President Biden recently announced new rules that use “march-in rights” to seize control of medical patents as a backdoor to regulate prices. The rule extends to any patent that received government funding, but the White House’s announcement singled out the pharmaceutical industry as its motivation. This would be a step backward toward a time before the Bayh-Dole Act of 1980 when the federal government seized most of the patents in which it had any participation.

In 1980, the government had taken control of nearly 28,000 patents.  Of these, less than 5 percent were licensed for use, whereas patents the federal government had helped fund but had not seized were licensed at a rate above 25 percent. The Bayh-Dole Act addressed this by allowing patent developers to maintain control of patents except in limited circumstances where march-in rights could be applied.

While it has not been actively used, march-in rights grant federal agencies the ability to license privately owned patents to companies other than the one that developed them. March-in rights can be applied to a patent produced with a funding agreement from any federal agency. It can only be used if the company holding the patent isn’t developing the product, meeting health and safety needs, providing enough of the product for a specified public use, or selling the product in the United States.

The framework put forward by the National Institute of Standards and Technology (NIST) would allow for the price of a product to be a factor as well, effectively giving the federal government de facto price-setting authority over many pharmaceuticals. However, the Biden administration’s new rules would apply to all products for which the research receives or received federal funding regardless of industry or the amount of funding, not just pharmaceuticals.

Because of how broadly the proposed framework can be applied, it will drastically disincentivize accepting government funding agreements for research, particularly in pharmaceutical research, where the administration has focused its attention.

This includes patents developed and owned by universities and other nonprofit organizations that rely on licensing patents they develop for funding. A joint letter from the Association of American Universities, the Association of American Medical Colleges, and others explains that expanding march-in rights will likely decrease universities’ ability to license patents, innovation, and outside investment in university research. At the same time, there is no reason to think it will address the problem of high drug prices.

Losing patent rights disincentivizes universities, businesses, and nonprofit organizations from innovation by lessening the benefits to the innovator. This leaves them facing the choice of less investment by abandoning government funding agreements or the possibility that licenses for their innovations could simply be given away at any time. In the end, the cost is fewer innovations in the future, extending beyond the pharmaceutical industry.

Other problems arise with this proposal as well. This price standard creates uncertainty by not providing a metric to determine when a price is too high. Vague definitions invite political pressure to determine when and when not to use march-in rights. It also incentivizes businesses to lobby for competitors’ products to be deemed too expensive so they can obtain a license, even if unjustified.

Even the authors of the Bayh-Dole Act state the law explicitly and intentionally does not list prices, and was never intended to grant the federal government price-setting powers.

While the motivation to reduce drug prices is compassionate, the proposal to expand march-in rights won’t drop the prices consumers pay at the pharmacy. Instead, it will mean fewer new medicines are developed in the long run and risks expanding this problem into other markets than pharmaceuticals. Any final framework NIST adopts should avoid reducing innovation by giving federal agencies control over patents and implicit price-setting power over innovative products.

Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.