WASHINGTON -- Controlling the cost of drugs developed withNIH funds while simultaneously moving the maximum numberof new drugs into private enterprise are incompatible goals,Reid Adler, patent counsel for the National Institutes of Health,told congressional staffers at a briefing Friday on "The FederalGovernment's Role in New Drug Research and Development."

Nonetheless, the administration's current draft of the health-care reform package calls for control of prices of federallyfunded new drugs, and Rep. Ron Wyden, D-Ore., introducedlegislation earlier this year that would require companies tocommit to a pricing formula under cooperative research anddevelopment agreements (CRADAs) or licensing agreementswith NIH.

At the congressional briefing held by the Senate AgingCommittee, Adler and Michael Gluck, a senior analyst with theCongressional Office of Technology Assessment (OTA),explained in detail the difficulties of such a policy.

NIH already has a pricing policy for some NIH-funded drugs,albeit a vague one. But "one of our major findings," Gluck said,is that "the federal government has no way to implement this'fair pricing clause.' "

For one thing, there is disagreement over what constitutes fairpricing methodology. New drugs could be priced comparablywith old ones used to treat the same condition, or such thatrevenues do not greatly exceed the cost of development, Glucksaid. Or the government could investigate ways to structurepricing when an agreement is made.

But a problem with setting prices up front, said Gluck, is thatoften "the developer of intellectual property does not knowwhat the product is going to be."

Furthermore, even a team from OTA that included Harvardacademics with wide-ranging expertise was stymied in itsattempt to analyze the fairness of the price of Genzyme Corp.'sexpensive orphan drug, Ceredase, Gluck said.

"We had access to the company data and their time, and wehad (help from) both economists and academic accountingprofessors, and there still were several areas where wecouldn't come to an agreement about whether the price thatthe company had targeted reflected its risks," he said.

"It was a pretty hairy piece of analysis."

One problem with their analysis is that "OTA seems to thinkthat biotechnology companies should be able to raise money atthe prime interest rate," Lisa Raines, vice president forgovernment affairs at Genzyme, told BioWorld. Butbiotechnology companies, she said, must give investors a 30-40percent annual rate of return since "they have a considerablerisk that they are going to lose everything. That was notsomething that OTA really understood or accepted."

If OTA didn't understand it, the proposed breakthrough drugcommittee of the new National Health Board also would beunlikely to understand it, Raines told BioWorld.

Gluck warned that price setting policies might deter companiesfrom collaborating with the federal government, and Rainesagreed. "I know four large pharmaceutical companies that donot do collaborations with any NIH laboratory," she toldBioWorld. "There are a number of biotechnology companiesthat generally avoid it as well," she added.

"I have advised Genzyme to think long and hard beforeentering into a licensing agreement with NIH if that agreementcontains this provision," said Raines. "Just because (theprovision is) undefined today doesn't mean its going to beundefined three to five years from now when you have aproduct come out of the research."

-- David C. Holzman Washington Editor

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