The Law is Clear: There's No Legal Authority to Control Prices Via Bayh-Dole

On the question of taking action to lower prescription drug prices, progressive lawmakers are of two minds. Some argue that Congress should simply pass legislation to allow the government to set the price for prescription medications. That approach, whether wise on policy grounds or not, at least has the virtue of fidelity to our constitutional process of lawmaking.

A more brazen view, on the other hand, holds that Congress, without meaning to do so or even knowing it was doing so, has already enacted legislation that would allow the federal government to bypass patent rights on certain medications. This tortured reading of existing law forms the basis of a demand from a number of progressive lawmakers that when a medication is "too expensive," the Biden administration should force patent owners to license their patents to generic companies so that they can make and sell cheaper copies.

Earlier this year, they urged the Secretary of Health and Human Services to do just that for the prostate cancer drug Xtandi. But their list only starts there. The Biden administration would do well to join all its predecessors who considered the issue in rejecting such petitions — or risk a swift and certain rebuke from the federal courts. 

The government has no authority to set prescription drug prices under existing law. The claim that it does is facially absurd. But let's review.

In 1980, Congress passed the University and Small Business Patent Procedures Act. Sponsored by Senators Birch Bayh (D-IN) and Bob Dole (R-KS), the law, colloquially known as the Bayh-Dole Act, allows universities, non-profits, and businesses to hold the patents stemming from their federally-funded research and license their inventions to private companies for commercial development. Previously, the federal government laid claim to the patents on such inventions and turned very few into commercial products.

Because Senators Bayh and Dole wrote the law to get inventions off the shelf and into new products, they included a clause known as the government's "march-in" right — the provision at the center of progressive demands today. Among other reasons, the government can force the relicensing of a patent if "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."

In essence, the march-in provision allows federal agencies to forcibly relicense patents that resulted from federally-funded research only if the companies that license the patents fail to commercialize a product containing these patented inventions. Bayh and Dole themselves affirmed this in a 2004 letter to the Washington Post.

In the case of Bayh-Dole, the intent of the law's authors matches multiple administrations' interpretations of it. In 2004, for example, The National Institutes of Health (NIH) under the Bush administration reviewed another such march-in petition, rightly concluding "the extraordinary remedy of march-in is not an appropriate means of controlling prices." And the first time progressive petitioners asked NIH to march in on Xtandi in 2016, officials of the Obama administration rightly concluded the government had no such authority.^, 

Now, citizen groups certainly have a right to challenge in court regulators' interpretation of laws. One key function of the judicial branch is to decide whether those interpretations are justified under the law. But because the federal government has not once sought to exercise march-in rights in over 40 years, no judge has ruled directly on their legality in controlling prices. If the Biden administration or a future administration were to reverse course, four decades of regulatory precedent against using march-in on the basis of price would carry immense weight in a court case.

Bayh-Dole does not provide the authority for the government to relicense drug patents because some politicians believe some medications are too expensive. Our lawmakers should not press such erroneous interpretations but rather act in accordance with the laws on the books. For progressive legislators — or anyone — to pressure NIH to violate this clear law is not only legally unsound, but highly irresponsible.

Paul R. Michel served on the United States Court of Appeals for the Federal Circuit from 1988 to his retirement in 2010, and as its chief judge from 2004 to 2010.