When the National Institutes of Health (NIH) announced in July that it would move forward with a Biden-era proposal to require “access plans” for companies seeking to license NIH-owned patents, the decision stunned many in the innovation community. Industry groups warned that this new bureaucratic hurdle would “kill NIH licensing.”
They’re right, and not merely in a practical sense. The policy’s very design embodies the fatal conceit that government planners can anticipate and orchestrate the countless market interactions that drive innovation.
At its core, the NIH policy requires that any company seeking a commercial license to NIH-developed technology must first submit an “access plan”—a detailed blueprint of how it will make resulting drugs or devices broadly available and affordable to patients, including in “underserved communities” and even low-income countries. NIH officials will review and approve these plans before granting licenses and can later revoke the licenses if companies fail to live up to them.
The problem, as Austrian economists like Friedrich Hayek and Ludwig von Mises would recognize, is that such a system assumes knowledge and foresight that no central authority can possess. Innovation is not a predictable linear process that begins in a lab and ends with a finished product ready for “access planning.” It is an emergent, uncertain process shaped by trial, error, and discovery. The knowledge of what patients need, what prices are sustainable, and what manufacturing or distribution methods are viable arises only over time, through decentralized market interactions.
Under the NIH’s scheme, by contrast, a company must attempt to chart this unknowable future before it even decides whether to take on the risk of commercialization. It must propose, in effect, a distribution and pricing plan before it knows what the product will be, if it works, if it can be manufactured at scale, or if a market for it will even exist.
Such demands are not just unrealistic; they are counterproductive. Rational firms will simply walk away, rather than assume this kind of open-ended political and economic risk. The result will be what economists call “shelfware”—promising NIH inventions that languish unlicensed, undeveloped, and unused.
This is not speculation. The 1980 Bayh-Dole Act was enacted precisely to remedy that problem. Before Bayh-Dole, the federal government coerced universities into allowing it to own tens of thousands of patents that no one would license because bureaucratic controls made the process too arduous and too risky. Bayh-Dole restored the longstanding U.S. principle that ownership follows inventorship, not funding. Post Bayh-Dole, universities and small businesses can retain title to federally funded inventions and license them freely, unleashing a wave of technology transfer that helped to fuel America’s biotech revolution. The new NIH policy turns that clock back.
Proponents justify the policy by invoking “taxpayer fairness”—the idea that, because taxpayers fund NIH research, they deserve affordable access to any resulting products. But this argument misunderstands how biomedical innovation actually works. While taxpayers may, indeed, fund the early-stage discovery that identifies a new target or molecule, private firms bear the overwhelming majority of costs—often billions of dollars—to develop, test, manufacture, and distribute the final product. To suggest that the government, having paid for the match, therefore owns the bonfire is economic nonsense.
Austrian economics offers a better framework to understand this process. Prices and profits are not arbitrary or exploitative; they are vital signals that coordinate dispersed knowledge across the economy. When government agencies attempt to fix or preordain these outcomes—whether through “access plans,” “equitable pricing,” or other bureaucratic dictates—they distort the very mechanisms that drive innovation and bring new products to market.
Hayek warned in “The Use of Knowledge in Society” that “the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” The NIH’s new rules embody exactly that hubris. By presuming that policymakers can anticipate future production costs, distribution challenges, and global demand—and enforce compliance through licensing—the agency substitutes administrative guesswork for entrepreneurial discovery.
The damage, moreover, may not remain confined to NIH’s internal or “intramural” inventions. Because NIH also funds the vast majority of biomedical research through its extramural grants to universities and research institutions, there is a real danger that this access-plan requirement could spill over into that broader ecosystem. Should NIH begin conditioning its grants or approvals on similar access commitments, the chilling effect could be catastrophic. Companies would think twice before licensing university patents; venture capital would flow elsewhere; and America’s life sciences sector — the envy of the world — could be throttled by its own government’s good intentions.
Supporters of the policy claim that without such oversight, companies might charge too much or neglect underserved populations. But the solution to high prices or limited access is not more planning from Washington. It is more competition, more innovation, and more discovery — all of which require the freedom to take risks and reap rewards. The miracle of the market is not that it produces perfect outcomes, but that it allows millions of actors, each with partial knowledge, to coordinate toward better outcomes than any planner could design.
The NIH’s “access plan” mandate replaces that spontaneous order with bureaucratic order. In doing so, it threatens to smother the very process that transforms public science into private cures.
America’s biomedical success story has always rested on the partnership between government research and private enterprise, mediated by markets, not mandates. If we forget that lesson, we risk turning the engine of innovation into another government-run committee meeting: well-intentioned, well-funded, and ultimately fruitless.
