New licensing Guidelines issued by the National Institutes of Health at the end of the Biden Administration could undermine American innovation in the biomedical field – a sector in which the U.S. has long been the world leader. In a period of growing international competition, including threats from China, the Trump Administration may want to closely examine and consider rescinding the new NIH Guidelines.
Background: The Bayh-Dole Act Commercializes Federally-Funded Research
Prior to 1980, recipients of federal research grants could not patent the inventions derived from those funds. As a result, federally funded research generated very few commercially valuable innovations.
The Bayh-Dole Act of 1980 dramatically changed everything. It authorized universities, nonprofit research institutions, and small businesses to retain ownership of patents stemming from federally funded research. This led to a flood of new patents and the rapid commercialization of innovative products throughout the American economy.
According to a 2022 report by the Center for Strategic and International Studies:
Since it was enacted in 1980, the [Bayh-Dole] Act has led to over $1.3 trillion in U.S. economic growth, created more than 4.2 million jobs across the country, and contributed to the success of over 11,000 new startup companies from universities throughout America. Bayh-Dole continues to encourage American entrepreneurship today, helping to strengthen the nation’s innovative capacity.
Burdensome NIH Licensing Restrictions Could Harm Biotech Innovation
To promote commercialization, the Bayh-Dole Act requires parties seeking a license to a federally funded patent to “suppl[y]
the agency with a[n] [access] plan for development and/or marketing of the invention.”
The January 10 NIH Guidelines add to this requirement with respect to patent licenses “that would authorize the commercialization of drugs, biologics (including vaccines), or devices for the prevention, diagnosis, or treatment of human disease.” For such licenses, access plans must “address how resulting products will be available, affordable, acceptable, and sustainable. Each [requirement]
has an extensive list of aspects that licensees must address.”
The Bayh-Dole Coalition, a coalition of scientists, judges, technology experts, and firms that support Bayh-Dole’s commercialization goals, has highlighted the Guidelines’ risks to biotech innovation and commercialization:
[T]he NIH [G]uidelines allow the bureaucracy to second-guess purely business decisions like how a resulting product is priced, distributed, or maintained. The law does not give NIH that authority.
What’s more, the Guidelines provide that NIH can revoke a license if it dislikes access plan revisions that the Guidelines mandate after the Food and Drug Administration authorizes a new therapy. Furthermore, small companies that drive U.S. pharma innovation (and invest far more in new therapies than NIH) would be heavily burdened by Guidelines regulatory demands, strongly disincentivizing new product development.
In sum, according to patent expert Professor Adam Mossoff:
[The Guidelines] will transform the NIH from a research institution into a de facto price regulator – 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.
Finally, as Professor Mossoff stresses, the new Guidelines seek to repeat a failed experiment:
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.”
U.S. Biotech Leadership Imperiled
The Guidelines come at a time when China is posing an increasingly serious challenge to continued American leadership in the biotech sector.
Executives and investors at the January 2025 J.P Morgan Healthcare Conference noted signs of Chinese ascendancy. Those signs include:
- A rapid rise in the licensing of Chinese experimental drugs.
- New research showing Chinese drugs outperforming blockbuster U.S. drugs.
- Rapid innovation by Chinese drugmakers covering a wide variety of products.
These new commercial drug initiatives enjoy strong Chinese Government support, including “funding, discounted or even free laboratory space and grants to support . . . a ‘robust ecosystem’ of biotechs.”
In light of all this, the implementation of U.S. government guidance that discourages biotech commercialization would appear to be the last thing in the world that the American economy needs.
Accordingly, the Trump Administration may wish to consider swiftly reviewing the NIH Guidelines and promptly rescinding them, if it concludes that they do indeed raise a major threat to American leadership in biotechnology.