Please do not quote or cite without permission.
Presented to the second meeting, "NIH Collaborative Research and Development Agreements (CRADAs): Perspectives, Outlook, and Public Development," Advisory Committee to the Director, NIH, September 8, 1994. Note, PHS/NIH dropped its "reasonable pricing" requirements for exclusive licenses, including those arising from CRADAs, in early 1995. See related news article.
My name is Ron Rader. I am president of the Biotechnology Information Institute in Rockville, a desktop publishing company. I publish the Antiviral Agents Bulletin, the only periodical specializing in antiviral drug and vaccine development, and the Federal Bio-Technology Transfer Directory, a book and database that abstracts and indexes in-depth all federal labororatory inventions from 1980-present. Some information about the Directory and about federal and NIH technology transfer are set out in back. I don't have time to discuss the Directory, but I would like to caution you that there are limitations to the data presented in my hand-out. These statistics are derived from a rigorously indexed database and many of the criteria (more fully defined in the book) are different from those used by NIH.
Professionally, I am a biomedical and pharmaceutical information specialist. I have been following NIH and federal technology transfer since 1985, working as Manager of Information Services for a biotechnology company very interested in federal technology transfer. With their publishing subsidiary, I was Editor of BioINVENTION, a U.S. patent abstract and news periodical, for five years and founded the Antiviral Agents Bulletin in 1988. I should state that my activities are fully self-financed with sweat equity. I receive no funds or other assistance from any government or other organization.
I am going to briefly present my own broad assesment of PHS and NIH technology transfer and the "reasonable pricing" issue. By a number of conventional measures, and in comparison with all other biomedical research organizations, including the largest pharmaceutical companieis, PHS and NIH are number one in technology transfer in the biomedical, biotechnology and pharmaceutical areas.
PHS and NIH have:
a) the largest R&D budgets, larger or comparable to those of the largest pharmaceutical companies;
b) are number one recipient of patents in the biotechnology and biopharmaceutical areas;
c) by far have the largest portolio of inventions available for licensing; and
d) have the most products, notably therapeutics, in development, both in terms of those being developed in-house and those licensed out to others that are in active development.
The magnitude of PHS and NIH involvement in the biomedical innovation and technology transfer is self-evident. The PHS section in the Federal Bio-Technology Transfer Directory is over 250-pages and describes over 1,200 patent properties; 800 invention licenses granted; and 250 CRADAs. These are mind numbingly high indicators of innovation and technology transfer. However, we must realize that most of these inventions and technology transfers are recent, have resulted in few major pharmaceutical products, and that NIH is just getting oriented in terms of its technology transfer. With the "reasonable pricing" issue NIH is being forced to go through some growing pains.
The "reasonable pricing" clause has been and is a major obstacle and contrary to PHS and NIH accomplishing its goal of advancing the public health through technology transfer. Most companies rightly view the "reasonable pricing" clause and NIH as best avoided. NIH is considered a poor or very risky source for technology and collaborative R&D. And it is. Besides the threat of intrusive price controls, this clause makes any licensee or collaborator a potential target for the types of attacks we have heard here today. This is needless and should be corrected forcefully to begin to repair the considerable rift that drives our nation's most innovative and research-intensive industries away NIH and federal technology transfer.
Let's face it, "reasonable pricing" is an undefined and unenforceable clause that was instituted for politically expedient reasons. It is excess baggage from a previous administration that surely never really meant for it to actually be implemented. The mere existence of the "reasonable pricing" clause, much less its implementation, seriously hinders and contradicts the NIH technology transfer and public health mission. It will take years of effort to repair the damage it has done.
What makes NIH and its research so special and different from all other federal laboratories and research organizations that it should control the prices of its technology transfer partners? Nothing, except the "reasonable pricing" clause.
"Reasonable pricing" is certainly appealing from an ethical and idealistic view. However, we must ask: Are there any clear examples of unreasonable pricing of NIH or any other federal biomedical inventions? No. Is there any cencensus in the medical or research communities or body of evidence supporting the contention that NIH of other federal inventions are over-priced? No.
In fact, the evidence is pretty weak. Ceredase and taxol are most often presented as examples, but these were developed through CRADAs, which themselves were far from typical and primarily involved clinical trials, and have little to do with the issue of products developed through exclusive licensing, whether licenses of off-the-shelf inventions or those developed through CRADAs.
NIH must go through growing pains, as most other major federal research agencies did about during the 1980s. It must realize that no matter how appealing, interfering with its technology transfer partners and the marketplace is counter productive. Implementation of "reasonable pricing" ultimately leads to higher prices due to decreased competition, would result in unfair competition from subsidized products, and is counterproductive. Whether it's microcircuitry, energy, military, industrial, agricultural or whatever technologies, other federal agencies have learned that, in the end, it is cheaper for everyone, including themselves and the consumer, to engage in competitive technology transfer and avoid subsidies and price controls. Many at NIH fear political fallout from exclusive licensing, but I would think it you're asking for much greater problems to have an federal agency trying to control industry pricing and strategic planning.
The real issues involved with the discussions here revolve around issues that NIH has much experience with - conflict of interest and fair competition. We are really talking about NIH establishing limits on its own involvement in technology transfer. When does NIH contribute or invest too much in a technology or product in development? How should NIH balance its interests in promoting commercialization of its own and others' technologies with the need to avoid unfair subsidies to companies, avoid picking favorites and avoid backing technologies that fail in the real world?
The worse case anecdotes discussed in connection with "reasonable pricing" actually concern dealing with successes in terms of bringing breakthrough products to the marketplace. NIH may need to take such "worse case" success scenarios into account, such as finding a truly effective anti-HIV drug, when deciding how much to get or remain involved in development of a product or technology. In some cases, it may be prudent for NIH to cut and run as soon as commercial success appears sufficiently likely. For example in hindsight, as soon clinical efficacy was demonstrated, it might have been prudent for NIH to back off from its support, conducting most of the clinical trials and its fixation with AZT. It might have more quickly moved to concentrate on intensive development of competing products, such as its own inventions, DDI and DDC, combination protocols and new products. Surely, many AIDS activists have this view. NIH should endeavor to diversify its activities and promote competition and progress by moving on to next generation technologies as soon as one shows significant commercial promise and has a CRADA partner/licensee actively bringing this to market.
In conclusion, "reasonable pricing" is not in the interests of NIH, industy or consumers. There may well be cases where NIH may find it politcally unacceptable not to seek to assure reasonable prices. If this is the case, this should be done very explicitely and up-front. For example, it might be reasonable in some cases to request candidate exclusive licensees and collaborators to propose upper limits they would charge after acheiving an economically significant market size, such as 100, 500 million or billion dollar markets for an exclusively licensed biopharmaceutical. Such straightforward and readily confirmable parameters linked to upper price limits could be used along with all the other current criteria for selecting exclusive licensees and CRADA partners.
However, I am afraid that any implementation of "reasonable pricing" will continue to hinder NIH technology transfer, be counter-productive, non-competitive and constitute a major conflict of interest on the part of NIH. It will surely be bad for my business, selling books and databases providing access to federal bio-technology transfer. It would surely be bad for NIH and all federal technology transfer efforts