Q1. What is the Bayh-Dole Act?
The Bayh-Dole Act (or University and Small Business Patent Procedures Act) was originally enacted in 1980 as Public Law 96-517, and was amended in 1984 by Public Law 98-620. Among other things, the Bayh-Dole Act was designed to facilitate the patenting of U.S. government funded inventions by universities, other non-profit entities and businesses, and also:
“to ensure that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions” [35 USC 200]
Under the Act, as amended in 1984, contracting universities, non-profits and businesses are more free to exclusively license patents on inventions.
The Bayh-Dole Act also reserved certain rights for the government to protect the public’s interests. Specifically, the government retains:
A nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world, also known as a nonexclusive royalty- free license. 35 U.S.C. §202(c)(4)
The federal government also has the right to respond to requests from the public to “march-in” and grant licenses to use patents, in cases involving abuses of patent rights.
Q2. What is a march-in request?
The “march-in” right is a right granted to the Government to issue a new license or to revoke an existing license of a patented property. Unlike the royalty free right held by the government, the march-in rights are only granted after a finding of an abuse.
As set out in 35 USC 203(a), and as terms are defined in 35 USC 201(f), the federal government can grant march-in requests (issue a compulsory license) if the agency determines that any of the follow four abuses have occured:
- 1. The contractor has not made, and 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 the defintions section, “practical application” means that “the invention is being utilized and that its benefits are . . . available to the public on reasonable terms.” At issue in the petition is what constitutes “reasonable terms.”
- 2. Public health or safety needs are not reasonably satisfied by the contractor or licensee;
- 3. The use of the invention is required by the federal government and the contractor or licensee cannot meet the government’s requirements; or
- 4. The invention is not “manufactured substantially” in the United States and has not obtained the necessary waivers to do so.
In the petition, the first three grounds were cited in the request for the compulsory license. Any single ground is sufficient to grant a march-in request.
Q3. What is ritonavir? Why ritonavir?
Ritonavir is a drug that is important for the treatment of HIV/AIDS, particularly as a “booster” of the efficacy of other drugs used in combination drug treatments. Ritonavir was selected because of the significant difference between US and foreign prices. The prices to the US private sector are 4 to 10 times higher than the prices that Abbott charges other high income consumers. Abbott’s abusive practices over ritonavir were first noted in a 2004 march-in request which highlighted Abbott’s 400% overnight price increase in the United States for ritonavir as a standalone product, making it much more expensive for individuals to purchase ritonavir as a boosting agent for anything other than Abbott’s product, Kaletra (ritonavir + lopinavir). That petition was rejected by the Bush Administration. The new petition revisits the same issue, under a different President.
Q4. How does march-in work?
Parties contact the agency that funded the research that supported the development of the invention and set out the rationale for the march-in request. The agency then has authority to approve or reject the march-in request. In one case (the 2004 ritonavir case) the NIH called for a hearing. In all other cases the NIH has rejected petitions without a hearing.
Q5. Have march-in rights ever been exercised before?
Since the passage of the Bayh-Dole Act in 1980, the Department of Health and Human Services (DHHS) has never granted a petition to “march-in” to permit third parties to use patents invented on federally funded research in response to abuses of the patent rights. In some cases agreements with or offers by patent holders have partially mitigated the abuse allegations. We are unaware of the use of march-in by Department of Defense or other federal agencies.
It is inconceivable to us that there has never been an abuse of patent rights of NIH funded inventions in the more than 30 years of the existence of the Bayh-Dole Act. However, despite the unlikelihood of zero abuses of patent rights on federally funded inventions, the safeguards contained in the Bayh-Dole Act have yet to be used by the NIH.
Q6. If not, why not?
The NIH has been lobbied by rightholders, and as time has gone on, the taboo of granting a march-in request has grown. Senator Leahy’s 2013 request in the BRCA gene patent case has caused people to take a fresh look at this inaction.
Q7. What does this request to the NIH ask for?
The request asks for two general rules that may be applied to any government funded drug invention and, specifically, for it to apply to ritonavir. Although the fact that Abbott has not made the invention available on reasonable terms is at the heart of both petitions, the pricing differential between U.S. residents and residents of other high-income countries is highlighted in the present petition and includes data points from a survey with other high-income countries.
The first requested rule would presume the granting of the march-in when U.S. residents face substantially higher prices than prices charged to residents of other high-income countries.
The second requested rule would grant the march-in where the invention is necessary for another product that would be used to prevent, treat or diagnose medical conditions or diseases.
