NIH Comments: Transforming Discoveries into Products – Maximizing NIH’s Levers to Catalyze Technology Transfer

By SBE Council at 16 August, 2023, 7:06 pm

Lyric Jorgenson, PhD

Acting Associate Director for Science Policy

National Institutes of Health Office of Science Policy

6705 Rockledge Dr #750

Bethesda, MD 20817

Dear Director Jorgenson,

On behalf of the Small Business & Entrepreneurship Council (SBE Council), I’d like to thank you for the opportunity to submit comments regarding the themes discussed at the National Institutes of Health’s recent workshop, Transforming Discoveries into Products: Maximizing NIH’s Levers to Catalyze Technology Transfer.

SBE Council is an education, advocacy, and research organization dedicated to protecting small businesses and promoting entrepreneurship. Our members include small business owners, entrepreneurs, state and local business groups, and corporate partners and associations.

Many of them play an extraordinary role in driving U.S. innovation forward. Small businesses and startups make up the large majority of firms in high-patenting industries.^[1] In the life sciences, for instance, nearly 80% of firms have fewer than 100 employees. Roughly half have fewer than 10.^[2]

Despite their size, small businesses account for the lion’s share of new drug approvals. Between 2015 and 2020, nearly two-thirds of new medicines were developed by small firms.^[3]

Unlike larger pharmaceutical companies, small businesses and startups do not have the ample pipelines and previous successes to fund their ongoing research and development endeavors. Instead, they rely on venture capital to support their efforts.

Naturally, attracting investors requires certain assurances. Drug development is a formidable process, often spanning a decade or longer and demanding $2 billion of capital or more. ^[4] A staggering 90% of development attempts don’t succeed. ^[5] Startups, with their inherent vulnerabilities and limited safety nets, are particularly susceptible to failure — making them high-risk investments.

If not for our world-leading system of intellectual property rights, few investors would dare to take the leap. IP protections offer venture capital firms an opportunity to recoup their investments – and turn a profit – should a development effort succeed. In so doing, IP rights function as a catalyst, incentivizing funders to commit capital to innovative startups developing groundbreaking new treatments.

It is for this reason that we were concerned by certain discussions that took place during the NIH’s July 31 workshop. Rather than protect and build on critical IP rights, some panelists suggested reforms that would erode these protections – threatening the small business-led innovation ecosystem economy in the process.

Some activists and lawmakers have long believed undermining patent rights is key to lowering drug prices. They’ve repeatedly petitioned the government, for example, to misuse the “march-in” provision of the Bayh-Dole Act to force down the cost of prescription drugs.

The 1980 law permitted universities and small research institutions to retain the patent rights on discoveries their scientists made with federal funding and exclusively license them to private companies for development. It was designed to ensure taxpayer-funded inventions reached consumers — rather than languish on government laboratory shelves, as many discoveries did pre-Bayh-Dole.

The law has proven to be an incredible success. Between 1996 and 2020, technology transfer between academic institutions and private companies led to the development of more than 200 vaccines and treatments. The Bayh-Dole system has helped launch more than 17,000 startups and support 6.5 million jobs.^[6]

Unfortunately, that hasn’t stopped activists from suggesting the government can misuse its “march-in” rights under Bayh-Dole as a price control mechanism. Those rights allow government to revoke an exclusive patent right on an invention in an extremely limited set of circumstances – namely, when the original licensee fails to commercialize the discovery. The price of a drug developed by private industry is simply not one of those circumstances, as the law’s authors have reaffirmed.

To date, the NIH has rightfully denied all march-in requests. But if the agency were to reverse course, it would instill significant uncertainty regarding the intellectual property safeguards that have empowered startups and small businesses to emerge and bring treatments to patients.

With no guarantee of the exclusive patent rights that could help them recoup their investments in the life sciences, venture capital firms will no doubt look elsewhere. Innovative startups already struggling to find capital may go under. Others will never get off the ground.

March-in petitions aren’t the only existential threat facing small businesses and entrepreneurs in the industry. There have also been renewed calls for the NIH to require any company licensing agency-funded research to set a “reasonable price” for the resulting product.^[7] Those calls have since been taken up by scorned march-in advocates — and even echoed during the NIH workshop.

A reasonable pricing clause would similarly destabilize intellectual property rights and the innovation ecosystem at large. Knowing NIH can set an ill-defined price for any product resulting from its research, few small businesses, entrepreneurs, and venture capitalists will partner with the agency to commercialize government-funded discoveries. The very technology transfer and innovation NIH is working to catalyze will grind to a halt.

Such a scenario is not theoretical. The NIH implemented a reasonable pricing clause in its Cooperative Research and Development Agreements in 1990. By 1995, the NIH director concluded that “the pricing clause has driven industry away from potentially beneficial scientific collaborations with [NIH] scientists without providing an offsetting benefit to the public” and subsequently removed it from future agreements.^[8]

Put simply, small businesses and startups are advancing the next generation of innovative treatments. We urge the NIH to continue supporting and promoting the system of robust and assured intellectual property protections that make it all possible. SBE Council appreciates the opportunity to weigh in on this important matter.

Sincerely,

Karen Kerrigan, President & CEO

[1] https://sbecouncil.org/about-us/facts-and-data/

[2] https://bayhdolecoalition.org/wp-content/uploads/2022/04/Attacks-on-Bayh-Dole-Webinar-Transcript.pdf pg. 2

[3] https://www.pharmavoice.com/news/2020-01-pharma-innovation/612330/

[4] https://pubmed.ncbi.nlm.nih.gov/26928437/

[5] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9293739/

[6] https://autm.net/AUTM/media/Surveys-Tools/Documents/AUTM-Infographic-22-for-uploading.pdf pg. 1

[7]https://www.statnews.com/pharmalot/2023/06/13/sanders-biden-nih-drugs-medicine/#:~:text=Sanders%20wants%20NIH%20to%20adopt,that%20agency%20research%20helps%20develop&text=In%20another%20bid%20to,Sanders%20(I%2DVt.)

[8] https://bayhdolecoalition.org/wp-content/uploads/2023/06/CRADA-QA-Nov-2021-FINAL.pdf pg. 2