NIH Waivers for U.S. Manufacturing Requirements for Federally-Funded Drugs
The National Institutes of Health, from 2011 through May of 2015, appears to have granted all requests for waivers of a requirement under federal law that patent holders who benefit from U.S. taxpayer-funding ensure that their patented inventions are manufactured in the United States.
The Bayh-Dole Act imposes various requirements on the grant of exclusive licenses by the patent holders of federally-funded inventions. In particular, the act generally requires that exclusive licensees “substantially” manufacture the invention in the United States.
The Act, however, also allows for the patent holder to obtain a waiver on the U.S. manufacturing requirement from the Federal agency that provided for the funding of the invention. According to a FOIA response recently obtained by Knowledge Ecology International, the NIH seems to grant every manufacturing waiver request that comes its way.
Waivers can be granted on the grounds that the firm either (1) made “reasonable but unsuccessful efforts … to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States,” or (2) “that under the circumstances domestic manufacture is not commercially feasible” (35 U.S.C. § 204). The statute notes that the NIH may grant a waiver in either circumstance, not that it is required to if either condition is met.
The FOIA response, originally filed by Johns Hopkins University’s technology transfer center in May of 2015, revealed that the National Institutes of Health (NIH) received and granted nine fee waiver requests in 2014, and received four through May of 2015, granting three with one pending at the time of the FOIA response.
The NIH Office of Technology Transfer (OTT) maintains statistics on its website on the grant of waivers between 2011 and 2014, which also incorporates waivers made under other provisions in federal law, such as waivers of federal titles in patent rights.
According to the FOIA response, all Bayh-Dole U.S. manufacturing waivers for the NIH are currently administered by the Division of Extramural Inventions & Technology Resources (DEITR) in the NIH Office of Extramural Research.
NIH Waivers Granted Under 35 U.S.C § 204, 2011 to May 2015
"The intent of section 204 of the Bayh-Dole Act was that drug corporations who profit from American taxpayer funded research in turn manufacture these drugs in America," Alex Lawson, Executive Director of the non-profit Social Security Works, wrote in a statement. He continued:
"There is a waiver system for corporations that cannot manufacture the drugs in the United States, but the NIH seems to be granting these waivers to every single company that requests one.
"Further, some drug corporations use offshore manufacturing to avoid paying US taxes, it would be completely against the letter and spirit of the law if companies that benefit from taxpayer funded research are granted waivers to then produce drugs overseas in order to avoid paying US taxes."
Chapter 604A of the United States Public Health Service Technology Transfer Policy Manual outlines detailed procedures for the evaluation of waivers for the section 204 U.S. manufacturing requirement by the National Institutes of Health. As stated above, there are two separate grounds, one of which must be satisfied for the grant of a waiver:
- that the licensee made reasonable but unsuccessful efforts to license to a firm with the capacity for U.S. manufacturing; or
- that U.S. manufacture of the patented invention is not commercially feasible.
Under the first grounds, the NIH is required to consider the “probable range of companies interested in a license,” and “The significance of the technology, the availability of alternative products, size and location of intended patient populations, and the degree of regulatory review needed to bring the product to the U.S. market.” The NIH is also required to evaluate the good faith efforts made by the federal contractor seeking to license its invention. The manual lists five separate criteria that may be relevant in making a determination that the company actually made good faith efforts.
The “not commercially feasible” standard is even more stringent, requiring the NIH to evaluate at least seven factors.
The NIH requires licensors to submit a detailed waiver request, including all of the information listed in the manual.
Given the extensive requirements outlined in the Tech Transfer Manual and the level of detail required in a waiver request, as well as the large number of drug and medical device manufacturers in the United States, it comes as a surprise that the NIH seems to grant every manufacturing waiver request.