Both policy rules would apply presumptively, and would allow for the rightholder to rebut the rule in a particular case. For example, a patent holder could try to show a necessity to charge U.S. residents a higher price. The exact rules proposed in the request are as follows:
Rule 1: Ceiling on prices to U.S. residents
The Secretary shall normally grant open licenses to third parties to use patented inventions that have benefited from federal funding, subject to the payment of a reasonable royalty and an appropriate field of use, if a product or products based upon those inventions are sold in the United States at prices higher than in other high income countries. In implementing this rule, we suggest the following standard for a ceiling on prices to U.S. residents.
Rule 2: Use of invention for a dependent technology
The Secretary shall grant licenses to third parties to use patented inventions that have benefited from federal funding, subject to the payment of a reasonable royalty and an appropriate field of use, if a product based on those patented inventions:
- (a) is a drug, drug formulation, delivery mechanism, medical device, diagnostic or similar invention, and
- (b) is used or is potentially useful to prevent, treat or diagnose medical conditions or diseases involving humans, and
- (c) its co-formulation, co-administration or concomitant use with a second product is necessary to effect significant health benefits from the second product, and
- (d) the patent holder has refused a reasonable offer for a license.
Q8. How does this request differ from the 2004 petition on ritonavir?
The request asks for two general rules that may be applied to any government funded drug invention and, specifically, for it to apply to ritonavir.
In addition to the large pricing differential for ritionavir, the petition cites 12 other NIH funded drug inventions that are substantially more expensive in the United States, despite benefiting from NIH research grants and contracts.
Q9. What groups have signed on to this request?
Four groups have signed on to this request. The American Medical Students Association (AMSA), Knowledge Ecology International (KEI), the United States Public Interest Research Group (U.S. PIRG) and the Universities Allied for Essential Medicines (UAEM) have all signed on to this request.
Q10. What is the timeline of this request?
The request was initially sent to the NIH on 25 October 2012. On 9 November 2012, we received a response from Mark Rohrbaugh, Director of the NIH Office of Technology Transfer, who stated that they expected to respond to our request by the end of the year (Ann Hammersla, Director of the Policy Division within the Office of Technology Transfer has been handling the request). After several follow up e-mails and upon request by the NIH, on 18 March 2013, the NIH hosted a conference call with representatives of each of the four groups that signed on to the petition to ask follow up questions. During that call, we were informed that Abbott would be given the chance to respond to the request. We have not received an updated timetable or additional information since then.
Q11. Why are you seeking Congressional action now?
Congress is supposed to provide oversight of the NIH. The NIH has never granted a march-in petition, in the more than 32 years of the Bayh-Dole Act. Someone on the Hill might want to ask why.
The issue of higher prices is particularly relevant given the current realities of the U.S. economy. When employers are forced to pay higher prices for insurance premiums as a result of having to pay higher prices for medicines, particularly those invented or discovered through federal funds, it results in detrimental effects to the U.S. economy and U.S. businesses become less competitive in the global market. There is no reason that U.S. residents and businesses should be forced to pay higher prices for medical technologies that were developed or invented through public taxpayer dollars than residents of other high-income countries.
Q12. How do the general rules proposed in the petition relate to/affect the Affordable Care Act?
It would reduce prices for drugs that governments and employers have to pay for under the Affordable Care Act.
Q13. What are the other medicines that would be affected by the proposed rules?
A recent review of FDA Orange Book patents by KEI found that 7 percent of FDA approved pharmaceutical drugs have patents with disclosures of federal rights in the patents due to NIH or other federal agency funding of the research leading to the invention. This is likely to be an underestimation due to under-reporting on federal Bayh-Dole rights in patents. On the other hand, some products with patents with federal rights have other patents that may limited the benefits of a march-in request. In many cases, the federal funding and subsidies that benefit drug developers do not in fact result in rights in patents.
Q14. What happened in the other march-in requests?
None of the previous march-in requests resulted in a grant of a march-in. However, in efforts to avoid a march-in or the use of the government’s royalty free right in the patent, patent owners made certain concessions, such as agreement or offer to license (the NIH WARF case, the DOE FISH case), to partially roll back price increases for certain categories of purchasers (the 2004 NIH ritonavir case), to temporarily permit infringing imports (the NIH Fabrazyme case), or to otherwise permit uses of the patents (CDC influenza vaccine case).
Q15. What happened during the 2004 hearing on ritonavir?
Abbott agreed to rollback its 400-percent price increase for certain U.S. government funded programs for HIV/AIDS, while keeping the price hike in place for private sector purchases. (The 2004 case involving Latanoprost was rejected without any concessions).