U.S. innovation faces dire future under proposed Bayh-Dole gutting

Guest:	Jere Glover and Joe Allen
Title:	Executive Director of the Small Business Technology Council and Executive Director of the Bayh-Dole Coalition
Summary:	Research shows the Bayh‑Dole Act has fueled thousands of inventions, patents and startups, but disruptions like SBIR’s expiration and 8(a) turmoil are testing the system. Jere Glover and Joe Allen are here to explain how those shocks ripple into federal R&D, commercialization and long‑term competitiveness. Jere Glover serves as the executive director of the Small Business Technology Council. Joe Allen is executive director of the Bayh-Dole Coalition.

The Federal Drive with Terry Gerton provides expert insights on current events in the federal community. Read more interviews to keep up with daily news and analysis that affect the federal workforce. Reach out to Terry and the Federal Drive producers with feedback and story ideas at FederalDrive@federalnewsnetwork.com.

Interview transcript:

Terry Gerton People have argued that America’s innovation edge really depends on small businesses. And there’s a lot going on in that space. At a high level, what are the risks you’re seeing right now?

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Jere Glover The risk, one, is the Small Business and Innovation Research program, which is a phenomenally great program that’s just over 40 years and has done phenomenal things across the board. If you’ve got a minute, I’ll mention just one new one that we’ve come up with. The National Academy of Sciences did a study in 2022 and found that 12% of all new drugs approved by the Food and Drug Administration had SBIR funding. And that’s pretty impressive. But what we’ve done recently is look to see what those drugs were and what their annual sales were. What we found was that those drug companies did $24 billion in annual sales of those drugs. So that’s a phenomenal record of success. Of course, everybody knows about all the successes in the other areas. But in terms of new drug approvals, and in terms of new medical devices — I’m sorry, it’s $36 billion for new drugs, $24 billion for new devices — that’s $60 billion. That’s a phenomenal result. Interestingly enough, the university-backed part of this program, which is the STTR program, does $5.7 billion. And people have not fully appreciated how important the STTR program is, because it pulls universities and innovators and entrepreneurs together to commercialize those products. And it’s been, together with the Bayh-Dole bill, a phenomenal training experience where we pull people, scientists, engineers from universities together with entrepreneurs who know how to make that product go to the marketplace. It’s a great program and it’s both Bayh-Dole that’s threatened and certainly SBIR being shut down is threatened.

Terry Gerton Are you most concerned about the U.S. innovation lead in pharmaceuticals, or are there other spaces and sectors where you think that our innovation lead through small businesses is at risk?

Jere Glover A recent study looking at all of the categories of innovation found that of 64 or so that they had identified, China was ahead in 57. We have lost the innovative edge in competition worldwide. And things like the SBIR program hasn’t been increased in size in 15 years, and Bayh-Dole — folks are threatening the foundation of the Bayh-Dole bill. We don’t have a national strategy to really help small business. We’re using 40-year-old ideas to help small business. We need to be doing a lot more, and we certainly need to be having the SBIR, STTR programs reauthorized and back in place.

Terry Gerton Joe, let me come to you because Jerry’s mentioned the Bayh-Dole Act, and that was passed in the 1980s, but the world looks very different now than it did then. What about the current innovation debate do you think most people misunderstand when it comes to businesses that need this kind of protection?

