marching in' on nih-funded drugs

GOVERNMENT & POLICY

'MARCHING IN' ON NIH-FUNDED DRUGS Consumer group asks agency to use rights under Bayh-Dole Act to ensure reasonable drug prices SUSAN R. MORRISSEY, C&EN WASHINGTON

IN I988, ABBOTT LABORATORIES RE-ceived a National Cooperative Drug Discovery Group for AIDS grant, ad­ministered by the National Institute of Allergy & Infectious Diseases at the

National Institutes of Health. The $3.5 million, five-year grant supported Abbott scientists in the discovery of the protease inhibitor ritonavir, which was further de­veloped and marketed by Abbott as Norvir. This successful drug, which was intro­duced in 1996, was thrust into the spot­light when Abbott raised its price in the US. by 400% last December.

In many ways, the case of Norvir is a good example of how technology de­veloped with federal funds can be effectively transferred into the com­mercial sector where it can be devel­oped into a product that benefits countless people. This outcome is, in fact, the goal of the Bayh-Dole Act of 1980—the legislation that gpverns the transfer of federally funded research from the lab to the marketplace.

The Norvir case, however, has also raised the question of whether Bayh-Dole gives government agencies the right to regulate the price of drugs that are developed with federal funds when pricing abuses are reported. At issue is the language used in the legislation to define the conditions under which agencies can exercise their rights to step in to change licensing agreements.

It is this language that is at the heart of a petition filed with NIH by Essen­tial Inventions, a Washington, D C , consumer advocacy group. In the pe- ~~ tition, Essential Inventions claims that Ab­bott's price increase for Norvir violates the spirit of the Bayh-Dole law, and it requests that NIH use its rights under the law to make the patents involving the active in­gredient ritonavir available to a third par­

ty This third party could then produce a generic drug and make it available to the public at a reasonable price, Essential In­ventions argues. Norvir is currently sched­uled to go off patent in 2014.

To understand Essential Inventions' pe­tition, it is first necessary to understand Bayh-Dole, which governs these activities. Bayh-Dole was put in place 24 years ago to give universities and businesses the ability

SOARING Abbott increased the cost of its drug Norvir by 400% last December, while keeping the cost of Kaletra, which contains Norvir, unchanged, raising issues of unfair business practices.

to patent and hold the rights to inventions they make with federal funding. The in­stitutions can then license the invention to a third party, giving preference to small businesses, for commercial development. The government retains a nonexclusive li­

cense to the invention, meaning the gov­ernment is free to use the resulting patent­ed material without paying a royalty And most important to the Norvir case, the government also keeps the right to step in and issue a license if the benefits of the patented technology are not being real­ized—referred to as "march-in'' rights.

But the government cannot just march in as it pleases. The legislation requires that the patent holder make the invention avail­able to the public on "reasonable terms" and sets forth four conditions to determine if this criterion is violated. If any one of the four conditions is not met, then the gov­ernment agency has the authority to act.

As outlined in Section 203 of Tide 35 of the U.S. Code, the government can march in and ensure a license is issued if the patented technology is not being made available to the public in a reasonable time frame. In other words, the patent holder or its licensees simply cannot put federal­

ly funded inventions on a shelf to col­lect dust.

THE LAW also allows for these rights to be exercised if the patent holder or its licensees are not able to meet emerging or existing public health or safety needs.

The final two conditions—which are not at issue in the Norvir case— cover the instances where the patent holder or its licensees are unable to meet conditions specified by federal regulations or if the product will not be made in the U.S.

Requests to government agencies such as NIH to exercise their march-in rights under Bayh-Dole are rare and have never resulted in any formal ac­tion from the agencies. In the past, these requests involved situations where products weren't making it to market in a reasonable time, an NIH official notes.

For example, in 1997, the pharma­ceutical company CellPro Inc. asked NIH to use its march-in rights with re­spect to an invention related to stem

~~ cell technology made by Johns Hop­kins University and licensed to Baxter Health Care Corp. At issue was a device for which Baxter failed to take reasonable steps to bring it to market, according to the Cell-Pro petition.

"This case involved two parties that

Under Bayh-Dole, you have to make things available on 'reasonable terms/ What else does it mean besides price?" 34 C&EN / SEPTEMBER 20, 2004 H T T P : / / W W W . C E N - O N L I N E . O R G

were competing with each other to get a product on the market," an NIH official explains. In fact, CellPro filed the petition only after a U.S. district court ruled that the device marketed by CellPro was a will­ful infringement of the patents licensed to Baxter. NIH ultimately decided that march-in proceedings were not necessary because Baxter had a device available un­der premarket approval

The grounds for the Norvir petition filed this year by Essential Inventions are different, however. Norvir is a drug that can be used by itself to treat HIV or as a booster drug to increase the effectiveness of other protease inhibitors. Last year, Ab­bott raised the price of this drug by 400% in the U.S., which impacted the cost of HIV regimens that include it. The price increase, however, did not apply to anoth­er Abbott HIV drug, Kaletra, which con­tains Norvir.

