Reimagining Drug Pricing with an American Health Innovation Sovereign Fund

A public IP trust could turn taxpayer-funded discoveries into affordable medicines

This is not my typical article. I want to put this thought out there and explore this idea with y'all. Goal is to improve our health care.

Deeply appreciate your comments

Topline

A sovereign fund holding patents from federally supported research could channel licensing royalties into direct drug discounts and co-pay assistance for U.S. patients.

The gap between discovery and access

Every year, U.S. taxpayers invest over $40 billion in basic biomedical research through agencies like NIH and NSF. Yet when those breakthroughs reach the pharmacy counter, patients often face significant list-price markups - the initial price set by manufacturers - that can make life-saving treatments unaffordable.

Universities earn royalties on patents from this research, but they often lack the leverage to ensure reasonable pricing. Meanwhile, pharmaceutical companies frequently obtain exclusive licenses, which can limit competition and keep prices high.

Global precedents

• Norwegian Petroleum Fund
  Norway channels royalties from its oil and gas resources into a sovereign wealth fund that now exceeds $1.7 trillion. This fund supports various public programs, from pensions to green technology. The key takeaway is that royalties from a valuable resource - in our case, intellectual property - can sustain public initiatives for decades.

• Alaska Permanent Fund
  A portion of Alaska’s oil revenues is deposited into a trust, and annual dividends are paid directly to state residents. Imagine a similar “Medicine Dividend” for every U.S. taxpayer or patient

Building a public IP trust

An American Health Innovation Sovereign Fund would transfer ownership of all patents stemming from federally funded research into a professionally managed vehicle. Key design elements could include:

• Bayh-Dole transfer: Federal law, specifically the Bayh-Dole Act which currently allows universities to own patents from federally funded research , would be revised to assign march-in rights - the government's right to intervene in certain situations - and patent title from individual universities to the Fund.

• Transparent licensing: The Fund would issue non-exclusive licenses, allowing multiple manufacturers to produce the same drug, and use competitive bidding to select licensees. This approach aims to increase the supply of medications and potentially lower their prices through competition.

• Global access clauses: Licensing agreements would include mandatory price ceilings, setting maximum prices, and tiered pricing, adjusting prices based on a country's income level. Sub-licensing triggers could be included if affordability targets aren’t met, aiming to ensure medications are accessible worldwide.

Turning royalties into savings

Rather than solely benefiting university endowments, the net royalties generated by the Fund would be deposited into a dedicated Drug Discount Account. This account would be used to::

• Subsidize point-of-sale pricing (e.g., 20–50 percent off initial price)

• Fund co-pay assistance for low- and middle-income patients

• Reinvest in neglected-disease R&D and public-interest trials

Benefits for patients and innovation

• Lower out-of-pocket costs: Direct subsidies would provide immediate financial relief to patients when purchasing medications.

• Sustainable revenue: Similar to how oil royalties or mineral trusts fund public programs, revenues from intellectual property could provide a consistent funding source for ongoing health initiatives.

• Stronger public-private alignment: The Fund could shift the focus from “maximizing university patent income” to prioritizing the “broader public health impact” of federally funded research.

Navigating challenges

• Political buy-in: Universities and industry groups will resist changes to existing intellectual property frameworks.

• Incentivizing clinical investment: The terms for licensing patents would need to be carefully designed to ensure that pharmaceutical developers can still cover the substantial costs of late-stage clinical trials.

• Operational complexity: Establishing a professional technology transfer office and renegotiating existing licenses would be a significant undertaking requiring time and resources.

A roadmap for implementation

1. Draft legislation to establish the Fund, assign Bayh-Dole rights, and define the Fund's governance structure.

2. Pilot program at one or two federal agencies (e.g., NCI or NIAID) to refine licensing workflows and pricing metrics.

3. Scale up by onboarding additional agency patents, building an expert licensing team, and automating royalty accounting.

4. Measure impact through annual reports on patient savings, royalty returns, and R&D reinvestment. Establish clear metrics to measure the Fund's success, such as patient savings, royalty revenues generated, and reinvestment in research and development.