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Currents in Contemporary Ethics: The Demise of Bayh-Dole Protections Against the Pharmaceutical Industry’s Abuses of Government-Funded Inventions

Published online by Cambridge University Press:  01 January 2021

Amy R. Schofield
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Type
Currents in Contemporary Ethics
Information
Journal of Law, Medicine & Ethics , Volume 32 , Issue 4 , Winter 2004 , pp. 777 - 783
Copyright
Copyright © American Society of Law, Medicine and Ethics 2004

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References

Government Patent Policy Act of 1980, 35 U.S.CA. §§ 200 et seq. (2004).Google Scholar
Congress considered numerous bills and held dozens of hearings related to this topic throughout the latter half of the 1970s and into the early 1980s. See, e.g., Patent and Trademark Law Amendments of 1980: Hearings Before a Subcomm. of the House Comm. on Gov't Operations, 96th Cong. (1980); Industrial Innovation and Patent and Copyright Law Amendments: Hearings on H.R. 6033, H.R. 6934, H.R. 3806, and H.R. 2414 Before the Subcomm. on Courts, Civil Liberties, and the Admin, of Justice of the House Comm. on the Judiciary, 96th Cong. (1980) [hereinafter 1980 House Industrial Innovation Hearings]; Patent Policy: Joint Hearing Before the Senate Comm. on Commerce, Sci., and Transp. and the Senate Comm. on the Judiciary, Pt. II, 96th Cong. (1980) [hereinafter 1980 Joint Hearing]; Government Patent Policy Act of 1980: Hearings on H.R. 5715 Before the Subcomm. on Sci., Research, and Tech. of the House Comm. on Sci. and Tech., Pt. I, 96th Cong. (1980); Patent Policy: Hearings on S. 1215 Before the Subcomm. on Sci., Tech., and Space of the Senate Comm. on Commerce, Sci., and Transp., 96th Cong. (1979); University and Small Business Patent Procedures Act: Hearings on S. 414 Before the Senate Comm. on the Judiciary, 96th Cong. (1979) [hereinafter S. 414 Hearings].Google Scholar
There were several exceptions to this general policy. For example, both the Department of Defense (DOD) and the National Aeronautics and Space Administration (NASA) frequently permitted contractors to obtain title to their inventions. See 126 Congressional Record (Washington, D.C.: U.S. Government Printing Office, 1980): at 1,994 (statement of Sen. Stevenson).Google Scholar
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35 U.S.C.A. § 202(a). The Act permitted the government to retain title to government-funded inventions when it determined national interests, national security, or other “exceptional circumstances” so demanded. See id.Google Scholar
35 U.S.C.A. § 204. It was widely believed that corporations would not invest the large sums of money associated with product commercialization without the promise of exclusive rights in return and that the government's previous policy of issuing only non-exclusive licenses to government-funded inventions had been an utter economic failure. See, e.g., 1980 House Industrial Innovation Hearings, supra note 2, at 4 (statement of Philip Klutznick, Secretary of Commerce).Google Scholar
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See id. at 14. Essential Inventions proposed that Abbott receive a five percent royalty on all generic NORVIR sales made pursuant to the march-in license, if granted. See id. Although Essential Inventions properly addressed its petition to the Secretary of the Department of Health and Human Services (see id. at 1), Secretary Thompson delegated his authority under the Act's march-in provisions to the NIH. See Letter from United States Representative Sherrod Brown to the Honorable Tommy Thompson, Secretary, United States Department of Health and Human Services (Aug. 17, 2004), available at <http://sippi.aaas.org/ipis-sues/updates/?res_id=393> (last visited November 8, 2004) [hereinafter Brown Letter]. (last visited November 8, 2004) [hereinafter Brown Letter].' href=https://scholar.google.com/scholar?q=See+id.+at+14.+Essential+Inventions+proposed+that+Abbott+receive+a+five+percent+royalty+on+all+generic+NORVIR+sales+made+pursuant+to+the+march-in+license,+if+granted.+See+id.+Although+Essential+Inventions+properly+addressed+its+petition+to+the+Secretary+of+the+Department+of+Health+and+Human+Services+(see+id.+at+1),+Secretary+Thompson+delegated+his+authority+under+the+Act's+march-in+provisions+to+the+NIH.+See+Letter+from+United+States+Representative+Sherrod+Brown+to+the+Honorable+Tommy+Thompson,+Secretary,+United+States+Department+of+Health+and+Human+Services+(Aug.+17,+2004),+available+at++(last+visited+November+8,+2004)+[hereinafter+Brown+Letter].>Google Scholar
