The ongoing coronavirus pandemic highlights a potential conflict between patenting innovations by allowing companies to profit from their inventions and protecting public health by allowing people access to those treatments. This tension forms the basis of my first book, Intellectual Property and Health Technologies, and is also the overarching theme to my law school course.
As a result of the current outbreak, we are seeing many companies and universities devote significant resources to COVID-19 research in hopes of developing a vaccine or cure for the disease. The big question on many peoples’ minds: is what happens when someone develops a vaccine or cure? Will it be available to everyone? And at what cost will it be available?
Last week I wrote about compulsory licensing and how countries can circumvent patents using that mechanism. We have already seen this with Israel announcing that AbbVie’s HIV treatment Kaletra® has been approved for importation despite the fact that patent protection for Kaletra® doesn’t expire until 2024 in Israel.
In the U.S. there is also something called march-in right which allows the government to circumvent a patent and practice the invention itself or have a third party practice the invention. Below is a brief over of march-in rights in the U.S. and what they mean for the current pandemic.
Overview of Bayh-Dole Act
The Bayh-Dole Act, also called the University and Small Business Patent Procedures Act, is U.S. legislation that addresses intellectual property arising from federally-funded research. Enacted on December 12, 1980, the Bayh-Dole Act gives U.S. universities, small businesses and non-profit organizations the ability “to retain title to any invention developed under such support”. In other words, the Bayh-Dole Act allows U.S. universities, small businesses and non-profit organization to own the intellectual property that results from it rather than automatically vesting ownership rights in the government.
Prior to the Bayh-Dole Act, inventions that arose out of federally funded research were owned by the government. The government, however, was not adept at commercializing the technology, and as a result, university technologies were not efficiently commercialized. Of the approximately 30,000 patents awarded to the government, for instance, only about five percent were licensed for use. According to Senator Bayh, “[d]iscoveries were lying there, gathering dust.”
To stimulate innovation and promote the use and development of federally funded inventions, Senator Birch Bayh of Indiana and Senator Dole of Kansas sponsored the Bayh-Dole Act, which gave ownership of such technologies to the university. The thought behind granting ownership of the patented technology to the university rather than the government was that the university would be more efficient and successful at developing and commercializing the technology. The university would do this by entering into a license agreement with a company to grant access to the technology.
In return for ownership of the technology, the university had to satisfy several requirements of Bayh-Dole, including: providing the government with a non-exclusive royalty-free license to the invention; patenting and commercializing the inventions; sharing a portion of any revenue received from licensing the invention with the inventor; providing licensing preferences for small businesses to facilitate the growth of small businesses; and requiring that the product be substantially manufactured in the U.S.
Government’s March-in Rights
A critical feature of the Bayh-Dole Act relates to the federal government’s right to maintain control over the technology that it funded. In what is known as the government’s right to “march-in,” the Bayh-Dole Act explicitly allows the government to step in and acquire technology under certain circumstances. Under this provision, the government, as the funding agency, has a right to “require the contractor [university], an assignee or exclusive licensee of a subject invention to grant a non-exclusive, partially exclusive, or exclusive license―in any field of use―to a responsible applicant or applicants, upon terms that are reasonable under the circumstances, and if the contractor, assignee, or exclusive licensee refuses such a request, to grant such a license itself.” In order words, the Bayh-Dole Act allows the government to ignore the exclusivity of a patent and practice the invention itself, or have a third party practice the invention on its behalf.
The government’s rights, however, are not without limitation. To enforce its march-in rights, at least one of four criteria must be satisfied by the government, which include:
(1) action is necessary because 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 in such field of use;
(2) action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;
(3) action 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) action is necessary because the agreement required by section 204 has not been obtained or waived or because a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement obtained pursuant to section 204.
March-In Rights Case Studies
The government has yet to exercise its march-in rights, making it difficult to determine exactly under what circumstances government intervention is likely. In the few petitions that were filed, however, it is clear that the most common scenario used to justify marching-in was the second criteria - to satisfy the "health and safety needs" of the public. Under this provision the petitioner claimed that the original licensor of the technology is inadequately addressing the public’s health and the government should therefore intervene allowing a third party to practice the technology.
