Bye-bye Bayh: Pharmaceutical Industry Critics are Abusing a Law & Killing Innovation

The following column by Arizona Chamber of Commece & Industry President and CEO Danny Seiden originally appeared in Real Clear Policy.

Here we go again. 

The Build Back Better bill hit a dead end in the U.S. Senate last year, thanks in part to a host of harmful drug pricing schemes included in the trillion-dollar plan. 

But the assault on pharmaceutical innovation continues, through the front door of Congress and the back door of the bureaucracy.

Stymied thus far by an inability to pass their anti-innovation agenda through the legislative process, some lawmakers and activists have opened up a new front. They want to misuse the “march-in” provision of the 1980 Bayh-Dole Act to seize patent rights for innovative treatments and technologies. 

Under the longstanding law, the federal government has authority – under limited circumstances – to “march in” and force businesses and universities to license their inventions to additional companies.  

But cost concerns from the pharmaceutical industry’s regular critics, however, are not one of those allowable circumstances. This is an unprecedented misapplication of Bayh-Dole and a deceptively creative attempt to institute government price controls.

It’s a proposal that not only would violate the law, but it would also crush American innovation, creating a new avenue for government to punish companies for bringing products – including lifesaving treatments – successfully to market. 

Pharmaceutical research and manufacturing is a highly regulated, complicated business. But the laws of economics still apply. When government attempts to control prices, it doesn’t lessen demand, it just shrinks supply.

Drugmakers know discovery is never guaranteed, so they may be hesitant to risk their capital on the expensive and time-consuming research necessary to develop a lifechanging or lifesaving product if the government will limit the company’s ability to recover its costs, never mind turn a profit. So, innovation takes a back seat, competition between manufacturers dwindles, and patients lose out.

Inevitably, government abuse of its march-in authority will dissuade the future production of not only groundbreaking pharmaceuticals, but of all new technologies that receive any amount of federal funding for their research and development. It’s an attack on the very purpose for which the Bayh-Dole law was established and it sets a dangerous precedent.  

Remember: lack of innovation isn’t just an inconvenience or some undefined missed opportunity. There are economic and human consequences, as well.  

An analysis by two University of Chicago economists finds that a government pricing scheme like one proposed in Congress would lead to as much as a 60% drop in R&D by 2039.

“We conservatively find the loss in life from the price controls the next 10 years is 20 times larger than the loss from COVID-19 to date in the U.S.,” they write.

Too alarmist? Not if you’re a patient whose quality of life has markedly improved thanks to a new drug from the very same pharmaceutical companies pilloried by politicians willing to mug for the cameras, but much less willing to advance policy that can pass Congress with bipartisan support and help their constituents.

Any short-term, feelgood gains from a government takeover of drug pricing will soon evaporate due to fewer new drug developments and fewer clinical trials. How do we know this? Because we have seen this movie before in Europe where, over the last decade, government price control policies can be linked to less R&D – and even more troubling – a decrease in patient access to treatments.

We all want lower prices, including for pharmaceuticals. But abusing a law to wrest away a company’s innovations comes with disastrous long-term side effects.   

Danny Seiden is the president and CEO of the Arizona Chamber of Commerce & Industry.

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