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See id. In fact, several entities, including the Attorneys General of Illinois and New York, have initiated antitrust investigations regarding Abbott's NORVIR price increase. See Albert, , supra note 33. Additionally, the AIDS Healthcare Foundation and several HIV patients have filed lawsuits against Abbott, alleging antitrust violations. See “Two HIV/AIDS Patients File Federal Antitrust Suit Against Abbott Over Price of Norvir,” Kaiser Daily HIV/AIDS Report, Apr. 20, 2004, available at <http://www.kaisernetwork.org/daily_reports/rep_index.cfin?hint=1&DR_ID=23279> (last visited November 8, 2004); “AIDS Healthcare Foundation Files Suit Against Abbott Alleging False Advertising After 400% Price Increase on AIDS Drug,” Kaiser Daily HIV/AIDS Report, Mar. 19, 2004, available at <http://www.kaisernetwork.org/daily_reports/rep_index.cfm?hint=1&DR_ID=22771> (last visited November 8, 2004). (last visited November 8, 2004); “AIDS Healthcare Foundation Files Suit Against Abbott Alleging False Advertising After 400% Price Increase on AIDS Drug,” Kaiser Daily HIV/AIDS Report, Mar. 19, 2004, available at (last visited November 8, 2004).' href=https://scholar.google.com/scholar?q=See+id.+In+fact,+several+entities,+including+the+Attorneys+General+of+Illinois+and+New+York,+have+initiated+antitrust+investigations+regarding+Abbott's+NORVIR+price+increase.+See+Albert,+,+supra+note+33.+Additionally,+the+AIDS+Healthcare+Foundation+and+several+HIV+patients+have+filed+lawsuits+against+Abbott,+alleging+antitrust+violations.+See+“Two+HIV/AIDS+Patients+File+Federal+Antitrust+Suit+Against+Abbott+Over+Price+of+Norvir,”+Kaiser+Daily+HIV/AIDS+Report,+Apr.+20,+2004,+available+at++(last+visited+November+8,+2004);+“AIDS+Healthcare+Foundation+Files+Suit+Against+Abbott+Alleging+False+Advertising+After+400%+Price+Increase+on+AIDS+Drug,”+Kaiser+Daily+HIV/AIDS+Report,+Mar.+19,+2004,+available+at++(last+visited+November+8,+2004).>Google Scholar
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See, e.g., Halperin, D., The Bayh-Dole Act and March in Rights: Written Statement Submitted to the National Institutes of Health 10 (May 2001), available at <http://ott.od.nih.gov/Meeting/David-Halperin-Attomey-Counselor.pdf> (last visited October 29, 2004) (“American pharmaceutical companies have profited greatly from the Government benefits provided under Bayh-Dole and the subsequent extension of Bayh-Dole to large corporations. And these benefits to drug companies have come on top of other substantial federal aid through the tax code….A 1999 analysis concluded that pharmaceutical makers have one of the lowest effective tax rates and one of the highest after-tax profit rates of any industry”).+(last+visited+October+29,+2004)+(“American+pharmaceutical+companies+have+profited+greatly+from+the+Government+benefits+provided+under+Bayh-Dole+and+the+subsequent+extension+of+Bayh-Dole+to+large+corporations.+And+these+benefits+to+drug+companies+have+come+on+top+of+other+substantial+federal+aid+through+the+tax+code….A+1999+analysis+concluded+that+pharmaceutical+makers+have+one+of+the+lowest+effective+tax+rates+and+one+of+the+highest+after-tax+profit+rates+of+any+industry”).>Google Scholar
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Id. at 5. The NIH report acknowledges that this interpretation of “practical application” was adopted in its CellPro decision. See id.; CellPro Determination, supra note 24, at 4.Google Scholar
See NIH NORVIR Decision, supra note 28, at 5.Google Scholar
Id. at 5–6.Google Scholar
Id. at 5. While the NIH's failure to consider the practical health impacts of Abbott's four-hundred percent price increase raise potentially troubling issues, this article will not address that aspect of the NIH's decision.Google Scholar
For a detailed discussion of the NIH's failure to properly apply the Act's march-in provision historically, as well as NIH's abdication of its Bayh-Dole oversight responsibilities, see Arno, P. S. and Davis, M. H., “Why Don't We Enforce Existing Drug Price Controls? The Unrecognized and Unenforced Reasonable Pricing Requirements Imposed upon Patents Deriving in Whole or in Part from Federally Funded Research,” Tulane Law Review 75 (2001): 631–693 thereinafter Arno & Davis].Google Scholar
35 U.S.C.A. § 203(1)(a), supra text accompanying notes 12 and 13.Google Scholar
See, e.g., Arno, & Davis, , supra note 51, at 649–53; Letter, Brown, supra note 36.Google Scholar
