NIH Intramural Licensing Guidelines Hit the Wrong Note at the Wrong Time
“If the Administration can misuse a 44-year-old statute in ways which were explicitly rejected by the law’s authors, why can’t it do the same with these vaguely worded guidelines? The answer is they could—and probably would.”
With exquisitely bad timing, the National Institutes of Heath (NIH) floated a new policy governing licensing inventions made by its scientists subtitled “Promoting Equity in Access Planning.”. With stakeholders still stunned by the Administration’s attempt to misuse the Bayh-Dole Act to impose Washington price controls on products based on federally funded inventions, the new plan could hardly have been floated at a worse time. The document asks for public comments by July 22, 2024.
The Plan
Under the guidelines, licensees (including those seeking non-exclusive licenses) could be required to provide NIH with an access plan “within 3 months of entering into Phase III clinical trials or their equivalent” showing how resulting products would provide broad access to:
“… underserved communities such as Black, Latino, and Indigenous and Native American persons, Asian Americans and Pacific Islanders and other persons of color; members of religious minorities; lesbian, gay, bisexual, transgender, and queer (LGBTQ+) persons; persons with disabilities; persons who live in rural areas; and persons otherwise adversely affected by persistent poverty or inequality, as defined by Executive Order 13985 and/or (b) populations in low- and middle-income countries, as defined using the World Bank classification system.”
“Potential strategies for licensees to consider” in their plans include agreeing to sublicense “relevant intellectual property on a low-or no-royalty basis” in countries where the licensee doesn’t intend to make sales or if they leave the market. They could also agree to donate or sell a portion of their products at a cost-plus basis, including to the U.S. government.
But the access plan doesn’t only apply to poor countries. Licensees could also agree to “include committing to keep prices in the U.S. equal to those in other developing countries.”
Unanswered Questions
The document raises several key questions. For one, there is no documentation supporting the need for such plans. Skeptics might say this reads like a political document intended to assuage the critics of NIH/industry partnerships.
Indeed, the tone of the guidelines seems based on the assertion that entrepreneurs are getting a special benefit from licensing NIH-funded inventions. Critics often allege that because the agency spends billions of dollars on related research, resulting inventions must be potential gold mines. Of course, there’s a wide gulf between such allegations and reality.
For example, the NIH is lucky if even one company is interested in licensing their inventions. Further, two-thirds of NIH licenses are for research tools like assays, tests and reagents. Additionally, most NIH licenses are non-exclusive, so these inventions are unlikely to be blockbuster new products.
The document fails to note that licensees are paying NIH for the right to use their inventions. The vast majority of those getting exclusive licenses (which the same critics usually try to block) are much more likely to fail than they are to hit the jackpot. And when projects go down, it is the licensee that might lose millions—or billions— of dollars. When that happens in large companies, people often lose their jobs. If they are small companies, they can go under, taking down substantial investments by the venture community.
Conversely, no one at NIH is in jeopardy if a project fails. While its scientists are passionate about their discoveries, they aren’t going to be fired if a licensing deal fails, nor is the agency taking any risk. As long as taxpayer dollars continue to flow, life goes merrily on its way.There’s also no indication of any quid pro quo to the licensee for accepting the new burdens in the guidelines. NIH isn’t offering to lower or forego royalties, nor are they committing any funds to help with product development.
And a company may well ask, what if we take a license, spend considerable amounts of our time and money getting to Phase III trials only to have NIH reject our access plan? Is the license terminated so copiers can rush in? Can we appeal? If so, to whom? Someone at NIH? These questions become more pertinent considering what the Administration is attempting to do by deliberately misusing march in rights under the Bayh-Dole Act to impose drug price controls. The White House made it clear that its primary target is NIH-funded inventions. If the Administration can misuse a 44-year-old statute in ways which were explicitly rejected by the law’s authors, why can’t it do the same with these vaguely worded guidelines? The answer is they could—and probably would.
So where does this leave us? Most likely, with even fewer companies taking a license. Of course, that solves the “access problem.” When there’s no product, everyone’s in the same boat— we all do without a potential cure.
Lives at Stake
We’ve been down this road before. Twenty-five years ago bowing to the same political pressures, NIH imposed “reasonable pricing” clauses on its exclusive licenses and cooperative R&D agreements (CRADAS). The result—partnerships collapsed, so then NIH Director Harold Varmus rescinded them, stating they had accomplished no public good but only prevented important partnerships with industry from being formed. Sad to think that we could be heading down that road again.
One reason why Congress passed the Bayh-Dole Act, which allows NIH and other agencies to effectively license their inventions, is that before then promising discoveries simply wasted away on the shelves. While research universities and federal laboratories are tremendous sources of promising discoveries, these inventions require enormous time, money and risk by the private sector to transform them into something useful.
NIH better think long and hard about imposing additional burdens on its licensees. Getting this wrong is more than a political blunder. There are lives at stake.
Image Source: Deposit Photos
Author: everett225
Image ID: 12286941
