Congress seems ever ready to meddle in markets. One of its recent attempts is the Invent Here, Make Here Act currently making its way through the Senate. The legislation mandates that patents receiving federal grants be “substantially” manufactured in America and prevents the use of materials from certain countries, including China. Not only will this raise prices for consumers, but only small businesses and nonprofit organizations are subject to this restriction. Instead of targeting these entities, Congress should be acting to ease the restrictions that are already in place.
As written, the bill singles out small businesses and nonprofits. However, as of the time of this writing there are hundreds of federal grants posted not only for small businesses, but also for public and private higher education and “for-profit organizations other than small businesses.”
Nonprofit organizations include many universities, which develop many new patents. In doing so, it undermines the ownership of university patents granted by the Bayh-Dole Act by limiting the ability of universities to produce their patents.
Additionally, targeting small businesses but not large ones makes little sense. Small businesses are less able to handle the higher costs associated with increased manufacturing regulations. Production restrictions raise the cost of goods and are ultimately a net negative economically. The act’s restrictions only make sense in terms of a national security concern, which generally doesn’t concern small businesses. Large businesses, such as the defense contractor Raytheon, are more likely to be developing technologies with national security implications.
Proponents may argue the act only limits patents that received government funding, but since the 1940’s federal investment in privately conducted research and development (R&D) has risen dramatically. From the 1940’s through the early 1970’s less than 10 percent of patents received federal dollars. In 1975 this began to rise steadily until reaching 30 percent in 2011, and only slightly decreasing after that.
The production restrictions in the Invent Here, Make Here Act apply to a growing number of patents as more government funding creeps into innovation, especially in the pharmaceutical market. From 2010 through 2019, 356 new drugs were approved, of which the National Institutes of Health helped fund 99.4 percent. All but two drugs received some form of federal funding for research. The Invent Here, Make Here Act would make production of these drugs more expensive than it is today.
One provision of this bill seems aimed at China in particular, our third largest trading partner. Given that more than a quarter of patents receive some form of federal money, this would likely spark a trade response from China. China is to be listed as a “country of concern” alongside Russia, North Korea, and Iran as nations with whom no waiver could be granted to relieve the bill’s restrictions, even if there were no national security or other concern for the invention.
Currently 13 percent of manufacturers of active pharmaceutical ingredients for U.S. drugs are located in China. Given that nearly all new drugs receive federal R&D funding, a pattern that shows no sign of changing, this would drastically increase the price of U.S. pharmaceuticals by eliminating a large portion of ingredients for pharmaceutical manufacturing. Ultimately the restrictions in the Invent Here, Make Here Act would drive up healthcare costs for patients across America.
This would also cut us off from China’s market of the rare earth minerals needed for modern technologies like electronics. China mines vastly more rare earth minerals that any other country. In 2023 nearly 70 percent of all rare earth minerals mined came from China. This bill would drastically reduce availability of these materials in the U.S., increasing prices for everything from smartphones to solar panels and electric vehicles.
It should come as no surprise that decreasing the available materials to make green technologies and increasing their cost will likely slow the transition to more clean energy in America. The Invent Here, Make Here Act would not only cut off the largest supply of these critical resources, but it would also require a “substantial” quantity be mined in the U.S., further limiting the supply and increasing prices. Currently, very little mining occurs in the U.S. due to tight environmental regulations and complicated permitting requirements.
Congress should be removing barriers and regulations on how consumer products are manufactured, not increasing them, given how many waivers are already granted for restrictions already in place. A better step would be to streamline this by switching the burden of proof from the producer to the federal agencies making the grants. This would mean that instead of forcing an inventor to demonstrate a product cannot be reasonably produced in the U.S., a federal agency would have to prove there is a specific and compelling reason, such as national security, to require a product’s construction be limited.
Adding costs and requirements to the production of new inventions will raise consumer prices on everything from pharmaceuticals to electronics. This ultimately undermines the goal of commercializing federally funded research. Instead, the federal government should be making it easier to bring new innovations to market at lower costs.
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 (X) @ConsumerPal.