Law360 (August 21, 2020, 5:59 PM EDT) --
These politicians allege that since the U.S. helped pay for some of remdesivir's clinical trials, the federal government can use its march-in power in a 1980 law to appropriate Gilead's patent and license it to generic manufacturers to lower the price and increase availability of the drug.
At first glance, their argument may seem appealing. Unfortunately, the state AGs' letter is another example of populist rhetoric contrary to both law and reason. The state AGs clearly don't understand the law in question — or the drug development process. If they succeed, this would sanction government theft of patents that will chill innovation and harm patients.
First, consider how their proposal rests on a foundation of sand.
The 1980 law they cite, the Bayh-Dole Act, was not enacted for the purpose of government confiscation of patents. Congress enacted this law to facilitate universities and other research institutions to obtain patents and then license their innovations in the marketplace. Before 1980, no one knew who owned inventions if one cent of federal funding was used in the basic research that led to the patent. As a result, life-saving innovations sat on the shelf in the university lab.
Bayh-Dole changed this. As former Sen. Bob Dole, R-Kan., recently observed, his legislation spurred the licensing of new innovations, promoted thousands of startups, and led to massive economic growth. It contributed to the explosion in new drugs over the past 40 years that have turned what were once death sentences into manageable conditions — from cancer to diabetes to hepatitis.
Bayh-Dole does authorize a march-in power for the federal government to take patents and license them under very limited conditions. Contrary to the state AGs' claim, this is not an authorization for the federal government to confiscate patents merely to lower a price by expanding production. The National Institutes of Health has repeatedly stated that "the extraordinary remedy of march-in is not an appropriate means of controlling prices."
Since 1980, bipartisan administrations have consistently rejected lobbying efforts to use the march-in power for the purpose of lowering prices of drugs. They did so for one simple reason: Bayh-Dole does not authorize it.
But there's a more basic legal problem with the state AGs' letter: Bayh-Dole doesn't even apply to remdesivir. The company readily acknowledges working with universities and the U.S. military in testing the drug, but it was invented by and patented by Gilead researchers. The chief patent counsel for the U.S. Army Medical Research Institute of Infectious Diseases, or USAMRIID, which assisted Gilead in some of the later-stage testing, recently stated that its contributions did "not qualify USAMRIID as a joint inventor of the compound."
Remdesivir is an example of the miracle drugs created by the modern biopharmaceutical sector. Researchers at Gilead labored for more than a decade and ultimately the company will spend more than a billion dollars in R&D expenditures on the drug. This is typical of the average time and R&D expenditures that lead to all life-enhancing drugs today.
The federal government's total funding of remdesivir's testing, and the additional funding provided in response to the COVID-19 pandemic, ranged from $30 million to $70 million. These federal monies are a minuscule fraction — approximately 3% to 7% — of the total $1 billion plus in private investments ultimately made by Gilead in this life-saving medicine. For this, the state AGs would have the federal government confiscate Gilead's entire patent.
This is not what Bayh-Dole was intended to do, as Dole has made clear. It was not enacted to justify confiscation of the patents that this law made possible in the first place. It was especially not enacted to justify confiscation simply to lower prices given massive disparities in federal funding versus private funding of the R&D in a life-saving drug.
The politicians and activists lobbying since February for the government to invoke its march-in power for any COVID-19 drugs do a disservice to innovators and to the American patients who benefit from the fruits of their inventive labors.
If the government can twist the Bayh-Dole law and arbitrarily decide when to confiscate patents, companies like Gilead will no longer risk billions of dollars and decades of research in creating miracle drugs like remdesivir. We will never see cures for diseases like Alzheimer's and ultimately for pandemics like COVID-19.
Adam Mossoff is a patent law expert at George Mason University's Antonin Scalia Law School and a senior fellow at the Hudson Institute.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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