NIH Return-On-Investment Report Will Be Subject Of Senate Hearing This Fall

The Senate Commerce/Science Subcommittee will hold hearings this fall on the return to taxpayers from research funded by the National Institutes of Health.

Subcommittee Chairman Wyden (D-Ore.) announced the hearing Aug. 20 after NIH completed a report to Congress on the role of federal research in the development of "blockbuster" drugs.

An amendment authored by Wyden in the agency's fiscal 2001 appropriations bill directed NIH to develop a plan to ensure a return on investment for products of taxpayer-funded research that generate over $500 mil. in U.S. sales per year (¹ (Also see "NIH Royalty Plan Due March 31 Under Wyden Amendment To Funding Bill" - Pink Sheet, 3 Jul, 2000.)).

Wyden first proposed requiring NIH to receive repayment of grant awards when they lead to an FDA-approved product, and to collect a 1% royalty for "blockbuster" products. He opted not to pursue that amendment after consultation with other members of the appropriations subcommittee.

The NIH report does not recommend "royalty redirection," saying that "requiring direct financial recoupment of the federal investment in biomedical research can potentially impede the development of promising technologies by causing industry to be unwilling to license federally funded technologies."

The NIH report points to resistance from research universities as one reason for dismissing the "royalty redirection" approach.

The proposal "was met with strong resistance from the academic community because it was perceived as a tax that would, at best, have no net effect on the price of a therapeutic drug and, at worst, increase its cost," the report says. "Further, it was argued that such redirection of royalties would undermine the research enterprise, drain funds from academic development and discourage faculty members from embarking in the technology transfer process," the report adds.

NIH also heard "concern that any movement to extract a direct financial return for the investment would dampen, if not destroy, industry's willingness to establish agreements with academic institutions."

The agency noted prior experience with the "reasonable pricing" clause in Cooperative Research & Development Agreements. Under scrutiny from then- Rep. Wyden, NIH enforced the clause in discussions with Bristol-Myers Squibb over the pricing of the oncologic agent Taxol (paclitaxel) in the early 1990s. In the wake of that experience, NIH found that interest in CRADAs was restrained, and the agency dropped the policy in 1994.

A royalty policy could also lessen the government's ability to maintain standards for the conduct of research, NIH said.

"Of even greater concern should be the potential that the economic disincentives of recoupment will make it expedient for industry to move research outside the federal milieu," the report declares. "Such action would...have the unintended consequence of removing the research from federal oversight."

Rather than seek direct repayment on its research, NIH suggests focusing on the long-term payoff to society from medical advances.

The report cites estimates by the Congressional Joint Economic Committee that increases in life expectancy due to healthcare advances translate to $2.4 trillion in net economic benefits in the U.S. "If only 10% of these increases in value ($240 bil.) are the result of NIH-funded medical research, it indicates a payoff of about 15 times the taxpayers' annual NIH investment of $16 bil.," the report states. NIH's FY 2002 budget is expected to be about $23 bil.

The report also cites practical obstacles to creating a royalty policy along the lines suggested by Wyden.

"While NIH's federally funded research has contributed in a substantial, dramatic, yet general way to advances in medicine and biology, the direct contributions to a final therapeutic product as a consequence of the [technology transfer] process is limited and difficult to determine," the report says.

The report cites the difficulty NIH encountered in analyzing the contribution of federal research to drugs that generate domestic sales of more than $500 mil.

The agency determined that 47 drugs met the sales threshold in 1999. However, "determination of which of these had intellectual property that ties back to federal funding was particularly difficult."

"This is due to the fact that implementing regulations of the Bayh-Dole Act do not require that investigators provide such information to the funding agency, and it is generally not provided," the report says. "As a result, tracking down the 'pedigree' of these drugs had to be done manually and on a case-by-case basis."

The report concludes that four of the 47 "blockbuster" products do rely on patents obtained with the help of federal funding. The four products are Taxol, the two erythropoietin brands (Amgen's Epogen, Ortho's Procrit) and Amgen's Neupogen (filgrastim).

"Epogen and Procrit are based on different uses of a patented process technology developed at Columbia University with support from NIH grants," the report says. "Columbia licensed their technology to Amgen for Epogen and to Johnson & Johnson for Procrit."

The Columbia patent expired a year ago. The university received royalties from 18 different products that involved licenses to the patent (² (Also see "Amgen Epogen Profit Margins Could Rise 1% After Columbia Patent Expires" - Pink Sheet, 22 May, 2000.)). Immunex' arthritis agent Enbrel (etanercept) and Genentech's oncologic Herceptin (trastuzumab) were among other licensees: neither had sales of $500 mil. in 1999, but both are growing rapidly.

Neupogen uses "patented technologies for a process and a composition licensed from Memorial Sloan-Kettering Cancer Center," the report notes. "These technologies were developed with NIH grant support."

Finally, "Taxol is manufactured by Bristol-Myers Squibb using a patented process technology developed by Florida State University with NIH grant funds," the report says. "In addition, the NIH has rights to an underlying technology arising from a NIH CRADA collaboration with BMS."

The report notes that the agency has received a direct return from Taxol: "NIH has received from BMS tens of millions of dollars in royalties from FY 1997 to FY 2000 under the license to the NIH technology."

The list of blockbusters funded by taxpayer research is much shorter than was suggested by Wyden in proposing the report. In a floor statement last year, the Oregon Democrat cited Lilly's Prozac (fluoxetine), Merck's Mevacor (lovastatin), Bristol's Platinol (cisplatin), and GlaxoSmithKline's Imitrex (sumatriptan) and Zovirax (acyclovir) as examples.

Mevacor, Platinol and Zovirax sales all peaked before 1999 and did not reach $500 mil. that year. Prozac and Imitrex did, but NIH apparently concluded that there were no patent rights for the products that resulted from federal investments.

Instead of a royalty program, the report recommends steps to make it easier to track the "pedigree" of products supported by federal research.

NIH plans to "modify its existing extramural policy manuals to ensure that grantees and contractors report to the agency the name, trademark or other appropriate identifiers of a therapeutic drug that embodies technology funded by the NIH once it is FDA-approved and reaches the market," the report says.

The agency plans to "make this information available to the public in a web-based database." NIH will also "develop standardized language to simplify the reporting requirements." Finally, the agency will comply with the same process for intramural research.

NIH also proposes a "continued dialogue" with representatives from "government, academic and research entities, private industry and other appropriate interested parties" to "aid in the evaluation of the costs and benefits of technology transfer to the taxpayers and inform future decisions by NIH."

The Pharmaceutical Research & Manufacturers of America, in a July letter to NIH, agreed with the need for measures "to increase the transparency of licensing agreements." PhRMA recommended that NIH's annual report to Congress "provide some additional data...to outline the success you have had in securing positive results in technology transfer."

"Specifically, this report could detail the manner in which you negotiate and obtain licenses on commercially viable terms," the letter says. "In addition, the report could focus on the criteria you apply in determining when and whether to seek an exclusive or nonexclusive license...[and] a comprehensive assessment of the public health and socio-economic benefits of technology transfer."

In his statement on the report, Wyden did not object to NIH's conclusions or repeat his call for a royalty program. "Congress has a responsibility to investigate how to create an effective information gathering and sharing process that promotes the dual goals of innovative research and accountability to the taxpayer," he said. The hearings will "discuss the NIH recommendations and a possible timeline for implementation."