On August 4, 2020, a bipartisan coalition of over 30 attorneys general led by California Attorney General Xavier Becerra and Louisiana Attorney General Jeff Landry sent a letter request to United States Health and Human Services (HHS), the National Institutes of Health (NIH), and the Food and Drug Administration (FDA), invoking the “march-in” provision of the Bayh-Dole Act to demand that Gilead Sciences license remdesivir to other manufacturers—a drug that has attracted much attention due to its promise in the treatment of COVID-19.1 In justifying this request, the attorneys general sought to increase the supply and lower the prices of remdesivir in order to ease potential shortages throughout the United States. Currently, Gilead prices remdesivir at $3,120 for a five-day course for patients who have private insurance, Medicare, or Medicaid. 2,3
The 1980 Bayh-Dole Act was enacted by U.S. Congress with the policies and objectives recited in 35 U.S.C. § 200, one of which being “to ensure that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions”.4 Essentially, the Bayh-Dole Act aims to encourage the commercialization and utilization of inventions that spring from federally funded research or development.5 Under the Bayh-Dole Act, an organization may elect to retain title to any subject invention, even if they have a federal funding agreement.6 However, in special circumstances, the Bayh-Dole Act also gives the U.S. government “march-in” rights, in which they can require that the owner of the subject invention must grant “a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants”.7 Pursuant to 35 U.S.C. §203(a)(2), in order for the federal government to invoke this compulsory license, the Federal agency must determine that “action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees.”8 If such a determination is made, a contract is created containing “terms that are reasonable under the circumstances.”9
Knowledge Ecology International (KEI) is a non-profit organization having the goal of “search[ing] for better outcomes, including new solutions, to the management of knowledge resources.”10 KEI has taken action to achieve this goal by “publish[ing] research and new ideas, engag[ing] in global public interest advocacy, provid[ing] technical advice to governments, NGOs and firms, enhance[ing] transparency of policy making, [and] monitor[ing] actions of key actors.”11 Over the last several years, KEI has approached various pharmaceutical manufacturers alleging that they have not complied with various aspects of Bayh-Dole. Recently, KEI has sent requests to Moderna, the owner of patents that involve research on COVID-19 vaccine candidate.
What Does a Knowledge Ecology International Bayh-Dole Challenge Look Like and How Far Do These Challenges Go?
KEI alleges that Moderna failed to comply with the following contract provision entitled H.7 Acknowledgement of Federal Funding – Publication and Publicity:12
. . . The Contractor shall clearly state, when issuing statements, press releases, requests for proposals, bid solicitations and other documents describing projects or programs funded in whole or in part with Federal money: (1) the percentage of the total costs of the program or project which will be financed with Federal money; (2) the dollar amount of Federal funds for the project or program; and (3) the percentage and dollar amount of the total costs of the project or program that will be financed by nongovernmental sources.
The contract-at-issue was “the BARDA contract with Moderna to fund preclinical and clinical research on mRNA-1273, the investigational COVID-19 vaccine candidate jointly invented by the National Institutes of Health and Moderna.”14 On July 31, 2020, both KEI and Public Citizen sent the Biomedical Advanced Research and Development Authority (BARDA) a joint letter requesting that BARDA enforce these terms of Moderna’s billion dollar contract with BARDA, alleging that (1) Moderna was ignoring provision requiring that Moderna report the total cost of the project and/or program and the amount and percentage share of the costs provided by the federal government; and (2) BARDA was not enforcing said provision.15 According to KEI, none of Moderna’s press releases complied with these contractual obligations.16
BARDA responded to KEI/Public Citizen Letter on August 5, 2020, when Acting Director Gary Disbrow sent a letter stating that BARDA will reach out to Moderna to “ensure their compliance with their contractual requirements.”17 Moderna, however, in a statement to Axios, contended that the disclosure requirement was met because one of Moderna’s press releases stated that “BARDA will fund the advancement of mRNA-1273 to FDA licensure.”18 Particularly, Moderna posits that it had not violated the contract because the “project as defined in the BARDA contract [was] fully funded by BARDA” and “[e]very relevant press release issued ha[d] been reviewed by BARDA in advance of release.”19
KEI disagreed, opining that: (1) the press release does not satisfy the specificity required by the contract; (2) the scope of the contract extends to FDA licensure, and is not solely directed to the advancement of mRNA-1273;20 and (3) Moderna’s contentions are undermined by another the press release stating that BARDA was only partially funding the vaccine’s development.21 Therefore, despite Moderna’s position, KEI asserted that “[t]he inconsistencies, contradictions, and omissions in Moderna’s press releases d[id] not comply with Moderna’s clear contractual obligation.”22
As of September 4, 2020, pursuant to a letter sent by BARDA to KEI, BARDA is investigating the issue: “[t]he contracting officers responsible for the BARDA contracts with Moderna are reviewing the requirements to report the role of government-funding of inventions and identifying any Moderna patents or patent applications.”23 When reporting on BARDA’s response, KEI continued their critique of Moderna’s alleged noncompliance by citing the Bayh-Dole Act:
The Bayh-Dole Act authorizes the federal government to issue a compulsory license to federally-funded intellectual property underlying the vaccine if Moderna fails to achieve practical application of the vaccine, which means that it fails to make the vaccine available to the public on reasonable terms. This includes Moderna charging an unreasonable price for the vaccine.
