We are often asked by readers how to explain Bayh-Dole commercialization’s importance to Members of Congress when they know so little about patent law or policy. As is always essential to conducting any successful sale it helps to begin with where the customer is. Most members favor federal research and development funding known as “R&D funding” This is an approach that has worked for us. For the past ten years, federal R&D grants have been level-funded at $130 and 140 billion annually. NIH typically receives about $30 billion. Most members appreciate and value the work of NIH whose job it is to convert that funding into economic and medical progress. After setting aside approximately 10% for its research, NIH distributes specific project financing to research institutions and universities for peer-reviewed competitive research proposals. Such grants for basic scientific research may run from 2 to 5 years. Grants include creating antidotes to “super bugs,” cures for cancer, diabetes and presently incurable diseases like Alzheimer’s. Such research may have a promising hypothesis but it is not yet proven or enough advanced to attract private sector development funding. The government begins the process through federal grants, but the bulk of the risk and expense of moving it from lab bench to bedside is assumed in the private sector. Here’s how:
For the past ten years, federal R&D grants have been level-funded at $130 and 140 billion annually. NIH typically receives about $30 billion. Most members appreciate and value the work of NIH whose job it is to convert that funding into economic and medical progress. After setting aside approximately 10% for its research, NIH distributes specific project financing to research institutions and universities for peer-reviewed competitive research proposals. Such grants for basic scientific research may run from 2 to 5 years. Grants include creating antidotes to “super bugs,” cures for cancer, diabetes and presently incurable diseases like Alzheimer’s. Such research may have a promising hypothesis but it is not yet proven or enough advanced to attract private sector development funding. The government begins the process through federal grants, but the bulk of the risk and expense of moving it from lab bench to bedside is assumed in the private sector.
Continue reading Draft NIH
There is much to report today. We will cover it as efficiently as possible.
TV talk show hosts and newscasters often appreciatively refer to their repeat guests as “friends of the show.” As it turns out Bayh-Dole has put on an impressive economic show over recent years. Now there are fresh numbers to prove it. I am sure readers would agree that the 36 yearlong B-D show’s indispensable and longest serving “friend of the show” is Joe Allen. In his IPWatchdog article today (see below), Joe lays out the recent new statistics you and your congressional delegation need to see. B-D was enacted with bi-partisan sponsorship and support. Because its public-private inventor/investor partnership commercialization dynamic is mainstream Republican in nature, its continued bi-partisan support is assured but only if R&D funding continues and otherwise uninvestable but needed basic research can be converted through private investment into jobs and economic development. His excellent article explains why congressional proposals to reduce R&D funding of basic research while weakening patent strength contradict common sense.
Three other notable links also are significant.
The excerpt below draws on a recent Techcrunch article confirming that China’s recent ascendency has made it a patent “powerhouse.”
“China is not only taking the spotlight in strong defense of global markets and free trade, filling a vacuum left by retreating Western capitalist democracies, China is quickly becoming a (if not the) global leader in intellectual property protection and enforcement. And there too, just as Western democracies (especially the United States) have grown increasingly skeptical of the value of intellectual property and have weakened protection and enforcement, China has been steadily advancing its own intellectual property system and the protected assets of its companies and citizens.”
The third significant piece is a recent Reuters article recounting the continuing conflict between SCOTUS and the CAFC which to no one’s surprise is adding increased uncertainty to patents’ predictable reliability. The fourth is another excellent IPWatchdog post that pointedly pins the efficient infringement tail driving all this court and congressional chaos on Apple’s donkey.
Continue reading A Busy Day
Economist Farhad Manjoo’s NYT column yesterday discusses public and private funding basic scientific research, a subject about which research universities and all US citizens should genuinely be concerned. Congress now funds basic research through annual R&D appropriations of $140 billion to grant agencies who distribute research grants in response to proposals for basic research. Under Bayh-Dole (B-D), promising discoveries may be patented, then commercialized through public-private partnerships that require fulfilling specific societal obligations. Research universities are appropriately concerned about the continued viability of today’s R&D funding dynamic. At a time when funding increases are needed, Trump has proposed R&D budget cuts and unfunded tax reform. And, to make matters more perilous, deficit-hawk budget concerns combine to jeopardize such funding.
