is one company that is interested in making an investment,” he said. “They’re going to develop the capacity to make this drug, and there’s no other company in the world willing to do that.”
WARF makes the agreement but doesn’t control prices.
“In fact, it would be an anti-trust violation if we as a patent holder went to our licensee and said, ‘You should charge a certain price.’ That’s called price-fixing,” he said.
The National Institute of Standards and Technology (NIST), which oversees standards regulating the Bayh-Dole Act, has proposed a rule that would clarify that march-in rights not be used solely for price control.
“We support that change, support it being codified,” Walters said.
The Biden administration is in the process of considering that. “We don’t think technology transfer is a place where we should be messing with prices,” Walters said.
“When federal agencies own the intellectual property then obviously that intellectual property is concentrated in Washington, D.C.,” he said. “The Bayh-Dole Act, by allowing universities to own the patent rights from their research inventions, that spreads the intellectual property across the country. Places like the Dakotas, Minnesota and Wisconsin, are able to speak more directly to their farmers.”