BETHESDA, Md. _ The National Institutes of Health (NIH) is onthe verge of recommending that the so-called `reasonable price'clause be dropped from Cooperative Research and DevelopmentAgreements (CRADA), except in a handful of cases where the NIHhas developed a product to an advanced stage on its own.

The agency is in the final stages of negotiations with the PublicHealth Service (PHS) to delete the clause, which seeks to establish a"reasonable relationship" between the price of a product and "thepublic investment in that product."

NIH Director Harold Varmus, speaking at a meeting of the NationalTask Force on AIDS Drug Development (NTFADD) on Thursday,said that his agency will present its final proposal for a policy changein the next two to four weeks. "I've seen clear evidence that theclause, at the moment, is providing an impediment to theperformance of our science, which is our major duty at the NIH,"Varmus told BioWorld.

He said the number of documented cases in which industry hasrefused to work with NIH scientists due to the clause is on the rise."In the current climate, many companies won't deal with the NIH onany terms because of this policy," said Varmus.

Daryl Chamblee, acting deputy director for science policy andtechnology transfer, said the NIH will likely recommend deletion ofthe clause from all CRADA contracts but will offer an alternative forcases involving heavy NIH investment. In those cases, she said, theNIH may suggest to the PHS that the CRADA be "competed." Inother words, companies could vie for the CRADA by identifying the"additional benefits" that would accrue to the public if they won anexclusive license to an NIH-patented product or technology.Currently, the clause only applies to exclusive license agreements.Specifically, companies would need to describe detailed accessibilityplans to prove that they would make the end-product available to thepublic.

An Exception To The Rule

"We would like to eliminate this obstacle [the reasonable pricingclause] but preserve some ability to negotiate in cases where the NIHhas taken on a substantial portion of the risk of productdevelopment," explained Varmus. He underscored the point thatcompanies that wish to collaborate with government scientists onthese types of projects must "consider issues of access."

Chamblee said that the NIH reached two conclusions after twopublic forums to discuss the controversial issue: 1) the clause shouldnot impede science, and 2) the NIH is not a regulatory agency. Thesetwo assumptions formed the basis of its policy change proposal.

According to sources close to the NIH policy-making process, adetailed internal review of the more than 240 CRADAs signedbetween the NIH and industry to date revealed that, in a vastmajority of cases, industry _ and not the NIH _ held criticalintellectual property rights and/or provided invaluable expertise. Inmany cases, research could not go forward without high-grade (goodmanufacturing practices) product from the industrial partner. Only atiny fraction of CRADAs involved products or technology that theNIH invested in to a greater degree than industry.

Sources said that the "painstaking" study, involving a review ofevery CRADA ever signed between the NIH and an industry partner,was undertaken in an effort to document for PHS officials the needto change current policy.

An example of a project that would represent a significant NIHinvestment might be a drug that was shepherded through Phase Iclinical trials by the NIH and then passed off to industry for Phase IIand III trials and manufacturing scale-up. These types of projectsoccur rarely, though they attract attention _ as in the case of theAIDS drug AZT. Most CRADAs don't result in products at all,according to Varmus.

Genentech president and CEO Kirk Raab, who is a member ofNTFADD and attended Thursday's meeting, said that there havebeen plenty of "hearings and discussions" on the reasonable pricingclause. "We know there are powerful differences of opinion," saidRaab, referring to patient advocates and consumer and AIDSactivists who support the clause. "But someone is going to have tobite the bullet."

Philip Lee, Assistant Secretary for Health at the Department ofHealth and Human Services (HHS), told Raab that the NIH proposalwould be reviewed by PHS officials and forwarded (possibly withchanges) to HHS Secretary Donna Shalala. Lee said that the proposalwould then likely be "discussed with the White House."

Lee did not offer a clue as to PHS's stance on the CRADA issue butdid note that "managed care, formularies and price negotiations"have been driving down the price of drugs. "The market is verydifferent than it was five years ago," said Lee. "Even Medicaid ismoving toward managed care." The reasonable pricing clause wasinserted into CRADA contracts in 1989 due to concerns about thehigh price of drugs.

Changing the language in CRADA contracts does not require a newregulation or rule, but rather a PHS/HHS policy change. Leepromised the NIH CRADA issue "will be resolved within three tofour months." n

-- Lisa Piercey Washington Editor

(c) 1997 American Health Consultants. All rights reserved.