Manjoo references the 60 billion annual expenditures of our five largest corporations commonly referred to as the “Frightful Five” (FF) — Alphabet, (Google) Amazon, Apple, Facebook, and Microsoft. Highlighting Google’s efforts “to inject machine intelligence into much of the global economy” he notes that total FF non-defense spending on AI and other basic science is exceeded by annual congressional spending on non-defense basic science research by a mere $9 billion! Add in other privately conducted research and the private sector is outspending the public sector on basic research. Manjoo’s article is non-judgmental. He even references to the joint op-ed by Google’s Erik Schmidt and MIT’s President Eric Lander urging more R&D spending (see my article here). But curiosity-riven basic research is non-investable but imperative to technological and biomedical progress. Corporate basic research is a very different animal.
Nevertheless, a likely take away by deficit hawks from the Manjoo article is that since funding basic science research is so prevalent in the private sector, why not move all of its there? He wonders what would happen if we eliminated our government’s investment in non-defense basic science relying exclusively on the private sector. He leaves the question unanswered but effectively asks why the government should pay for it if both are taking it in the same direction? We will surely hear this argument again. By themselves, the FF expenditures alone almost equalize it. Could our annual federal non-defense spending of $69 Billion be put to better use? The simple answer is a resounding “no.” Increased federal spending is crucial if research that does not offer an adequate return because of its nature (like antibiotics ) or doubtful patent durability (resulting from uncertainty). Research universities can not let such an elimination happen.
Read on to see what we know that Manjoo doesn’t.
Continue reading The Frightful Five
Whether the subject is Bayh-Dole price-based march-in or other government schemes to control the final pricing of privately developed products emergent from the commercially promising discoveries made possible by federally-funded life science research, Joe Allen knows what he is talking about. NIH’s mission is to see to the commercialization of such discoveries so they can become available to the public that invested in it through congressional R&D appropriations. Such curiosity-driven basic research is otherwise uninvestable. What cannot be commercialized cannot become available. This disconnect will lead to the further diminution of R&D funding for such research. However well-intended, governmentally imposed price controls deter private sector for-profit investment. This is not a theory. It is a historical fact confirmed by CRADA pricing experiment explained by Joe in his article below. Fast forward to the present. Joe’s conclusions are being confirmed now. The private sector investment withdrawals triggered by SCOTUS’ Mayo and Myriad decisions is happening now. These Sec 101 eligibility judicial missteps have created unacceptable uncertainty, not only in the life science areas treated in the actual decisions but regarding all life science “discoveries” the examiners and Courts are declaring unpatentable. Life science commercialization has never been more needed. It has never been more perilous.
As Joe Allen explains below there are better ways to skin drug pricing’s cat than crippling life science investment in applied development that is definitionally different than the hoped for curiosity-driven discoveries that made its profit-directed development possible.”Many in Congress want to impose price controls on medicines that result from
“Many in Congress want to impose price controls on medicines that result from federally funded research. We’ve tried this before, and it nearly brought medical research and development to a halt. Lawmakers aren’t wrong to want to lower drug prices, but they should find a strategy that isn’t a proven failure. These policies would have terrible ramifications for the future of National Institutes of Health-supported research and development while harming those suffering from the ravages of disease.Responding to congressional pressure in 1989, NIH officials incorporated a form of price controls known as a “reasonable pricing” clause in its licensing agreements. In short, they didn’t want to let private firms build upon publicly funded discoveries to commercialize resulting products unless the government had a say in pricing decisions. Their actions were well-intentioned. By placing conditions on medical patent licensing agreements, they hoped to decrease drug costs for consumers. But the results were disastrous.”
Here is Joe’s Fierce Healthcare article.
