March-In Rights and U.S. Global Competitiveness
"March-in rights” are once again a subject of political debate, as the National Institutes of Health (NIH) and U.S. Department of Health and Human Services (HHS) decide whether to march in to offer cheaper versions of Japanese pharmaceutical firm Astellas’ prostate cancer drug, Xtandi. This case revives the question of the role of intellectual property (IP) protection in stimulating the innovation ecosystem to deliver new drugs, therapies, and vaccines versus government actions to boost the wider availability of specific products in the short run.
With the question of Xtandi on the table once again after the federal government’s rejection to exercise march-in rights in 2016, the debate needs to focus on the risks this action would pose to sustaining the dynamic system underpinning the United States’ world-leading, innovative industry. It is through the maintenance of this vital innovation ecosystem and its foundations of IP protections, that the United States can introduce new products and processes that improve the national and global health and wellness- effectively supporting U.S. national security and global economic competitiveness.
Q1: What are march-in rights, and when can they be invoked?
A1: The concept of march-in rights allows federal funding agencies access to use the research that they have sponsored at universities or businesses to meet agency missions. In practice, there are four instances where march-in rights can be invoked by the federal government:
- When the contractor or patent grantee has not taken, or is not expected to take, effective steps to achieve practical application of the subject intention in its field of use
- When action is necessary to address the health or safety needs that are not satisfied by the assignee or their licensees
- When interference is necessary to meet requirements for public use of an invention (as specified by federal regulations) and these requirements are not reasonably satisfied by the contractor, assignee, or licensees
- When the agreement is required by Section 204 of the Bayh-Dole Act has not been obtained or waived, or because a licensee of the exclusive right to use or sell any invention in the United States is in breach of its agreement; Section 204 requires that patented products be manufactured substantially in the United States unless domestic manufacture is not commercially feasible
Q2: When have march-in rights been invoked?
A2: It is important to note that in almost 42 years since the enactment of the Bayh-Dole Act, march-in rights have never been exercised. The only federal agency that has received petitions to march in is the NIH. In the years since Bayh-Dole, there have been eight petitions filed requesting the NIH march in, all of which were denied.
In 2004, petitioners asked the NIH to exercise march-in rights due to concerns over the high price of an HIV/AIDS treatment, Norvir/ritonavir, and a glaucoma treatment, Xalatan/Latanoprost, but the agency declined because it deemed each drug was available to the public on a sufficient basis. In 2012, petitioners requested the NIH invoke march-in rights for Norvir/ritonavir again, as prices for the drug were greater in the United States than other high-income nations.
Most recently in 2016, petitioners asserted the drug Xtandi/enzalutamide, used for prostate cancer, had a higher average price in the United States than other high-income countries. However, the NIH declined to investigate, as sales of the product were increasing, and no evidence suggested the drug was in short supply. This case is now up for debate once more.
Q3: What is the current argument for march-in rights?
A3: Some advocates read the march-in rights provision as a method to attack the increasingly high prices of pharmaceutical drugs throughout the United States. They have urged the federal government to overlook the drug’s existing patents and force the lowering of prices. In the case of Xtandi, they cite its high price of roughly $98 per pill and point out that the drug was originally developed in part with funding for research and development by the federal government.
These advocates believe that high drug prices violate the clause stipulating those inventions must be made available to the public on “reasonable terms.” They see march-in rights as a tool to allow third parties to make and sell inventions or products at lower prices. While well-intentioned toward Americans who struggle to pay for life-saving drugs, this position is short-sighted, as it risks great harm to the innovation ecosystem that generates these lifesaving and life-enhancing pharmaceuticals in the first place. It is in the broad interest to protect and maintain this shared asset for the current and future benefit of all Americans.
Q4: What is the Bayh-Dole Act of 1980, and how do calls to march in go against it?
A4: The Bayh-Dole Act – or the Patent and Trademark Law Amendments Act of 1980 – allows universities and businesses to capitalize on federally funded research and bring new ideas to the market, creating an incentive for the private sector development and commercialization of federally funded research and development that would otherwise lie dormant. Bayh-Dole has been widely hailed as a milestone in innovation policy and is emulated around the world.
Following the introduction of march-in rights by several decades, the Bayh-Dole Act includes a march-in clause allowing the federal government to step in and grant a license to a responsible new applicant if these products are not put to market for public use. The primary purpose of Bayh-Dole was to encourage public-private research collaboration to bring new ideas to the market. The act should not be used as a tool to address the issue of drug access that stems from market imperfections located elsewhere in the United States’ privatized healthcare system. Bayh-Dole makes no reference to reasonable prices being dictated by the federal government.
Moreover, the use of the march-in rights provision of technology transfer legislation to regulate prices of patented technology goes against the spirit of that legislation. The march-in provision was included in the Bayh-Dole Act of 1980 to ensure that inventions were made available for public use; it was not meant to be a means to address perceived social inequities. Indeed, the invocation of march-in rights to control drug prices undermines the very purpose of Bayh-Dole, which is to incentivize welfare-improving innovation from federally funded university research.
Q5: How do march-in rights threaten U.S. competitiveness?
A5: The United States is the world leader in biopharmaceutical research and development, thanks to strong IP laws and legislation that incentivize risk-taking. It accounts for a third of the global pharmaceutical market and conducts half of all global research and development in pharmaceuticals. The dynamism and competitiveness of this industry is itself a key national security asset. If march-in rights were used to lower drug prices, and grant licenses to new applicants, the incentive to create and market new products would decrease. Even worse, the improper use of march-in rights would trivialize the importance of IP in the development of the United States’ global leadership in biopharmaceuticals.
Though affordable drug access is a significant concern in the United States, the use of march-in rights in these situations would have a largely negative effect on the very innovation ecosystem that has brought forth these drugs in the first place. It would disincentivize actors in this ecosystem- including the investment and technology transfer communities, universities, and research institutions- from taking the risks and efforts needed to bring new ideas to the marketplace. By short-circuiting the dynamism of the American innovation economy, selectively controlling drug prices today would likely mean fewer new drugs tomorrow, leaving the United States and other nations less prepared for future pandemics and other health emergencies.
This publication is made possible by general support to CSIS. No direct sponsorship contributed to this publication.
Alexander Kersten is a deputy director and fellow with the Renewing American Innovation Project at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Gabrielle Athanasia is a program coordinator and research assistant for the CSIS Renewing American Innovation Project.
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