Basic research conducted by scientists at federally funded academic laboratories has been essential to the rapid development of COVID-19 vaccines, and the federal government has poured billions of dollars into vaccine companies since the pandemic began to accelerate the delivery of their products. However, coronavirus vaccines are likely to be worth billions to the drug industry, and even though vaccine supplies are steadily improving, groups like Doctors Without Borders are urging governments to seize the patents on any coronavirus therapies from taxpayer-funded research to prevent price gouging.
Patentholders object to government intervention because their implementation would set a dangerous precedent and interfere with people’s incentives to invest in research and development for future treatments and vaccines. However, given the state of the current public health crisis, the U.S. may opt to take such drastic measures to ensure a COVID-19 vaccine is widely accessible, and their legal implications should be studied carefully.
March-In Rights Under the Bayh-Dole Act
If key patents for an approved vaccine are publicly funded, the federal government may be able to exercise its march-in rights under the Bayh-Dole Act of 1980. The Moderna vaccine, for example, emerged directly out of a partnership between Moderna and a federally funded academic laboratory. March-in rights were included to prevent big businesses from licensing federally funded technologies from universities, only to shelve the technologies and not commercialize them. In specific circumstances, the U.S. government has the right to “march-in” and either grant licenses or require the patent holder/licensee to grant licenses to third parties if several conditions are satisfied. If the U.S. government decides to exercise its march-in rights, the patent holder may appeal to the U.S. Court of Federal Claims, and the march-in rights may not be exercised until all appeals or petitions are exhausted.
Although the U.S. government has the authority to do so, it has never exercised its march-in rights. Indeed, although petitions to have the government exercise its march-in rights have been filed at least six times in the past, the National Institutes of Health has declined to pursue any of these petitions. In response to a 1997 petition requesting that the NIH exercise its march-in rights, the NIH noted that its unwillingness “to influence the marketplace for the benefit of a single company, particularly when such actions may have far-reaching repercussions on many companies’ and investors’ future willingness to invest in federally funded medical technologies.” With respect to drug pricing, in response to a 2004 petition, the NIH suggested that the extraordinary remedy of march-in was not an appropriate means of controlling prices.
Given the fact that (a) the NIH has been unwilling to exercise its march-in rights in the past because it does not want to disincentivize innovation and does not believe they should be used to control drug prices and (b) patentholders may appeal the exercise of march-in rights, it is unlikely that the U.S. government will invoke the Bayh-Dole Act and exercise its march-in rights to prevent price gouging.
Compulsory Licensing Under 28 U.S.C. § 1498
The government cannot exercise march-in rights when key patents are not publicly funded. For example, the Pfizer-BioNTech vaccine was developed without government funding. However, even if key patents are not publicly funded, the federal government can also use compulsory licensing to prevent price gouging down the road.
Under 28 U.S.C. § 1498, the government may manufacture, import, or use patented inventions without the permission of the original patent holder in exchange for “reasonable and entire compensation.” The government threatened to invoke section 1498 during the 2001 anthrax attacks after Bayer initially refused to lower prices for ciprofloxacin to a reasonable level or raise its production levels. Following this threat, Bayer subsequently provided a substantial price discount and guaranteed an adequate supply.
If the cost of ensuring a steady supply of COVID-19 vaccines is prohibitive, the government may choose to invoke § 1498 to allow other manufacturers to produce the vaccine themselves. Considering that the current pandemic is more of a public health crisis than the anthrax attacks and that the government has already threatened to leverage section 1498 in the past, it seems likely that U.S. government will use compulsory licensing if necessary.
* Andrew Lee is an Associate Editor on the Michigan Technology Law Review.