This week, Congressman Lloyd Doggett released the march-in letter we warned about several weeks ago. Its KEI sponsors then said they were waiting for things to “quiet down” before its release. We assume they tired of waiting. Rep. Doggett’s press release and letter (both linked below) is signed by 51 Democrat House Members and is addressed to President Trump. Misinterpreting Bayh-Dole, the letter demands presidential pressure on NIH to issue guidelines for the B-D price-based march-in order to enable compulsory licensing of prescription drugs. As Francis Collins has explained to Congress, the 1995 CRADA retraction episode conclusively proved that even the possibility of such price controls would deter the private investor research in university life science commercialization NIH needs to implement NIH’s life science mission. To prove his point Collins expressly pointed to the CRADA experience in the “90’s. Speaking at a more recent KEI conference on compulsory licensing, AUTM representative Ashley Stevens echoed Dr. Collins’ comments by emphasizing the Doggett proposal’s inevitable harm to research university education research and public benefit mission. Continue reading Rep. Doggett to Pres. Trump – Implement B-D Price-based March-in!
Our Report’s title repeats a headline in today’s “Heard on the Street” section of the Wall Street Journal. Readers may have missed it but investors won’t.
The piece suggests that despite strong polling support for prescription drug price controls, equity investors seem to be ignoring Capitol Hill where the “Improving Access to Affordable Prescription Drug Act” (The Act) was introduced last week in both the House and Senate. (Both are similarly worded and linked below) As the WSJ article emphasizes, investors in pharmaceutical stocks may think they have time to watch and wait. The WSJ says their investments may soon be significantly devalued. Why should we care?
Investment in drug stocks is conceptually no different than related higher risk investment in the promising discoveries of early stage life science research. VC’s read the WSJ. If VC investors in life science research cannot calculate projected ROI they will not invest. If the Act passes their inevitable absence will eventually end life science research commercialization because without them NIH’s cannot complete its Bayh-Dole (B-D)-directed commercialization mission. HR 1776 and its senate counterpart can soon become the beginning of the end. Perhaps its authors saw B-D’s collapse ahead. The Act initiates prize-incentivized life science research. It establishes NIH medical centers for clinical research. Many research universities depend on life science grants to attract scientific talent. For universities and medical centers that rely on access to life science grants, university engagement in the commercialization impacts of proposed drug price controls is an existential imperative. Continue reading Don’t Write Off Pharma’s Nightmare Scenario
The seismic disruption of President Trump’s 2018 budgeted NIH funding cuts cannot be ignored because their future impact will not be erased this time by the usual congressional brush-off of “dead-on-arrival”.
Nobel Prize recipient and former NIH and NCI Director Harold Varmus has warned us in a NYT guest editorial today.
“A substantial N.I.H. budget cut would undermine the fiscal stability of universities and medical schools, many of which depend on N.I.H. funding; it would erode America’s leadership in medical research; and it would diminish opportunities to discover new ways to prevent and treat diseases.”
In his op-ed Dr. Varmus explains in concise detail why the proposed deep cuts may later be partially compromised but not entirely cancelled, thus undermining the continuation of grants already committed to their Bayh-Dole development of much-needed biomedical therapies, already scarce new projects, and the training of today’s junior scientists. Research universities must act now if they and NIH are to be spared the existential harm of further lowering NIH’s decade long flattened funding. Continue reading Dr. Varmus Warns Convincingly. Universities Must Back Him with Specifics
The fog of war on the Hill is thick. Now chaos is the only constant. This is not your usual “dead on arrival” termed presidential budget where negotiation showmanship calls for partisan disdain. These players are all Republicans. The victim list includes almost everyone. As long as Trump’s advisors are calling the shots, Speaker Ryan’s choice is to accept Trump’s “Deconstruction of the Administrative State” or follow former Speaker Boehner’s footsteps into retirement. The disrupted atmosphere promises incapacitating injury to all non-military entities. There will be no exceptions made for the low hanging fruit of R&D’s annual $130 billion budget allocation. And as the saying goes with massive budget cuts, ” if you are not at the table, you are on the menu “. It isn’t validated yet officially but the simple math of discretionary federal budget remainders following a $54 Billion military increase and educated whispers point to the coming cut of at least 8% to10% in R&D research by Trump’s budget proposal, doubling down on the Control Budget Act’s sequester.
