Washington Editor

WASHINGTON - If the government demands a bigger cut on drugs developed from technology discovered at the National Institutes of Health, some lawmakers fear private-sector collaborations driven by government discoveries will come to a screeching halt.

Others argue that drug companies, such as New York-based Bristol-Myers Squibb Co., are getting fat off products bankrolled by taxpayers. And to add insult to injury, they said, these same pharmaceutical and biotechnology firms that reap financial benefits because of their relationships with the NIH, turn around and charge Medicare recipients exorbitant prices for prescription drugs that can be purchased for a fraction of the cost in Canada.

In a House Energy and Commerce health subcommittee meeting Thursday, politicians on both sides of the aisle aired concerns about drug industry innovation and prices before panels of government and academic officials.

While the panels were called to discuss the transfer of research from the "bench to the bedside," much of the three-hour meeting centered on who's getting gypped - the government or the drug industry.

Take, for example, the situation surrounding development of the cancer drug Taxol. Rep. Sherrod Brown (D-Ohio) said the NIH spent $484 million on early stage research for the product, eventually licensing it to BMS, which in turn spent $1 billion developing it. But here's the part that irks Brown - between 1993 and 2002, BMS made $9 billion on Taxol and the government got a "paltry $35 million."

Kathy Baum, spokeswoman for BMS, wouldn't comment on Brown's figures. However, she said the company has not increased the price of Taxol since its entry on the market a decade ago.

Nevertheless, Rep. Bart Stupak (D-Mich.) said the government should at least receive a dollar-for-dollar return on its investment.

When Stupak asked NIH and FDA officials whether a better reimbursement system should be created, no one jumped to answer. Finally, Mark Rohrbaugh, director of the NIH's office of technology transfer, said NIH research is usually early stage; in fact, "our research is usually only a small part of a final product."

Responding to Brown's charges against Taxol, Rohrbaugh said the NIH simply provided BMS the method of administering the drug. He views the Taxol story as one of the NIH's greatest successes. Not only has Taxol saved or extended the lives of thousands of people with breast, ovarian, lung or AIDS-related cancers, it also has been tested in other cancers either alone or in combination with other therapies.

"We license the technology at a very early stage. It's the industry that takes on the greatest risk," he said.

Since most licenses are negotiated on early stage development, it's difficult for the NIH to make demands on a company when no one is sure whether the technology will be worthwhile, he said. In fiscal year 2002, the NIH collected $51 million in royalty income, and over the past nine years the agency has generated $325 million in royalties.

Companies and investors are not willing to take a chance on early stage technologies if the government gets to impose hefty licensing fees or price controls, Brown said.

Rep. Lois Capps (D-Calif.) said it seems like the drug industry is holding the NIH hostage.

She asked if the committee should revisit the Bayh-Dole Act of 1980, legislation designed to promote the transfer of government-sponsored research to universities and small businesses. The law was created in response to concern that the majority of technologies developed with federal funding were not being commercially exploited.

According to written testimony submitted by Phyllis Gardner, associate professor of Medicine at Stanford University in Palo Alto, Calif., who spoke on behalf of the Biotechnology Industry Organization, prior to Bayh-Dole, federal agencies would rarely relinquish ownership of federally funded inventions to academic and private institutions, even when private-sector scientists and engineers actually contributed to the inventions. "Valuable technology was left languishing on the shelves of research institutions," the statement said.

According to BIO, since enactment of Bayh-Dole, technology partnerships have led to the founding of more than 1,100 companies based on NIH and university research. At Stanford, many "spin-off" companies have been established by current or former students and faculty.