How bio­phar­ma com­pa­nies use NIH and vice ver­sa

An ar­gu­ment has been brew­ing on Capi­tol Hill and else­where that boils down to the the­o­ry that US tax­pay­ers are fronting bil­lions of dol­lars’ worth of pub­lic re­search that trans­lates in­to ear­ly-stage prod­ucts that are lat­er sold to com­pa­nies, go on to win FDA ap­proval and then reap mil­lions or bil­lions in sales, al­though the gov­ern­ment nev­er sees a dime of those earn­ings.

With the help of a new Con­gres­sion­al Re­search Ser­vice (CRS) re­port pub­lished Fri­day and some oth­er ma­te­ri­als, Fo­cus can break down what’s hap­pen­ing.

1. Do tax­pay­ers pay for bil­lions in re­search?

Yes. In FY 2018, the Na­tion­al In­sti­tutes of Health (NIH) had a bud­get of more than $34 bil­lion to sup­port more than 300,000 sci­en­tists and re­search per­son­nel work­ing at over 2,500 in­sti­tu­tions across the US and abroad. And from FY 1998 to FY 2003, Con­gress dou­bled the NIH bud­get. The to­tal NIH ap­pro­pri­a­tion for FY 2019 is $39 bil­lion.

2. Does NIH re­search trans­late in­to ear­ly-stage prod­ucts?

Some­times. And here’s where the quan­tifi­ca­tion of NIH’s work gets tricky.

As the CRS re­port notes, over 50% of NIH fund­ing sup­ports ba­sic re­search, mean­ing, “NIH fund­ed re­search is, to a greater ex­tent, in­di­rect­ly in­volved—by gen­er­at­ing sci­en­tif­ic knowl­edge and in­no­va­tions that aid in phar­ma­ceu­ti­cal de­vel­op­ment. For ex­am­ple, im­por­tant ba­sic ad­vances in re­search, such as re­com­bi­nant DNA, can lead to the de­vel­op­ment of whole new class­es of drugs.”

But drugs with a patent held by NIH or NIH-fund­ed re­searchers rep­re­sent a small por­tion of all ap­proved drugs by the US Food and Drug Ad­min­is­tra­tion (FDA). A Health Af­fairs study from 2011 found that 9% of the new drugs ap­proved by FDA from 1988 to 2005 were based on a patent held by ei­ther a gov­ern­ment agency or a non­govern­men­tal in­sti­tu­tion that had re­ceived gov­ern­ment sup­port.

An­oth­er study from the New Eng­land Med­ical Jour­nal in 2011 found that of the 1,541 drugs ap­proved by FDA from 1990 through 2007, 143, or 9.3%, re­sult­ed from work con­duct­ed in pub­lic sec­tor re­search in­sti­tu­tions, in­clud­ing all uni­ver­si­ties, re­search hos­pi­tals, non­prof­it re­search in­sti­tutes and fed­er­al lab­o­ra­to­ries in the US.

But when the di­rect and in­di­rect im­pact of NIH fund­ing is con­sid­ered, the re­sults show a larg­er NIH im­pact. For in­stance, a PNAS study from 2018 found that NIH was “di­rect­ly or in­di­rect­ly as­so­ci­at­ed with every one of 210 NMEs [new mol­e­c­u­lar en­ti­ties] ap­proved from 2010-2016.”

Sim­i­lar­ly, 2018 study de­ter­mined that NIH in­vest­ments in a par­tic­u­lar re­search area in­crease sub­se­quent pri­vate sec­tor patent­ing in that area—a $10 mil­lion in­crease in NIH fund­ing for a re­search area re­sults in 2.7 ad­di­tion­al patents.

But as NIH’s Steven Fer­gu­son not­ed in the Jour­nal of Com­mer­cial Biotech­nol­o­gy in 2012, it’s not as if NIH can take these ear­ly-stage prod­ucts to mar­ket. And as with bio­phar­ma com­pa­nies, the num­ber of fail­ures con­tin­ues to heav­i­ly out­num­ber the ap­provals. Fer­gu­son said: “Be­cause many, if not most of the tech­nolo­gies de­vel­oped at the NIH and FDA, are ear­ly stage bio­med­ical tech­nolo­gies, the time and de­vel­op­ment risks to de­vel­op a com­mer­cial prod­uct are high.”

3. Does NIH make mon­ey from its ear­ly-stage prod­ucts?

Yes. From 1988 to 2004, NIH en­tered in­to al­most 2,500 li­cense agree­ments and gen­er­at­ed more than $500 mil­lion in roy­al­ty rev­enues. More re­cent­ly, roy­al­ties have amount­ed to more than $100 mil­lion per year.

NIH’s Of­fice of Tech­nol­o­gy Trans­fer FY 2014 an­nu­al re­port ex­plains how roy­al­ties col­lect­ed on prod­uct sales, pri­mar­i­ly drugs and bi­o­log­ics, ac­count for 84% of the $138 mil­lion in roy­al­ties col­lect­ed in 2014. And the three best-sell­ing prod­ucts uti­liz­ing tech­nol­o­gy li­censed from NIH that year were Janssen’s Prezista, a nov­el pro­tease in­hibitor for the treat­ment of HIV-1 in pa­tients who are non-re­spon­sive to ex­ist­ing an­ti­retro­vi­ral ther­a­pies, Mer­ck’s Gar­dasil, a vac­cine to pro­tect against cer­vi­cal can­cer, and As­traZeneca’s Synagis, a mon­o­clon­al an­ti­body for the treat­ment of Res­pi­ra­to­ry Syn­cy­tial Virus (RSV) in in­fants.

4. What else is com­ing?

Oth­er ques­tions are mount­ing now, in­clud­ing whether the roy­al­ties that NIH and oth­er gov­ern­ment agen­cies reap from its ear­ly-stage prod­ucts are ad­e­quate, and whether NIH should be able to step in and low­er the price of a prod­uct that it helped to de­vel­op.

Late last month, some are ques­tion­ing why the CDC is not reap­ing prof­its from patents it has on a li­censed HIV drug brought to mar­ket by Gilead. Gilead, how­ev­er, con­tends that the patents are in­valid.

More re­cent­ly, the Na­tion­al In­sti­tute of Stan­dards and Tech­nol­o­gy (NIST) is look­ing in­to the idea of clar­i­fy­ing that the gov­ern­ment can­not uni­lat­er­al­ly set prices for cer­tain phar­ma­ceu­ti­cals. The is­sue at hand con­cerns whether cer­tain reg­u­la­tions (nev­er used by NIH), un­der the Bayh-Dole Act, should be al­tered so the gov­ern­ment can­not con­trol the price of some phar­ma­ceu­ti­cals it helped to de­vel­op. Sev­er­al groups, in­clud­ing Doc­tors With­out Bor­ders, are push­ing back on those NIST changes.

CRS Re­port on NIH


First pub­lished in Reg­u­la­to­ry Fo­cus™ by the Reg­u­la­to­ry Af­fairs Pro­fes­sion­als So­ci­ety, the largest glob­al or­ga­ni­za­tion of and for those in­volved with the reg­u­la­tion of health­care prod­ucts. Click here for more in­for­ma­tion.

Im­age: NIH

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