As we have said before, Bayh-Dole commercialization is like a bridge having an on-ramp and an off-ramp. Its off-ramp is quickly narrowing as private capital backs away from piling up uncertainties enveloping the future of patent enforcement as Congress and the courts keep moving the goal posts of patent reliability. Post development PTAB nullifications, looming life science price controls and the confused subjective analysis of Alice/ Mayo eligibility have combined to virtually defeat the prudent possibility of private investor participation in ROI-driven B-D partnerships. Now however, B-D’s protective focus is shifting to the commercialization bridges’ on-ramp entry by R&D’s basic science funding through federal grant agencies.
The federal government’s “deconstruction” is taking shape in reality not just rhetoric. The parlous consequences for universities are well described in an WSJ op-ed last December by MIT’s President Rafael Rief, who after highlighting findings of a National Science Foundation report ….. Continue reading Commercialization Bridge On-ramp “Loss is as Lethal as Off-ramp Failure”
Our last post referenced the Advanced Patent Law Institute opening Panel’s concerns about the decline of investment in commercialization caused by a precipitous decline in patent reliability and pervasive patent legal uncertainty. Life science commercialization drew extra emphasis because of the seemingly simple but complex ramifications of price controls for prescription drug products. Bayh-Dole march-in’s compulsory licensing and importation of drugs through Canada were joined last week by prominent discussion of repealing the “nonintervention” law, the statutory prohibition of direct negotiations with drug makers over the price of Medicare prescription by President Trump replacing the insurance companies and PBM’s who negotiate now.
Many believe such negotiations will lower prices. In some cases maybe yes …in others maybe no. Trump said they would save 3 billion dollars. CBO has said savings, if any, would be small. Negotiators however must be ready to disagree. Non-agreement means reducing access to certain medicines because disagreement means removal from patient formularies. While the conference was pondering the commercialization effects of price controls at the USPTO President Trump was meeting with Representatives Cummings to discuss the direct negotiations issue. Speaker Ryan could not have been pleased to see the meeting get two day’s news coverage.
On Saturday NPR commentator Scott Simon caught up with Rep Cummings to learn more about his White House meeting. Cummings said not only that the meeting went well but that Friday night he was advised by the president that he would try to insert repeal of the non-interference law into the contentious ACA repeal debate which began last week. The meeting went well for Cummings to be sure. For Trump …not so much. There is no way Cummings will support ACA’s Repeal and Replace no matter what Trump does but the meeting and its outcome added more uncertainty to the commercialization issue. When Simon asked Cummings about the meeting’s outcome this weekend Cummings, who is one of the president’s harshest critics, cleverly drew Trump back into the direct negotiations debate….
CUMMINGS: I think that we have a chance. As a matter of fact, as late as yesterday – last night – he told me that he’s going to try to get it into his bill.
SIMON: He told you this last night, Friday night.
CUMMINGS: Last night, that’s right. So we’ll see what happens. You know, with President Trump you – I think you have to wait and see. You’re going to have a good conversation. It sounds like he’s going in the direction that you’re going in, and people have told me you step out of the room and next thing you know maybe something has changed. But the conversation that we had with him was a very good one.
Earlier in his interview Simon asked why direct negotiations were not provided for during ACA’s original enactment, noting that true negotiations can only occur when one of the parties can walk away if they do not agree. In effect, he was asking if the president was ready to exclude formerly included drugs from patient formularies. Continue reading Trump is Trapped Again
Bayh-Dole’s (B-D) commercialization of federally-funded basic research is the bridge connecting annual $130+ bn. congressional funding to its congressionally intended public benefits of jobs, economic development and scientific progress. This B-D bridge’s on-ramp is controlled by federal grant agencies, each with its own mission. Life science’s on-ramp is supervised by NIH. Its off-ramp exit is policed by the FDA. Life science’s high-risk commercialization crossing to the off-ramp is difficult, long and costly. Its chances of reaching and using the FDA managed off-ramp are statistically slim. Continue reading Elimination of Further R&D Funding