The False Promise of Breaking Patents to Lower Drug Prices


Congressional leaders, policy activists, and scholars contend that patents are a principal cause of rising drug prices. They argue that a solution exists in two federal statutes that allegedly authorize agencies to impose price controls on drug patents: 28 U.S.C. § 1498 and the Bayh-Dole Act. These “price-control theories of § 1498 and the Bayh-Dole Act” maintain that Congress has already endorsed the unprecedented and controversial policy of breaking patents to lower drug prices in private transactions in the healthcare market.

Neither § 1498 nor the Bayh-Dole Act authorize agencies to impose price controls, as confirmed by their plain text and by their interpretation by courts and agencies. Section 1498 is an eminent domain statute that applies only when a patent is used by and for the government, such for the military, the Post Office, or the Veterans Administration. The Bayh-Dole Act promotes commercialization of patented inventions derived from federal funding of upstream research; consistent with this commercialization function, this law specifies four delimited conditions when a federal agency may “march in” and license a patent when a patented product is not sold or available in the marketplace. Applying canons of statutory interpretation, the meaning of these two statutes is clear. Neither specifies that “price” triggers regulatory controls over private market transactions. Congress knows how to enact price-control laws, such as the Emergency Price Control Act of 1942 or when it specifies “reasonable price” as a goal of legislation. The price-control theories of § 1498 and the Bayh-Dole Act profess unprecedented agency powers lacking any authorization in existing statutes. Yet academic scholarship, as well as policy and legal work based on this scholarship, continue to promote the price-control theories of § 1498 and the Bayh-Dole Act. These are policy arguments masquerading as statutory construction.