The most promising Covid-19 treatments and vaccines being explored right now were made possible by a little-known law that encourages licensing agreements between private pharmaceutical companies and government-funded researchers.

Treatments such as Gilead’s remdesivir, Ridgeback Biotherapeutics’ EIDD-2801 drug, and Moderna’s vaccine candidate were all achieved through public-private partnerships that didn’t exist before the Bayh-Dole Act in 1980. 

The law, best known for giving the government the never-used authority to seize licensing rights for any product funded by taxpayer dollars, changed the pharmaceutical industry dramatically. It made it possible for drug companies to profit when they license new inventions from universities, nonprofits, or any government-funded entities or partner with them for early stage research and testing.

“Before Bayh-Dole, if the government funded an invention, even a small percentage of funding, the government would take the invention away and try to license it non-exclusively,” said Joseph Allen, a former Senate staffer who was instrumental in passing the act. 

“It sounds noble, but it completely failed because there was no incentive if a university made an invention for a company to license it,” added Allen, who is also founder of consulting firm Allen & Associates.

For companies developing potential Covid-19 treatments and vaccines, being able to profit by building on university research has been critical. 

Gilead partnered with various universities, led by the University of Alabama, for remdesivir research in 2014. Moderna collaborated with Harvard and the University of Pennsylvania on its vaccine. Ridgeback licensed its Covid-19 technology from Emory University. 

Without the flexibility of Bayh-Dole “you kill innovation,” Wendy Holman, CEO and founder of Ridgeback, said during an April webinar on Bayh-Dole. 

“I say that having licensed 2801 from Emory,” she added. “It would have been irresponsible of me to have licensed it if I didn’t think I could raise money around it.” 

Results

The act spurred nearly 300 new drugs in the past 40 years by encouraging companies to turn raw intellectual property into viable products. 

“The companies are assuming tremendous risk, but because of the incentives of Bayh-Dole, they’re willing to do that so that these inventions aren’t sitting in a laboratory waiting for someone to use them,” Allen said. 

In the first two decades of Bayh-Dole, American universities experienced a ten-fold increase in the number of patent applications, and created more than 2,200 companies to exploit their technology.

Bayh-Dole has spurred 13,000 startups, resulted in more than 100,000 new patents, and led to the disclosure of more than 420,000 inventions just from 1996-2017, according to the Association of University Technology Managers.

While only 55 U.S. universities had been granted a patent in 1976, 240 universities had been issued at least one patent by 2006.

In the era of Covid-19, “it’s incredible to see how fast companies and the public sector are responding” to the demand for treatments and vaccines, Allen said. 

Drugmakers vs. Universities

One common question is why universities, nonprofits, and the government can’t produce lower-cost drugs with their own inventions, but that’s not a realistic prospect, said Brian O’Shaughnessy, a partner and intellectual property attorney at Dinsmore & Shohl.

Universities and nonprofits are “looking at new ways of fighting certain types of infections at a much more basic level,” O’Shaughnessy said. “They might elucidate a particular pathway or particular mechanism of action [in molecules], but rarely do those actual first efforts find their way into a commercial product.”

Instead, university research is often the jumping off point that guides the industry toward the ultimate invention. 

“To have industry come in and invest the tremendous amount of money time and resources into something that can be commercialized and put into the human body requires about 10 years of research and $2.6 billion—and that’s not something any university is going to do,” O’Shaughnessy said. “They’re not in a position to take that kind of risk.” 

For example, Gilead anticipates spending up to $1 billion on remdesivir’s further development and manufacturing, company spokesman Ryan McKeel said. 

“Government funding and participation in research helps progress scientific knowledge, and Gilead encourages these sorts of government collaborations across the entire industry for the benefit of patients,” he said. 

Drug Pricing During Covid-19

The public is placing tremendous pressure drugmakers to ensure any viable Covid-19 treatments or vaccines are affordable and widely accessible.

That pressure will be the most effective element keeping prices down on products that virtually the whole world is expected to need, O’Shaughnessy said. 

However, disagreement remains over whether drugmakers will—or should—be able to profit off any Covid-19 innovations.

“Not a single drug company thinks there’s an opportunity to profit from Covid-related technologies,” said Jon Soderstrom, managing director of the Office of Cooperative Research at Yale University.

“There’s a lot of private sector dollars that are going into this without much hope at all of a financial payoff from Covid,” Soderstrom said. 

“This is a public service,” he added. “This is an opportunity to rebuild that [profit-driven] reputation. They’re not going to price gouge.”

Despite pricing pressure, the drug companies that come up with successful products are still likely to turn some kind of profit thanks to the licensing deals they’ve struck with research institutions, O’Shaughnessy said. 

“There’s a huge need and there will be enormous sales, so I agree with the notion that most pharmaceutical companies are likely to charge only a marginal profit for each treatment, for each dose, but with the numbers that we’re talking about, they still stand to make a tremendous profit,” he said. 

Currently, an estimated 400 Covid-19 products are in the lab and more than 100 of those are already in trials, said Tom DiLenge, president of advocacy, law and public policy at BIO, the, lobbying group for the biopharmaceutical industry. 

“I don’t know how you put a value on a really effective Covid cure,” DiLenge said. “It would be astronomical. I don’t think that’s the conversation when companies talk about affordability.”

“Affordability and value are two different things,” he added. “Companies need to distribute in a financially responsible way.”

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