How an obscure law brought us nasal flu spray — and new conflicts of interest

We may owe the nasal flu vaccine in part to an obscure law signed 35 years ago this week.

Also, the nicotine patch. The HPV vaccine. The once-a-day pill for HIV infection. And thousands more drugs, medical devices, and technological advances.

The Bayh-Dole Act of 1980 aimed to do nothing less than transform scientific research. For the first time, it allowed American universities to own the patents on all discoveries their faculty members had made using federal research grants. Not only that: Universities could cut exclusive deals with private companies to turn those inventions into commercial products in exchange for a cut of the profits.

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Backers of the law say it spurred the biotech revolution. They point to the several thousand startups that have been founded and the scores of new vaccines, drugs, and diagnostic tools that have come to market since Bayh-Dole was enacted. “It’s a landslide of good outcomes,” said Fred Reinhart, the president of a trade group that supports the transfer of technology from university labs to private industry.

But critics find plenty of fault with the law. They say it’s shifted focus away from basic research and toward inventions with commercial potential. Entangled academics in a web of conflicts of interest. Replaced a spirit of collaboration in academia with secrecy.

And created a structure that effectively rips off taxpayers, who fund the research that leads to big discoveries — but don’t get any of the profits when those discoveries are turned into pricey new drugs. The public does get access to those medications, of course, but skeptics say most of them would have reached the market anyway; they point to the essentially flat rate of new drug approvals dating back to the post-WWII era.

Here’s a look at the origins of the law and its impacts today:

Why Bayh-Dole?

In the late 1970s, American politicians and CEOs were anxious. US productivity was slipping. Japan’s economy was on the rise. Eager to spur innovation, civic leaders focused on what many saw as a broken US patent system.

At the time, many of the federal agencies that funded scientific research in American universities retained ownership of the resulting inventions. And they weren’t allowed to license them exclusively to a single company, which dampened interest among entrepreneurs.

The government often sat on its patents; by 1980, it held 28,000 of them and fewer than 5 percent were licensed to the private sector.

A bold plan to change the law, spearheaded by Democratic Senator Birch Bayh and Republican Senator Bob Dole, gathered steam. Even in the uneasy climate, the idea was opposed by consumer advocates, but it passed easily in the waning days of the Carter administration.

Fabulous riches for a few universities

The Bayh-Dole Act wasn’t supposed to enrich universities. But the law made it possible for universities to negotiate licensing deals with companies. In a few cases, they have paid off spectacularly.

Take Northwestern University.

In 1989, Northwestern chemist Richard Silverman made a discovery that ultimately became the blockbuster anti-seizure drug Lyrica — and has brought the school a windfall well north of a billion dollars. It’s also helped Northwestern build a $100 million building to house a research institute, paid for in part by a donation Silverman made from his own royalties.

Academics in full startup mode

Thanks to the Bayh-Dole Act, all major research universities — and plenty of smaller ones — have a technology transfer office staffed with scouts with a keen eye for commercially promising science and the business acumen to license it out.

When the law passed, there were just a few dozen such offices in the US; now there are more than 300, according to the Association of University Technology Managers, the industry group.

Many boast trendy names that sound more like startups than university arms — for example, the University of Nebraska’s UNeMed or Arizona State’s AzTE.

Some are set up as separate corporate entities or have flexible charters that allow them to do business in a manner more typical of for-profit companies.  Taking a page from the business world, some even reward their directors with annual cash bonuses based on their office’s financial performance, according to Walter Valdivia, a scholar of innovation at the Brookings Institution.

Universities suing companies

Now that patents are so valuable, universities are defending them in court.

In 2014, 17 universities participated as plaintiffs in a total of 27 lawsuits defending their patents against perceived infringements — including by a few biotech companies, according to Jacob Rooksby, an assistant law professor at Duquesne University.

That, too, was an unintended consequence of the Bayh-Dole Act and subsequent changes in patent law. “Litigation is not a game that higher education is well-suited to play,” Rooksby said, “and the Bayh-Dole Act says nothing about any need for universities to play it.”

Correction: An earlier version of this story mischaracterized the legal status of some technology transfer offices.

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