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The National Institutes of Health has been called the jewel of American science. With a $17.8 billion annual budget, NIH doles out research grants to thousands of institutions where scientists labor to develop treatments for cancer, AIDS and any number of other life-threatening diseases. Although the government is good at developing drugs, it is ill-equipped to manufacture and market them. As a result, NIH historically has turned to the private sector, cutting deals with pharmaceutical companies that give them exclusive rights to drugs for a limited time as incentive for them to bring the compound to market. The result can be a windfall for the company that gets the rights to the drug. But the rewards often are scant to the taxpayers who paid for its development and who find they have restricted access and must pay high prices for the drug. Consequently, efforts to insure that drugs developed at taxpayer expense are provided at a reasonable cost have been an uphill battle. That’s because pharmaceutical companies argue that they, too, spend millions to get a drug to market and therefore should reap more of the rewards. During a recent court hearing in Miami involving a lawsuit between Miami-based Ivax and Bristol-Myers, Robert Lipper, vice president of biopharmaceutical research and development for Bristol-Myers Squibb, said his company invests more than $1 billion each year in research and development of new drugs. “The drugs that are successful fund the ones that are not, and there are an awful lot of failures,” said Lipper. Charged by the NIH with bringing Taxol to market, pharmaceutical giant Bristol-Myers managed to turn a five-year hold on the drug into nearly eight years of exclusive sales and millions in extra profits. Discovered and developed by the federal government at a cost of $32 million, the drug was turned over to Bristol-Myers in 1991 through what is known as a Cooperative Research And Development Agreement or CRADA. NIH currently has 145 active CRADAs, including one other than Taxol with Bristol-Myers. By being the first to file with the FDA for approval to use Taxol’s active ingredient paclitaxel to treat cancer, Bristol-Myers was given five years exclusive rights to the drug. After that, other drug companies would be free to develop and market their own versions of the drug. The CRADA also stipulated that the price of the drug should reflect the public investment in its development. But through a series of legal machinations, Bristol-Myers extended its hold on the drug by nearly three years and in the process garnered millions more in profits. “That was the ultimate hypocrisy,” said James Love, director of the Consumer Project on Technology, a Washington, D.C. consumer watchdog group started by Ralph Nader. Taxol can cost thousands of dollars per treatment, per patient, a far cry from the “fair and reasonable pricing” promised by Bristol-Myers executives when they announced the launch of the drug, he says. “The consequence has been restricted access to the drug,” says Love. Love and others question whether CRADAs are anything more than corporate welfare, giving pharmaceutical giants such as Bristol-Myers unbridled control over a product or technology that was developed largely at taxpayer expense. “I understand that the government doesn’t want to be in the business of retailing products, so there is a role for industry,” said Love. “The question is, do you give over a monopoly to the industry, or are there alternatives?” Until 1995, a federal regulation required companies working under CRADAs to charge reasonable prices. But the requirement was dropped because of concern that large pharmaceutical companies would have no financial incentive to work with NIH in developing drugs. Congress debated whether to re-impose the reasonable pricing provision earlier this year. Among those pressing for its passage was Democratic Sen. Paul Wellstone of Minnesota. “Our constituents believe that if we are going to be funding some of the research and these companies are going to benefit from our taxpayer dollars, then there ought to be an agreement that these companies are going to be willing to charge us a reasonable price. That is not too much to ask,” Wellstone said during a June hearing on the measure. But the drug industry doesn’t see it that way. “There is already a mechanism in place whereby the companies and the NIH negotiate a royalty payment,” argues Jeff Trewhitt, a spokesman for the Pharmaceutical Research Manufacturers Association in Washington, D.C. “And in the vast majority of cases it works because it was NIH and not us that, in 1995, dropped the reasonable pricing provision that was part of the CRADA law. We didn’t ask for that.” While the provision passed in the House, it failed to get out of the Senate. As a result, NIH has begun to draft its own policy to ensure an appropriate return-on-investment. The plan, which is expected to be ready by next July, would cover drugs that are developed under agency-funded research grants by FDA and that generate at least a half billion dollars in annual U.S. sales. The pharmaceutical industry, which opposes such a policy, points to the fact that companies spend $500 million on average to develop a single drug. “The real kicker is you don’t know until seven, eight, nine years into the process whether or not the product you are researching or developing will make it,” Trewhitt said. “For every five medicines, only one is ultimately approved to go to market.” Still, say critics, only 17 percent of key discoveries have come from private industry, with the vast majority generated by public, not-for-profit or foreign labs. Indeed, of the 21 most important drugs introduced between 1965 and 1992, 15 were developed using knowledge and techniques from federally funded research. They include Tamoxifin, for the treatment of breast cancer; AZT for the treatment of AIDS; the antidepressant Prozac; and Xalatan, a drug to treat glaucoma. There are “all sorts of things that can be done differently” to ensure that taxpayers benefit from the government’s work, argues Love. The question, he says, is whether NIH is acting in the best interest of the taxpayer or of the drug company: “The NIH thinks that the people who put up the money, the taxpayers, have no rights.”

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