Federally Funded Stem Cell Research: A Good Deal for the Taxpayer and Consumer?

Abstract

In my article Federally Funded Stem Cell Research: A Good Deal for the Taxpayer and Consumer?, 14 Loy. Consumer L. Rev. 36-56 (2001) I focus on pragmatic taxpayer and consumer issues. Particularly, if government owned or funded patents result from stem cell research, should private companies get exclusive rights to develop the government patents? The article questions whether it is good policy for the government to selectively fund research leading to patents that are turned over to some companies for exclusive commercial development. My article includes an introductory discussion of relevant stem cell science and the law of technology transfer, and then moves to discussion of controversies relevant to issues of regulation of price and patent rights. One controversy has concerned AZT and other anti-aids drugs. These drugs, developed with substantial government participation, have presented perhaps the best known poster child story for those who believe private commercialization of government funded research leads to drugs that are too scarce and too costly, and who advocate government price regulation as a response. Another controversy involved patents for separating stem cells most useful for medical treatment. Patent holder Cellpro supplemented its defense of patent litigation by complaining to the federal government, which had funded a competing Johns Hopkins patent. Cellpro requested that the government use its march-in authority under the Bayh-Dole Act and require that the federally funded Hopkins stem cell separation technology be made more freely available to others, including itself. Cellpro's rationale was that Hopkins and its commercial partner were laggards in exploiting their federally funded patent. I next review comments of leading commentators like Professor Rebecca Eisenberg concerning federal technology transfer policy. Much of that comment is critical. I suggest that AZT and Cellpro type issues of regulation of price and patent rights follow the most basic analytical question: whether rights to government owned or funded patents should be transferred to private companies for exclusive exploitation. It is only if the answer is yes to the transfer question that companies can rely on exclusivity and resulting market power to charge high prices, or get away with being overly cautious in commercially developing government patents. If the answer is no, and companies get exclusive rights, then there are diminished opportunities for companies to charge high prices and go slowly in developing products, in part because there may be competition between companies with non-exclusive rights. A benefit of saying no to transfers of exclusive patent rights to private companies is that complex and undesirable regulation is avoided. Government price regulation can be complex and unfair. Government regulation of the timeliness of a company's product development and commercial exploitation is more difficult yet. Where possible, exclusivity should be avoided and competitive forces relied on to determine price and the speed of commercialization of government owned and funded patents involving stem cell research. The views expressed do not purport to reflect those of the United States Department of Justice, where the author was employed when the article was first published, or the Government of the District of Columbia, Office of the Corporation Counsel, where the author is employed now.