Biden Administration invites comments on new march-in rights framework

Background

Recent years have seen increased attention to march-in rights and the U.S. Government's authority to exercise them, especially with controversy around access to new technologies during the COVID-19 pandemic. These "march-in rights" are a concept set forth in the Bayh-Dole Act of 1980, a cornerstone of the Government's approach to federally funded intellectual property. The Act both preserves the rights of contractors to own their “subject inventions” under certain conditions while providing the Government with the extraordinary — and to date, never exercised — right to grant a license to third parties under specific circumstances. The Act provides a loose framework for when the Government can "march in" and commercialize a subject invention, limited to cases where the agency determines:

1. a contractor has not taken steps within a reasonable period of time to commercialize subject inventions;

2. health or safety needs are not reasonably satisfied;

3. federal regulation requirements for public use are not satisfied; or

4. the obligation to manufacture substantially in the U.S. has not been met (or otherwise waived).

The march-in process described in 37 CFR part 401 affords contractors (including assignees and exclusive licensees) some procedural protections. These protections include written notice, informal consultation, fact-finding, and an opportunity for written briefings and a hearing. While the newly proposed framework does not override these procedural protections, the framework operates as a field guide for agencies to position march-in as a formidable tool at the Government’s disposal.

Draft March-in Rights Framework

The Draft Interagency Guidance Framework is meant to guide the Government's decision making as to whether to intervene and exercise march-in rights.[1] The framework is a roadmap for agencies to utilize in determining whether to exercise march-in rights, and provides a step-by-step analysis for the following three questions:

1. whether the Bayh-Dole Act applies to the invention(s) at issue;

2. whether any of the statutory criteria for exercising march-in rights apply under the circumstances; and,

3. whether the exercise of march-in rights would support the policy and objectives of the Bayh-Dole Act.

The framework acknowledges that march-in considerations are “extremely” fact-dependent.  To that end, it offers agencies arrayed considerations pertinent to each of the foregoing questions. 

For example, the framework suggests that even where a product has been commercialized, there may be a basis for Government march-in where (a) price or other terms at which the product is offered to the public “unreasonably limit[s] availability” of the invention to the public; or (b) the contractor or licensee is exploiting a public health emergency to set a product price that is unjustified.  

Link to drug pricing

There is concern that introducing price reasonableness into the availability analysis would allow the march-in authority to be used as a tool to manage drug pricing – a use that may well exceed the authority set out in the Bayh-Dole Act. President Biden explicitly stated his Administration “is proposing that if a drug made using taxpayer funds is not reasonably available to Americans, the government reserves the right to ‘march in’ and license that drug to another manufacturer who could sell it for less.” U.S. Senator Bill Cassidy, M.D. (R-LA), ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee has said in response that the "Biden administration does not have the legal authority for this use of march-in rights."  

These sentiments have been shared by others, including former NIH Director Francis Collins, who stated in a 2017 Congressional hearing that march-in rights only apply “where a drug is simply not available to the public under any circumstance.” What’s more, Senators Bayh and Dole had penned an op-ed in 2002 explaining that “Bayh-Dole did not intend that government set prices on resulting products. The law makes no reference to a reasonable price that should be dictated by the government. This omission was intentional … .”  With this historical context, legal challenges to the government’s authority would seem inevitable should drug pricing be factored in as a basis for the exercise of march-in rights in the future.

Implications for academic and research institutions

The new march-in framework could have wide-ranging implications for the university/industry technology transfer ecosystem.  Universities and research institutions work hard through tech transfer teams to commercialize their subject inventions, consistent with Bayh-Dole’s mandate.  Insofar as the new framework – which elevates march-in possibilities – makes subject inventions less attractive candidates for licensing to the private sector, it could have major detrimental effects on private investment in university inventions.  

The hypothetical scenarios discussed in the framework feature several examples of government-funded university inventions that could be the subject of march-in, depending on the circumstances.  What’s clear from the framework is that the terms of a license agreement between the research institution and the licensee will factor in the agency’s march-in decision.  For instance, if a biotech’s exclusive licensee is not taking effective steps to achieve practical application of a university subject invention, the agency may look to whether the license agreement allows the university to terminate the license and “clawback” the technology, which would weigh against march-in. 

As another example, if a university issued an exclusive license to a pharmaceutical company to use or sell a product embodying the subject invention in the United States and the university omitted to include the Bayh-Dole requirement for U.S. manufacturing of products embodying the subject invention, then if the company intends to manufacture only abroad and the government did not waive the U.S. manufacturing requirement, these facts (if not remedied) would weigh in favor of march-in.

Requested input

The potential utilization of march-in rights highlights the Government's challenge to balance innovation while increasing the accessibility of drugs and other technology developed with federal funds. As a result, the Administration seeks public input on the following five questions:

1. Is the guidance about when an agency might want to exercise march-in and the factors that an agency might consider sufficiently clear?

2. Are the definitions provided in the framework easy to understand and do they aid the ability to interpret the framework?

3. How could the framework be improved to be easier to follow and comprehend?

4. Does this framework sufficiently address concerns about public utilization of products developed from subject inventions, taking into account the fact that encouraging development and commercialization is a central objective of the Bayh-Dole Act?

5. Does the framework ask questions and capture scenarios applicable across all technology sectors and different stages of development? How could any gaps in technology sectors or stages of development be better addressed?

We are following the RFI closely and will provide updates as the process advances. Please reach out to our life sciences procurement team if you would like assistance in assessing march-in risks, in preparing comment letters, or with any particular questions.

Authored by Joy Sturm, William Ferreira, Allison Pugsley, Christine Reynolds, Lauren Colantonio