“The historical and economic data is clear. Without private-sector investments, the relatively smaller NIH-funded lab work will be squandered on discoveries that will never result in real-world drug treatments.”
On its way out the door, the Biden administration took a parting shot at America’s most innovative companies in a self-described bid to “expand equitable patient access to products that emerge from NIH-owned patents.”
On the last workday before the inauguration, officials at the National Institutes of Health (NIH) quietly published new patent licensing guidelines. Any company that wants to license patented discoveries from NIH labs must now guarantee the “affordability, availability, acceptability, and sustainability” of any future products they develop.
And if bureaucrats determine that firms haven’t met these arbitrary and amorphous standards, the NIH retains the power to unilaterally modify the license terms.
In practice, these licensing rules will transform the NIH from a research institution into a de facto price regulator—a role Congress never authorized and one that would destroy the private sector’s incentive to invest the billions in additional research and development that is required to commercialize the basic research discoveries first made in NIH-funded labs.
This isn’t scaremongering hyperbole. We’ve seen this all happen before. It will all happen again.
In the early 1990s, the NIH implemented a “reasonable pricing” mandate for all research collaborations with private companies. The result of this price-control mandate? The NIH found the number of its collaboration agreements with private companies plunged. When the price-control mandate was repealed, the collaboration agreements immediately rebounded by over 400%. When announcing the repeal, the agency’s director explained that the price-control mandate “drove industry away from potentially beneficial scientific collaborations without providing an offsetting benefit to the public.”
The Biden Administration’s licensing guidelines will repeat that failed experiment, swapping “reasonable pricing” for the even vaguer and far more sweeping requirements of “affordability, availability, acceptability, and sustainability.”
To comply, companies would have to pre-commit to undefined and broad accessibility and affordability strategies before knowing whether the experimental molecule will prove effective, what it will cost to further research and develop this molecule into an actual drug, or how it might even be used by patients.
What startup would agree to maximum price restrictions, production quotas, and whatever “sustainability” might mean to a DC bureaucrat in creating and selling a product before it has invested even one cent into creating this new product? This is exactly what the NIH will impose on biotech innovators developing radical new cures. The NIH licensing guidelines are not just burdensome and stupid— they are economically nonsensical.
Price controls and other regulatory restrictions destroy investments in production and undermine economic growth—Venezuela is the most recent example of this basic economic truth. This truth was confirmed with the NIH’s “reasonable pricing” mandate in the early 1990s. We will see it confirmed again with NIH’s new licensing guidelines.
Rather than risk billions in lost investments in the R&D necessary to take a new drug from lab to market, biotech innovators won’t license any scientific discoveries from NIH labs. The result won’t be more affordable or accessible drugs—it will be fewer drugs. Our quality of life will suffer.
More than 50% of all new drugs are still developed in the United States, and private investments in drug development are three to four times what the NIH spends. One recent study looked at 23,230 NIH grants dispensed in 2000, and found that over the next two decades, those grants resulted in only 18 Food and Drug Administration (FDA)-approved therapies for use by patients. Those successful drugs received a combined total of $670 million in NIH grants, while private companies invested $44.3 billion—a staggering 66 times more—on researching and developing those treatments.
The historical and economic data is clear. Without private-sector investments, the relatively smaller NIH-funded lab work will be squandered on discoveries that will never result in real-world drug treatments. Not even 18 FDA-approved therapies. The price of a drug never developed is zero.
It’s critical that the Trump Administration revoke the new NIH licensing guidelines. Their utter lack of any justification is confirmed by how they were quietly pushed through among a flurry of last-minute executive orders and other actions by the Biden Administration. The American people deserve better—both from their government officials and the biotech innovations that will be squandered in NIH labs in the coming years.
Image Source: Deposit Photos
Author: j.dudzinski
Image ID: 124935998