Joe Allen Well, actually, Jere and I worked together on the Bayh-Dole Act 45 years ago, and as he just said, actually the world is starting to look more similar as it did in the late ’70s. I think we need to go back and re-learn some of the hard-won lessons we learned before. If you go back to the 1970s, we were losing technology edge to Japan. A lot people at that time really thought the future of the United States was industrial policy, which is big government and big business, which is what the Japanese did, plotting the future. And luckily we didn’t do that. I used to work for a senator named Birch Bayh, who was a Democrat from Indiana. And one day we were shocked to find out that if a university or a small company worked for the federal government, did R&D, if they made an invention, the government took it away from them and gave it away. So the upshot was billions of dollars being funded. University research was basically being squandered. And the other thing was innovative small companies stayed away from government research, because you couldn’t afford to work with them because they might take your invention away. And Bob Dole was a conservative Republican; Birch Bayh was a liberal Democrat. We were in an election year. And they didn’t agree on much, but they agreed we couldn’t have afford to just give away billions of dollars of government-funded research without getting any economic return. So the Bayh-Dole Act was really an amazing change in Washington, in an election year, by people who were opposed to each other on different things. And basically what it said was, if a university or a small company makes an invention with government research, they can own it. The government can use it for free, but now they can start commercializing it. And that’s the basis of SBIR. Without that basis, you still wouldn’t take government research if they’re going to take the technology away. It’s phenomenal what happened because 70% of university inventions and 70% of federal laboratory inventions are licensed by small companies. Now, in 1980, most people would never have predicted that. They would have figured it was big business like the Japanese model. But it’s small-business entrepreneurs that drive American innovation across the board. Google came out of Bayh-Dole. Google was invented by two kids at Stanford. They came up with a search engine from National Science Foundation funding. No one wanted it. Stanford could not find a single licensee. So these two kids went in and said, let’s start a company. That’s how American innovation drives, and we’re the only country in the world where our innovation is driven by small companies, not big conglomerates, or not by government. And I think that’s one thing that gives an edge over China. But as Jere was just saying, if we don’t pay attention to our knitting, if we weaken SBIR, if we weaken Bayh-Dole, we’re going to go right back to where we were in the ’70s. And that was not a good place.

Terry Gerton So let’s follow up on that because the 8(a) program that’s designed to bring more small businesses into government contracts has really been under intense strain over the last year. Is that kind of eligibility uncertainty hitting small research-oriented firms especially hard? How do you see those disruptions?

Jere Glover Well, the 8(a) program has helped set role models and examples for underprivileged minorities and underserved populations. And it worked very well to do that. Over the years, it has helped literally thousands of companies, and it’s also helped be a role model for other companies. So the 8(a) program did work, has worked in the past, and perhaps as with any program tuning and tweaking it might be important. But we still need to make sure that we have everybody in the country know they have a chance to be an innovative and successful small business.

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Terry Gerton I’m speaking with Jere Glover, who serves as the executive director of the Small Business Technology Council, and Joe Allen, who’s the executive director of the Bayh-Dole Coalition. Joe, let me come to you. The federal government’s relying more and more on small businesses in AI and biotech and defense. What should Congress be paying closest attention to as it considers extending or reauthorizing SBIR and maybe updating Bayh-Dole?

Joe Allen Well hopefully they don’t update Bayh-Dole, because I think Bayh-Dole is working as it. The last thing we want is people monkeying around with something that works. There’s so many things in Washington that need to be fixed; this is not one of them. I think the critical thing is, again, it’s been 45 years since we passed Bayh-Dole and probably almost that long since we passed SBIR. Jere and I remember that —most people today don’t. That’s ancient history. And the thing that makes Bayh-Dole unique is Bayh-Dole did not create any bureaucracy, didn’t create any new government funding. So there are not a bunch of cheerleaders in Washington agencies for Bayh-Dole. I think one of the things I’m concerned about is, before Bayh-Dole, you had Washington micromanaging technology management. The agencies would take the technology away and give it away. And Bayh-Dole went in a different direction and said, we’re going to decentralize the power out of Washington and put it in the hands of entrepreneurs. There’s always a tendency in bureaucracies of re-centralization again. You know, we know more, this is a different era, we need to bring this back again, more centralized planning. Which is, again, what China does. I mean, it’s like the Japanese model, except for China’s Japan on steroids — in the 1980s, Japan was not a military threat, so it’s different. But I think one thing that we need to emphasize is, Bayh-Dole and SBIR are not theories. They work in the hard, cold light of day. They are drivers of our economy. Another stat that people don’t realize, and not just to talk about drugs, but the drug industry as most people think about it is major multinationals — but 50% of our new drugs originate in small companies. If you look at the companies that actually first licensed mRNA and immunotherapy, which won Nobel prizes, they were small companies. It took 10 years to find an American company because they were so early stage, most big companies didn’t do them. So I think the thing that I’m trying to emphasize in the Bayh-Dole Coalition is: Learn the lessons we learned before. We ran the experiment. We tried giving away technology for 40 years. It didn’t work. And we tried Washington’s micromanagement. There’s a role for Washington, and that’s certainly something that’s appropriate, but it’s not micromanaging the economy, it’s not micromanaging entrepreneurs. And small-business entrepreneurs are doing this on their own dime, on their own risk, and most times they fail. We are the only country in the world that’s been driven by that model, and it’s what makes us unique from China and other parts of the world.

