Testimony on Bayh-Dole Act

Essential Action Director Robert Weissman presented testimony to the Senate Judiciary Committee on the Bayh-Dole Act on October 24, 2007. The Bayh-Dole act sets rules for how inventions — including pharmaceuticals — developed with federal money will be owned and controlled.

The testimony is available here (warning: 4.5 megabyte file):

An rtf version of the testimony, without appendices, is here:

The testimony argues that the Bayh-Dole system is not working. Drug companies are able to gain exclusive rights to U.S.-funded inventions, and then price gouge the taxpayers who funded the development of the medicines they buy as consumers. The companies even price gouge the government itself, which is the largest buyer of drugs. The Bayh-Dole Act contains various safeguards, but government agencies have refused to utilize them, even in cases of extraordinary abuse.

The introduction to the testimony follows.

Chairman Leahy and Members of the Senate Judiciary Committee, thank you for the opportunity to testify today on the important subject of federally funded research and development.

I am the director of Essential Action, a nonprofit advocacy organization that works on pharmaceutical access and other corporate accountability issues. I am also counsel to Essential Inventions, a separate nonprofit corporation that aims to promote the creation and distribution of essential inventions and other works that support public health and access to information. Information about the organizations is available at and .

With colleagues, both organizations have urged federal agencies to exercise safeguards in the Bayh-Dole Act, which governs the disposition of federally sponsored inventions, to address pharmaceutical pricing abuses and promote affordable access to medicines. Unfortunately, our efforts have failed.

The Bayh-Dole Act was signed into law in 1980, and effectively expanded through administrative and subsequent Congressional action over the next decade. The law aims to promote commercialization of government-funded inventions. It transfers title to government-funded inventions to universities and other contractors. Universities in turn are able to license the inventions to other parties, including on an exclusive basis.

Although federal agencies have actively embraced the Bayh-Dole mission of licensing federally funded inventions to private corporations, our experience shows that the government has abrogated its duty to ensure that pharmaceuticals incorporating federally funded inventions are reasonably priced.

The result is a public policy outrage, and a public health tragedy. U.S. taxpayers pay to fund R&D. The government turns the fruits of the research over to pharmaceutical and biotechnology companies, which then price gouge U.S. consumers and even the government itself. Thus the industry is able to execute a double swindle of the public. There is little doubt that U.S. consumers experience financial hardship as a consequence, and sometimes have been deprived of needed medicines. The Bayh-Dole licensing system has, in too many cases, distorted and concentrated markets, and facilitated abuses of market power, all with substantial deleterious consequences for pharmaceutical affordability and other public health objectives — including promotion of the R&D enterprise. The public health consequences are most profound in the developing world, where high prices typically mean that patients go without life-saving and other essential medicines. There is a U.S. taxpayer component in the global health arena as well, because U.S. aid monies are not uncommonly used to buy drugs invented with federal research support.

Bayh-Dole created the climate in which these abuses could occur, but they were not inevitable. Government agencies could have implemented Bayh-Dole on terms that would have prevented or at least greatly limited the abuses that have occurred. With few exceptions, they have declined to do so.

In my testimony today, I will describe our initiatives and the federal government’s response. The first portion of my testimony briefly reviews the history of Bayh-Dole and associated statutes. The second section recounts our efforts to employ safeguards in Bayh-Dole. The third section presents and critiques the National Institutes’ of Health (NIH’s) stated rationale for refusing to apply price-restraining measures to pharmaceuticals incorporating NIH-funded inventions. Finally, I conclude with recommendations for policy changes and areas for the committee to examine as it begins its investigations into disposition of federally funded inventions. These recommendations draw both on our direct experience, and the overall experience in the Bayh-Dole era.