In addition to its Norvir petition, Es­sential Inventions has filed a second peti­tion related to unreasonably high drug pric­ing. That petition focuses on Pfizer's glaucoma drug latanoprost (marketed as Xalatan), which is being sold at a price in the U.S. that is two to five times higher than that in Canada or Europe. This drug was developed in the early 1980s at Co­lumbia University and licensed to Phar­macia Corp., now Pfizer. NIH, through the National Eye Institute, contributed more than $4 million to support the de­velopment of this drug.

ΊΝ GENERAL, our view is that the prices for products that were developed with tax­payer money should not be multiply more expensive in the U.S. than they are in oth­er industrialized countries," says Robert Weissman, general council for Essential Inventions. "Under Bayh-Dole, you have to make things available on 'reasonable terms,' " he explains. "What else does it mean besides price?"

The intent of the law is not so clear-cut to those who have studied it, however. "The question of whether when Congress talked about making federally funded in­ventions available to the public on rea­sonable terms they contemplated that it would include pricing is a very disputed question," explains Arti K. Rai, professor of law at Duke University "From the leg­islative history, it's not entirely clear."

"When I first heard about the sugges­tion of reasonable pricing, I thought it was ridiculous," says John Raubitschek, patent counsel for the Department of Commerce and coauthor of a review paper in prepa­ration on the issues of march-in rights. But

he admits, after taking a closer look, it's not so straightforward. "From the history of Bayh-Dole, it's fairly clear that the focus was on utilization as opposed to the ben­efits being available on reasonable terms. It's just that somehowutilization shifted to the idea of reasonable terms and the ques­tion is, How far should you take it?"

To help decide if a formal march-in hearing was war­ranted in the Norvir case, NIH held a public meeting in May to gather informa­tion (C&EN, May 31, page 6). At that hearing, Essen­tial Inventions presented its case that the phrase "rea­sonable terms'' in the law was intended to mean rea­sonable price and, there­fore, NIH should exercise Rai its march-in rights. Abbott, on the other hand, defended its 400% price increase by noting that the drug is still the "lowest priced drug in its class at its common dose and remains the lowest cost component of a typical HIVregimen."

Also at the NIH meeting was former Indiana Sen. Birch Bayh, cosponsor of Bayh-Dole, who offered his insight into the legislation. He said that the "clear in­tent'' of this law was to bring inventions to market, and march-in rights were intend­ed to ensure the public's health and safety needs were met, not to set prices.

Although legally Bayh's opinion is not binding, Rai notes that "NIH probably considered that opinion quite heavily in determining what to do." And it appears that that was the case.

In August, NIH released a statement from agency Director Elias A. Zerhouni saying march-in proceedings were not war­ranted in this case (C&EN, Aug. 9, page 12). Zerhouni noted that Norvir has been publicly available to patients for eightyears and there was no evidence march-in could alleviate any health or safety needs not al­ready reasonably satisfied by Abbott.

"NIH agrees with the public testimony that suggests that the extraordinary rem­edy of march-in is not an appropriate means of controlling prices," Zerhouni wrote. "The issue of drug pricing has glob­al implications and, thus, is appropriately left for Congress to address legislatively''

If the decision had gone the other way, it would have undercut the incentive sys­tem that Bayh-Dole gives, Raubitschek says. "Bayh-Dole is a balancing of interests and if you affect the balance, the whole thing could get out of kilter. To the extent

that NIH chose not to have a march-in rights proceeding, I think the balance of Bayh-Dole is retained,'' he says.

However, NIH's decision not to pursue march-in proceedings has caused some members of Congress to join Essential In­ventions in calling on the agency's parent,

the Department of Health & Human Services, to re­consider the issue. To date, HHS has not replied.

The FederalTrade Com­mission was also asked by Congress to look into whether Abbott violated any antitrust laws, but FTC decided not to open an investigation.

With respect to Essen­tial Inventions' petition dealing with Xalatan, the verdict is still out. An NIH office tells C&EN that a

decision is expected soon but would not elaborate as to what the decision would be.

These two cases highlight a broader is­sue in which Congress has been interest­ed for years. Most recendy, language in the Conference Report of the Consolidated Appropriations Act of 2004 requested that NIH prepare a report on the afford-ability of inventions and products devel­oped with federal funds.

In July,.NIH released a report to Con­gress called Affordability of Inventions & Products. It notes that the federal gov­ernment holds rights to only a few com­mercial products and inventions. In fact, the report cites the 2003 General Ac­counting Office (now the Government Accountability Office) report "Technol­ogy Transfer Agencies' Rights to Feder­ally Sponsored Biomedical Inventions" (GAO-03-536), which found that only five of the top 100 pharmaceuticals pro­cured by the Department ofVeterans Af­fairs in fiscal 2001 involved active gov­ernment rights.

"Even in those few cases in which an NIH invention is an identifiable part of a final product, the invention would typi-caUy be one of numerous components that would go into building the product," the report says. *Agood analogy would be that of an automobile, where different com­ponents are invented and manufactured by a variety of entities. Just as the provider of any one component of an automobile can­not dictate the cost of the final vehicle, the provider of a single technology in the development of a therapeutic drug can­not dictate the final cost of the drug," the report explains. •

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