Sen. Sanders: Price controls on drug innovations repeat a failed strategy

Editor’s note: This story was updated to omit a reference regarding the discovery of new drug treatments. We regret the error.

Forty years ago the U.S. developed a very successful policy to accelerate the impact of early-stage discovery science, and how its intellectual property could be used to innovate new technologies for society. But recently a price control proposal from Sen. Bernie Sanders (I-Vt.) would roll back two generations of successful policy and implement steps that were proven unsuccessful in the 1990s. 

The U.S. federal government is the largest global funder of discovery in the sciences. This early-stage funding supports discovery science that looks at ideas too far away from cash flow for the private sector to support. And this support in pre-venture discovery has made the U.S. the envy of the world for innovation, and the dominant nation for Nobel prize awards in the sciences. 

But a major problem prior to 1980 was the question of who owned the intellectual property generated in part by this federal funding. In 1980, two federal acts, the Bayh-Dole Act and the Stevenson–Wydler Technology Innovation Act, were passed that provided clarity on the ownership of the IP developed with discovery research funds from the federal government.  The acts assigned the IP ownership to the university or laboratory that did the research and required certain obligations of those institutions, such as requiring the filing for patents of IP they plan to use, sharing royalties with the inventor, and having a preference for licensing the IP to small business. And they give the federal agencies “march-in rights” to re-assert control of the IP if the licensee does not take effective steps to achieve practical application of the invention.

Subsequent to that early-stage support, private companies, universities and labs assume considerable risk and expense to transform early-stage, federally-funded inventions into useful products, and most fail. In the drug sector, more than 80 percent of prospects entering clinical development fail, with those costs borne by the private sector.  

Sanders has an interest in reducing drug costs. He is holding up the confirmation of the new National Institutes of Health director until she agrees that NIH adds an additional “reasonable pricing clause” in its drug discovery grant process, effectively creating government price controls for any discovery supported by NIH. This idea has been tried before at the NIH. 

Under congressional pressure, NIH imposed that term on its research agreements from 1989 to 1995. As a result, zero new drugs were commercialized from efforts supported by NIH, as researchers recoiled from taking NIH support with that term. And as a former leader of another federal agency supporting discovery in the sciences, I can attest this proposal would have been very detrimental to innovation from the National Labs and university research we supported. 

The policies in the Bayh-Dole and Stevenson Acts have supported large jumps in innovation that have impacted American leadership in many new technology areas, such as the Human Genome Project, gene editing, solar photovoltaics, the lithium-ion battery, and accelerated the prospects of fusion power.  

If people want to address high drug costs, there are better ideas than reimplementing this failed price control idea, and risk disrupting a very successful innovation ecosystem that is the envy of the world.  

Paul Dabbar served as undersecretary of energy for science, 2017-2021.