WASHINGTON _ U.S. government laboratories, including the PublicHealth Service (PHS) and its main component, the National Institutesof Health (NIH), are the leading single source of biomedical,biotechnology and pharmaceutical inventions, according to a recentstudy.In the biomedical arena, federal labs are the number one source ofinventions available for licensing, of patents received and applied for,of licensed inventions and of therapeutics in active development (bothin terms of those licensed out and those developed internally). A recentreport from the Biotechnology Information Institute (BII) in Rockville,Md., documents what BII president Ronald Rader says is an unheraldedphenomenon."Many people don't realize that the federal government ranks right upthere with the largest pharmaceutical companies in the world, in termsof all conventional measures of productivity: patents granted, licensesgranted and therapeutics in active development," Rader told BioWorld.BII counted all federal labs doing biomedical research as a single entityand compared the output level for 1980-1993 to that of individualpharmaceutical companies, universities and non-profit researchinstitutes.Rader's findings may not come as a surprise since the total federalbudget for biomedical research is about $2.2 billion, an amount thatdwarfs the research and development budgets of any singlepharmaceutical company, university or foreign government. (The $2.2billion includes biotechnology-related research done at the departmentsof Energy and Agriculture, in addition to the NIH's budget.)As a reference point, Rader notes that the R&D budget of Merck & Co.was about $1.1 billion in 1993, roughly comparable to the NIH's $1.2billion budget for intramural R&D. And, "the NIH alone ranks up therewith the largest pharmaceutical companies in the world in terms ofdrugs in active development at any one time," said Rader.Rader has compiled data for all federal biomedical, biotechnology andpharmaceutical U.S. patents, patent applications, licenses granted andCooperative Research and Development Agreements (CRADAs) from1980 to 1993. He published the results in the 678-page "Federal Bio-Technology Transfer Directory." Among his findings:* Federal agencies and labs were granted approximately 1,200biotechnology-related U.S. patents from 1980 to 1993, with about halforiginating at NIH. In the same time period, the government submittedmore than 1,000 patent applications that are still pending. Thesenumbers make federal labs (counted as one entity) the leading singlerecipient of U.S. patents in biotechnology, genetic engineering, drugsand other bio-active agents. (However, federal labs were granted onlyabout 7 to 8 percent of all such patents between 1980 and 1993 _ withthe lion's share (80 percent) going to industry and the rest touniversities and individual researchers.)* There is a trend at federal labs toward more biotechnology-relatedinventions and fewer traditional pharmaceutical or medical deviceinventions. In 1980, 16 percent of federal patents involved biologicsand/or biotechnology inventions while in 1993, the ratio jumped to 60percent of patents. BII defined biotechnology-related as "biologics (asdefined by FDA), biotechnology, biological molecules or materials,and organisms or their components."* About 27 percent of federal biotechnology inventions have beenlicensed out, including 32 percent of NIH inventions. Since only about10 percent of inventions are ever used commercially, the NIH licensingrate is high.* From 1980 to 1993, a total of 1,000 biotechnology-related licenseswere executed between industry and government. About 72 percent ofthose licenses covered NIH inventions. The majority of federalinvention licenses are non-exclusive (with no restrictions on thegovernment's right to grant further licenses), and a few enablingtechnology inventions and screening assays have been licensed by upto 20 companies.Industry Doesn't Take Advantage Of GovernmentDespite the government's impressive track record in generating newinventions, Rader argued that license and technology transferopportunities have been under-utilized by the biotechnology andpharmaceutical industries. "An incredible amount of commerciallyviable government inventions are languishing," he told BioWorld.Rader laid the blame in part on the NIH's tepid efforts to advertisegovernment technologies available for licensing. Another reason isclearly corporate fear of the "reasonable pricing" clause inserted in allNIH CRADAs and exclusive license agreements. The clause, whichstates that exclusive licensees may need to demonstrate a "reasonablerelationship" between the price of a product and the "public investmentin the product," has been a source of controversy since it wasconceived in 1989.Biotechnology and pharmaceutical companies have argued that theclause, which has never been operationally defined or enforced, hassquelched technology transfer between the government and the privatesector. Although the federal technologies available for licensing mayappear to be a vast gold mine, some biotechnology executives viewthem as a collection of land mines that could potentially explode intoprice controls on commercial products via the pricing clause.GTI Leverages Government ResearchOne company willing to take a risk on government inventions,complete with reasonable pricing clauses, is the gene therapy firmGenetic Therapy Inc. (GTI), of Gaithersburg, Md. In fact, GTI wasfounded only after technology transfer legislation, known as the Bayh-Dole Act (using the names of the senators who conceived it), wasenacted in 1986."Without that legislation, which gave us the opportunity to do genetherapy research with French Anderson [a prominent NIH gene therapyspecialist], our company wouldn't exist," GTI CEO James Barrett toldBioWorld. "Our strategy has been to leverage government research andresources. The key role of the NIH was to do what they do best:provide the proof-of-principle research for a cutting edge technology."But Barrett concedes that the pricing clause, contained in virtually allof GTI's numerous license agreements and CRADAs with NIH,represents a huge question mark hanging over the company's products,should they reach the marketplace. "Sometimes fools rush in whereangels fear to tread," he said. "We believe that, should it be required,we could provide a strong rationale for the price of our products."Of course, GTI is not the only biotechnology company that has minedthe deep veins of government-invented technologies. Other companiesthat stand out in terms of the number of licenses and CRADAsexecuted between 1980 and 1993 (using BII's data) includebiotechnology giants like Amgen Inc., Chiron Corp. and GenentechInc. Among smaller companies, GTI, MedImmune Inc. and OncologixInc. stand out.Interestingly, the smaller firms were all funded by the Edison, N.J.-based venture capital firm, HealthCare Investment Corp., which hasseemingly made a tradition of leveraging government research. AsBarrett says, federal technology transfer opportunities are "one of thebest kept secrets in the industry." n

-- Lisa Piercey Washington Editor

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