Terry Gerton Jere, let me come back to you because Joe said we don’t want to mess with Bayh-Dole, but Congress does have a role here in reauthorizing SBIR and that seems to be really difficult. What do you think the main sticking points are on getting a reauthorization of SBIR?

Jere Glover Well, Sen. Ernst said on the floor of the Senate that she would block renewal of the SBIR program unless she got two provisions. One is eliminating the largest, most successful companies from the program, and two, much stronger risk protections for small business. I think that those two provisions are standing in the way. And Sen. Ernst specifically saying, “I don’t care if the program doesn’t succeed” — and she said it on the Senate floor, so she obviously means it — the question is, will everybody else realize how important this program is? Since the program lapsed there have been $1 billion dollars and over 1,000 awards not made that would have been made if the SBIR program was in place, going to innovative, creative small businesses, like the drug companies I mentioned that now do $60 billion dollars. In terms of the top drug and annual sales, SBIR was number five, number 13, and number 18 of the top 20. This program really does work, and to have it shut down over policy disputes when it’s been successful for 43 years is a shame. It really is tragic.

Terry Gerton Joe, you’ve got an event tomorrow on Capitol Hill to talk about this. What do you hope folks take away?

Joe Allen Well, Jere and I are working together. The Bayh-Dole Coalition is a hosting event on Capitol Hill starting at 11:30. Our host is the chairman of the House Small Business Committee, Mr. Williams. So what we’re focusing on is what Bayh-Dole has really done in the role of small companies and innovation. Because again, we have a track record, but most people have never heard it. And that’s our real fear — if we don’t educate people, policymakers, the media, the public, you can’t have people going back, coming up with new theories off the wall that really undo things that are working right now that really make us competitive. So the deputy administrator of SBA is coming. We have an all-star panel, including people like Jere Glover. And again, the Bayh-Dole Coalition, we never have theoreticians. We always have people who have actually done this in the real world. Washington is full of people with theories. That’s great. Nothing wrong with that. But these are things where innovation is something that really is hard to do; it takes a lot of risk; that risk is assumed by small companies, not the government; and we want people to understand that, because this is critically important to our future. As Jere said in the beginning, China is deadly serious about this. China is also replicating Bayh-Dole in their own universities. They’re putting billions of dollars into trying to surpass us in early stage research. They think they’ve already passed us in manufacturing. If we squander that lead, I don’t know how we get it back. I mean, if you lose innovation in manufacturing, I don’t know what you have left that you think is going to make us competitive. We went there in the ’70s. We revived ourselves when people thought we’d irrevocably lost our lead in technology. We are the undisputed leader of that. And the final thing I’ll say is Bayh-Dole and SBIR have helped launch the most incredible renaissance in technology in human history. In human history. So if you look at where we were in 1980, and if you look at where we are right now, it’s day and night. But again, if you forget the lessons of the past, you’ll have to pay them again, and a lot of times the piper the second time is a lot steeper than the first time.

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