Cf. Alaska Dept. of Envtl. Conservation v. Envtl. Prot. Agency, 124 S.Ct. 983, 1002 n.13 (2004) (“It is, moreover, a cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.” [internal citations omitted]); Duncan v. Walker, 533 U.S. 167, 174 (2001) (“It is our duty to give effect, if possible, to every clause and word of a statute.” [internal citations omitted]); Brown Letter, supra note 36 (“NIH bypassed any consideration of price by ignoring a statutory mandate – the mandate that it not only evaluate ‘utilization,’ but also whether Norvir is sold on ‘reasonable terms.’ That fact should be sufficient to warrant your careful review of the agency's Norvir decision.”).Google Scholar
See NIH NORVIR Decision, supra note 28, at 5–6.Google Scholar
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Although other federal agencies, such as the Federal Trade Commission (FTC), may have independent grounds to evaluate Abbott's conduct, none of those agencies is vested with authority to consider whether Abbott is complying with the Act or to enforce the march-in provisions.Google Scholar
Analysis of the legislative history of the Bayh-Dole Act is complicated by the numerous hearings and proposed bills on the topic of government-funded inventions throughout the late 1970s and early 1980s. See supra note 2. The Bayh-Dole Act itself is derived from S. 414, “The University and Small Business Patent Procedures Act,” which passed the Senate in April 1980 and was referred to the House, where it apparently died in subcommittee. In November 1980, the House referred H.R. 6933, entitled “Government Patent Policy Act of 1980,” to the Senate, which approved an amendment substituting the nearly verbatim text of S. 414. See 126 Congressional Record (Washington, D.C.: U.S. Government Printing Office, 1980): at 30,360 (amendment offered by Sen. Dole); 126 Congressional Record (Washington, D.C.: U.S. Government Printing Office, 1980): at 30,364 (statement of Sen. Bayh). The discussion contained herein is, therefore, limited to the Senate hearings, reports, and floor debates on S. 414, which opponents of the NORVIR petition claim to be the “only legislative history with any bearing” on the Bayh-Dole Act. See Letter from J. P. Allen, President, National Technology Transfer Center and Author, S. Rep. No. 96-480, to Rohrbaugh, M., Director of the Office of Technology Transfer, Office of Intramural Research, National Institutes of Health 1 (Mar. 31, 2004) (available at <http://ott.od.nih.gov/Meeting/Joseph-P-Allen.pdf> (last visited October 29, 2004); Bayh Statement, supra note 43, at 3.Google Scholar
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Id. at 28 (emphasis added).Google Scholar
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See U.S. Gen. Accounting Offices, GAO/RCED-99-242, Technology Transfer: Reporting Requirements for Federally Sponsored Inventions Need Revision 2 (Aug. 1999) (concluding that “[f]ederal agencies and their contractors and grantees are not complying with provisions on the disclosure, reporting, retention, and licensing of federally sponsored inventions under the regulations implementing the Bayh-Dole Act and Executive Order 12591…. As a result, the government is not always aware of federally-sponsored inventions to which it has royalty-free rights”). See generally Arno, & Davis, , supra note 51, at 674–91 (discussing the NIH's execution of its Bayh-Dole responsibilities).Google Scholar
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The NIH maintained this position again in September 2004, when it denied a march-in petition regarding Pfizer's pricing of its glaucoma drug Xalatan. See In the Case of Xalatan® Manufactured by PFIZER INC. (Office of the Director, National Institutes of Health, Sept. 17, 2004), available at <http://ott.od.nih.gov/NewPages/xalatan.pdf> (last visited November 8, 2004). In this decision, the NIH refused to consider whether Xalatan® was available to the public on “reasonable terms” and insisted that Congress address issues of price control. See id. at 5–6. (last visited November 8, 2004). In this decision, the NIH refused to consider whether Xalatan® was available to the public on “reasonable terms” and insisted that Congress address issues of price control. See id. at 5–6.' href=https://scholar.google.com/scholar?q=The+NIH+maintained+this+position+again+in+September+2004,+when+it+denied+a+march-in+petition+regarding+Pfizer's+pricing+of+its+glaucoma+drug+Xalatan.+See+In+the+Case+of+Xalatan®+Manufactured+by+PFIZER+INC.+(Office+of+the+Director,+National+Institutes+of+Health,+Sept.+17,+2004),+available+at++(last+visited+November+8,+2004).+In+this+decision,+the+NIH+refused+to+consider+whether+Xalatan®+was+available+to+the+public+on+“reasonable+terms”+and+insisted+that+Congress+address+issues+of+price+control.+See+id.+at+5–6.>Google Scholar
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