By Lisa Seachrist

Washington Editor

WASHINGTON -- A proposal to give brand-name drug companies an extended period of market exclusivity in exchange for a three percent royalty paid to the federal government to fund research at the National Institutes of Health (NIH) cropped up during the conference committee to reconcile the Health and Human Services 1998 Appropriations legislation.

The proposal, which would grant Bristol-Myers Squibb Co. another five years exclusivity on the cancer drug Taxol, served as the subject of a hearing by the Labor, Health and Human Services and Education subcommittee of the Senate Appropriations Committee. While the proposal is backed by several large pharmaceutical companies and several patient organizations, no member of Congress has claimed sponsorship. The proposal potentially could apply to any drug that has received FDA aproval in the last five years.

"This is an intriguing proposal and an idea worth considering," said Sen. Arlen Specter (R-Pa.), chair of the subcommittee. "I'm apprehensive about more money for NIH in exchange for greater exclusivity. This proposal is not ripe for the conference report."

Called a "demonstration project to fund biomedical research," the proposal calls for products approved during the five years prior to enactment to be eligible for five more years of market exclusivity in exchange for a three percent royalty payment to the Department of Health and Human Services. The companies would also conduct research in the same disease area during those five years and generic drug makers would be frozen out of the market.

Bristol-Myers' Taxol rose to the surface as the most obvious beneficiary of the proposal. Taxol's active ingredient, paclitaxel, was discovered, formulated and initially tested by the National Cancer Institute. Bristol-Myers signed a cooperative research and development agreement with NCI to develop paclitaxel as a cancer drug. In 1992, Taxol received FDA approval.

Because Taxol is unpatentable, it received five years market exclusivity under the Waxman-Hatch Act. That exclusivity expires on Dec. 27, 1997.

Extension Would Hinder Competition

Immunex Corp. of Seattle is set to market its generic version of Taxol once that marketing exclusivity expires. Scott Hallquist, senior vice president and general counsel at Immunex, told the subcommittee that if the royalty was the issue, "name any rate you want. We just want a chance to compete with Taxol."

Immunex's generic is available in Canada where it has already pushed the price of the drug down. In the U.S., a single vial of Taxol costs $183, and in Canada the same vial costs US$100.

"This proposal would deter research," Hallquist said. "Simply put, other companies that otherwise might produce new versions of drugs with fewer side effects, easier delivery systems or greater efficacy would be unable to receive approval and would have no incentive to conduct research."

Sen. Tom Harkin (D-Iowa), a subcommittee member, questioned the proposal's fairness for companies who have invested time and money in producing generics. "Is it fair to have Congress swoop down and extend a drug's market exclusivity?" he asked.

However, the measure has the backing not only of large pharmaceutical companies, but also of the several patient organizations including the Cooley's Anemia Foundation and the Alliance for Aging Research.

"The growing tide of older adults is just now beginning its sharpest rise," said Daniel Perry, executive director of the Alliance for Aging Research. "It is imperative that resources be dedicated today to research to reduce the costs of chronic diseases of aging. This proposal is an excellent private/public partnership."

Hallquist, however, disagreed calling the proposal a "submarine that will greatly raise Medicare costs over the next few years." *