KEI defined “unreasonable price” by pointing to Moderna’s decision to charge the U.S. taxpayers twice for the vaccine.25 Thus, KEI relied on the Bayh-Dole Act in order to assert that the U.S. government can intervene to stop Moderna’s “price gouging.”26
Therefore, only two questions remain: (1) will BARDA find that Moderna did in fact comply with the contractual term at issue because Moderna’s actions were sufficient with KEI’s request to enforce the contractual term; and (2) regardless of the result of BARDA’s investigation, will the federal government exercise its “march-in” rights under the Bayh-Dole Act in order to force Moderna to license its COVID-relevant patents due to the KEI’s “price gouging” allegation?
Knowledge Ecology International Alleges that Pharmaceutical Companies are Using “Other Transactions Authority” to Weaken or Eliminate Bayh-Dole and FAR Safeguards
KEI also alleges that various federal agencies use “Other Transactions Authority to limit or eliminate the government’s rights in inventions and data that were funded by taxpayers.”27 Such federal agencies include the Department of Defense (DOD), BARDA, and the NIH.28
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) gave BARDA and the DOD expanded authority to use “Other Transaction Authority” (OTA).29 An OTA is a legally binding instrument used by federal agencies to obtain or advance research and development (R&D) and prototypes in a streamlined manner.30 The Federal Acquisition Regulation (FAR), codified in Title 48 of the United States Code of Federal Regulations, sets forth principles that govern the federal government’s purchase of goods and services, and the procurement process itself.31 KEI contends that OTAs are currently being amended and created that contain provisions that completely disregard the Bayh-Dole Act and FAR.32
In an article posted by KEI on July 1, 2020, KEI announced that it had “a number of outstanding requests under the United States Freedom of Information Act (FOIA) for contracts related to biomedical innovations to control or treat the COVID-19 pandemic”33 in light of its receipt of a number of contracts and amendments to contracts from BARDA and DOD “that were signed or expanded in 2020 to cover research on COVID-19 vaccines or therapeutics.”34 KEI stated that the language found in these contracts potentially “eliminate[d] the Bayh-Dole obligation to make products available ‘to the public on reasonable terms’ — language that authorizes the federal government to intervene if pharmaceutical companies charge unreasonable prices for federally-funded drugs, biologics, vaccines, and other medical products.”35 KEI purports to show how the government rights in federally funded patents differ when directly comparing the standard contractual language for Bayh-Dole Act provisions with the language contained in the new OTA contracts for the COVID-19 pandemic response.36 However, this article only gives a general overview of KEI’s analysis of the contractual terms’ effect on the federal government’s rights.
In light of the current status of the COVID-19 pandemic, third parties will likely continue to allege that recipients of federal funds for research are violating the Bayh-Dole Act with respect to COVID-related research and patents. However, all pharmaceutical companies that are researching and developing drugs with federal funding should be aware of the provisions of the Bayh-Dole Act’s impact on intellectual property rights. It remains critical that pharmaceutical companies that receive federal funds remain vigilant at complying with Bayh-Dole and all relevant regulations.