KEI Advisory on NIST Green Paper
RE: Publication of NIST Green Paper on Innovation and Federally-funded R&D
Date: Expected Release by NIST on Weds, April 24, 2019
On Wednesday, April 24, 2019, The National Institute of Standards and Technology (NIST), which falls under the Department of Commerce, publishes a Green Paper that proposes curbing the ability of the federal government to use its rights in federally-funded inventions, including but not limited to drugs, vaccines, diagnostic tests, new cell- and gene-therapies and other biomedical inventions.
Statement, by James Love, Director of KEI
The NIST recommendations on march-in and government use rights are part of an effort undermine the central protections in the Bayh-Dole. The Final Report has been softened in some areas, although only marginally.
Compelling national issue or declared national emergency
In one welcome change, the proposal in the Draft Green Paper to limit march-in rights to a “compelling national issue or declared national emergency” was eliminated in the Final Green Paper.
There are, however, two key areas where the NIST Report intends to narrow the public’s rights.
Reasonable terms definition
In the section of the report on march-in rights, NIST quotes selectively critics of the march-in rights, and suggests that rulemaking could be used to define the phrase “available to the public on reasonable terms,” so the obligation is only “to allow a product or service to reach the marketplace rather than reasonable pricing terms to the consumer.” [page 33] This is justified on the grounds that it would address a “lack of clarity” in the statute, and is consistent with current practice by the NIH and the U.S. Army, but is controversial. A regulatory change would make it binding on agencies to ignore excessive and unreasonable prices for drugs and other health technologies invented on federal grants or research contracts, and eliminate an important if underutilized tool the government has to reduce prices.
Government use license
The NIST report proposes narrowing the rights the United States government has under what NIST refers to a “government use license.” After mentioning specifically the possible use of the license to obtain discounts on pharmaceuticals, the NIST Finding 1 [Page 27] states:
“The scope of the government use license should not extend to goods and services made, sold, or otherwise distributed by third parties if the government—or a government contractor in the performance of an agreement with the government—does not directly use, provide, or consume those goods and services.”
The language in the final report was only slightly modified from the draft version, adding the word “provide.” The proposal is intended to limit the possibility that the governments royalty free right in the patents can be used to as leverage or to provide a low cost supplier for the public, in some circumstances, although even this will depend upon how “directly . . . provide” a good or service is interpreted. Certainly NIST intends to make it difficult to use the federal government’s right in patents to permit a company to manufacture and sell a drug or vaccine at regulated but unsubsidized prices to the public, to broaden access to cancer treatments in developing countries, or any number of other possible uses of the government’s license.
Since the Bayh-Dole Act was passed in 1980, there have been several occasions where government agencies have been asked to exercise either the march-in or the government use rights in patents. In general, agencies have done a poor job of protecting the public, but in some cases, the government’s rights have achieved important benefits. This is a link to a webpage describing several cases, and the results, which were mixed: https://www.keionline.org/cl/march-in-royalty-free.
In recent years, there has been growing interest by Congress to force federal agencies to protect the public from excessive prices in federally-funded inventions. One such effort was the 2017 proposal by the Senate Armed Services Committee to direct the Department of Defense to use the march-in rights when prices in the U.S. were higher than the median price in seven large high income countries. The NIST proposals are an attempt to prevent agencies from responding to Congressional demands for action.
The development of new cell- and gene-therapies (invented with federal grants, and extremely expensive for U.S. residents) are among the new areas where the government’s rights in inventions can be used to unblock patent thickets and reduce prices, if not under President Trump, under a successor who is more inclined to use those rights on behalf of the public.
Union for Affordable Cancer Treatment (UACT)
Joint NGO Open Letter to Congress
Eleven non-governmental organizations sent a letter to Congress urging them to heed this threat to the safeguards in the Bayh-Dole Act.
2019. April 5. Open letter on NIST Draft Green Paper on Bayh-Dole Act Policies and Regulations
Knowledge Ecology International (KEI) Comments and Blogs
2019. January 4. The December 2018 NIST Draft Green paper on “Return on Investment.
2019. January 10. KEI Comments Regarding the NIST Special Publication 1234 Draft Green Paper on Return on Public Investment.
2019. February 20. KEI asks NIST to extend comment period on their Special Publication 1234 Draft Green Paper on Return on Public Investment. 20 February 2019.
2019. April 5. “Advocates say a Commerce Dept. report would preclude reclaiming patents as a way to lower drug prices.” Ed Silverman. 5 April 2019. https://www.statnews.com/pharmalot/2019/04/05/commerce-report-patents-drug-prices/, Stat.
2019. April 18. “A rare deterrent to limitless drug price increases may die under Trump.” Christopher Rowland. https://www.washingtonpost.com/business/economy/a-rare-deterrent-to-limitless-drug-price-increases-may-die-under-trump/2019/04/17/7578e5e0-5bcd-11e9-a00e-050dc7b82693_story.html, The Washington Post.
2019. April 19. “Commerce department expected to slash march-in rights for drugs.” Sarah Karlin-Smith and Sarah Owermohle https://www.politico.com/newsletters/prescription-pulse/2019/04/19/commerce-department-expected-to-slash-march-in-rights-for-drugs-426742, Politico.
The Draft and the Final Green Paper.
Final Green Paper, ROI Initiative, NIST Special Publication 1234, April 24, 2019.
Draft Green Paper, ROI Initiative, NIST Special Publication 1234, December 2018.