Funding Fairness: Public Investment, Proprietary Rights, and Access to Health Care Technology
William Sage
Virginia Law Review
i. Introduction
 R. Eisenberg – federal technology transfer policies should be reexamined in light of
actual experience with patented technologies.
 1980 Bayh-Doyle act outdated – allowed organizations to retain patent ownership of
government sponsored research, a privilege which was later extended by executive
memorandum to large businesses
 Nation in highly unstable climate for biomedical research and the applied technologies it
I. Medical Innovation and Health Care Spending
a. Conventional economic analysis: no investment in knowledge without appropriation by investor
i. Patent monopolies replace one form of market failure for another
ii. Government funds basic research which is unlikely to be patentable
iii. Bayh-Doyle act was meant to strike a balance between patentability and
government sponsorship
b. Different playing field
i. Annual expenditures approaching one trillion dollars (~14% of GDP)
ii. 15% of Americans uninsured; most industrialized nations have universal
medical insurance programs
iii. Rising health care costs
1. Spending too much on health care?
2. Are we getting the value (our money’s worth)?
iv. No easy answer
1. most efficient health care system will only see short term gains
2. only a small percentage of medical innovations are “definitive”
technologies that prevent or cure long term illnesses (e.g. polio vaccine
displacing iron lungs)
3. most technologies are “half-way”
v. Two conditions for worthwhile spending:
1. cost-effective
2. available equitably to potential users
vi. AZT for HIV/AIDS
1. led to “reasonable price” requirement by the National Institutes of
Health for inventions arising form Cooperative Research and
Development Agreements (“CRADAs”)
vii. AMA Council on Ethical and Judicial Affairs
1. unethical to patent procedures which could benefit a larger number of
patients if performed without regard to ownership
viii. Human Genome Project
1. NIH requires grant recipients to sign a written pledge assuring open
access to research results
II. Private and Public Sector Influences
i. Private insurance and health care industries are being transformed by managed
ii. Federal and state governments have become the largest purchasers of health care
services through the Medicare and Medicaid programs
a. Managed Care
b. Public Payers
c. FDA Regulation
III. Patent Incentives and Biomedical Research
a. Supporting research through the promise of patent royalties is much like addressing
poverty with a state lottery.
IV. Linking Patent Policy and Health Policy
a. Reassess the Bayh-Doyle Act
b. Patents transferred to industry might contain recoupment provisions – obligations
imposed upon patent holders that would serve to repay government for its initial
investment in research and development.
c. Recoupment provisions in technology transfer laws might help promote equitable
utilization of expensive medical technologies.
d. Revenues derived from patent holders might be used to verify the cost-effectiveness of
new technology.
e. Compulsory licensing might be instituted to allow broader “experimental use” of
proprietary technologies and more rapid development of competitive alternatives.