One scenario in which a petition for marching-in may be warranted is during an infectious disease outbreak, such as the current coronavirus pandemic. In 2001, for instance, the government contemplated invoking the march-in doctrine during the anthrax attacks following the terrorist attacks of September 11, 2001. At the time of the attacks, Bayer had patent rights to the drug Cipro®”, which was the most effective anthrax treatment at the time. It was unclear whether Bayer would be able to supply the required amount of drug needed to treat a potentially large population. As the anthrax scare continued and fear of a full-blown epidemic increased, the Department of Health and Human Services threatened to use the march-in rights to acquire Bayer’s patent rights to Cipro® and allow other companies to manufacture it. By allowing other companies to manufacture Cipro®, the government would ensure that enough drug supply would be available to the population. Ultimately, however, the government did not proceed with its petition.
High Drug Pricing
Apart from this one limited instance, march-in rights have surfaced mainly in connection with drug pricing. In the case involving Norvir® and Xalatan®, for instance, the National Institutes of Health (NIH) received a request to exercise march-in rights for patents covering Abbott Laboratories’ HIV/AIDS drug, Norvir®, and Pfizer's glaucoma drug, Xalatan®, arguing that both drugs were priced too high. While Abbott increased the price of Norvir® 400% for U.S. consumers but not for other countries and Xalatan® was sold in the U.S. at up to five times the cost compared to other high-income countries, the NIH denied both petitions. In doing so, the NIH cited the availability of the drugs and also the lack of evidence suggesting that the health and safety needs of the public were not being adequately met by the companies. Moreover, the NIH considered the topic of drug pricing to be outside its jurisdiction and one that should be addressed by Congress.
In 2010, the NIH was petitioned to exercise its rights in response to a drug shortage. The petition asked the NIH to review Genzyme's inability to manufacture enough Fabrazyme® to treat Fabry patients as a result of manufacturing problems and FDA sanctions. To alleviate the drug shortage, petitioners asked the NIH to allow other manufactures to begin supplying the proper drug. The NIH again denied the march-in petition, but unlike in the previous situations, the government believed that marching-in in this situation would be futile given the length of time required to bring a generic version, or biosimilar, of Fabrazyme® to market. Because of the uncertain FDA approval process, the NIH contended that the drug shortage would not be solved any faster even if other companies were given the opportunity to manufacture the drug.
Implications for Current Pandemic
While the U.S. government has yet to exercise its march-in rights, the current pandemic could provide its first opportunity to do so. Companies that are working to develop COVID-19 treatments, including Moderna and Gilead Sciences, have each benefited from government funding. Remdesivir®, Gilead Sciences’ antiviral that has shown promise in treating COVID-19, was developed at the University of Alabama at Birmingham and has received approximately $38 million from the National Institutes of Health (NIH). The NIH itself has spent around $700 million to develop a vaccine to coronavirus.
The implications of this are potentially huge because it sets up the U.S government to circumvent any patents that could stand in the way of getting treatment to the public. Even though the U.S. government has yet to exercise its march-in rights, companies developing products with the aid of government funding are subject to Bayh-Dole and the march-in rights.
This, however, does not mean that the government will necessarily have to exercise its power. For instance, there could potential logistical problems with doing so. Some drugs, particularly biologic ones, are often challenging to manufacture. They require very specific materials and processes to be used to yield the correct product so asking a different company to manufacture a biologic drug could result in a significantly different end product. At best, this end product would not be effective at treating the disease, and at worst, it could cause harm.
Moreover, there is no evidence to say that drug companies will not make their drug available and accessible to all. We have already seen AbbVie give up its patent rights to Kaletra® in an effort to fight the pandemic. Other companies will likely follow suit considering the public relations nightmare they may otherwise face.
As I have mentioned before, protecting innovation and protecting the public’s health do not have to be mutually exclusive concepts. Allowing a company to make a profit from their drug and fund future innovation does not mean that people should be denied access to the drug, especially in the case of a pandemic. These two concepts can work together to bring newer and better treatments to the market and at the same time make people healthier.
As I have mentioned before, patent rights are not absolute, but neither is the right to circumvent those rights. In a time when restoring global public health is at an all-time high, patent rights and public health rights must work together to not only develop new treatments, but also to rid the public of COVID-19.
BioPharma Law Blog posts updates and analyses on IP topics, FDA regulatory issues, emerging legal developments, and other news in the constantly evolving world of biotech, pharma, and medical devices.